184 N.Y.S.2d 599
5 N.Y.2d 317, 157 N.E.2d 597

DANANN REALTY CORP., Respondent,
v.
David A. HARRIS et al., Appellants.

Court of Appeals of New York.
March 5, 1959.

[184 N.Y.S.2d 600] [157 N.E.2d 598] [5 N.Y.2d 318] George E. Netter, Morris A. Marks and Milton Waxenfeld, New York City, for appellants.

David Haar, New York City, for respondent.

[5 N.Y.2d 319] BURKE, Judge.

The plaintiff in its complaint alleges, insofar as its first cause of action is concerned, that it was induced to enter into a contract of sale of a lease of a building held by defendants because of oral representations, falsely made by the defendants, as to the operating expenses of the building and as to the profits to be derived from the investment. Plaintiff, affirming the contract, seeks damages for fraud.

[184 N.Y.S.2d 601] At Special Term, the Supreme Court sustained a motion to dismiss the complaint. On appeal, the Appellate Division unanimously reversed the order granting the dismissal of the complaint. Thereafter the Appellate Division granted leave to appeal, certifying the following question: “Does the first cause of action in the complaint state facts sufficient to constitute a cause of action?”

The basic problem presented is whether the plaintiff can possibly establish from the facts alleged in the complaint (together with the contract which was annexed to the complaint) reliance upon the misrepresentations (Cohen v. Cohen, 1 A.D.2d 586, 151 N.Y.S.2d 949, affirmed 3 N.Y.2d 813, 166 N.Y.S.2d 10).

We must, of course, accept as true plaintiff's statements that during the course of negotiations defendants misrepresented the operating expenses and profits. Such misrepresentations are undoubtedly material. However, the provisions of the written contract which directly contradict the allegations of oral representations are of equal importance in our task of reaching a decisive answer to the question posed in these cases.

[5 N.Y.2d 320] The contract, annexed to and made a part of the complaint, contains the following language pertaining to the particular facts of representations:

"The Purchaser has examined the premises agreed to be sold and is familiar with the physical condition thereof. The Seller has not made and does not make any representations as to the physical condition, rents, leases, expenses, operation or any other matter or thing affecting or related to the aforesaid premises, except as herein specifically set forth, and the Purchaser hereby expressly acknowledges that no such representations have been made, and the Purchaser further acknowledges that it has inspected the premises and agrees to take the premises 'as is' . . . It is understood and agreed that all understandings and agreements heretofore had between the parties hereto are merged in this contract, which alone fully and completely expresses their agreement, and that the same is entered into after full investigation, neither party relying upon any statement or representation, not embodied in this contract, made by the other. The Purchaser has inspected the buildings standing on said premises and is thoroughly acquainted with their condition." (Emphasis supplied.)

Were we dealing solely with a general and vague merger clause, our task would be simple. A reiteration of the fundamental principle that a general merger clause is ineffective to exclude parol evidence to show fraud in inducing the contract would then be dispositive of the issue (Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714). To put it another way, where the complaint states a cause of action for fraud, the parol evidence rule is not a bar to showing the fraud either in [184 N.Y.S.2d 602] the inducement or in the execution despite an omnibus statement that the written instrument embodies the [157 N.E.2d 599] whole agreement, or that no representations have been made. Bridger v. Goldsmith, 143 N.Y. 424, 38 N.E. 458; Angerosa v. White Co., 248 App.Div. 425, 290 N.Y.S. 204, affirmed 275 N.Y. 524, 11 N.E.2d 325; Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 566; 3 Williston, Contracts (Rev. ed.), § 811A.

Here, however, plaintiff has in the plainest language announced and stipulated that it is not relying on any representations as to the very matter as to which it now claims it was defrauded. Such a specific disclaimer destroys the allegations in plaintiff's complaint that the agreement was executed in reliance [5 N.Y.2d 321] upon these contrary oral representations (Cohen v. Cohen, supra). The Sabo case, supra, dealt with the usual merger clause. The present case, as the Cohen case, additionally, includes a disclaimer as to specific representations.

