APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA HONORABLE KATHLEEN K. CALDWELL Judge.
The opinion of the court was delivered by: Zinter, Justice (on reassignment).
CONSIDERED ON BRIEFS ON MARCH 23, 2009
[¶1.] A jury found that repayment of a gambling debt was a part of the consideration for a promissory note executed by Gerald Neve in favor of the Donald L. Davis Living Trust. In accordance with the jury verdict, the circuit court voided the note pursuant to a statute that prohibits enforcement of notes given in full or partial consideration of gambling debts. Neve appeals the circuit court's subsequent entry of a judgment notwithstanding the verdict (j.n.o.v.) in favor of the Davis Trust. We reverse and remand for reinstatement of the judgment entered on the jury verdict.
Facts and Procedural History
[¶2.] Neve and Donald Davis met in the early 1990s through their membership in the Elks Club in Sioux Falls. Neve and Davis frequently gambled against each other and with other members at the club. According to Neve, one evening in 1992, he lost $1,500 to Davis and did not have the money to pay the debt. Neve testified that Davis told him not to worry about it and that they would work something out. Davis, however, denied that there ever was a $1,500 gambling debt. He testified that "there was never any gambling debt between -- that [Gerald] Neve owed me nor was there ever any payment made by the gambling debt."
[¶3.] During this same period of time, Neve was experiencing financial difficulties. He was significantly indebted for business expenses, medical expenses, and taxes due the Internal Revenue Service. In an effort to assist Neve, Davis loaned him $2,500 in December 1992. A promissory note for that amount was executed on December 10, 1992. Because Neve continued to experience financial difficulties, Davis subsequently referred Neve to bankruptcy attorney Claire Gerry.
[¶4.] After Gerry had reviewed Neve's financial affairs, Davis agreed to loan Neve an additional $30,000. Neve specifically testified that this amount included repayment of the $1,500 gambling debt. See infra ¶ 15 (citing Neve's testimony that the $30,000 loan was calculated as the amount necessary to satisfy his other financial obligations "plus the 1500"). On September 22, 1993, Davis placed the $30,000 in a trust account at Gerry's law firm. Neve testified that Davis called him when the note was ready to be signed and specifically cautioned Neve to not mention to Gerry that the proceeds of the note "were going to be used to pay off" the gambling debt to Davis. Infra ¶ 15. Neve and his wife subsequently executed a note for $33,000 in favor of the Donald L. Davis Living Trust. The note was for the $30,000 second loan, plus $3,000 representing a renewal of the $2,500 note from December 1992 and $500 in interest.
[¶5.] Gerry handled disposition of the proceeds. There is no dispute that all of the proceeds of the $30,000 loan, less the $500 in interest, were either paid directly to Neve or his creditors. Gerry provided an accounting to Davis, which was admitted into evidence at trial. The accounting reflected the following disbursements:
* September 1993: $9,005.63, Dakota State Bank
* January 1994: $4,000.00, Check to Neve
* May 1994: $7,500.00, Accounts Management
* July 1994: $1,700.00, Payment to Neve
* August 1994: $2,074.50, Attorney Fees
* August 1994: $5,719.87, Check to Neve Neve testified that pursuant to his agreement with Davis, he used $1,500 of the January 1994 $4,000 check to pay his gambling debt to Davis.
[¶6.] On June 2, 2005, Neve commenced an action for a declaratory judgment to have the promissory note declared void under SDCL 53-9-2 (providing that notes given in full or partial consideration of gambling debts are absolutely void). Davis counterclaimed for $83,155.59 (representing principal and interest, less payments made on the $33,000 note).
[¶7.] Neve moved for summary judgment. The court denied the motion, indicating that neither party was entitled to summary judgment. The court reasoned that a genuine issue of material fact existed for trial on the question whether a gambling debt was part of the consideration for the note.
[¶8.] The trial involved this limited factual question. The competing theories were straightforward. Neve contended that repayment of the gambling debt was part of the consideration for the loan. On the other hand, Davis contended that there never was any gambling debt, and therefore, part of the consideration for the loan could not have been to repay a gambling debt. Counsel for both sides agreed that the question of consideration was dependent upon which of the two witnesses the jury chose to believe. During opening statement, Neve's counsel explained that the jury would hear conflicting evidence on "how this debt [was] incurred and how it was paid":
[Y]ou are going to hear lots of testimony back and forth as to how this debt incurred and how it was paid and I think you can expect Mr. Davis to deny that any part of it was a gambling debt and you are going to have to separate out the integrity of the two people, my client and Mr. Davis. They both can't be telling the truth. And it's you, as jurors, that are going to have to decide really who is telling the truth in this case.
