Watts v. Malatesta

Brief Fact Summary.

Plaintiff sued Defendant to recover his losses after he lost $150,000 gambling. The trial court found in favor of Defendant. The court of appeals reversed. Defendant appealed.

Synopsis of Rule of Law.

A contracted for criminal act may not give rise to a cause of action.

Facts.

Watts (Plaintiff), a casual gambler, placed a number of bets on horseracing with Malatesta (Defendant), a professional bookmaker. Plaintiff won approximately $250,000 and lost approximately $150,000 on these bets. However, a New York statute had banned organized betting and gambling. Plaintiff sued Defendant to recover his losses. Defendant counterclaimed to recover the difference between the winnings that he had paid Plaintiff and the amount that Plaintiff had lost. The trial court found in favor of Defendant. The appellate court reversed, awarding Plaintiff the amount he lost and paid to Defendant. Defendant appealed.

Issue.

Whether a contracted-for criminal may act give rise to a cause of action.

Held.

No. The court of appeals’ ruling is affirmed. A contracted for criminal act may not give rise to a cause of action.

Dissent.

(Crane, J.): The court’s holding allows a casual gambler to place wagers and recover even if he loses. This in no way deters individuals from gambling and in fact does the opposite. The court’s opinion thus nullifies the purpose of New York’s anti-gambling statute. Courts should interpret statutes to uphold, not nullify their purpose.

Discussion.

A court may void a contract on public policy grounds if its purpose is illegal. Similarly, a contracted for criminal act may not give rise to a cause of action. In the case at bar, the court finds in favor of Plaintiff and awards him the amount of his gambling losses to Defendant. The New York statute at issue makes a distinction between casual gamblers and professional gamblers, making only professional gambling illegal. Accordingly, Plaintiff has a valid claim to his losses because he has committed no crime under the law. On the contrary, Defendant, as a professional gambler, committed a crime by accepting Plaintiff’s wagers. This criminal act may not give rise to a valid counterclaim.