This specific disclaimer is one of the material distinctions between this case and Bridger v. Goldsmith, supra, and Crowell-Collier Pub. Co. v. Josefowitz, 5 N.Y.2d 998, 184 N.Y.S.2d 859. In the Bridger case, the court considered the effect of a general disclaimer as to representations in a contract of sale, concluding that the insertion of such a clause at the insistence of the seller cannot be used as a shield to protect him from his fraud. Another material distinction is that nowhere in the contract in the Bridger case is there a denial of reliance on representations, as there is here. Similarly, in Crowell-Collier Pub. Co. v. Josefowitz, supra, only a general merger clause was incorporated into the contract of sale. Moreover, the complaint there additionally alleged that further misrepresentations were made after the agreement had been signed, but while the contract was held in escrow and before it had been finally approved.

Consequently, this clause, which declares that the parties to the agreement do not rely on specific representations not embodied in the contract, excludes this case from the scope of the Jackson, Angerosa, Bridger and Crowell-Collier cases, supra. See Foundation Co. v. State of New York, 233 N.Y. 177, 135 N.E. 236.

The complaint here contains no allegations that the contract was not read by the purchaser. We can fairly conclude that plaintiff's officers read and understood the contract, and that they were aware of the provision by which they aver that plaintiff did not rely on such extra-contractual representations. It is not alleged that this provision was not understood, or that the provision itself was procured by fraud. It would be unrealistic to ascribe to plaintiff's officers such incompetence that they did not understand what they read and signed. Cf. Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 171, 200 N.E. 683, 685. [184 N.Y.S.2d 603] Although this court in the Ernst case discounted the merger clause as ineffective to preclude proof of fraud, it gave effect to the specific disclaimer of representation clause, holding that such a clause limited the authority of the agent, and hence, [5 N.Y.2d 322] plaintiff had notice of his lack of authority. But the larger implication of the Ernst case is that, where a person has read and understood the disclaimer of representation clause, he is bound by it. The court rejected, as a matter of law, the allegation of plaintiffs “that they relied upon an oral statement made to them in direct contradiction of this provision of the contract.” The presence of such a disclaimer clause “is inconsistent with the contention that plaintiff relied upon the misrepresentation, and was led thereby to make the contract.” Kreshover v. Berger, 135 App.Div. 27, 28, 119 N.Y.S. 737, 738.

It is not necessary to distinguish seriatim the cases in other jurisdictions as they are not, in the main, in point or in, a few instances, clash with the rule followed in the State of New York. The marshaling of phrases plucked from various opinions and references to generalizations, with which no one disagrees, cannot subvert the fundamental precept that the asserted [157 N.E.2d 600] reliance must be found to be justifiable under all the circumstances before a complaint can be found to state a cause of action in fraud. We must keep in mind that "opinions must be read in the setting of the particular cases and as the product of preoccupation with their special facts" (Freeman v. Hewit, 329 U.S. 249, 252, 67 S.Ct. 274, 276, 91 L.Ed. 265). When the citations are read in the light of this caveat, we find that they are generally concerned with factual situations wherein the facts represented were matters peculiarly within the defendant's knowledge, as in the cases of Sabo v. Delman, supra, and Jackson v. State of New York, supra.

The general rule was enunciated by this court over a half a century ago in Schumaker v. Mather, 133 N.Y. 590, 596, 30 N.E. 755, 757, that “if the facts represented are not matters peculiarly within the party's knowledge, and the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth, or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations. (Baily v. Merrell, Bulstrode's Rep.Part III, p. 94; Slaughter's Adm'r v. Gerson, 13 Wall. (379) 383, 20 L.Ed. 627; Chrysler v. Canaday, 90 N.Y. 272.)”

Very recently this rule was approved as settled law by this court in the case of Sylvester v. Bernstein, 283 App.Div. 333, 127 N.Y.S.2d 746, affirmed 307 N.Y. 778, 121 N.E.2d 616.

[184 N.Y.S.2d 604] [5 N.Y.2d 323] In this case, of course, the plaintiff made a representation in the contract that it was not relying on specific representations not embodied in the contract, while, it now asserts, it was in fact relying on such oral representations. Plaintiff admits then that it is guilty of deliberately misrepresenting to the seller its true intention. To condone this fraud would place the purchaser in a favored position. Cf. Riggs v. Palmer, 115 N.Y. 506, 511, 512, 22 N.E. 188, 190, 5 L.R.A. 340. This is particularly so, where, as here, the purchaser confirms the contract, but seeks damages. If the plaintiff has made a bad bargain he cannot avoid it in this manner.

