U.S. Bankruptcy Court Opinions
IN RE TITAN CRUISE LINES, (M.D.Fla. 9-18-2006) In re: TITAN
CRUISE LINES, a Cayman Islands exempted company, registered
as a foreign corporation in Florida as TITAN CRUISE LINES,
INC., Chapter 11, Debtor. TITAN CRUISE LINES, Plaintiff, v.
SCOTT ELLIOT and SCOTT ELLIOT, INC., a Florida Corporation,
Defendants. Case No. 8:05-bk-15154-ALP, Adv. Pro.
05-00841. United States Bankruptcy Court, M.D. Florida,
Tampa Division. September 18, 2006
ORDER ON DEFENDANTS’ MOTION FOR FINAL SUMMARY JUDGMENT AND FIRST AMERICAN BANK, N.A.’S MOTION FOR SUMMARY JUDGMENT. (Doc. Nos. 58 and 63)
ALEXANDER PASKAY, Chief Judge
THE MATTERS under consideration in this Chapter 11 case of
Titan Cruise Lines, a Cayman Islands Exempted Company
(“Debtor”), are the Defendants’ Motion for Final Summary
Judgment (Doc. No. 58), filed by Scott Elliot and Scott
Elliot Inc. (“Defendants”), and a Motion for Summary
Judgment (Doc. No. 63), filed by Plaintiff Intervenor First
American Bank, N.A. (“Bank”), the largest secured creditor
of the Debtor. Page 2
The Debtor filed the above-captioned adversary proceeding
seeking to recover property of the estate. The claims as
pled in the Amended Complaint are as follows: The claim in
Count I for Money Lent contends that the Debtor is entitled
to a judgment for $200,000 against the Defendant for loans
that have not been repaid. The claim in Count II is for the
Enforcement of an Oral Promise to Pay and contends the
Defendant borrowed $200,000 from the Debtor with an oral
promise to repay that has not been fulfilled. The claim in
Count III is for Liability on a Worthless Instrument,
brought pursuant to Section 68.065 of the Florida Statutes.
The Debtor contends that the Defendant provided checks as
collateral for the loans, but later stopped payment on the
checks with the intent to defraud the Debtor. The Debtor
seeks $200,000, plus treble damages, prejudgment interest,
and costs.
The Bank’s Motion for Summary Judgment only concerns the
Claims in Count I (Money Lent) and in Count II (Oral
Promise to Pay). The Debtor has elected to pursue all
claims as pled in the Amended Complaint.
It is the contention of the Defendants that, based on the
record, there are no genuine issues of material fact and
based on same they are entitled to a judgment in their
favor as a matter of law dismissing all three Counts of the
Complaint with prejudice. In support of their Motion for
Summary Judgment, the Defendants contend that Florida has a
strong public policy against enforcing Page 3 gambling
debts like the Defendants’ and, moreover, the debt is a
void and unenforceable gambling debt under Fla.Stat.
§ 849.26 (2004). The Defendants cite numerous state
law cases where courts have refused to enforce similar
gambling debts, even though the debts were valid and
enforceable where incurred. The Defendants further contend
that Florida’s choice of law rules prohibit the courts of
this state from applying the law of another State if to do
so would be repugnant to an established public policy of
this state, citing Northland Casualty Co. v. HBE Corp.,
160 F.Supp.2d 1348, 1360-61 (M.D. Fla. 2001).
The Bank, while conceding that the facts relevant to the
pivotal issue are indeed without dispute, contends that the
Debtor is entitled to a judgment as a matter of law in the
amount pled in the Complaint because under either a state
or federal conflict of law analysis, the relevant law is
that of St. Vincent and the Grenadines and, according to
the Bank’s expert, the debt is a valid, enforceable
obligation under the laws of that sovereign.
