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§4.2.2 Avoiding situs law
  • 1 §4.2.2.1 The contract/conveyance distinction

    • 1.1 Polson v. Stewart

      1

      167 Mass. 211

      2
      RICHARD POLSON
      v.
      HENRY STEWART, Jr.
      3

      Suffolk. January 20, 21, 1896. —January 5, 1897.

      4

      Present: FIELD, C. J., ALLEN, HOLMES, LATHROP, & BARKER, JJ.

      5

      Specific Performance of Covenant — Husband and Wife — Conflict of Laws — Construction — Consideration.

      6

      [211] A covenant made by a husband to his wife in North Carolina where they are domiciled, to surrender all his rights in land owned by her in Massachusetts, may be enforced specifically here, if she has a right to contract with him by the law of North Carolina. FIELD, C. J. dissenting. A covenant by a husband, A., to his wife, B, "to surrender, convey, and transfer to said B. and her heirs all the rights of him the said A. in and to the lands and property above described which he may have acquired by reason of the aforesaid marriage, and the said B. is to have the full and absolute control and possession of all of said property free and discharged of all the rights, claims, or demands of every nature whatsoever of the said A.," embraces claims arising upon his wife's death. The fact that forbearance to bring a well founded suit for divorce is one of the considerations for a covenant does not invalidate the covenant.

      7

      BILL IN EQUITY, filed June 6, 1895, to enforce specific performance of a covenant executed by the defendant to his wife, Kitty T. P. Stewart, who died on December 26, 1898, intestate, and of whose estate the plaintiff, who was her brother, was appointed administrator, he having also acquired the rights of the other heirs in her estate.

      8

      The bill alleged, in substance, that the plaintiff's intestate, at the time of her death, and for more than two years previously, owned certain lands in this Commonwealth ; that she was married to the defendant on or about January 25, 1892 ; that during the months of December, 1892, and January, 1898, they had their domicil in the State of North Carolina, and differences arose between them, by reason of which they separated; that the conduct of the defendant was such that, by the laws of that State, his wife was entitled to maintain against him a suit for divorce, and to be decreed a suitable allowance for alimony; that she intended and was about to bring such suit, " when, in order to induce her to forbear from that intention, and for other good and adequate considerations," [212] the defendant made with her the agreements hereinafter mentioned ; that, relying upon such agreements, she abandoned the divorce proceedings which she had contemplated; that on or about January 4, 1893, she, with the consent of her husband, " entered herself as a free trader, and acquired the right of contracting and dealing as if she were sole" by a written instrument, marked A, " duly executed, proved, and registered pursuant to the laws of North Carolina," which instrument purported to have been executed on January 4, and registered on January 7, 1893 ; that " immediately after" she "became a free trader, and had acquired the right to contract as if she were sole" she released and covenanted to release her rights of dower in all the lands which the defendant then owned or might thereafter acquire, by an instrument in writing, marked B, and which recited that it was entered into on January 4, 1893; that, "in consideration of such release of dower, and of other good and adequate considerations," the defendant executed with his wife an instrument marked C, which was dated January 4, 1893, and which, after reciting that the parties were then living separate and apart, and that Mrs. Stewart owned certain lands in North Carolina and Massachusetts, provided as follows:

      9

      "And whereas both parties to this contract are desirous that the said Kitty T. Poison Stewart, Jr., shall have full, absolute, and complete possession, management, and control of all the above described property; now, therefore, in consideration of the above premises, and in consideration of one dollar this day paid the said Henry Stewart, Jr., doth by these presents covenant and agree to surrender, convey, and transfer to said Kitty T. Poison Stewart, Jr., and her heirs, all the rights of him, the said Henry Stewart, in and to the lands and property above described, which he may have acquired by reason of the aforesaid marriage; and the said Kitty T. Poison Stewart, Jr., is to have the free and absolute control and possession of all of said property, free and discharged of all the rights, claims, or demands of every nature whatsoever of the said Henry Stewart, Jr."

      10

      The bill further alleged that all the agreements were made, and the instruments were executed and delivered, in North Carolina, where the parties had their domicil at the time, and were valid and effectual instruments, according to their intent [213] under the laws of that State; that when the agreements and instruments were made and delivered the defendant owned valuable real estate in North Carolina and in other States, in which his wife had an inchoate right of dower; that the agreement by the wife to release her dower was a full and adequate consideration for the agreement of the defendant to release and surrender his marital rights, and the agreement was fully performed by her; that, " by reason of his agreement and promises in the instrument marked C," the defendant became bound Lo release to the heirs of his wife, upon her death, and to the plaintiff as the purchaser from them, all his right and estate in her property; and that, although requested, the defendant had refused to execute such release, or to perform his agreement in any respect, but contends that he is entitled to the same rights in the real estate of his wife as if the agreement had not been made, and threatens to enforce his claim thereto by legal proceedings.

      11

      The prayer of the bill was that the defendant might be enjoined from asserting against the plaintiff any title to the real estate in question ; and that he might be ordered to convey to the plaintiff all his right, title, and interest therein. Extracts from the statutes of North Carolina relating to husband and wife were annexed to the bill, § 1828 of which provides that the wife shall be a free trader from the time of registration ; and § 1835 provides that one of the requisites to the validity of a contract between a husband and wife shall be an examination of her separate and apart from him.

      12

      The defendant demurred to the bill, assigning several grounds therefor. Hearing before Knowlton, J., who, at the request of the parties, reserved the case upon the bill and demurrer for the consideration of the full court.

      13

      Q. B. Upham, for the defendant.

      14

      J. Fox, for the plaintiff. HOLMES,

      15

      J. This is a bill to enforce a covenant made by the defendant to his wife, the plaintiff's intestate, in North Carolina, to surrender all his marital rights in certain land of hers. The land is in Massachusetts. The parties to the covenant were domiciled in North Carolina. According to the bill, the wife took steps which under the North Carolina statutes [214] gave her the right to contract as a feme sole with her husband as well as with others, and afterwards released her dower in the defendant's lands. In consideration of this release, and to induce his wife to forbear suing for divorce, for which she had just cause, and for other adequate considerations, the defendant executed the covenant. The defendant demurs.

      16

      The argument in support of the demurrer goes a little further than is open on the allegations of the bill. It suggests that the instrument which made the wife a " free trader," in the language of the statute, did not go into effect until after the execution of the release of dower and of the defendant's covenant. But the allegation is that the last mentioned two deeds were executed after the wife became a free trader, as they probably were in fact, notwithstanding their bearing date earlier than the registration of the free trader instrument. We must assume that at the date of their dealings together the defendant and his wife had as large a freedom to contract together as the laws of their domicil could give them.

      17

      But it is said that the laws of the parties' domicil could not authorize a contract between them as to lands in Massachusetts. Obviously this is not true. It is true that the laws of other States cannot render valid conveyances of property within our borders which our laws say are void, for the plain reason that we have exclusive power over the res. Moss v. Moss, 129 Mass. 243, 246. Hallgarten v. Oldham, 135 Mass. 1, 7, 8. But the same reason inverted establishes that the lex rei sitae cannot control personal covenants, not purporting to be conveyances, between persons outside the jurisdiction, although concerning a thing within it. Whatever the covenant, the laws of North Carolina could subject the defendant's property to seizure on execution, and his person to imprisonment, for a failure to perform it. Therefore, on principle, the law of North Carolina determines the validity of the contract. Such precedents as there are, are on the same side. The most important intimations to the contrary which we have seen are a brief note in Story, Confl. of Laws, § 436, note, and the doubts expressed in Mr. Dicey's very able and valuable book. Lord Cottenham stated and enforced the rule in the clearest way in Ex parte Pollard, 4 Deac. 27, 40 et seq.; S. 0. Mont. & Ch. 239, 250. So Lord [215] Romilly in Good v. Good, 33 Beav. 314, 322. So in Scotland, in a case like the present, where the contract enforced was the wife's. Findlater v. Seafield, Faculty Decisions, 553, Feb. 8,1814. See also Ouninghame v. Sernple, 11 Morison, 4462; Erskine, Inst. Bk. 3, tit. 2, § 40; Westlake, Priv. Int. Law, (3d ed.) § 172 ; Rorer, Interstate Law, (2d ed.) 289, 290.

      18

      If valid by the law of North Carolina there is no reason why the contract should not be enforced here. The general principle is familiar. Without considering the argument addressed to us that such a contract would have been good in equity if made here, (Holmes v. Winchester, 133 Mass. 140, Jones v. Clifton, 101 U. S. 225, and Bean v. Patterson, 122 U. S. 496, 499,) we see no ground of policy for an exception. The statutory limits which have been found to the power of a wife to release dower (Mason v. Mason, 140 Mass. 63, and Peaslee v. Peaslee, 147 Mass. 171, 181) do not prevent a husband from making a valid covenant that he will not claim marital rights with any person competent to receive a covenant from him. Charles v. Charles, 8 Grat. 486. Logan v. Birkett, 1 Myl. & K. 220. Marshall v. Beall, 6 How. 70. The competency of the wife to receive the covenant is established by the law of her domicil and of the place of the contract. The laws of Massachusetts do not make it impossible for him specifically to perform his undertaking. He can give a release which will be good by Massachusetts law. If it be said that the rights of the administrator are only derivative from the wife, we agree, and we do not for a moment regard any one as privy to the contract except as representing the wife. But if then it be asked whether she could have enforced the contract during her life, an answer in the affirmative is made easy by considering exactly what the defendant undertook to do. So far as occurs to us, he undertook three things: first, not to disturb his wife's enjoyment while she kept her property ; secondly, to execute whatever instrument was necessary in order to release his rights if she conveyed ; and thirdly, to claim no rights on her death, but to do whatever was necessary to clear the title from such rights then. All these things were as capable of performance in Massachusetts as they would have been in North Carolina. Indeed, all the purposes of the covenant could have been [216] secured at once in the lifetime of the wife by a joint conveyance of the property to a trustee upon trusts properly limited. It will be seen that the case does not raise the question as to what the common law and the presumed law of North Carolina would be as to a North Carolina contract calling for acts in Massachusetts, or concerning property in Massachusetts, which could not be done consistently with Massachusetts law.

      19

      With regard to the construction of the defendant's covenant we have no doubt. It is " to surrender, convey, and transfer to said Kitty T. Poison Stewart, Jr., and her heirs, all the rights of him, the said Henry Stewart, Jr., in and to the lands and property above described, which he may have acquired by reason of the aforesaid marriage, and the said Kitty T. Poison Stewart, Jr., is to have the full and absolute control and possession of all of said property free and discharged of all the rights, claims, or demands of every nature whatsoever of the said Henry Stewart, Jr." Notwithstanding the decision of the majority in Roohon v. Leoatt, 2 Stew. (Ala) 429, we think that it would be quibbling with the manifest intent to put an end to all claims of the defendant if we were to distinguish between vested rights which had and those which had not yet become estates in the land, or between claims during the life of the wife and claims after her death. It is plain, too, that the words import a covenant for such further assurance as may be necessary to carry out the manifest object of the deed. See Marshall v. Beall,Q How. 70; Ward v. Thompson, 6 Gill & Johns. 349; Hutchins v. Dixon, 11 Md. 29; Hamrico v. Laird, 10 Yerger, 222; Mason v. Deese, 30 Ga. 308; MoLeod v. Board, 30 Tex. 238.