If the language here used is not sufficient to estop a party from claiming that he entered the contract because of fraudulent representations, then no language can accomplish that purpose. To hold otherwise would be to say that it is impossible for two businessmen dealing at arm's length to agree that the buyer is not buying in reliance on any representations of the seller as to a particular fact.

Accordingly, the order of the Appellate Division should be reversed and that of Special Term reinstated, without costs. The question certified should be answered in the negative.

FULD, Judge. (dissenting). If a party has actually induced another to enter into a contract by means of fraud and so the complaint before us alleges I conceive that language may not be devised to shield him from the consequences of such fraud. The law does not temporize with trickery or duplicity, and this court, after having weighed the advantages of certainty in contractual relations against the harm and injustice which result from fraud, long ago unequivocally declared that “a party who has perpetrated a fraud upon his neighbor may (not) contract with him, in the very instrument by means of which it was perpetrated, for immunity against its consequences, close his mouth from complaining of it, and bind him never to seek redress. Public policy and morality are both ignored if such an agreement can be given effect in a court of justice. The maxim that fraud vitiates every transaction would no longer be the rule, but the exception.” Bridger v. Goldsmith, 143 N.Y. 424, 428, 38 N.E. 458, [157 N.E.2d 601] 459. It was a concern for similar considerations of policy which persuaded Massachusetts to repudiate the contrary rule which it had initially espoused. The [5 N.Y.2d 324] same public policy that in general sanctions the avoidance of a promise obtained by deceit, wrote that state's Supreme Judicial Court in Bates v. Southgate, (308 Mass. 170, 182), 31 N.E.2d 551, 558, 133 A.L.R. 1349, “strikes down all attempts to circumvent that policy by means of contractual devices. In the realm of fact it is [184 N.Y.S.2d 605] entirely possible for a party knowingly to agree that no representations have been made to him, while at the same time believing and relying upon representations which in fact have been made and in fact are false but for which he would not have made the agreement. To deny this possibility is to ignore the frequent instances in everyday experience where parties accept . . . and act upon agreements containing . . . exculpatory clauses in one form or another, but where they do so, nevertheless, in reliance upon the honesty of supposed friends, the plausible and disarming statements of salesmen, or the customary course of business. To refuse relief would result in opening the door to a multitude of frauds and in thwarting the general policy of the law.”

It is impossible, on either principle or reasoning, to distinguish the present case from the many others which this court has decided. See, e. g., Bridger v. Goldsmith, 143 N.Y. 424, 428, 38 N.E. 458, 459, supra; Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 556; Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 169, 200 N.E. 683; Angerosa v. White Co., 248 App.Div. 425, 431, 290 N.Y.S. 204, 213, affirmed 275 N.Y. 524, 11 N.E.2d 325; Sabo v. Delman, 3 N.Y.2d 155, 162, 164 N.Y.S.2d 714, 718; Crowell-Collier Pub. Co. v. Josefowitz, 5 N.Y.2d 998, 184 N.Y.S.2d 859. As far back as 1894, we decided, in the Bridger case, 143 N.Y. 424, 38 N.E. 458, 459, supra, that the plaintiff was not prevented from bringing an action for fraud, based on oral misrepresentations, even though the written contract provided that it was “understood and agreed” that the defendant seller had not made, “for the purpose of inducing the sale . . . or the making of this agreement, any statements or representations . . . other than” the single one therein set forth (143 N.Y. at pages 426-427, 38 N.E. at page 459). And, just today, we are holding, in the Crowell-Collier Publishing case, that the plaintiffs were not barred from suing the defendants for fraud in inducing them to make the contract, despite its recital that [5 N.Y.2d 325] “This Agreement constitutes the entire understanding between the parties, (and) was not induced by any representations . . . not herein contained.”

In addition, in Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 556, supra, the contract provided that the contract (plaintiff's predecessor in interest) agreed that he had satisfied himself by his own investigation regarding all the conditions of the work to be done and that his conclusion to enter into the contract was based solely upon such investigation [184 N.Y.S.2d 606] and not upon any information or data imparted by the State.

