Baffin Land Corp. v. Monticello Motor Inn, Inc.

• Citation: 70 Wn.2d 893,425 P.2d 623
• Decision Date: 24 March 1967
• Docket Number: No. 38165,38165
• Court: United States State Supreme Court of Washington
• Parties: BAFFIN LAND CORPORATION, a Delaware corporation, Appellant, v. MONTICELLO MOTOR INN, INC., a Washington corporation, Matthew G. Clark, Individually, and Eleanor M. Clark, formerly wife of Matthew G. Clark, Respondents.

Page 893

70 Wn.2d 893

425 P.2d 623

BAFFIN LAND CORPORATION, a Delaware corporation, Appellant, v. MONTICELLO MOTOR INN, INC., a Washington corporation Matthew G. Clark, Individually, and Eleanor M Clark, formerly wife of Matthew G Clark, Respondents.

No. 38165.

Supreme Court of Washington, En Banc.

March 24, 1967.

As Amended on Denial of Rehearing June 13, 1967.

Moore, Walstead, Hallowell & Mertsching, Jerome Walstead, Longview, for appellant.

Cartano, Botzer & Chapman, Seattle, for respondents.

FINLEY, Chief Justice.

This action was brought by Baffin Land Corporation, a Delaware corporation, as assignee of Master Video Systems, Inc., to collect delinquent payments under a television rental agreement with an option to purchase made in 1958 with Matthew G. Clark, who was operating what was then known as the Monticello Hotel in Longview, Washington. At the time the contract was made, Mr. Clark was operating the hotel, now known as the Monticello Motor Inn, Inc., on behalf of the marital community composed of himself and his wife, Eleanor M. Clark. The agreement was signed in Longview, Washington, by Matthew G. Clark and by a salesman of Master Video and forwarded to New York, where it was signed by a vice president of Master Video, a Delaware corporation duly authorized to do business in Washington. Under the provisions of the agreement, a binding contract was not formed until the signature of the vice president was affixed in New York.

Master Video then did the necessary wiring and installed the television sets in the Monticello Hotel. Monthly rental payments were mailed from Washington to the lessor in New York. Acting under the agreement Master Video serviced the television sets to a certain extent until the provision of the contract calling for such servicing was deleted by mutual consent.

Subsequently the Clarks were divorced, and the property settlement they had agreed upon was approved in the divorce proceeding. Under the terms of the settlement, certain real and personal assets which had previously been held as community property went to Eleanor M. Clark, and she waived any further interest in the Monticello Hotel or its assets. The agreement also provided that Matthew would indemnify Eleanor and save her harmless from any liability on obligations arising from the operation of the hotel, including costs and attorney fees incurred in any necessary defense by her.

After a trial to the court below, judgment for the plaintiff was entered against Monticello Motor Inn, Inc., and Matthew G. Clark for delinquent rentals of $14,507.40 plus interest and sales tax upon the rental. From the portion of the judgment denying any recovery against Eleanor M. Clark, plaintiff appeals.

The trial court, relying on such decisions of this court as Escrow Service Co., Inc. v. Cressler, 59 Wash.2d 38, 365 P.2d 760 (1961); Achilles v. Hoopes, 40 Wash.2d 664, 245 P.2d 1005 (1952); and La Selle v. Woolery, 14 Wash. 70, 44 P. 115, 32 L.R.A. 73 (1896), held that the obligations of the contract were governed by the rule of Lex loci contractus. Since the last act necessary to form a binding contract occurred in New York, and since the contract was therefore made or executed in New York, the trial court held that the obligations of the contract and its effect were determined and governed by the law of New York. The court below further found the law of New York to be such that neither the defendant Eleanor M. Clark nor the former marital community composed of Eleanor M. and Matthew G. Clark has at any time been obligated or liable on the contract, and that the plaintiff has never had any enforceable claim against any property of the defendant Eleanor M. Clark which was formerly the community property of the individual defendants here or against any separate property of Eleanor M. Clark.

In the recent case of Pacific Finance Corp. v. J. Ed Raymer Co., Inc., 68 Wash.Dec.2d 191, 412 P.2d 120 (1966), this court was asked to adopt the 'center of gravity' or 'most significant relationship' ¹ approach to the contract choice of law problem. In declining to do so, we noted that a financial institution was involved and that it could have protected itself by having the wife execute her guaranty in Washington or by making certain Washington law would govern by expressly so providing. We further stated, 68 Wash.Dec.2d at 195--196, 412 P.2d at 123:

In any event, we are not convinced that the fact pattern in the instant case is a particularly significant one. For this and the policy reason implicit in the principle of stare decisis, we adhere to our previous decisions and refrain At this time from adopting the 'center of gravity' or 'points of contact' approach to the contracts-choice-of-law problem involved herein. (Emphasis in original.)