      20

      Objections are urged against the consideration. The instrument is alleged to have been a covenant. It is set forth, and mentions one dollar as the consideration. But the bill alleges others, to which we have referred. It is argued that one of them, forbearance to bring a well founded suit for divorce, was illegal. The judgment of the majority in Merrill v. Peaslee, 146 Mass. 460, 463, expressly guarded itself against sanctioning such a notion, and decisions of the greatest weight referred to in that case show that such a consideration is both sufficient and legal. Newsome v. Newsome, L. R. 2 P. & D. 308, 312. Wil-[217]-son v. Wilson, 1 H. L. Cas. 538, 574. Besant v. Wood, 12 Ch. D. 605, 622. Hart v. Bart, 18 Oh. D. 670, 685. Adams v. Adams, 91 N. Y. 381. Sterling v. Sterling, 12 Ga. 201. Then it is said that the wife's agreement in bar of her dower was invalid, because it had not the certificate that she had been examined, etc., as required by the North Carolina statutes annexed to the bill. Whether it was invalid or not, the defendant was content with it, and accepted the execution of it as a consideration. This being so, it would be hard to say that it was not one, even if without legal effect. Whether void or not, it is alleged to have been performed ; and finally, if it was void, it was void on its face, as matter of law, and the husband must be taken to have known it, so that the most that could be done would be to disregard it; if that were done, the other considerations would be sufficient. See Jones v. Waite, 5 Bing. N. C 341, 351.

      21

      Demurrer overruled.

      22

      FIELD, C. J. I cannot assent to the opinion of a majority of the court. By our law husband and wife are under a general disability or incapacity to make contracts with each other. The decision in Whitney v. Closson, 138 Mass. 49, shows, I think, that the contract sued on would not be enforced if the husband and wife had been domiciled in Massachusetts when it was made. As a conveyance made directly between husband and wife of an interest in Massachusetts land would be void although the parties were domiciled in North Carolina when it was made, and by the laws of North Carolina were authorized to make such a conveyance, so I think that a contract for such a conveyance between the same persons also would be void. It seems to me illogical to say that we will not permit a conveyance of Massachusetts land directly between husband and wife, wherever they may have their domicil, and yet say that they may make a contract to convey such land from one to the other which our courts will specifically enforce. It is possible to abandon the rule of lex rei sitce, but to keep it for conveyances of land and to abandon it for contracts to convey land seems to me unwarrantable.

      23

      The question of the validity of a mortgage of land in this Commonwealth is to be decided by the law here, although the [218] mortgage was executed elsewhere where the parties resided, and would have been void if upon land there situated. Goddard v. Sawyer, 9 Allen, 78. " It is a settled principle, that ' the title to, and the disposition of, real estate must be exclusively regulated by the law of the place in which it is situated.' " Cutter v. Davenport, 1 Pick. 81. Osborn v. Adams, 18 Pick. 245. The testamentary execution of a power of appointment given by will in relation to land is governed by the lex situs, or the law of the domicil of the donor of the power. Sewall v. Wilmer, 132 Mass. 131.

      24

      The plaintiff, merely as administrator, cannot maintain the bill. Caverly v. Simpson, 182 Mass. 462, 464. The plaintiff must proceed on the ground that Mrs. Henry Stewart, Jr. acquired by the instruments executed in North Carolina the right to have conveyed or released to her and her heirs by her husband all the interest he had as her husband in her lands in Massachusetts; that this right descended on her death to her heirs, according to the law of Massachusetts; and that the plaintiff, being an heir, has acquired the interest of the other heirs, and therefore brings the bill as owner of this right. The plaintiff, as heir, claims by descent from Mrs. Stewart, and if the contract sued on is void as to her, it is void as to him.

      25

      It is only on the ground that the contract conveyed an equitable title that the plaintiff as heir has any standing in court. His counsel founds his argument on the distinction between a conveyance of the legal title to land and a contract to convey it. If the instrument relied on purported to convey the legal title, his counsel in effect admits that it would be void by our law. He accepts the doctrine stated in Boss v. Moss, 129 Mass. 243, 246, as follows: " And the validity of any transfer of real estate by act of the owner, whether inter vivos or by will, is to be determined, even as regards the capacity of the grantor or testator, by the law of the State in which the land is situated." As a contract purporting to convey a right in equity to obtain the legal title to land, he contends that it is valid. I do not dispute the cases cited with reference to contracts concerning personal property, but the rule at common law in regard to the capacity of parties to make contracts concerning real property, as I read the cases and text-books, is that the lex situs governs. [219] Cochran v. Benton, 126 Ind. 58. Boyle v. McCruire, 38 Iowa, 410. Sell v. Miller, 11 Ohio St. 381. Johnston v. Qawtry, 11 Mo. App. 322. Frierson v. Williams, 57 Miss. 451.

      26

      Dicey on the Conflict of Laws is the latest text-book on the subject. He states the rule as follows.

      27

      Page lxxxix. " (B). Validity of Contract, (i) Capacity. " Rule 146. Subject to the exceptions hereinafter mentioned, a person's capacity to enter into a contract is governed by the law of his domicil (lex domicilii') at the time of the making of the contract.

      " (1) If he has such capacity by that law, the contract is, in so far as its validity depends upon his capacity, valid.

      " (2) If he has not such capacity by that law, the contract is invalid.

      "Exception 1. A person's capacity to bind himself by an ordinary mercantile contract is (probably) governed by the law of the country where the contract is made (lex loci contractus) [?].

      " Exception 2. A person's capacity to contract in respect of an immovable (land) is governed by the lex situs."

      Page xcii. " (A). Contracts with regard to Immovables. " Rule 151. The effect of a contract with regard to an immovable is governed by the proper law of the contract [?].

      " The proper law of such contract is, in general, the law of the country where the immovable is situate (lex situs)."

      28

      On page 517 et seq. he states the law in the same way, with numerous illustrations, but with some hesitation as to the law governing the form of contracts to convey immovables. See page xc, Rule 147, Exception 1. For American notes with cases, see page 527 et seq. In the Appendix, page 769, note (B), he discusses the subject at length, and with the same result. Some of the cases cited are the following: Succession of Larendon, 39 La. An. 952; Besse v. Pelloehoux, 73 111. 285; Fuss v. Fuss, 24 Wis. 256; Moore v. Church, 70 Iowa, 208; Reine v. Mechanics $ Traders Ins. Co. 45 La. An. 770; First National Bank of Attleboro v. Hughes, 10 Mo. App. 7; Ordronaux v. Rey, 2 Sandf. Ch. 33; Adams v. Clutterluck, 10 Q. B. D. 403; Chapman v. Robertson, 6 Paige, 627, 630.

      29

      Phillimore in 4 Int. Law, (3d ed.) 596, states the law as follows:

      30

      [220] " DCCXXXV. 1. The case of a contract respecting the transfer of immovable 'property illustrates the variety of the rules which the foreign writers upon private international law consider applicable to a contract to which a foreigner is a party : they say that,

      " i. The capacity of the obligor to enter into the contract is determined by reference to the law of his domicil.

      "ii. The like capacity of the obligee by the law of hu domicil. " iii. The mode of alienation or acquisition of the immovable property is to be governed by the law of the situation of that property.

      " iv. The external form of the contract is to be governed by the law of the place in which the contract is made.

      " It is even suggested by Foelix, that sometimes the interpretation of the contract may require the application of a fifth law.

      " DCCXXXVI. The Law of England, and the Law of the North American United States, require the application of the lex rei sitce to all the four predicaments mentioned in the last section.

      "DGCXXXVII. But a distinction is to be taken between contracts to transfer property and the contracts by which it is transferred. The former are valid if executed according to the lex loci contractus ; the latter require for their validity a compliance with the forms prescribed by the lex rei sitce. Without this compliance the dominium in the property will not pass."

      31

      To the same effect as to the capacity of the parties are Ratigan, Priv. Int. Law, 128 ; Whart. Confl. of Laws, (2d ed.) § 296; Story, Confl. of Laws, (8th ed.) §§ 424-431, 435 ; Rorer, Interstate Law, 263; Nelson, Priv. Int. Law, 147, 260. See Westlake, Priv. Int. Law, (3d ed.) §§ 156, 167 et seq.

      32

      On reason and authority 1 think it cannot be held that, although a deed between a husband and his wife, domiciled in North Carolina, of the rights of each in the lands of the other in Massachusetts, is void as a conveyance by reason of the incapacity of the parties under the law of Massachusetts to make and receive such a conveyance to and from each other, jet, if there are covenants in the deed to make a good title, the covenants can be specifically enforced by our courts, and a conveyance compelled, which, if voluntarily made between the parties, would be void.

      33

      I doubt if all of the instruments relied on have been executed in accordance with the statutes of North Carolina. By § 1828 of the statutes of that State set out in the papers, the wife became a free trader from the time of registration. This I understand is January 7, 1893. Exhibit B purports to have been executed before that time,-to wit, January 4, 1893. There does not appear to have been any examination of the wife separate and apart from her husband, as required by § 1835. If Exhibit B fails, there is at least a partial failure of consideration for Exhibit C. It is said that an additional consideration is alleged, viz. the wife's forbearing to bring a suit for divorce. Whether this last is a sufficient consideration for a contract I do not consider. It is plain enough that there was an attempt on the part of the husband and wife to continue to live separate and apart from each other without divorce, and to release to each other all the property rights each had in the property of the other. If the release of one fails, I think that this court should not specifically enforce the release of the other ; mutuality in this respect is of the essence of the transaction. If the husband owned lands in Massachusetts, and had died before his wife, I do not think that Exhibit B, even if it were executed according to the statutes of North Carolina, and the wife duly examined and a certificate thereof duly made, would bar her of her dower. Our statutes provide how dower may be barred. Pub. Sts. c. 124, §§ 6-9. Exhibit B is not within the statute. See Mason v. Mason, 140 Mass. 63. Ante-nuptial contracts have been enforced here in equity so as to operate as a bar of dower, even if they did not constitute a legal bar. Jenkins v. Holt, 109 Mass. 261. But post-nuptial contracts, so far as I am aware, never have been enforced here so as to bar dower, unless they conform to the statutes. Whitney v. Olosson, 138 Mass. 49. Whatever may be true of contracts between husband and wife made in or when they are domiciled in other jurisdictions, so far as personal property or personal liability is concerned, I think that contracts affecting the title to real property situate within the Commonwealth should be such as are authorized by our laws. I am of opinion that the bill should be dismissed.