It was held that even this explicit disavowal of reliance did not bar the plaintiff from recovery. In answering the argument that the provision prevented proof either of misrepresentation by the defendant or reliance on the part of the plaintiff, the Appellate Division, in an opinion approved by this court, wrote:

“A party to a contract cannot, by misrepresentation of a material fact, induce the other party to the contract to enter into it to his damage, and then protect himself from the legal effect of such misrepresentation by inserting in the [157 N.E.2d 602] contract a clause to the effect that he is not to be held liable for the misrepresentation which induced the other party to enter into the contract. The effect of misrepresentation and fraud cannot be thus easily avoided” (210 App.Div. at pages 119-120, 205 N.Y.S. at page 661).

Although the clause in the contract before us may be differently worded from those in the agreements involved in the other cases decided by this court, it undoubtedly reflects the same thought and meaning, and the reasoning and the principles which the court deemed controlling in those cases are likewise controlling in this one. Their application, it seems plain to me, compels the conclusion that the complaint herein should be sustained and the plaintiff accorded a trial of its allegations.

It is said, however, that the provision in this contract differs from those heretofore considered in that it embodies a specific and deliberate exclusion of a particular subject. The quick answer is that the clause now before us is not of such a sort. On the contrary, instead of being limited, it is all-embracing, encompassing every representation that a seller could possibly make about the property being sold and, instead of representing [5 N.Y.2d 326] a special term of a bargain, is essentially "boiler plate." See Contract of Sale, Standard N.Y.B.T.U. Form 8041; Bicks, Contracts for the Sale of Realty (1956 ed.), pp. 79-80, 94-95. The more elaborate verbiage in the present contract cannot disguise the fact that the language which is said to immunize the defendants from their own fraud is no more specific than the general merger clause in Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, supra, and far less specific than the provision dealt with in the Jackson case, 210 App.Div. 115, 205 N.Y.S. 58, affirmed 241 N.Y. 563, 150 N.E. 556, supra, or in Crowell-Collier.

In any event, though, I cannot believe that the outcome of a case such as this, in which the defendant is charged with fraud, should turn on the particular language employed in the contract. As Judge Augustus Hand, writing for the Federal Court of Appeals, observed, “the ingenuity of draftsmen is sure to keep pace with the demands of wrongdoers, and if a deliberate fraud may be shielded by a clause in a contract that the [184 N.Y.S.2d 607] writing contains every representation made by way of inducement, or that utterances shown to be untrue were not an inducement to the agreement,” a fraudulent seller would have a simple method of obtaining immunity for his misconduct. Arnold v. National Aniline & Chem. Co., 2 Cir., 20 F.2d 364, 369.

The guiding rule that fraud vitiates every agreement which it touches has been well expressed not only by the courts of this state, but by courts throughout the country and by the House of Lords in England. And, in recognizing that the plaintiff may assert a cause of action in fraud, the courts have not differentiated between the type or form of exculpatory provision inserted in the contract. It matters not, the cases demonstrate, whether the clause simply recites that no representations have been made or more fully stipulates that the seller has not made any representations concerning certain enumerated subjects and that the purchaser has made his own investigation and has not relied upon any representation by the seller, not embodied in the writing. See, e. g., Sabo v. Delman, 3 N.Y.2d 155, 161-162, 164 N.Y.S.2d 714, 717-718, supra; Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 169, 200 N.E. 683, 684, supra; Bridger v. Goldsmith, 143 N.Y. 424, 428, 38 N.E. 458, 459, supra; Angerosa v. White Co., 248 App.Div. 425, 431, 290 N.Y.S. 204, affirmed 275 N.Y. 524, 11 N.E.2d 325, supra; Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 556, supra; Pearson [5 N.Y.2d 327] & Son v. Dublin Corp., (1907) A.C. 351, 353-354, 362; Arnold v. National Aniline & Chem. Co., [157 N.E.2d 603] 2 Cir., 20 F.2d 364, 369, supra; Lutfy v. R. D. Roper & Sons Motor Co., 57 Ariz. 495, 506, 115 P.2d 161; Omar Oil & Gas Co. v. MacKenzie Oil Co., 33 Del. 259, 289-290, 138 A. 392; Jordan v. Nelson, Iowa, 178 N.W. 544; Bryant v. Troutman, Ky., 287 S.W.2d 918, 921; Bates v. Southgate, 308 Mass. 170, 182, 31 N.E.2d 551, 133 A.L.R. 1349, supra; Ganley Bros., Inc., v. Butler Bros. Bldg. Co., 170 Minn. 373, 376-377, 212 N.W. 602, 56 A.L.R. 1; Brown v. Ohman, Miss., 42 So.2d 209, 212-213; Martin v. Harris, 121 Neb. 372, 236 N.W. 914; Blacknall v. Rowland, 108 N.C. 554, 557-558, 13 S.E. 191; Pennsylvania Turnpike Comm. v. Smith, 350 Pa. 355, 361-362, 39 A.2d 139; Dallas Farm Mach. Co. v. Reaves, Tex., 307 S.W.2d 233, 239; Dieterich v. Rice, 115 Wash. 365, 197 P. 1; see, also, 3 Williston, Contracts (Rev.ed., 1936), §§ 811, 811A; Corbin, Contracts (1951), Vol. 3, § 578; Vol. 6, § 1516; Restatement of Contracts, § 573.