Davis's counsel agreed that the "only issue" was to determine who was telling the truth, and Davis's position was that the transaction "was nothing more than a loan." His counsel argued:
The evidence . . . will not show there is any gambling debt. . . .
[T]his is not about a promissory note that was made to secure or to repay a gambling debt. . . . This is, however, a very unusual trial because it boils down to who you believe. . . . What the jury is going to have to do is to look into all the details of what each witness is saying to determine who is telling the truth and that is the only issue the jury will have to deal with today[.] . . . It was nothing more than a loan and there is nothing about a gambling debt in this transaction[.]
Thus, the only issue at trial was whether the transaction "was nothing more than a loan," or whether part of the consideration included a gambling debt.
[¶9.] At the close of Neve's case-in-chief, Davis moved for a directed verdict. The circuit court denied the motion, acknowledging that Neve's evidence was sufficient for a jury to have concluded that the loan was made in partial consideration of a gambling debt. The jury ultimately returned a verdict in favor of Neve. Pursuant to the verdict, the circuit court entered a judgment declaring the note void.
[¶10.] Davis subsequently moved for a j.n.o.v. The circuit court granted the motion. Notably, the court did not find that the gambling debt was not part of the consideration for the note. Rather, the court concluded that even if the loan was motivated by the gambling debt, the consideration was for "money loaned."
Therefore, the court found the evidence insufficient to support the jury verdict. Neve appeals arguing that the evidence was both factually and legally sufficient to support the verdict.
[¶11.] We generally review the circuit court's j.n.o.v. under the abuse of discretion standard. Welch v. Haase, 2003 SD 141, ¶ 19, 672 NW2d 689, 696.
However, the decisive question in this type of case is a factual issue: whether the note involves gambling. 7 Richard A. Lord, Williston on Contracts § 17:16 (4th ed 2009). Therefore, we must examine the facts supporting the jury verdict. "We review the testimony and evidence in a light most favorable to the verdict of the nonmoving party, 'then without weighing the evidence [we] must decide if there is evidence which would have supported or did support a verdict.'" Martinmaas v. Englemann, 2000 SD 85, ¶ 20, 612 NW2d 600, 606 (citation omitted). "Conflicting evidence is not reweighed; witness credibility is not reassessed. The moving party's evidence is only given consideration if it is uncontradicted or tends to amplify, clarify or explain evidence which supports the verdict." Welch , 2003 SD 141, ¶ 19, 672 NW2d at 696 (citation omitted).
[¶12.] Neve argues that factually, the circuit court's j.n.o.v. nullified a jury decision on a disputed issue of fact and failed to consider Neve's testimony in a light most favorable to the verdict. Neve contends that the court failed to consider his testimony that he owed Davis $1,500 for the gambling debt; that the amount of the note was determined by including the gambling debt; that Davis specifically told Neve not to mention to Gerry at the time of signing the note that some of the funds were going to be used to pay off the gambling debt; and that the note proceeds were used to repay the gambling debt. Neve also argues that in light of these facts, the circuit court erred as a matter of law in concluding that the note was made for "money loaned" rather than in partial consideration of a gambling debt.
[¶13.] For more than 100 years, the Legislature has provided that if any part of the consideration for a note is for the repayment of money lost in gambling, the entire note is absolutely void.
Any note, bond, or other contract made and entered into, where the whole or any part of the consideration thereof shall be for money or other valuable thing, won or lost, laid, staked, or betted at or upon any game of any kind, under any name or by any means; or for the repayment of money or other thing of value, lent or advanced, at the time and for the purpose of any game, play, bet, or wager, or being laid, staked, betted, or wagered thereon shall be absolutely void.
SDCL 53-9-2 (emphasis added).
Following this statute, this Court has consistently voided such agreements. See Bayer v. Burke, 338 NW2d 293, 294 (SD 1983); McCardell v. Davis, 49 SD 554, 554, 207 NW 662, 662 (1926); Waite v. Frank, 14 SD 626, 626, 86 NW 645, 645-46 (1901); see also Union Collection Co. v. Buckman, 150 Cal 159, 164, 88 P 708, 711 (1907); see generally Jones v. Yokum, 24 SD 176, 123 NW 272 (1909) (involving illegal notes given as consideration for the sale of liquor). The statutory prohibition is viewed as an affirmative defense. It imposes on the party asserting the failure of consideration due to gambling the burden of proving that the note was made in partial consideration of the gambling debt. See Scolaro v. Bellitto, 184 NE2d 604, 607 (OhioCtApp 1962). However, "[i]t makes no difference whether the real intention ...