    • 1.2 Gate City Fed. Sav. & Loan v. O'Connor

      1
      410 N.W.2d 448 (1987)
      2
      GATE CITY FEDERAL SAVINGS AND LOAN ASSOCIATION, f.k.a. Gate City Savings and Loan Association, Respondent,
      v.
      Martin E. O'CONNOR, et al., Appellants.
      3
      No. C8-86-2186.
      4

      Court of Appeals of Minnesota.

      5
      August 18, 1987.
      6
      Review Denied October 21, 1987.
      7

      [449] J. Philip Johnson, Robert A. Feder, Fargo, N.D., for respondent.

      8

      William A. Scholossman, Jr., Fargo, N.D., for appellants.

      9

      Heard, considered and decided by SEDGWICK, P.J., and PARKER and NIERENGARTEN, JJ.

      10
      OPINION
      11
      NIERENGARTEN, Judge.
      12

      Martin and Jean O'Connor appeal from the entry of a judgment of foreclosure on land in Minnesota and the entry of a deficiency judgment against them. They assert North Dakota law regarding deficiency judgments, not Minnesota law, should apply. We agree and reverse.

      13
      FACTS
      14

      In April 1978 the Aakres and the Moyers, North Dakota residents, borrowed $91,920 from Gate City Savings and Loan Association (Gate City) whose principal place of business is North Dakota. The loan involved four separate promissory notes executed and payable in Fargo, North Dakota. The notes were secured by four mortgages on condominiums located in Clay County, Minnesota. In June 1979 Martin and Jean O'Connor, North Dakota residents, assumed the notes and mortgages by an agreement executed at Gate City in Fargo, North Dakota.

      15

      In 1986 the O'Connors defaulted on the notes and mortgages. Gate City began an action in Clay County, Minnesota, to foreclose the mortgages and recover a deficiency judgment. Gate City moved for summary judgment. The O'Connors did not dispute the foreclosure but objected to entry of a deficiency judgment on the basis that such judgment would be contrary to North Dakota's antideficiency laws. On September 4, 1986, the trial judge issued the order of foreclosure. The condominiums were sold to Gate City on November 18, 1986, for $66,000, leaving a deficiency of $31,291.64 plus interest upon which a deficiency judgment would be entered pursuant to Minn.Stat. §§ 581.09, 582.30 (1986).

      16

      The O'Connors now appeal, arguing that North Dakota law should apply to the deficiency, not Minnesota law. Under North Dakota law, a deficiency judgment is possible [450] but only after the fair market value of the property is determined in a trial proceeding. According to North Dakota law, Gate City is entitled to a deficiency judgment in an amount equal to the difference between the fair market value and the unpaid balance due on the notes.

      17
      ISSUES
      18

      1. Is determination of a deficiency judgment procedural or substantive law?

      19

      2. If substantive, should Minnesota or North Dakota law be applied?

      20
      ANALYSIS
      21
      I
      22

      When faced with a conflict of law question, the first step is determining whether there is a conflict. Hague v. Allstate Insurance Co., 289 N.W.2d 43, 46-47 (Minn.1979), aff'd, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981). If Minnesota law is applied, the O'Connors will have a $31,291 personal judgment automatically entered. If North Dakota law is applied, there may be no deficiency or a deficiency of a lesser amount entered. The method of determining the existence and amount of a deficiency judgment is significantly different.

      23

      Once a conflict is established, the next step is to determine if the law involved is procedural or substantive. Matters involving procedure and remedies are governed by the law of the forum state. Davis v. Furlong, 328 N.W.2d 150, 153 (Minn.1983). The court of the forum determines if a given question is one of substance or procedure. Anderson v. State Farm Mutual Automobile Insurance Co., 222 Minn. 428, 432, 24 N.W.2d 836, 839 (1946). The district court found that under both North Dakota and Minnesota law, the appropriate forum for foreclosure suits is determined by the location of the land and the law of the forum governs the foreclosure procedure. See Connecticut Mutual Life Insurance Co. v. Conley, 194 Minn. 41, 259 N.W. 390 (1935); Wilson v. Kryger, 29 N.D. 28, 149 N.W. 721 (1914); Cosgrave v. McAvay, 24 N.D. 343, 139 N.W. 693 (1913). The trial court determined that the act of foreclosure was a remedy or procedure and thus governed by Minnesota law.

      24

      A law is substantive if it will substantially affect the result. See Guaranty Trust Co. of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079 (1945). If North Dakota law on deficiency judgments applies, the O'Connors may incur either no judgment, or a larger or smaller one. If Minnesota law applies, there is a certain, relatively large deficiency judgment. Since the respective deficiency judgment laws are significantly different and application of the statutes will substantially affect the result, we hold that deficiency judgments are matters of substantive law.

      25
      II
      26

      When the conflict involves substantive law, the court must determine which law applies. In Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973), the Minnesota Supreme Court adopted an analysis for determination of the applicable law. The test involved:

      27
      (a) Predictability of results; (b) maintenance of interstate and international order; (c) simplification of the judicial task; (d) advancement of the forum's governmental interest; and (e) application of the better rule of law.
      28

      Id. at 161, 203 N.W.2d at 412.

      29
      (a) Predictability of Results
      30

      In the past obligations incurred by residents of one state, in that state, to be performed in that state, were governed by the laws of that state. See Patterson v. Wyman, 142 Minn. 70, 170 N.W. 928 (1919) (mortgaged property was in Minnesota but Minnesota recognized usury laws of North Dakota where contract arose); Clement v. Willett, 105 Minn. 267, 117 N.W. 491 (1908) (validity of mortgage assumption made in Minnesota relating to land in Iowa was governed by Minnesota law). Because these were North Dakota residents with an obligation to be performed in North Dakota [451] the application of North Dakota law could be predicted.

      31
      (b) Maintenance of Interstate and International Order
      32
      This concept requires that the state whose laws are ultimately applied have sufficient contacts with the facts in issue.
      33

      Hague, 289 N.W.2d at 48. The material contacts in this case all favor application of North Dakota law. The notes were signed in North Dakota and were to be performed in North Dakota. The loan modification agreements were executed in North Dakota. All the parties to the transaction are residents of North Dakota. The only contact with Minnesota is the fact that the land securing the notes happens to be located here.

      34
      (c) Simplification of the Judicial Task
      35

      Frequently, this factor is irrelevant since one court can apply the applicable statute as well as any other court. Hague, 289 N.W.2d at 49. A Minnesota court should have no problem applying the appropriate North Dakota statute.

      36
      (d) Advancement of the Forum's Governmental Interest
      37

      In analyzing the forum's interest, the public policy of North Dakota also must be considered. Myers v. Government Employees Insurance Co., 302 Minn. 359, 365, 225 N.W.2d 238, 242 (1974). It does not appear that Minnesota should have any particular interest in a North Dakota contract between North Dakota residents. The North Dakota antideficiency statute demonstrates a clear interest in balancing the rights of the North Dakota lenders and debtors.

      38
      (e) Better Rule of Law
      39

      The "better law" is to be applied only when the other considerations leave the choice of law uncertain. Myers, 302 Minn. at 368, 225 N.W.2d at 244. The previous tests all favor application of North Dakota law, as does the better rule of law test.

      40

      Under Minnesota law, the sale price of the foreclosed property determines the amount of the deficiency. Frequently, the only bidder is the lender. If there are no other bidders, the only risk the lender runs in bidding low is the risk the property will be redeemed. A defaulting borrower is unlikely to be in a position to redeem. If there are other bidders, the sale price may be more fair and more accurately reflect the property's value. The North Dakota requirement that a jury determine the value of the property and base the deficiency judgment on the difference between actual value and debt is more equitable. The mortgagee will still be entitled to a deficiency judgment if the land value is insufficient to cover the debt.

      41
      DECISION
      42

      Determination of a deficiency judgment following a foreclosure is substantive not procedural law. In applying the tests established to resolve conflicts of law, we determine that North Dakota law should apply. The portion of the judgment requiring entry of a deficiency judgment in favor of Gate City is reversed.

      43

      Reversed.

  • 2 §4.2.2.2 Constructive trusts

    • 2.1 Rudow v. Fogel

      1
      12 Mass. App. Ct. 430 (1981)
      2
      426 N.E.2d 155
      3
      WILLIAM RUDOW[1]
      vs.
      ALBERT FOGEL.
      4

      Appeals Court of Massachusetts, Essex.

      5
      May 20, 1981.
      6
      September 17, 1981.
      7

      Present: ARMSTRONG, ROSE, & DREBEN, JJ.

      8

      James T. Ronan (Mary P. Harrington with him) for the plaintiff.

      9

      Bertram Glovsky (Jane Kilduff with him) for the defendant.

      10
      DREBEN, J.
      11

      This dispute is the sequel to Rudow v. Fogel, 376 Mass. 587 (1978), and involves a parcel of real estate located in Rockport, Massachusetts, which has been the subject of litigation since the death of the plaintiff's mother in 1963.[2] The principal issue in this appeal is what law should Massachusetts apply in determining whether the defendant, the plaintiff's uncle, holds the property in constructive [431] trust for the plaintiff. The trial judge found that the property was transferred to the defendant in New York on an oral trust at a time when the plaintiff, his mother, and the defendant were all domiciled in New York. We hold that, in the circumstances of this case, Massachusetts should look to New York law.

      12

      We state the relevant facts found by the trial judge. Marvin and Florence Rudow, the parents of the plaintiff William Rudow, purchased the Rockport property in 1958, taking title as tenants by the entirety. They operated a jewelry store in Rockport during the summer but lived in New York City during the rest of the year, where Florence taught school. In 1961, William's parents separated, Florence brought divorce proceedings in New York, and Marvin moved to Rockport. The plaintiff and Florence lived in New York with Florence's mother and with the defendant Albert Fogel, who was Florence's brother.

      13

      Great animosity developed between Marvin and Florence. Nevertheless, in 1962, while Florence was hospitalized for cancer, Marvin conveyed his interest in the Rockport property to Florence. The judge found this was done "out of a sense of remorse over the failure of the marriage and also because he felt sorry for his wife." The conveyance was a gift to Florence without any promise on her part of any kind.

      14

      In May, 1962, Florence made a will which, after several small gifts, left the residue of her property in trust for the plaintiff to be distributed to him at age twenty-five.[3] Thereafter, on July 27, 1962, "anxious to keep the property away from her husband, then and in the future," Florence conveyed the Rockport property to the defendant in New York. The transfer was without consideration. The judge found, and his finding is not clearly erroneous, that at the time of transfer the defendant orally agreed that he would hold the property for the benefit of the plaintiff and "would turn it [432] over to the plaintiff when [he] reached maturity." The judge also found that there was no fraud on the part of the defendant.

