The instant case deals with the application of private international law or the conflict of laws following the law of contracts between two states as both the states follow a different set of rules when it comes to the validity of oral contracts.
By: Melena Janet Jeen R, 4th Year, BBA LL.B, Alliance University.
Facts of the case
- The trial court found that on July 1, 1951, plaintiffs were the owners of certain real property in Las Vegas, Nevada.
- The property was subject to the first deed of trust in favor of David O. Parks and Lenabel Parks given to secure a note of $17,820, payable in monthly installments, and that the then unpaid balance was approximately $11,000. That at the same time the property was subject to a second deed of trust in favor of John Granrud given to secure a note issued by the plaintiffs dated July 25, 1952 and payable to John Granrud for $32,871.61, payable in monthly installments, and that the then unpaid balance of the said note was approximately $24,000.
- On July 1, 1954, in Las Vegas, Nevada, the deceased, John Granrud, orally stated to the plaintiffs that he would ‘make a sporting proposition and provide in his Will that any debt at the time of his death which remained on the purchase price’ of the John Granrud Garden Apartments would be forgiven and canceled in exchange for a partial payment and refinancing of the second trust deed note. That at the said time, the deceased, John Granrud, requested plaintiffs to refinance to enable him to purchase a trailer park.
- The plaintiffs did refinance by obtaining a new first trust deed loan of $25,000 for $800.90. Then the plaintiff paid off the note in favor of David O. Parks and Lenabel Parks and applied the balance of the new loan for $13,114.20 in part payment of the second trust deed note.
- Then on October 27, 1954, plaintiffs executed a note in favor of John Granrud for the then balance of the loan of $9,227 payable in monthly installments and secured by a second trust deed. That the deceased subsequently used the part payment made on or about October 27, 1954, for the purchase of a trailer park.
- The court further found that John Granrud died testate on March 4, 1956, and that at the time of his death was a resident of the County of Los Angeles; that he left a will be dated January 23, 1956; that said will be duly admitted to probate in the Superior Court of the State of California, in and for the County of Los Angeles on April 9, 1956, and that Dorothy Black Fowler was named in said will as executrix, and that at all times since April 9, 1956, she has been and now is the executrix of the Estate of John Granrud, Deceased.
Finally, the court found that the will of said deceased contained no provision for the cancellation of the said note executed by the plaintiffs and that the balance due on March 4, 1956, was $6,425.
Matters in issue
A. Does the basic policy of enforcing lawful contracts made under the law of the state of execution prevent the application of the forum’s Statute of Frauds when the application arises because contracting parties move across state lines?
B. Was the action barred by both Nevada and the California statute of frauds?
C. Which choice of law will be followed: the place where the contract took place or the place where parties of contract reside?
D. Did the plaintiffs have enough proof to their case that the defendant’s father was staying in Nevada while the contract was executed?
The trial court concluded that the action was barred by both Nevada and the California statute of frauds; that to remove the bar of the statutes, the action must be one for quasi-specific performance in which an heir or beneficiary under the will would be an indispensable party; and that defendant was not estopped to rely on the statutes of frauds.
From the foregoing findings of fact, the Supreme court concluded:
(1) That the action is barred by the Statute of Frauds of both the State of Nevada and the State of California unless removed from the operation thereof by estoppel or performance;
(2) That to remove the bar of the Statute of Frauds the action must be founded in quasi-specific performance and to maintain such an action an heir or beneficiary under the will is an indispensable party;
(3) That the oral agreement upon which the action is based is not of such nature as to estop the defendant-executrix from asserting the Statute of Frauds or to cause a court sitting in equity to enforce the oral agreement quasi-specifically; and
(4) That the defendant is entitled to judgment against the plaintiffs with costs.
Judgment was thereupon entered that plaintiffs take nothing and the defendant has a judgment for her costs. Thereafter, the plaintiffs’ motion to vacate the judgment and to enter a new and different judgment was denied.
The contract is valid under the laws of Nevada where it was executed and performed but invalid under the California Statute of Frauds if that Statute is applicable.
There is no doubt that California’s interest in protecting estates being probated here from false claims based on alleged oral contracts to make wills is constitutionally sufficient to justify making our Statute of Frauds applicable to all contracts such as this.
However, the legislature is usually concerned with enacting laws to govern purely local transactions, and it has not spelled out the extent to which the Statute of Frauds is to apply to a contract having substantial contacts with another state. In this case, Plaintiff and the others were residents of Nevada; the contract was made in Nevada and performed in Nevada. If Granrud were a resident of Nevada at the time of the contract’s inception, the California Statute of Frauds would not apply even though Granrud moved to California afterward.
The basic policy of upholding the expectations of the parties by enforcing contracts valid under the law of the state where the transaction occurred would prevent an interpretation of the Statute of Frauds that would make it apply to and therefore invalidate the contract because of the movement of one or more of the parties across state lines.
In this case, however, there is no finding regarding where Granrud was domiciled at the time the contract was made and therefore the plaintiffs could not be expected to have been alerted to the Statute of Frauds.
The judgment is reversed from that of the Trial Court Judgment.
In this article, we have discussed the application of private international law or the conflict of laws following the law of contracts between two states. Both states follow a different set of rules when it comes to the validity of oral contracts. This article analyses the case of Bernkrant V. Fowler to understand the application of private international law. The plaintiffs did not have enough proof as to that the defendant’s father was residing in Nevada at the time of contract. If only the plaintiffs had enough proof as to the residence, the Nevada laws would have been applied as it was applied in the trial courts.
According to the Court, protection of the buyers’ rights under a valid contract precluded interpreting the general language of the statute of frauds to destroy such rights despite possible applicability of the statute arising from the movement of one or more of the parties across state lines.