In support of its Motion for Summary Judgment, the Bank
claims that this Court need not apply state conflict rules
to the present matter because this is a federal court
applying federal Bankruptcy Law. The Bank cites numerous
cases which stand for the proposition that when a federal
court is applying a federal law which references state law
(e.g., the Bankruptcy Code), the court is not Page 4
required to use the conflict rules of the forum state, but
instead may use its independent judgment to decide which law
is most relevant to the controversy. See In re The New
Power Co., 313 B.R. 496, 514 n. 4 (N.D. Ga. 2004); L.M.S.
Assoc., Inc. v. Roemelmeyer, 18 B.R. 425, 428 (Bankr. S.D.
Fla. 1982); Woods-Tucker Leasing Corp. v. Hutcheson-Ingram,
642 F.2d 744, 748 (5th Cir. 1981); Matter of Crist, 632
F.2d 1226, 1229 (5th Cir. 1980) (citing 1A Moore’s Federal
Practice P. 0.325 (2d ed. 1979)).
The Bank also contends that the “most significant
relationship” approach in Sections 6 and 188 of the
Restatement (Second) Conflict of Laws, as adopted by the
Eleventh Circuit in Dresdner Bank AG v. M/V Olympia
Voyager, 446 F.3d 1377 (11th Cir. 2006), is the appropriate
federal conflict analysis to be applied in this case.
Accordingly the Bank asserts that the facts in the record
indicate that the transaction has a more significant
relationship to St. Vincent and the Grenadines and
therefore, the law of that sovereign ought to be
controlling.
The Bank has asserted in the alternative that even if
state conflict of law principles govern this proceeding,
Florida’s conflict rules require the law of St. Vincent and
the Grenadines to be applied in this proceeding. In support
of this contention, the Bank cites the case of LaFarge
Corp. v. Travelers Indemnity Co., 118 F.3d 1511 (11th Cir.
1997). In LaFarge, the court noted that Florida courts
Page 5 have adopted the lex loci contractus rule to
conflict of law problems involving contract disputes.
According to this doctrine, a court will look to the law of
the place where the contract was made to determine the
rights of the parties. The Bank also cites the case of
Lauritzen v. Larson, 345 U.S. 571 (1953), in which the
Supreme Court reaffirmed the “universal rule of maritime
law” that actions aboard a ship are governed by the law of
the sovereign whose flag the ship flies. Id. at 584-85.
Thus, according to the Bank, because the Ocean Jewel is a
St. Vincent-flagged vessel, the loan transaction which is
the subject of the present dispute, being entered while on
board, was made in the territory of St. Vincent and the
Grenadines and is therefore governed by the laws of that
nation.
The record reveals that the relevant facts are indeed
without dispute and they are as follows. At the relevant
time, Titan Cruise Lines was the owner of an ocean going
vessel, the Ocean Jewel, operating off the West Coast of
Florida outside of the territorial limits of the United
States. The Ocean Jewel is registered in the Island of
Saint Vincent and the Grenadines, sailing under the flag of
Saint Vincent and the Grenadines. Saint Vincent and the
Grenadines is an independent sovereign state, part of the
Commonwealth of Nations and of the Caricom Community.
The Defendant Scott Elliot is the president and sole
stockholder of Scott Elliot Inc., a Florida corporation,
which is the other defendant sued by the Page 6 Debtor.
On September 16, 2005, Elliot was picked up by a
representative of the Debtor and taken to a dock where a
catamaran used as a shuttle, owned and operated by the
Debtor, was moored. Upon boarding the shuttle, Mr. Elliot
was ferried to the Ocean Jewel, which was anchored outside
the territorial limits of the United States. This record
leaves no doubt that the Ocean Jewel was operated solely as
a gambling casino and was not a cruise ship,
notwithstanding the reference to “cruise” in the name of
the Debtor.
Upon his arrival aboard the Ocean Jewel, the Defendant
proceeded to the “cage” and tendered a post-dated check
drawn on the account of Scott Elliot Inc. in the amount of
$50,000. The Defendant received gambling chips in the same
amount and proceeded to the blackjack table, where he
promptly lost the $50,000 worth of gambling chips. While
still seated at the blackjack table, the Defendant handed
the dealer a Scott Elliot Inc. post-dated check in the
amount of $75,000 for which he received $75,000 worth of
the gambling chips. After losing all the chips he just
“purchased” from the dealer with the post-dated corporate
check, the Defendant tendered yet another post-dated check
to the dealer while still seated at the blackjack table.