      15

      It appears that there is a difference between Massachusetts local law[4] and New York law as to when a confidential (fiduciary) relationship may be found between close family members so as to impose a constructive trust. While recognizing that "respectable authority," including the State of New York,[5] imposes a constructive trust on the principle "that a confidential relationship arises where the conveyance is made between members of a family," Ranicar v. Goodwin, 326 Mass. 710, 713 (1951), the Supreme Judicial Court has ruled, as a matter of Massachusetts local law, that "a confidential relationship does not arise merely because the conveyance was made between members of the family, even if the transferee promised to hold the land in trust." Meskell v. Meskell, 355 Mass. 148, 152 (1969). The court explicitly rejected Restatement (Second) of Trusts § 44, Comment c (1959).[6] Id. This holding was reaffirmed in [433] Kelly v. Kelly, 358 Mass. 154, 156-157 (1970). See also Markell v. Sidney B. Pfeifer Foundation, Inc., 9 Mass. App. Ct. 412, 443-444 (1980). Compare Samia v. Central Oil Co., 339 Mass. 101, 112 (1959), where additional factors resulted in a fiduciary relationship.

      16

      New York law permits a confidential relationship to be found "in the bond of kinship," and "unjust enrichment under cover of the relation of confidence ... puts the court in motion." Sinclair v. Purdy, 235 N.Y. 245, 253 (1923). See also Farano v. Stephanelli, 7 App. Div.2d 420, 424 (N.Y. 1959); Janke v. Janke, 47 App. Div.2d 445, 448-449 (1975), affirmed, 39 N.Y.2d 780 (1976). See also 1 Scott, Trusts §§ 44.2, 45.2 (3d ed. 1967) and cases cited, and 4 Palmer, Restitution § 19.3(b) (1978), which criticizes the Massachusetts rule.

      17

      The trial judge, applying Massachusetts local law, ruled that there was no constructive trust. Although he refused specific performance, he held that the plaintiff was not without remedy, and entered judgment for the plaintiff in the amount of the fair value of the property less expenses incurred by the defendant. The award to the plaintiff in the amount of the value of the property, less reasonable expenses, is in accord with Massachusetts law. See Cromwell v. Norton, 193 Mass. 291, 292-293 (1906); Kemp v. Kemp, 248 Mass. 354, 357-358 (1924); Collins v. Hillis, 7 Mass. App. Ct. 883 (1979) (action by beneficiary of promise).

      18

      In determining that there was no constructive trust, the judge followed the traditional conflicts rule which looks to the law of the situs for determining all material questions involving legal or beneficial interests in land. See, e.g., Herman v. Edington, 331 Mass. 310, 314 (1954) (whether sufficient declaration of an express trust); Hill v. Peterson, 323 Mass. 384, 386 (1948) (resulting trust).[7] See also 5 Scott, Trusts § 652, at 4123 (3d ed. 1967).

      19

      [434] The Supreme Judicial Court has, however, in a series of cases, rejected the notion that a single test is appropriate for determining which law governs all questions relating to a transaction. The court can be said to have adopted a "more functional approach." See Choate, Hall & Stewart v. SCA Servs., Inc., 378 Mass. 535, 541 (1979). See also Restatement (Second) of Conflict of Laws § 6(2) (1971).[8]

      20

      Thus, although the traditional tort conflicts rule provides for reference to the law of the place where the tort occurred, in Pevoski v. Pevoski, 371 Mass. 358, 360 (1976), the court recognized that "another jurisdiction may sometimes be more concerned and more involved with certain issues than the State in which the conduct occurred." In that case, which involved a three-car collision in New York State, the Pevoski automobile was registered in Massachusetts (as apparently were the other two) and all three vehicles were driven by Massachusetts residents. The plaintiff, a passenger in the car driven by her husband, brought an action against him for damages, and he defended on the ground of interspousal tort immunity. The court held that Massachusetts law governed that question. After pointing out that "the economic and social impact of this litigation will fall on Massachusetts domiciliaries and a Massachusetts insurer," the court concluded, "New York has an undoubted interest in enforcing its traffic laws and in making its highways safe for travel but it has no legitimate interest in regulating the interspousal relationships of Massachusetts domiciliaries who chance to be injured within its borders." Id.

      21

      [435] Although the court in Choate, Hall & Stewart v. SCA Servs., Inc., had no occasion to look to foreign law, id. at 541, it rejected reference to the law of the place of making of a contract as determinative of all issues involved in the transaction. Id. The court noted, "[T]here is nothing unusual about the laws of different States applying respectively to various phases of a single transaction or incident." Id. at 542.

      22

      While the court has not recently ruled on choice-of-law questions concerning trusts involving land, it has rejected the law of the situs as the only criterion for resolving all questions pertaining to an inter vivos trust. This is true even if the trust expressly directs that the trust shall be governed by and construed in accordance with internal Massachusetts law. In First Natl. Bank v. Shawmut Bank, 378 Mass. 137, 147-148 (1979), a Connecticut settlor created a revocable inter vivos trust in Massachusetts and directed her trustees to pay from the trust all estate and inheritance taxes imposed by reason of her death. Her will, executed while she was a resident of Connecticut but probated in Florida, her domicil at the time of her death, provided that such taxes were to be paid from the residue of her estate. In sending the matter back for more findings, the court found a significant choice of law question despite earlier Massachusetts cases[9] which appeared to have rejected a reference to any law, other than Massachusetts local law, to determine tax apportionment questions for Massachusetts trusts. The court found it unnecessary to decide "at this time whether the suggestion of the Isaacson and Warfield opinions on choice of law would be accepted today." Id. at 145. While recognizing that the law of the situs would often be given recognition in construing the trust instrument and rights and obligations under it, particularly when the trust expressly so directs, the court pointed out, "In particular circumstances, there may be reason to look to the law of [436] that jurisdiction with which the testator-settlor had the greatest contact at significant times (such as her domicil at the time of execution of the trust and will), or perhaps one would look to the law of that jurisdiction which the testatorsettlor had reason to believe would be applicable." Id. at 147.

      23

      We think these recent Massachusetts cases suggest that a trial court should examine the interests of both concerned jurisdictions, here Massachusetts and New York, and the interest of our interstate system before deciding what law is appropriate for Massachusetts to apply. See Restatement (Second) of Conflict of Laws § 6(2) (1971), set forth in note 8, supra. See generally Von Mehren & Trautman, Multistate Problems 193-200, 59-65, 76-79 (1965); Hancock, Conceptual Devices for Avoiding the Land Taboo in Conflict of Laws: The Disadvantages of Disingenuousness, 20 Stan. L. Rev. 1, especially 39 (1967).

      24

      The most important interest of the situs in land transactions is the protection of bona fide purchasers or other persons who rely on the record title. Additionally, it is desirable for purposes of convenience that a purchaser and his title searchers need consult only the law of one jurisdiction. See Restatement (Second) of Conflict of Laws § 223, Comment b (1971); Von Mehren & Trautman, supra at 197; Hancock, supra at 22. Here there are no such persons involved as these proceedings are solely between the defendant, the record holder of the real estate, and the plaintiff. See Kozdras v. Land/Vest Properties, Inc., 382 Mass. 34, 44 (1980) (registered land). Massachusetts also has an interest in upholding its Statute of Frauds; however, the policy underlying the Statute of Frauds is not here involved to any greater degree than in any other situation involving a constructive trust.

      25

      The concern at stake is not related to the situs of property but is analogous to the one recognized in Pevoski v. Pevoski, 371 Mass. at 360-361. Massachusetts is interested in establishing for its domiciliaries the obligations of family members to one another. New York has a similar interest for its [437] domiciliaries. Here, New York "has the dominant contacts and the superior claim for application of its law." Id. at 360.

      26

      The defendant, his sister and the plaintiff were domiciled in New York at the time the property was transferred to the defendant in that State. It appears that Florence Rudow had an attorney for the transaction. She knew that she was not yet divorced. Both her will and the judge's findings indicate that a primary reason for the transfer was to prevent Marvin from having any interest in the form of marital rights or otherwise in the property. Florence's legitimate expectation, enforceable under New York local law, was that her brother would hold the property for her son.

      27

      In estate or commercial planning areas, the intentions of the settlor-testator or the contracting parties are significant both for local law and choice-of-law decisions. See Restatement (Second) of Conflict of Laws § 6(2) (1971), note 8, supra, which lists as a factor "the protection of justified expectations." See generally Ehrenzweig, The Statute of Frauds in the Conflict of Laws: The Basic Rule of Validation, 59 Colum. L. Rev. 874 (1959). See also Trautman, A Comment on Twerski and Mayer: A Pragmatic Step Towards Consensus as a Basis for Choice-of-law Solutions, 7 Hofstra L. Rev. 830, 838 (1979). Cf. National Shawmut Bank v. Cumming, 325 Mass. 457, 463 (1950). The intention of the testatorsettlor was in the forefront of the choice-of-law discussion in First Natl. Bank v. Shawmut Bank, 378 Mass. at 147, where the court referred to the possibilities of looking to the law of the testator-settlor's domicil at the time of the execution of her will and trust, or "to the law of that jurisdiction which the testator-settlor had reason to believe would be applicable." See also Polson v. Stewart, 167 Mass. 211 (1897), where, speaking through Holmes, J., the court applied North Carolina law to validate a covenant between husband and wife whereby the husband agreed to surrender all of his marital rights in land located in Massachusetts. "If valid by the law of North Carolina there is no reason why the contract should not be enforced here. The general principle is familiar.... [W]e see no ground of policy for an exception." Id. at 215. See also Bernkrant v. Fowler, 55 Cal.2d 588, 595-596 (1961).

      28

      [438] Moreover, the interests of our interstate system as well as the interests of New York and Massachusetts are furthered by applying a single law in determining whether a given situation creates a fiduciary relationship. It is desirable that the same law apply to all property involved in the same transaction wherever situated. "[A]wkward or arbitrary results" can be produced, see Choate, Hall & Stewart v. SCA Servs., Inc., 378 Mass. at 541, if different laws are applied to different portions of a settlor-testator's property based solely on the fortuitous physical location of his or her assets. In Keith v. Eaton, 58 Kan. 732, 738 (1897), a testator had owned parcels of land located in four different states. The possibility of applying four different rules of construction in determining whether an illegitimate son was included as an heir "furnish[ed] the reason for giving over to the law of [the] testator's domicile the interpretation of his will, unless to do so contravenes the law of the place where the will is probated." See also In re Estate of Clark, 21 N.Y.2d 478, 485 (1968), where the court held that the law of Virginia, the testatorsettlor's domicil, governed the widow's right of election including assets held by a New York trustee. Compare National Shawmut Bank v. Cumming, 325 Mass. at 462-463. See generally 5 Scott, Trusts § 648, at 4097 (3d ed. 1967). See also Restatement (Second) of Conflict of Laws § 223, Comment i (1971), which, as set forth in the margin, suggests that New York law be applied in this case.[10]

      29

      There are no policy considerations against applying that law here. Massachusetts is not opposed to constructive trusts. To the contrary, in Kelly v. Kelly, 358 Mass. at 156, [439] which held Massachusetts does not find a fiduciary relationship merely because the parties are family members, the court recognized the need for imposing constructive trusts to avoid unjust enrichment where legal title is obtained "in violation of a fiduciary relation." Massachusetts would impose no legal impediment even if the defendant were a Massachusetts domiciliary, had he wished to honor his promise, Twomey v. Crowley, 137 Mass. 184, 185 (1884), and, indeed, as the court below correctly ruled, Massachusetts law does impose an obligation on the promisor to return the value of the property. Kemp v. Kemp, 248 Mass. at 357-358.