The time for adoption of the center of gravity or most significant contacts approach has now come, and we do so by our decision in the instant matter.

The rule of lex loci contractus was first applied by this court in the second La Selle case, La Selle v. Woolery, 14 Wash. 70, 44 P. 115 (1896). This decision, which was on rehearing, departed from and overruled the well-reasoned decision in the first La Selle case, La Selle v. Woolery, 11 Wash. 337, 39 P. 663, 32 L.R.A. 73 (1895). The result of the first La Selle case has been considered commendable, and the rule traceable to the second La Selle case has been considered unfortunate. See note, 11 WASH.L.REV. 166 (1926); Maag v. Voykovich, 46 Wash.2d 302, 280 P.2d 680 (1955), concurring opinion of Hill, J. The rule of Lex loci contractus, or the law of the place of contracting, was adopted by the first Restatement of the Law of Conflict of Laws, even though it had never been a majority rule in the United States, simply because of what was once considered the inexorable, but is now the largely discredited, theory of vested rights. Reese, Conflict of Laws and the Restatement Second, 28 LAW & CONTEMP.PROB. 679 (1963); AM. LAW INSTITUTE, 37th ANNUAL MEETING PROCEEDINGS 494 (1961). The primary virtues of the rule, as found in the first Restatement, were thought to be simplicity and certainty. Cavers, Rerestating the Conflict of Laws: the Chapter on Contracts, in XXth CENTURY COMPARATIVE AND CONFLICTS LAW 349 (1961). The application of the theoretically simple formula to complex phenomena often failed to produce the desired certainty and simplicity. Ibid. The Lex loci contractus rule is not the easy, certain, and predictable panacea for all cases that it might superficially seem to be. Leflar, Conflict of Laws, Contracts, and the New Restatement, 15 ARK.L.REV. 163, 171 (1961). Some practical difficulties which may render its utility dubious can be best demonstrated by a hypothetical.

What if the vice president of Master Video had placed the rental agreement, unsigned, in his brief case and had left for a business appointment in Florida? Once aloft, he might choose to forego the various pleasures of air travel and make good use of the travel time by perusing the unfinished business in his brief case. Somewhere en route, he affixes his signature to the Monticello Hotel television rental agreement. Should a court attempt to ascertain the approximate time of the signing during the flight? By interpolating the pilot's log, should the judge conclude that the law of North Carolina applies, since the air-space of the Tar Heel State was the actual scene or loci of the execution of the contract? Or should the governing law be the law of the state of destination? Of the state of embarkation? The absurdity of placing the choice of law Necessarily on one fortuitous event--the place of execution--seems to be patent. It is not surprising then that at its 1960 meeting, the American Law Institute rejected the primacy of the place of making of the contract theory by a vote of 77 to 36. AM. LAW INSTITUTE, 37th ANNUAL MEETING PROCEEDINGS 505 (1961).

Is it not more rational and more consistent with standards of equity, fair play, and justice to attempt to ascertain which state had the most significant contacts with the agreement in dispute? 16 AM.JUR. Conflict of Laws, § 42 (1964); STUMBERG, PRINCIPLES OF CONFLICT OF LAWS 240--41 (3rd ed. 1963). The grouping of contacts or center of gravity theory admittedly lacks some of the apparent predictability and certainty of the Lex loci contractus formula. But again, predictability and certainty are not necessarily the only values which should govern the choice of the applicable law. The place of execution can be given important and possibly controlling effect under the significant contacts approach. However, other factors such as the apparent intention of the parties, the place of performance, and the place under whose law the agreement will be most effective should be accorded appropriate consideration in determining what state's law should govern litigated disputes involving contracts with multistate aspects.

The only other argument advanced in favor of continued adherence to the rule of Lex loci contractus is based on the policy reasons implicit in the doctrine of stare decisis. Too often courts justify decisions simply by stating in effect, as Justice Holmes observed, '(s)o it was in the time of Henry IV.' Holmes made the further observation that:

* * * (J)ust as the clavicle in the cat only tells of the existence of some earlier creature to which a collarbone was useful, precedents survive in the law long after the use they once served is at an end and the reason for them has been forgotten. The result of following them must often be failure and confusion from the merely logical point of view. HOLMES, THE COMMON LAW 35 (1881).

We think lex loci contractus is an unfortunately outstanding example of a rule which, in our modern multistate commercialism, has outlasted any usefulness it may ever have had, if it ever had any. As this court has said before in the case of State ex rel. Washington State Fin. Comm. v. Martin...