In England, in the Pearson case, (1907) A.C. 351, supra, the contract to perform certain construction work provided that the contractor “should satisfy himself” as to various specified items connected with the job and that the defendant corporation [184 N.Y.S.2d 608] “did not hold itself responsible for the accuracy of (such) information” (p. 351).

After performing the contract, the plaintiffs brought a deceit action, claiming damages for false representations as to the very items concerning which they had agreed they would satisfy themselves. The House of Lords reversed the judgment directed for the defendants and held that the action could be maintained; the Lord Chancellor, after noting that “The contract contained clauses . . . to the effect that the contractors must not rely on any representation…but must ascertain and judge of the facts for themselves”' (p. 353), went on to say (pp. 353-354):“Now it seems clear that no one can escape liability for his own fraudulent statements by inserting in a contract a clause that the other party shall not rely upon them.” Lord Ashbourne, concurring with the Lord Chancellor, pointed out that the clause relied upon “might in some cases be part of a fraud, and might advance and disguise a fraud” (p. 360) and Lord Hereford, also concurring, declared (p. 362) that, if the “protecting clause” be inserted fraudulently,

[5 N.Y.2d 328] “When the fraud succeeds, surely those who designed the fraudulent protection cannot take advantage of it. Such a clause would be good protection against any mistake or miscalculation, but fraud vitiates every contract and every clause in it.”

In the Dieterich case, 115 Wash. 365, 197 P. 1, supra, the contract contained the provision that

“This land is sold to (the plaintiff buyer) . . . with the understanding that he has personally and carefully inspected said premises, and is purchasing the same by said inspection, and not from any other sayings or inducements by (the seller) . . . and there has been no other inducements other than recited herein.”

Despite this explicit disclaimer of reliance and inducement, the Washington Supreme Court decided that the recital did not bar the plaintiff from showing “the fraudulent nature of the contract” (115 Wash. at page 373, 197 P. at page 3), and, in the course of its opinion, observed (115 Wash. at page 368, 197 P. at page 2) that the contention of the defendants to the contrary was “effectually answered by the Court of Appeals of New York, in the case of Bridger v. Goldsmith, 143 N.Y. 424, 38 N.E. 458.”

In Martin v. Harris, 121 Neb. 372, 236 N.W. 914, 915, supra, the agreement recited:

[184 N.Y.S.2d 609] “There have been no representations of the reasonable value of any of the [157 N.E.2d 604] properties herein described made by or to either party to this contract. Each party is relying upon his own judgment of such values after a personal inspection of the properties.”

The plaintiff, alleging that the defendant fraudulently misrepresented the value of the property, sought damages. Again, despite the explicit statement that such a representation had not been made and the specific disavowal of reliance thereon, the court upheld the plaintiff's right to bring the action (121 Neb. at page 376, 236 N.W. 914).

In the Ganley case, 170 Minn. 373, 212 N.W. 602, supra, too, the disclaimer was quite specific, reading in this way:

“The (plaintiff) contractor has examined the said contracts . . . and the specifications and plans forming a part thereof, and is familiar with the location [5 N.Y.2d 329] of said work and the conditions under which the same must be performed . . . and is not relying upon any statement made by the company in respect thereto.”