      30

      Our conclusion that New York law applies was, of course, not anticipated by the trial judge and, as a result, he made no findings as to whether there was an abuse of a confidential relationship under New York law. Our previous discussion has indicated that there are differences between Massachusetts and New York law and that a confidential (fiduciary) relationship will be much more readily found between family members in New York. However, the question is still one for determination by the trier of fact. Sinclair v. Purdy, 235 N.Y. at 252; Farano v. Stephanelli, 7 App. Div.2d at 427; Sharp v. Kosmalski, 40 N.Y.2d 119, 122-123 (1976).

      31

      The other issues raised by the parties are either without merit (especially their claims of inadequate pleading) or not argued within the meaning of Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975).

      32

      The matter is remanded to the Superior Court for further proceedings consistent with this opinion, including a determination whether there was, in fact, a confidential relationship between Florence Rudow and the defendant. The trial judge may in his discretion decide that question without hearing additional evidence. If he determines that there was a confidential relationship, the judgment is to be vacated and a new judgment is to be entered which shall include an order for the transfer of the property to the plaintiff. If it is determined that there was no confidential relationship,[11] [440] the judgment of May 12, 1980, is to stand, subject to such modification as the trial judge deems appropriate to reflect the reasonable expenses of or charges to the defendant since that date.

      33

      So ordered.

      34

      [1] By Marvin Rudow, his father and next friend.

      35

      [2] A brief explanation of the prior litigation involving the defendant and the plaintiff's father appears in Rudow v. Fogel, 6 Mass. App. Ct. 822 (1978), and in Rudow v. Fogel, 376 Mass. at 588-589. The Supreme Judicial Court agreed with the ruling of this court that the present action was not barred by the principles of former adjudication. Id. at 588.

      36

      [3] The plaintiff was born on March 11, 1956. We note that he has now reached the age of twenty-five.

      37

      [4] As used in this opinion, the terms "local law" or "internal law" refer to the laws of a given jurisdiction exclusive of its rules as to choice of law (conflicts rules). See Restatement (Second) of Conflict of Laws § 4(1) (1971).

      38

      [5] The authority cited by the court in Ranicar v. Goodwin included Sinclair v. Purdy, 235 N.Y. 245, 253 (1923).

      39

      [6] "Comment c. Where transferee is in a confidential relation to transferor. Where the owner of land transfers it inter vivos to another in trust for the transferor, but no memorandum properly evidencing the intention to create a trust is signed, the transferee will be compelled to hold the land upon a constructive trust for the transferor, if the transferee at the time of the transfer was in a confidential relation to the transferor.... Such a confidential relation exists not only where there is a fiduciary relation such as exists between attorney and client, ... and the like, but also where, because of family relationship or otherwise, the transferor is in fact accustomed to be guided by the judgment of the transferee or is justified in placing confidence in the belief that the transferee will act in the interest of the transferor.... It would seem, indeed, that wherever the transferee orally agrees to hold the property transferred to him in trust for the transferor there is a sufficient relation of confidence thereby created to justify imposing a constructive trust upon him if he breaks his promise; but some courts require additional evidence of confidence in the relation between them before they will impose a constructive trust." (Emphasis supplied.)

      40

      [7] We note that in both Herman v. Edington and Hill v. Peterson there was no apparent difference between the internal law of the situs and the law of the other concerned jurisdiction. Hence, there was no serious choice-of-law question before the court.

      41

      [8]Section 6(2) sets forth the choice of law factors which are relevant where there is no statutory directive as to choice of law. These factors include:

      42

      "(a) the needs of the interstate and international systems,

      "(b) the relevant policies of the forum,

      "(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

      "(d) the protection of justified expectations,

      "(e) the basic policies underlying the particular field of law,

      "(f) certainty, predictability and uniformity of result, and

      "(g) ease in the determination and application of the law to be applied."

      43

      [9] Isaacson v. Boston Safe Deposit & Trust Co., 325 Mass. 469 (1950), and Warfield v. Merchants Natl. Bank. 337 Mass. 14 (1958).

      44

      [10] "i. Collateral questions.... [T]he courts of the situs would usually apply their local law to determine whether a conveyance transfers an interest in land and the nature of the interest so transferred. On the other hand, these courts might apply the local law of some other state to determine questions that are incidental or collateral to the conveyance. So ..., for example ... if the basis of A's claim is that B obtained delivery of the deed in breach of a fiduciary obligation owed A, the X court would probably apply the local law of the state having the most significant relationship to the parties with respect to the particular issue in determining whether B did owe A a fiduciary obligation and, if so, whether this obligation was breached."

      45

      [11] Since both New York (see In re Buehler's Estate, 186 Misc. 306 [Sur. Ct. N.Y. County 1945], affirmed, 272 App. Div. 757 [N.Y. 1947]; Sutton v. Sandler, 18 App. Div.2d 362, affirmed, 13 N.Y.2d 1007 [1963]) and Massachusetts appear to give the plaintiff a remedy even in the absence of a constructive trust, we need not consider which law should be applied.

  • 3 4.2.2.3 Choice of law clauses

    • 3.1 Citibank, N.A. v. Errico

      1
      251 N.J. Super. 236 (1991)
      2
      597 A.2d 1091
      3
      CITIBANK, N.A., PLAINTIFF-RESPONDENT,
      v.
      ANTHONY ERRICO, DEFENDANT-APPELLANT.
      4

      Superior Court of New Jersey, Appellate Division.

      5
      Submitted September 16, 1991.
      6
      Decided October 16, 1991.
      7

      [238] Before Judges PETRELLA, ASHBEY and A.M. STEIN.

      8

      Hellring Lindeman Goldstein & Siegal, attorneys for appellant (Richard B. Honig and Matthew E. Moloshok, on the brief).

      9

      [239] Friedman Siegelbaum, attorneys for respondent (Joel R. Glucksman and Lindsey H. Taylor, on the brief).

      10
      The opinion of the court was delivered by PETRELLA, P.J.A.D.
      11

      Defendant Anthony Errico appeals from a September 11, 1990 order granting plaintiff Citibank N.A. (Citibank) summary judgment and entering a deficiency judgment of $2,601,149.08 as of August 3, 1990. The deficiency proceeding was instituted against Errico after foreclosure of a mortgage and security agreement which he and others had given to the bank in connection with a one year loan of $5,500,000. Errico's cross-motion for summary judgment dismissing the deficiency action was denied by the Law Division in the same order.

      12

      The underlying dispute between the parties arose out of the foreclosure of a mortgage and note on property known as Harbor Island Spa (the Spa) in Long Branch, New Jersey.

      13

      The facts are neither complicated nor disputed. On February 11, 1986, Errico, along with Ahmed Elsaid and Karim Elsaid (the Elsaids) executed a $5,500,000 note in favor of plaintiff Citibank secured by a first mortgage against the Spa, as well as mortgages against other properties (two in Hudson County and one in Monmouth County). Citibank was to be paid monthly interest at a rate of Citibank's prime rate plus .05%, with a balloon payment due on February 11, 1987.

      14

      The Mortgage Note and Security Agreement contained the following choice of law provisions:

      15
      This note is made and delivered in the Borough of Manhattan, City, County and State of New York, where all advances and repayments shall be made. The Maker agrees that this Note shall be construed in accordance with and governed by the laws of said State.
      16
      36.... this Mortgage, the Note and all other instruments, bearing even date herewith, in connection with the loan evidenced by the Note, have been executed and delivered in the Borough of Manhattan, City, County and State of New York. This Mortgage, the Note and said other instruments shall, in all respects, be governed, construed, applied and enforced in accordance with the [240] laws of the said State, except as to matters affecting title to Premises which shall be governed by the applicable laws of the State of New Jersey.
      17

      Citibank instituted foreclosure proceedings in the Chancery Division, Monmouth County, against Errico as well as the Elsaids on the mortgage when the parties failed to make the balloon payment on the maturity date. A judgment was entered in the foreclosure action and the sale of the Spa was ordered. However, the sale was stayed by the filing of a bankruptcy petition by the Elsaids. The stay was vacated by consent order of April 18, 1989 which also established that Citibank was entitled to $7,100,000 plus interest, fees and costs payable from the proceeds of the foreclosure sale. That order further provided that Errico and the Elsaids were not precluded from contesting the interest rate used by Citibank, and that Errico, as a second mortgagee, did not waive his right to object to confirmation of the sale.

      18

      A fair market value appraisal of the property was prepared in connection with the bankruptcy proceedings by Citibank's expert, Cushman & Wakefield, Inc., which indicated that as of February 3, 1989, the Spa's fair market value was $9,500,000. The Spa was sold at public auction on May 24, 1989, pursuant to the bankruptcy court order, to Citibank, the only bidder at the auction, for $5,900,000. Errico did not object to the auction price.[1]

      19

      Citibank then sued in the Law Division seeking a deficiency judgment against Errico in the amount of $1,769,153.17.[2] Errico moved to dismiss the complaint under R. 4:6-2(e), asserting a failure to state a claim upon which relief can be granted, and alleging that pursuant to New York law, which he asserted governed the transaction, no deficiency existed because he was [241] entitled to a $9.5 million credit for the fair market value of the property based on Citibank's own appraisal. After his motion to dismiss was denied on May 10, 1990, Errico filed an answer and demand for jury trial which contained an affirmative defense that no deficiency existed because the Spa's fair market value exceeded the debt claimed under the mortgage note.

      20

      Subsequently, Citibank moved for summary judgment arguing that (1) under N.J.S.A. 2A:50-3 Errico was not entitled to a fair market value credit in a commercial transaction; and (2) Errico's failure to object to the foreclosure sale price precluded him from claiming the fair market value credit. Errico cross-moved for summary judgment, alleging that New York law governed the deficiency proceeding based upon the choice of law provisions contained in the mortgage and note. In particular, Errico argued that New York's Real Property Actions and Proceedings Law (RPAPL) § 1371, subdivision 2, requires that when calculating a deficiency judgment, the debtor shall be credited with the higher of the fair market value as determined by the court, or the sale price. Thus, Errico claimed entitlement to a credit of $9,500,000, the appraised value of the Spa established for Citibank just three months prior to the foreclosure sale.