The amount of this check was in the amount of $75,000 and
was also drawn on the corporate account. The chips he
received in exchange for this third check were also lost,
just as before. After this final loss, the Defendant left
the Ocean Jewel and subsequently stopped Page 7 payment
on all three post-dated checks. The Debtor’s credit
advances to the Defendant, totaling $200,000, were never
repaid.
It is clear from the record and it is undisputed by the
Bank that the debt owed by the Defendants is in fact a
gambling debt as contemplated by the Florida Statute.
Obviously the Debtor provided the casino chips in exchange
for all three checks for the sole purpose of gambling;
indeed, Mr. Elliot wrote and tendered two of the checks
while still seated at the blackjack table. Although the
vessel had a lounge and restaurant in addition to the
casino, neither one accepted casino chips as payment for
goods or services.
It is evident from the foregoing that the primary issue to
be resolved in this proceeding is which law should be
applied to the claims, i.e., whether the law of Florida or
whether the law of St. Vincent and the Grenadines should
determine the rights of the parties. That determination
will necessarily dictate the outcome of this dispute
because it is clear that the debt is void and unenforceable
under the laws of Florida, but valid under the law of St.
Vincent. However, in order to determine the applicable body
of law, it is first necessary to determine which conflict
of law rules, state or federal, are appropriately applied
to that end. For the following reasons, this Court is
satisfied that the conflicts jurisprudence of the State of
Florida should be applied to this proceeding. Page 8
The Bank contends that because this is a Federal court
applying federal bankruptcy law, the laws and interests of
the State of Florida are not relevant. Yet even a cursory
analysis of the claims in the Complaint leaves no doubt
that the claims are based purely on state law and not on
any provision of the Bankruptcy Code or any other Federal
statute or the admiralty jurisdiction of the federal
courts. Thus, the jurisdiction of this Court to consider
the claims asserted in the Complaint, contrary to the
assertion of the Bank, is based on 28 U.S.C. 157(b), which
is the source of the jurisdictional power granted to this
Court by the District Court. It is clear that the
jurisdiction is based on the happenstance that the
Plaintiff, who commenced this adversary proceeding, is a
Debtor who sought relief under Chapter 11 of the Bankruptcy
Code.
It is well established that suits filed in the district
court based on diversity jurisdiction are governed by the
law of the forum, Erie R.R. Co. v. Tompkins, 304 U.S. 64
(1938), and the district court must apply the conflicts
rules of the forum. See Klaxon v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 496 (1941). There is no logical reason why
this same rule should not apply to a suit in a bankruptcy
court which is not filed to enforce any provision of the
Bankruptcy Code. Therefore, it is appropriate for this
Court to apply the conflict rules of the State of Florida.
See Hillsborough Holdings Corp. v. Celotex Corp., 166 BR
461, 468 (Bankr. M.D. Fla. 1994). Page 9
Even assuming without conceding that this Court should
apply the doctrine of lex loci contractus, it is clear that
the only nexus the Plaintiff-Debtor has with St. Vincent in
the Grenadines is that the Ocean Jewel is registered there.
The Debtor, owner of the Ocean Jewel, is a Cayman Islands
corporation with its business operations headquartered in
Florida. And while it is true that the Ocean Jewel is
registered in St. Vincent and the Grenadines, it is equally
true that the vessel flies the flag of that sovereign
merely as a “flag of convenience.” Moreover, it would defy
credibility to infer that the Defendant, Scott Elliot, was
able to board the Ocean Jewel and obtain a $200,000 credit
advance with postdated checks without some pre-existing
arrangement with the Debtor; obviously the Defendant was a
repeat player with an established line of credit. It is
also fair to assume that the arrangement with
representatives of the Debtor was made in Florida before
the Defendant boarded the ship.
