Bernkrant v. Fowler
360 P.2d 906, 55 Cal.2d 588, 12 Cal. Rptr. 266 (1961)
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Rule of Law:
A contract that is valid in the state where it was made and performed will not be invalidated by the Statute of Frauds of the forum state if the forum's interest in applying its law is outweighed by the policy of upholding the parties' reasonable expectations and the interests of the other state.
Facts:
- Plaintiffs purchased the Granrud Garden Apartments in Las Vegas, Nevada, which were encumbered by two deeds of trust, the second of which was held by John Granrud.
- In 1954, Granrud, needing funds to purchase a trailer park, asked plaintiffs to refinance their property and pay down a substantial portion of their debt to him.
- At a meeting in Las Vegas, Granrud orally promised that if plaintiffs refinanced, he would provide in his will that any debt remaining on the property at the time of his death would be cancelled.
- In reliance on Granrud's promise, plaintiffs secured a new $25,000 loan, paid off the first deed of trust, and paid Granrud $13,114.20.
- Plaintiffs then executed a new promissory note to Granrud for the remaining balance of $9,227.
- Granrud later moved to California and died there in 1956.
- Granrud's will, probated in California, made no provision to cancel the remaining debt of $6,425, and his executrix continued to demand payment.
Procedural Posture:
- Plaintiffs filed an action in a California trial court against Fowler, the executrix of Granrud's estate.
- Plaintiffs sought to have their promissory note cancelled, the property reconveyed, and to recover payments made to the estate after Granrud's death.
- The trial court entered a judgment for the defendant executrix, ruling that the action was barred by both the California and Nevada statutes of frauds.
- Plaintiffs appealed from the trial court's judgment to the Supreme Court of California.
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Issue:
Does the California Statute of Frauds, which requires agreements to make a provision by will to be in writing, apply to invalidate an oral contract made and performed in Nevada, where it is valid, simply because the promisor died a resident of California and the contract is sought to be enforced against his California estate?
Opinions:
Majority - Traynor, J.
No, the California Statute of Frauds does not apply to invalidate the contract. The court must consider both the policy of protecting the reasonable expectations of the parties and the policy of the forum's Statute of Frauds. The contract was made in Nevada, performed by plaintiffs (Nevada residents) in Nevada, and concerned refinancing obligations on Nevada land. Nevada has a substantial interest in the contract and its policy is that the contract is valid. Applying California's law would unfairly defeat the expectations of the plaintiffs, who could not have been expected to anticipate that the law of a state Granrud might later move to would invalidate their agreement. Therefore, the court gives effect to the common policy of both states to enforce lawful contracts and sustains Nevada's interest in protecting its residents and their reasonable expectations.
Analysis:
This case is a landmark in the development of modern choice-of-law theory, moving away from rigid, territorial rules toward a more functional 'governmental interest analysis.' Justice Traynor's opinion establishes that a forum court should not reflexively apply its own law, particularly its Statute of Frauds, when another state has a significant interest and applying forum law would defeat the parties' reasonable expectations. This decision requires courts to weigh the competing policies of the involved jurisdictions, marking a significant shift toward a more nuanced, policy-driven approach to resolving conflicts of law.