In deciding that a defendant could not protect himself against liability for fraud by such a provision or, indeed, by any language, the court wrote in no uncertain terms (170 Minn. at page 377, 212 N.W. at page 603):

“The law should not, and does not, permit a covenant of immunity to be drawn that will protect a person against him own fraud. Such is not enforceable because of public policy. Industrial & General Trust, Ltd. v. Tod, 180 N.Y. 215, 73 N.E. 7. Language is not strong enough to write such a contract. Fraud destroys all consent. It is the purpose of the law to shield only those whose armor embraces good faith. Theoretically, if there is no fraud, the rule we announce is harmless. If there is fraud, the rule we announce is wholesome. Whether the rule is effective depends upon the facts. Public interest supports our conclusion.”

And, said the court, while the argument that a party should have the right “to let his work to a certain person because the other will therein agree that he relies and acts only upon his own knowledge and not upon the representations of his adversary”, might on first thought seem plausible, it does not stand analysis. “It may be desirable in dealing with unscrupulous persons to have this clause as a shield against wrongful charges of fraud. But if there is no fraud that fact will be established on the trial. The merits of defendant's claim reach only the expense and annoyance of litigation. But every party should have his day in court. [184 N.Y.S.2d 610] . . . We are unable to formulate a rule of law sustaining defendant's contention which would not at the same time give opportunities for the commission of fraud for which the wronged party would have no redress” (170 Minn. at page 376, 212 N.W. at page 603).

And in the Lutfy case, 57 Ariz. 495, 115 P.2d 161, 166, supra, the contract of sale contained as specific a disavowal of reliance upon a particular representation as could be written:

“It is understood and agreed that there is no representation or warranty that the 'year model' of said [5 N.Y.2d 330] property, as hereinbefore stated, correctly states the year in which said property was manufactured, but is merely used by the parties hereto for convenience in describing it. . . . Purchaser agrees that he has made an independent investigation of the property and has relied solely upon his own investigation with reference thereto in entering into this contract, and has placed no reliance and acted upon no representations or warranties upon the part of the Seller.”

The plaintiff, suing for damages, alleged that the defendant had falsely represented the year model of the automobile which he purchased, and the high court of Arizona [157 N.E.2d 605] held that he could prove that such a representation had been made and that he had relied upon it, notwithstanding the contract's most explicit recital to the contrary (57 Ariz. at page 506, 115 P.2d at page 166):

“If binding upon (plaintiff) appellant, it would protect appellee, from the consequences of any fraudulent misrepresentations it might have made to appellant to induce him to sign the contract and, as we see it, any provision in a contract making it possible for a party thereto to free himself from the consequences of his own fraud in procuring its execution is invalid and necessarily constitutes no defense.”

The cases cited all upholding the sufficiency of a complaint based on fraud no matter how the exculpatory language in the contract is phrased show how firmly established the rule is, and the passages quoted show how compelling are the reasons for the rule. Nor is their force or value weakened or impaired by the decisions upon which the court now appears to rely. Except for Cohen v. Cohen, 3 N.Y.2d 813, 166 N.Y.S.2d 10, no one of them has anything to do with the adequacy of the complaint as a pleading; two are concerned with the proof adduced at the trial (Schumaker v. Mather, 133 N.Y. 590, 30 N.E. 755; Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 200 N.E. 683, supra, while the third deals with the subject of res judicata (Sylvester v. Bernstein, 283 App.Div. 333, 127 N.Y.S.2d 746, affirmed 307 N.Y. 778, 121 n.E.2d 616).