      21

      Citibank argued that New York's RPAPL provision is a procedural rule which is inapplicable to foreclosure and deficiency actions brought outside the State of New York, and that under general conflicts of law principles, New Jersey law governs the procedural aspects of the deficiency judgment proceeding.

      22

      After argument on the motions, summary judgment was entered in favor of Citibank. The judge's brief oral opinion addressed only the issue of which law governed the deficiency proceeding. Without distinguishing between the foreclosure action and the deficiency action, he concluded that New Jersey [242] law should apply because the property and foreclosure were in New Jersey.[3]

      23

      The summary judgment order from which Errico now appeals was entered on September 11, 1990. On Errico's request, execution and levy upon the judgment were stayed pending appeal, subject to certain conditions.

      24

      Because the mortgage and note specifically provided that New York law was to govern the financing transaction, but not title matters, Errico relies on the deficiency judgment provisions in RPAPL § 1371, subdivision 2, which states:

      25
      Such deficiency judgment shall be for an amount equal to the sum of the amount owing by the party liable as determined by the judgment with interest, plus the amount owing on all prior liens and encumbrances with interest, plus costs and disbursements of the action including the referee's fee and disbursements, less the market value as determined by the court or the sale price of the property whichever shall be the higher. (Emphasis added)
      26

      Citibank contends that the New York fair market value credit provisions (sometimes referred to as the anti-deficiency provisions) is procedural, and, thus does not apply under conflicts of law principles, in a New Jersey forum. It also contends that regardless of the "substantive" or "procedural" designation, the New York legislature did not intend for RPAPL § 1371 to apply to property located outside of New York.

      27

      The determination of whether a fair market value credit is substantive or procedural is generally accomplished in accordance with the law of the forum state, here New Jersey. See H. Goodrich & F. Scoles, Conflict of Laws, § 81 (4th ed. 1964). Light v. Granatell, 171 N.J. Super. 557, 410 A.2d 266 (App.Div. 1979), does not support Citibank's argument that RPAPL § 1371, subdivision 2, is procedural, rather than substantive. Light only considered RPAPL § 1301, which was intended to [243] prevent multiplicity of suits on the same debt, and concluded that that section was procedural. Section 1371 deals with the extent of a debtor's liability, a substantive right, rather than how a creditor is to proceed in enforcing liability, the procedural aspect. We find persuasive the language in Gate City Federal Savings & Loan Ass'n v. O'Connor, 410 N.W.2d 448, 450 (Minn. Ct. App. 1987), which held a fair market value credit statute to be substantive:

      28
      A law is substantive if it will substantially affect the result. See Guaranty Trust Co. of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079 (1945). If North Dakota's law on deficiency judgments applies, the O'Connors may incur either no judgment, or a larger or smaller one. If Minnesota law applies, there is a certain, relatively large deficiency judgment. Since the respective deficiency judgment laws are significantly different and application of the statute will substantially affect the result, we hold that deficiency judgments are matters of substantive law. [410 N.W.2d at 450] (Emphasis added).
      29

      We consider the New York law deficiency provisions to be substantive, but in any event even if they were procedural, there is no bar to the parties agreeing to apply the New York deficiency provisions to the non-title aspects of the financing arrangements. Simply stated, there is no impediment to applying a contractual choice of substantive law provision as long as the public policy of the forum state is not violated. Kalman Floor Co., Inc. v. Jos. L. Muscarelle, Inc., 196 N.J. Super. 16, 481 A.2d 553 (App.Div. 1984), aff'd o.b. 98 N.J. 266, 486 A.2d 334 (1985); Crinnion v. The Great Atlantic-Pacific Tea Co., 156 N.J. Super. 479, 384 A.2d 159 (App.Div. 1978); Knollmeyer v. Rudco Industries, Inc., 154 N.J. Super. 309, 381 A.2d 378 (App.Div. 1977), certif. denied 77 N.J. 477, 391 A.2d 492 (1978). Thus, the parties may expressly provide that the validity and interpretation of the mortgage and note are governed by the substantive laws of a state other than New Jersey.

      30

      Citibank argues that to apply the anti-deficiency provisions of the New York statute would be against the public [244] policy of this State because N.J.S.A. 2A:50-2.3(a), as amended,[4] contains a provision which exempts mortgage notes used in connection with mortgages for most business or commercial purposes from New Jersey's fair market value credit provision.

      31

      New Jersey's law now generally equates notes and bonds for the order of proceedings to collect a debt secured by a mortgage. N.J.S.A. 2A:50-2. It requires that in calculating a deficiency judgment a debtor shall be credited with the fair market value of the property. As a part of that law N.J.S.A. 2A:50-3 provides:

      32
      The obligor in any bond or note specified in section 2A:50-2 of this Title, with respect to any bond given after March 29, 1933, and with respect to any note given after the effective date of this amendatory act may file an answer in the action for deficiency, disputing the amount of the deficiency sued for. In that event both parties may introduce evidence as to the fair market value of the mortgaged premises at the time of the sale thereof in the foreclosure action, and the court, with or without a jury, shall determine the amount of such deficiency, by deducting from the debt secured the amount determined as the fair market value of the premises. If all parties to the action shall so agree, the court may accept as the fair market value of the mortgaged premises the value fixed by three appraisers, to be named by agreement of all the parties to the action, which agreement shall be evidenced by a stipulation to be filed in the action. (Emphasis added)
      33

      N.J.S.A. 2A:50-2.3 provides:

      34
      This act shall not apply to proceedings to collect a debt evidenced by a note and secured by a mortgage on real property in the following instances:
      35
      a. Where the debt secured is for a business or commercial purpose other than a two-family, three-family or four-family residence in which the owner or his immediate family resides;
      36
      b. Where the mortgaged property is other than a one-family, two-family, three-family or four-family dwelling in which the owner or his immediate family resides at the time of institution of proceedings to collect the debt;
      37
      c. Where a banking institution, savings and loan association or building and loan association, operating pursuant to State or Federal law, is the lender or his [245] assignee and the mortgage is not the primary security for the debt, as evidenced by (1) the financial condition of one or more persons directly or indirectly liable on the note, or (2) the giving of collateral in addition to the mortgage as security for the debt;
      38
      d. Where a banking institution, savings and loan association, building and loan association or licensed secondary mortgage lender, operating pursuant to State or Federal law, is the lender, and the mortgage is given to secure payment of a loan evidenced by a note, and where the mortgage so given is subject to the lien or liens of a prior mortgage or mortgages not held by such institution or association or by any holder in which such institution or association has an interest or with which such institution or association has an affiliation. (Emphasis added).
      39

      Errico argues that New Jersey law requires the court to consider fair market value in determining whether to grant the deficiency judgment, and that the statutory exception for commercial or business property does not preclude that result. Thus, Errico argues that we should conclude that the trial judge should have found that the Spa's fair market value exceeded and extinguished the personal debt based on Citibank's own appraisal, which reflected a fair market value in excess of the personal debt.

      40

      The enactment of Laws of 1979, chapter 286, was intended to eliminate the difference in treatment between bonds and notes secured by real estate mortgages so that a creditor would first have to look to the property in satisfaction of the debt, before personal liability was sought to be enforced on personal guarantees. See Central Penn National Bank v. Stonebridge, Ltd., 185 N.J. Super. 289, 304, 448 A.2d 498 (Ch.Div. 1982), and N.J.S.A. 2A:50-2. In Central Penn National Bank, the court did not limit the fair market value credit to residential property, but, in the case of a corporate debtor, imposed conditions, including a condition that "in the event of a suit for a deficiency, and upon objection to the sale of the mortgaged premises, defendants be permitted ... a fair market value hearing under the equitable deficiency proceedings pursuant to 79-83 Thirteenth Avenue v. DeMarco [44 N.J. 525, 210 A.2d 401 (1965)]...." 185 N.J. Super. at 312, 448 A.2d 498. The Chancery Division judge considered the fact that the secured debt in [246] the matter before him was for business or commercial purposes and fell within the exception of N.J.S.A. 2A:50-2.3(a) and (b). Id. at 304, 448 A.2d 498.

      41

      The judge in Central Penn National Bank clearly did not consider that the application of equitable principles in resolving that case conflicted in any way with the statute. Nor do we find any violation of public policy here in allowing the parties to contract for the application of New York law. The exceptions in N.J.S.A. 2A:50-2.3 do not create the type of policy statement that precludes private agreements. This statute merely declares the extent to which the Legislature was able to agree on equating mortgage bonds and notes at that time.

      42

      The argument raised by Citibank that the New York legislature did not intend for its deficiency statute to operate extraterritorially is a make-weight argument under these circumstances. Under our federal-state system no state purports to enact any legislation to operate extraterritorially, unless there is a legislatively sanctioned compact with another state or states or, perhaps, a uniform act. Citibank's argument is without merit where parties contract to be bound by a law that has a reasonable nexus to the transaction.

      43

      The case before us differs markedly from Key Bank of Alaska v. Donnels, 106 Nev. 49, 787 P.2d 382 (1990), which we do not find persuasive in any event. There, the Alaska statute's anti-deficiency language was specifically limited to Alaska land. The parties had contractually agreed in the mortgage note that Alaska law would govern. However, they agreed in the deed of trust (the counterpart of a mortgage) that they would be governed by Nevada law, thus setting up a conflict. Under those circumstances, the court declined to apply Alaska's anti-deficiency statute.

      44

      Even in the absence of the contractual provision applying New York law, Citibank's argument that there is no entitlement to a fair market value credit in a deficiency action in New Jersey on a note where business or commercial property is [247] involved is not a correct statement of our law. Although N.J.S.A. 2A:50-2.3 was amended to exempt mortgages secured by notes for business and commercial properties from the fair market credit provision, we find nothing which precludes a court from applying equitable principles to impose a fair market value credit to prevent a windfall or where circumstances require equitable relief in the interests of justice. See Hudson City Savings Bank v. Hampton Gardens, Ltd., 88 N.J. 16, 438 A.2d 323 (1981); 79-83 Thirteenth Avenue v. DeMarco, 44 N.J. 525, 210 A.2d 401 (1965), and Morsemere Federal Savings & Loan Ass'n v. Nicolau, 206 N.J. Super. 637, 503 A.2d 392 (App.Div. 1986). As we have noted, the Chancery Division applied equitable principles in conditioning relief on a fair market value hearing in Central Penn National Bank v. Stonebridge, Ltd., supra (185 N.J. Super. at 311, 448 A.2d 498). An equity court has the inherent power to prevent a potential double recovery or windfall to a judgment creditor. Morsemere Federal Savings & Loan Ass'n, supra (206 N.J. Super. at 645, 503 A.2d 392). Morsemere recognized that the court has equitable powers to mold relief. Although the deficiency suit here was instituted in the Law Division, rather than the Chancery Division, under our constitution each court has the ability to fashion equitable remedies. N.J. Const. of 1947, art. VI, § 3, para. 4; Wojcek v. Pollock, 97 N.J. Super. 319, 325, 235 A.2d 58 (Law Div. 1967). See also Winberry v. Salisbury, 5 N.J. 240, 247, 74 A.2d 406 (1950). We also note that the property involved in 79-83 Thirteenth Avenue Ltd. v. DeMarco, supra (44 N.J. 525, 210 A.2d 401) (a case decided before the amendments to the deficiency statutes), was commercial property but nonetheless, the court noted the inherent unfairness of the situation and applied traditional equitable principles. Such principles were also followed in Central Penn National Bank, decided after the amendments, which likewise involved business property. This analysis is particularly apt where the evidence of the security value being in excess of the debt was derived not from the debtor, but from the creditor.

