Bernkrant v. Fowler

Brief Fact Summary

Granrud was a vendor of land in Nevada who made an oral agreement with Bernkrant (Plaintiff) and other purchasers that if they paid a significant part of their debt prior to the due date he would provide in his will for the cancellation of any remaining indebtedness, but Granrud died having made no such provision in the will.

Synopsis of Rule of Law

The basic policy of enforcing lawful contracts made under the law of the state of execution prevents the application of the forum’s Statute of Frauds when the application arises because contracting parties move across state lines.

Facts

Granrud was a vendor of Nevada land who asked Bernkrant (Plaintiff) and the other purchasers to refinance their obligations and to pay a significant part of their indebtedness prior to the due date.  He made an oral promise that if Plaintiff and the others did this he would provide by will that any part of the purchase price still unpaid at his death would be cancelled.  Plaintiff and the others agreed to the request.  The vendor died with approximately $6,000 of the purchase money unpaid, but his will made no provision for the debt’s cancellation.  The purchasers brought an action in California against Fowler (Defendant), the vendor’s executor, to enforce the oral agreement.  Under Nevada law where the agreement was transacted, an oral contract such as this is valid.  However, under California law, such a transaction is only valid if written.  The trial court gave judgment for Fowler (Defendant) and Bernkrant (Plaintiff) appealed.

Issue

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?

Held

(Taynor, J.)  Yes.  The basic policy of enforcing lawful contracts made under the law of the state of execution prevents the application of the forum’s Statute of Frauds when the application arises because contracting parties move across state lines.  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 contracts inception, the California Statute of Frauds would not apply even though Granrud moved to California afterwards.  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.  Reversed.

Discussion

Apparently, even if Granrud was domiciled in California, the result would be the same since the contract was made in Nevada, performed by plaintiffs in Nevada, and it involved the refinancing of obligations arising from the sale of land in Nevada and secured by interests in Nevada.  The court therefore concluded that Nevada has a substantial interest in the contract and in protecting the rights of Nevada residents as parties to the contract.