The case of Dresdner Bank v. M/V Olympia Voyager is
likewise of no help to the Debtor and the Bank in this
matter. The 11th Circuit’s holding in Dresdner pertained to
an admiralty claim brought under the Commercial Instruments
and Maritime Liens Act and, accordingly, its holding was
intended to apply to maritime contracts cases brought under
the admiralty jurisdiction of the District Court. Dresdner,
446 F.3d at 1382. The conflict of law analysis Page 10
adopted by the court in Dresdner is therefore not applicable
to the instant proceeding which involves neither a federal
statute nor a maritime contract.
Under Florida’s choice of law rules, a court is not
permitted to apply the laws of another forum if to do so
would be repugnant to Florida’s public policy. See
Trafalgar Developers, Ltd. v. Geneva Investment Ltd., 285
So.2d 593, 597 (Fla. 1973) (“[P]ublic policy may preclude
enforcement of the contract valid under the laws of the
place of lex loci contractus where the same is contrary to
the law and public policy of Florida”). See also Northland
Casualty Co., 160 F.Supp. 2d at 1360-61.
The State of Florida has a stringent public policy against
the enforcement of gambling debts that is well established
in the decisional law of its courts. Numerous decisions of
Florida Appellate Courts have held that a gambling
obligation, even if valid in the state where it was
created, cannot be enforced in Florida because it would be
against the established public policy of this state. In one
such case, Dorado Beach Hotel Corp. v. Jernigan, 202 So.2d
830 (Fla.Dist.Ct.App. 1967), the court, applying the choice
of law rules of Florida, found that even though a gambling
debt incurred in Puerto Rico was valid and enforceable in
Puerto Rico, it could not be enforced in Florida because it
would violate the public policy of Florida. The Dorado
court cited the case of Young v. Sands, 122 So.2d 618
(Fla.Dist.Ct.App. 1960), which also held that gambling
debts Page 11 are not enforceable by courts of this state
based on the public policy of Florida, even though they are
valid and enforceable in the state where the debt arose.
This strong public policy has been codified in Florida
Statute § 849.26, which provides that:
All promises, agreements, notes, bills, bonds or other
contracts, mortgages or other securities, when the whole
or part of the consideration if for money or other
valuable thing won or lost, laid, staked, betted or
wagered in any gambling transaction whatsoever, regardless
of its name or nature, whether heretofore prohibited or
not, or for the repayment of money lent or advanced at the
time of a gambling transaction for the purpose of being
laid, betted, staked or wagered, are void and of no
effect; provided, that this act shall not apply to
wagering on pari-mutuels or any gambling transaction
expressly authorized by law.
In sum, it is clear that Florida courts have interpreted
this provision as a broad statement of public policy that
precludes enforcement of gambling debts, regardless of
whether such debts are valid where created.
Based on the foregoing, this Court is satisfied that
Florida conflict of law jurisprudence dictates that this
Court not apply the law of St Vincent and the Grenadines
where doing so would violate Florida public policy by
resulting in the enforcement of an invalid gambling debt.
This Court is further convinced that the debt resulting
from the transaction between the Debtor and the Defendant
falls within the purview of Fla. Stat. § 849.26 and
is therefore unenforceable as a matter of state law.
Therefore, because the gambling debt Page 12 owed by
Defendants Scott Elliot and Scott Elliot Inc. is a void and
unenforceable obligation, there are no genuine material
issues of fact yet to be resolved and the Defendants are
entitled to a judgment as a matter of law.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Defendants’ Motion
for Final Summary Judgment (Doc. No. 58) be, and the same
is hereby, granted. It is further
ORDERED, ADJUDGED AND DECREED that First American Bank,
N.A.’s Motion for Summary Judgment (Doc. No. 63) be, and
the same is hereby, denied.
A separate final judgment shall be entered in accordance
with the foregoing.
DONE AND ORDERED. Page 1