      45

      [248] We conclude that, in accordance with the agreement by the parties in the note and mortgage, New York law applies to the deficiency claim, and that alternatively, under the circumstances here, New Jersey law allows a deficiency hearing to preclude a windfall under general equitable principles. Accordingly, we remand for a deficiency hearing at which the fair market value of the property at the time of foreclosure sale shall be determined and the calculation of any credit to be allowed defendant in the deficiency action.

      46

      We reject Citibank's contention that Errico is precluded under the entire controversy doctrine from claiming a fair market value credit because he failed to object to the sale price in the bankruptcy court, as permitted by the bankruptcy court order. In the first place, a debtor is not required to object to a foreclosure sale price as a prerequisite for claiming a fair market value credit in a deficiency suit under N.J.S.A. 2A:50-3. McCloskey v. M.P.J. Co., 85 N.J. Super. 573, 575, 205 A.2d 469 (Law Div. 1964). Although the foreclosure judgment sets the amount due on the debt and may be res judicata among the parties, it is not determinative as to the debtor's liability for a deficiency in a separate suit. See Central Penn National Bank v. Stonebridge, Ltd., supra (185 N.J. Super. at 302, 448 A.2d 498). A claim that no personal liability exists, e.g., that the fair market value of the property exceeds the mortgage debt, is a personal defense which is properly asserted in the deficiency action. See N.J.S.A. 2A:50-3. To assert it in a foreclosure proceeding would be premature. Central Penn National Bank, supra (185 N.J. Super. at 310, 448 A.2d 498). In addition, although the bankruptcy court ordered sale of the Spa, it did not have exclusive jurisdiction over the property and certainly did not have jurisdiction in the deficiency suit instituted by Citibank against Errico. See 28 U.S.C.A. § 1334(b); Matter of Lemco Gypsum, Inc., 910 F.2d 784, 788 (11th Cir.1990). In our view, the deficiency claim is independent of the bankruptcy proceeding for entire controversy doctrine purposes.

      47

      [249] Likewise, a defense to personal liability on the note by virtue of a claimed fair market value credit is not germane to either the foreclosure action or the bankruptcy matter. The entire controversy doctrine does not bar Errico's claim here. See Ayers v. Jackson Tp., 202 N.J. Super. 106, 493 A.2d 1314 (App.Div. 1985), mod. 106 N.J. 557, 525 A.2d 287 (1987); Zaromb v. Borucka, 166 N.J. Super. 22, 398 A.2d 1308 (App.Div. 1979). Since the deficiency cause of action did not accrue until after the foreclosure proceeding, and until the property was sold for less than the amount owed on the note, there can be no bar by virtue of the entire controversy doctrine. Indeed, it might equally be argued that if Errico were barred by the entire controversy doctrine, Citibank's own deficiency claim would be barred because it had not been asserted in the foreclosure action. Obviously, neither party is barred because the involved claims could not have been presented earlier. See Viviano v. CBS, Inc. 251 N.J. Super. 113, 128-129, 597 A.2d 543, 551 (App.Div. 1991).

      48

      Errico also argues that Citibank's "wholly conclusory affidavit as to the balance allegedly due under the Note," without any supporting documents or computations, does not suffice to establish the amount due. The affidavit submitted by Citibank states that as of April 1, 1990, it was entitled to a $2,345,409 deficiency judgment. We recognize that the issue was not raised below, and hence need not be considered by us. See Nieder v. Royal Indemn. Ins. Co., 62 N.J. 229, 234, 300 A.2d 142 (1973). Nevertheless, because of the circumstances here, where Citibank submitted a fair market value appraisal which exceeded the amount due on the mortgage, and the deficiency action was decided on a motion for summary judgment which addressed only the issue of which law governed and not the amount due or the deficiency procedure itself, the interests of justice are best served by remanding for a hearing to determine the amount of the deficiency, if any.

      49

      Because it was not a question of allowing the debtor to file an answer under N.J.S.A. 2A:50-3 to dispute the amount due in [250] the deficiency action, but merely allowing the debtor to use the creditor's own appraisal figures, no delay or extended hearing is required. On a remand Citibank must prove the amount due and the parties may agree to an appraisal procedure, perhaps with the designation of three appraisers, as set forth in N.J.S.A. 2A:50-3, to determine the value of the security in the creditor's hands so that there may be an expeditious determination of any deficiency.

      50

      In light of our determination we need not address Errico's contention that Citibank should be estopped from arguing that New York law applies because its pleadings and briefs filed in the foreclosure action sought the application of New York law.

      51

      We reverse the order granting summary judgment and remand for a hearing to determine the amount of the deficiency, if any, and the allowance of a fair market credit under equitable principles to the extent that the fair market value at the time of the foreclosure sale exceeded the price for which the property was bid in by Citibank.

      52

      [1] We are informed that the other three properties subject to the mortgage were of insufficient equity to yield a monetary return to Citibank and were not foreclosed.

      53

      [2] The deficiency complaint was originally filed in Passaic County. By consent order of September 13, 1989, venue was changed to Bergen County.

      54

      [3] Errico argues that the judge failed to make sufficient findings and conclusions under R. 1:7-4. Respondent in effect acknowledges this, but urges us to nonetheless decide the case on the record and the law.

      55

      [4] L. 1979, c. 286 § 13, effective May 1, 1980, amended by L. 1981, c. 333 § 1, effective December 14, 1981. Although not argued in this case, subsections b and c could also be applicable. Indeed, this section as written would appear to run counter to the purpose of the amendments by N.J.S.A. 2A:50-2 and 3 which purported to treat mortgages secured by notes the same as those secured by bonds. See Central Penn National Bank of Stonebridge, Ltd., 185 N.J. Super. 289, 304, 448 A.2d 498 (Ch.Div. 1982).

    • 3.2 CS-Lakeview, Inc. v. Simon Property Group

      1
      642 S.E.2d 393 (2007)
      2
      CS-LAKEVIEW AT GWINNETT, INC.
      v.
      SIMON PROPERTY GROUP, INC. et al.
      Simon Property Group, Inc. et al.
      v.
      CS-Lakeview at Gwinnett, Inc.
      3
      Nos. A06A1841, A06A1842.
      4

      Court of Appeals of Georgia.

      5
      February 22, 2007.
      6

      [395] Mayfield, Commander & Pound, William S. Mayfield, Constance E. Rodts, Atlanta, for appellant.

      7

      Morris, Manning & Martin, John F. Manning, Donald A. Loft, Ross A. Albert, Atlanta, for appellees.

      8
      MIKELL, Judge.
      9

      In the wake of their failed joint venture concerning a commercial property in Gwinnett County, CS-Lakeview at Gwinnett, Inc. (CS-Lakeview), and Simon Property Group, Inc., and its related entities (Simon) entered into a settlement agreement under which CS-Lakeview gained a right of first refusal should Simon obtain a third-party offer as to the Gwinnett property. When such an offer materialized, however, the parties differed as to the procedures to follow, and CS-Lakeview sued Simon and others for breach of contract and other claims. The trial court granted summary judgment to Simon on the ground that CS-Lakeview's right of first refusal was invalid under Delaware's rule against perpetuities, but allowed CS-Lakeview's unjust enrichment claim to go forward. Both parties now appeal. We conclude that none of CS-Lakeview's claims are viable. We therefore affirm in Case No. A06A1841 and reverse in Case No. A06A1842.

      10

      The relevant facts are not in dispute. In 1985, CS-Lakeview and the Simon Property Group, both of which are Delaware corporations, began a joint venture to develop 133 acres of land in Gwinnett County. Disputes arose, and Simon sued CS-Lakeview in Delaware Chancery Court in 1994. In the settlement agreement reached late the following year, Simon received the Gwinnett property, while CS-Lakeview retained a right of first refusal under which it could match any "bona fide" offer received "at any time after November 30, 1995." Among other things, the settlement agreement provided that the parties would "take all additional actions that may be necessary or appropriate to give full force and effect to the terms and intent of [the] Agreement" and that it was "subject to and construed in accordance with the laws of the state of Delaware."

      11

      In May 2000, Simon gave CS-Lakeview notice that Retail Development Partners (RDP) had made a "bona fide" offer of $5.5 million for the Gwinnett property. When CS-Lakeview asked for additional information, however, Simon reported that it had not yet received a written offer on the property. To avoid litigation over CS-Lakeview's right of first refusal, Simon proposed an option agreement based on RDP's tentative price of $5.5 million. The parties negotiated a license under which CS-Lakeview would inspect the property to determine its prospects for development, [396] but failed to reach agreement on the remaining terms of the option agreement. On October 6, 2000, CS-Lakeview offered $3.85 million for the Gwinnett property.[1] Soon afterward, Simon rejected this offer, although CS-Lakeview objected that its right had been ignored. In June 2001, Simon sold the Gwinnett property to RDP for the same $5.5 million price it had quoted to CS-Lakeview the previous October.

      12

      On March 1, 2002, CS-Lakeview filed a breach of contract action against Simon and associated entities. CS-Lakeview later added Chicago Title Insurance Company (CTIC) as a defendant, alleging tortious interference with contract, fraudulent conveyance, civil conspiracy and other claims. CS-Lakeview also sued RDP in federal court. The federal district court granted summary judgment to RDP on grounds including that the right of first refusal was void under Delaware's rule against perpetuities. After the Eleventh Circuit affirmed on other grounds, the trial court in this case revisited the choice-of-law issue on Simon's motion for summary judgment and also held that CS-Lakeview's right of first refusal was invalid because it violated Delaware's rule against perpetuities. The trial court denied Simon's motion as to CS-Lakeview's unjust enrichment claim, however.

      13
      Case No. A06A1841
      14

      1. CS-Lakeview first argues that the trial court erred when it granted summary judgment to Simon on its breach of contract claim. We disagree.

      15

      This case is governed by well-established conflict-of-law principles. Under OCGA § 11-1-105(1), "when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties."[2] "Absent a contrary public policy, this court will normally enforce a contractual choice of law clause."[3] As we have previously explained:

      16
      [A] contract should not be held unenforceable as being in contravention of public policy except in cases free from substantial doubt where the prejudice to the public interest clearly appears. Enforcement of a contract or a contract provision which is valid by the law governing the contract will not be denied on the ground of public policy, unless a strong case for such action is presented; mere dissimilarity of law is not sufficient for application of the public policy doctrine.[4]
      17

      Applying these principles to this case, it is plain that the settlement agreement at issue here bears a "reasonable relation" to the state of Delaware and its laws. CS-Lakeview and Simon Property Group are both Delaware corporations, the settlement agreement ended a lawsuit filed in Delaware, and the parties chose to construe that agreement under Delaware law. As the Supreme Court of Georgia noted long ago as it enforced a note executed in Georgia but payable elsewhere:

      18
      To construe this note and mortgage as we have done works injustice to no one, but puts the parties where they manifestly intended to put themselves. . . . The contract being under our laws perfectly legal, [the defendant] cannot and ought not to expect the courts of this State to release him from his solemn and deliberate undertakings.[5]
      19

      [397] Despite its own negotiated choice of Delaware law, CS-Lakeview argues that its right of first refusal is governed by and valid under Georgia law. Specifically, it asserts that the right, though a future interest in property, is exempt from Georgia's version of the Uniform Statutory Rule against Perpetuities, which "shall not apply to . . . [a] nonvested property interest . . . arising out of a nondonative transfer."[6] A contractual right of first refusal is neither a property interest nor a "nonvested" version of the same, however. Instead, a right of first refusal is a personal and contractual right under Georgia law, and does not run with the land as to which the right is given.[7]

      20

      It is true that Delaware law goes further than Georgia's in its pursuit of a policy favoring the alienability of land, as when Delaware disallows a right of first refusal with an unlimited duration.[8] But this difference does not necessarily signify that such a right violates Georgia public policy. In Shiver v. Benton,[9] for example, a co-tenant filed suit to enjoin a sale of property as in violation of a first refusal agreement without any explicit time limit.[10] Our Supreme Court held that when a right of first refusal "is not tied to a fixed price method or some method of pricing which may not reflect true market value, but is conditioned upon meeting a sale price which the seller is willing to accept, [such an a]greement encourages the development of [a] property to its fullest potential."[11] Since the right of first refusal at issue was "compatible with the policies of commerce and utilization of land," the Shiver court concluded that the right neither violated Georgia's rule against perpetuities nor acted as an illegal restraint on alienation.[12]

      21

      Like the provision at issue in Shiver, CS-Lakeview's bargained-for right of first refusal allowed it to participate in the open market for the Gwinnett property by giving it a chance to buy at a price reached in that market. Georgia public policy does not bar such provisions. But we respect the parties' selection of Delaware law and conclude that Delaware law voids that right.[13]

      22

      2. CS-Lakeview also contends that if its right of first refusal is invalid, the trial court erred in failing (a) to reform the settlement agreement so as to remedy the parties' mutual mistake in choosing Delaware law, which invalidates the right, in favor of Georgia law, which authorizes the right; or (b) to require Simon to execute a document agreeing to apply Georgia law. There is nothing in the record, however, to contradict the conclusion that the parties intended the right of first refusal to be of unlimited duration. As in Thomas v. Murrow,[14] "[t]he question is whether or not the manner in which the parties reflected [their] intention"—here, the settlement provision containing the right of first refusal—"violates the rule against perpetuities."[15]

      23

      Division 1 holds that the settlement provision does indeed violate Delaware's version of the rule. OCGA § 23-2-27 provides that "where the facts are all known and there is no misplaced confidence and no artifice, deception, or fraudulent practice is used . . ., [a [398] party's mere ignorance of the law] shall not authorize the intervention of equity." As Georgia courts have often held, then, the trial court did not err when it denied CS-Lakeview equitable relief for its mere ignorance of applicable Delaware law.[16]

      24

      3. Finally, CS-Lakeview argues that the trial court erred when it granted summary judgment to CTIC concerning CS-Lakeview's claims for tortious interference and other wrongs. We disagree.

      25

      A plaintiff asserting tortious interference with a contractual relationship must show that the defendant "(1) acted improperly and without privilege; (2) acted purposely and with malice with the intent to injure; (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff; and (4) caused the plaintiff financial injury."[17]

      26

      The record shows that as a result of RDP's concerns about CS-Lakeview's right of first refusal, and in exchange for an agreement to indemnify CTIC against "any claims arising out of the [right of first refusal,]" Simon obtained title insurance from CTIC. There is nothing in the record, however, to support a finding that CTIC committed any wrongful act, including the inducement of Simon to breach CS-Lakeview's right of first refusal. By November 2000, Simon had decided to sell the Gwinnett property to RDP, whereas CTIC did not agree to issue its title insurance policy until June 2001. Like the trial court, the federal district court, and the Eleventh Circuit before us, we conclude that because CTIC could not have induced Simon's alleged breach, CS-Lakeview's claim for tortious interference, as well as its claims for civil conspiracy, punitive damages and fees arising from the same transaction, must therefore fail.[18]

      27
      Case No. A06A1842
      28

      4. In the companion case, Simon cross-appeals from the trial court's denial of its summary judgment motion as to CS-Lakeview's unjust enrichment claim. The trial court held that because CS-Lakeview likely would not have agreed to the settlement agreement without the inclusion of its right of first refusal, a question of fact remained as to whether the invalidation of that right would unjustly enrich Simon. Simon now reasserts arguments made below that CS-Lakeview actually received its bargained-for right and that its unjust enrichment claim is time-barred.

      29

      Here, only one part of the settlement agreement has been held invalid, and the agreement contains a severability clause asserting that "[i]f any part or provision of this agreement should be held void or invalid, the remaining provisions shall remain in full force and effect." "A severability clause indicates the intent of the parties where the remainder of the contract can exist without the void portion."[19] The law of unjust enrichment applies, moreover, only when there is no express contract between the parties.[20]

      30

      We have held in Division 2 above that CS-Lakeview cannot turn to equity to reform the settlement agreement. It is likewise true, then, that it cannot obtain equitable compensation for any alleged unjust enrichment arising from the invalidation of a bargained-for term in that valid contract when it contains a severability clause.[21] Finally, [399] even if the law of unjust enrichment were available to CS-Lakeview, its own complaint shows that it received the right it bargained for when Simon informed it of RDP's "bona fide" offer of $5.5 million for the Gwinnett property. For these reasons, we reverse the trial court's denial of Simon's motion for summary judgment on CS-Lakeview's unjust enrichment claim, and need not reach Simon's contention that this claim is time-barred.

      31

      Judgment affirmed in Case No. A06A1841 and reversed in Case No. A06A1842.

      32
      BLACKBURN, P.J., and ADAMS, J., concur.
      33

      [1] One of CS-Lakeview's business associates testified that no larger offer was made because the entity was in the "embarrassing situation" of not being able to obtain the larger amount.

      34

      [2] See also Lafitte v. Lawton, 25 Ga. 305, 308 (1858) (construing marriage settlement entered into in South Carolina concerning land in Georgia under South Carolina law); Daniel F. Hinkel, Pindar's Georgia Real Estate Law and Procedure, § 1-4 (6th ed.2004), p. 10 ("resort may be had to the law of other states in determining the intentions of the parties to contracts who resided in other states at the time of execution, even though so doing may incidentally affect title to realty in Georgia") (footnotes omitted).

      35

      [3] (Citations omitted.) Carr v. Kupfer, 250 Ga. 106, 107(1), 296 S.E.2d 560 (1982), citing New England Mtg. Security Co. v. McLaughlin, 87 Ga. 1, 13 S.E. 81 (1891).

      36

      [4] (Citations and punctuation omitted; emphasis supplied.) Nationwide Gen. Ins. Co. v. Parnham, 182 Ga.App. 823, 825(4), 357 S.E.2d 139 (1987).

      37

      [5] New England Mtg. Security Co., supra at 5-6, 13 S.E. 81.

      38

      [6] OCGA § 44-6-204(1).

      39

      [7] See Ricketson v. Bankers First Sav. Bank, 233 Ga.App. 11, 13-14(1), 503 S.E.2d 297 (1998); Hasty v. Health Svc. Centers, 258 Ga. 625, 373 S.E.2d 356 (1988).

      40

      [8] See Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1384-1385(III) (Del.1991).

      41

      [9] 251 Ga. 284, 304 S.E.2d 903 (1983).

      42

      [10] Id.

      43

      [11] Id. at 286(1), 304 S.E.2d 903.

      44

      [12] Id. at 287(1), 304 S.E.2d 903.

      45

      [13] See Stuart Kingston, supra (right of first refusal with unlimited duration violates Delaware's rule against perpetuities); see also Manderson & Assoc. v. Gore, 193 Ga.App. 723, 725(1), 389 S.E.2d 251 (1989) (honoring contract's choice of Alabama law concerning employment and stock agreements); Nationwide Gen., supra at 825-826(4), 357 S.E.2d 139 (honoring contract's choice of Texas law concerning claim under Texas insurance policy); compare Nasco, Inc. v. Gimbert, 239 Ga. 675, 676(2), 238 S.E.2d 368 (1977) (because validity of covenants not to disclose was a matter of Georgia public policy, trial court correctly disregarded contract's choice of Tennessee law).

      46

      [14] 245 Ga. 38, 262 S.E.2d 802 (1980).

      47

      [15] Id. at 39(2), 262 S.E.2d 802.

      48

      [16] Id.; see also Robbins v. Nat. Bank of Ga., 241 Ga. 538, 543-544(2), 246 S.E.2d 660 (1978).

      49

      [17] (Citation and punctuation omitted.) Atlanta Multispecialty Surgical Assoc. v. DeKalb Med. Center, 273 Ga.App. 355, 356(2), 615 S.E.2d 166 (2005).

      50

      [18] See id. (when one element of tortious interference fails, the entire claim fails); Nelson & Hill, P.A. v. Wood, 245 Ga.App. 60, 67-68(3), 537 S.E.2d 670 (2000) (granting summary judgment on punitive damages dependent on claim for breach of fiduciary duty).

      51

      [19] (Citations omitted.) Capricorn Systems v. Pednekar, 248 Ga.App. 424, 428-429(2)(d), 546 S.E.2d 554 (2001); see also OCGA § 13-1-8.

      52

      [20] See Cox v. Athens Regional Med. Center, 279 Ga.App. 586, 593(3), 631 S.E.2d 792 (2006).

      53

      [21] See id. (affirming dismissal of unjust enrichment claim when parties entered into valid contract); Capricorn, supra at 426-429(2)(a)-(d), 546 S.E.2d 554 (invalidating restrictive covenant, but enforcing employment contract containing severability clause); compare Imerman v. London, 255 Ga.App. 140, 564 S.E.2d 544 (2002) (refusing to find global settlement agreement severable without noting whether agreement had severability clause).

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