[184 N.Y.S.2d 611] In the Ernst Iron Works, case, the appeal was, as I have noted, taken after trial and was concerned with the proof and not, as is the present appeal, with the sufficiency of the complaint. [5 N.Y.2d 331] The contract contained both a blanket merger clause and a recital that the defendant “makes no representation regarding previous sales” (270 N.Y. 165, 200 N.E. 683) in Buffalo, where the plaintiff did business. Notwithstanding that provision, the plaintiff claimed that he had relied upon a representation by the defendant's salesman that the product had not been sold in that city, and testimony to that effect was received at the trial. The court did reverse the judgment for the plaintiff, but not on any theory that the specific disclaimer clause barred suit or that the evidence was inadmissible because of it. It was the court's conclusion, based on the evidence adduced at the trial, first, that the false representation attributed to the defendant had not been made (270 N.Y. at pages 169-170, 200 N.E. 683, 684); second, that, in any event, the defendant's salesman did not have authority to make such a representation and the plaintiff knew this (270 N.Y. at pages 170-171, 200 N.E. 684-685); and, finally, that “it (was) clear (from the proof at the trial) that the plaintiff did not rely upon the statement” (270 N.Y. at pages 171-172, 200 N.E. at page 685). And most significantly, the court did not question the general principle but affirmed it, stating that “A rogue cannot protect himself from liability for his fraud by inserting a printed clause in his contract” (270 N.Y. at page 169, 200 N.E. at page 684.)

As to Cohen v. Cohen (3 N.Y.2d 813, 166 N.Y.S.2d 11) I dissented from the decision there made and still consider it to have been wrongly decided. Constrained to accept it, I do so, but I cannot subscribe to extending its application beyond its own peculiar fact setting. A husband and wife had separated; there were bitter mutual recriminations followed by three separate lawsuits. The parties were ultimately reconciled and their lawyers drew a settlement agreement, which they executed, reciting that the husband had not made any representations “as to the continuation of the marital status.” The wife sometime later brought another action, alleging that her husband had falsely represented that he 'would effect a reconciliation with (her), return to live with her . . . permanently, and permanently resume their [157 N.E.2d 606] marital relationship.” As is quite evident, the Cohen case is a most unusual one not only because it involved an agreement designed to settle pending marital litigation, but because of the extraordinary and promissory nature of the misrepresentation alleged. Indeed, the only resemblance claimed for the cases that is, for Cohen and the present one is that in both [5 N.Y.2d 332] there is a specific disclaimer by the plaintiff of the very representations charged against the defendant. However, as noted above (5 N.Y.2d at pages 325-326, 184 [184 N.Y.S.2d 612] N.Y.S.2d 606), since the provision in the contract before us encompasses every representation which a seller of real estate could possibly have made, including those alleged, even the asserted similarity does not in fact exist.

Contrary to the intimation in the court's opinion (5 N.Y.2d at page 323, 184 N.Y.S.2d 604), the nonreliance clause cannot possibly operate as an estoppel against the plaintiff. Essentially equitable in nature, the principle of estoppel is to be invoked to prevent fraud and injustice, not to further them. The statement that the representations in question were not made was, according to the complaint, false to the defendant's knowledge. Surely, the perpetrator of a fraud cannot close the lips of his victim and deny him the right to state the facts as they actually exist. Indeed, the contention that a person, such as the defendant herein, could urge an estoppel was considered and emphatically disposed of in Bridger v. Goldsmith with this statement:

“The question now is whether (the no-representation non-inducement clause) can be given the effect claimed for it by the learned counsel for the defendant, to preclude the plaintiff from alleging fraud in the sale, and pursuing in the courts the remedies which the law gives in such cases. It cannot operate by way of estoppel, for the obvious reason that the statements were false to the defendant's knowledge. He may, indeed, have relied upon its force and efficacy to protect him from the consequences of his own fraud, but he certainly could not have relied upon the truth of any statement in it. A mere device of the guilty party to a contract, intended to shield himself from the results of his own fraud practiced upon the other party, cannot well be elevated to the dignity and importance of an equitable estoppel.”

(143 N.Y. 424, 427-428, 38 N.E. 458, 459, emphasis supplied; see, also, Angerosa v. White Co., 248 App.Div. 425, 433-434, 290 N.Y.S. 204, 215-216, affirmed 275 N.Y. 524, 11 N.E.2d 325, supra).

The rule heretofore applied by this court presents no obstacle to honest business dealings, and dishonest transactions ought not to receive judicial protection. The clause in the contract before us may lend support to the defense and render the plaintiff's task of establishing its claim more difficult, but it should not be held to bar institution of an action for fraud. Whether [5 N.Y.2d 333] the defendants made the statements attributed to them and, if they did, whether the plaintiff relied upon them, whether, in other words, the defendants were guilty of fraud, are questions of fact not capable of determination on the pleadings alone. The plaintiff in entitled to its day in court.

CONWAY, C. J., and DESMOND, DYE, FROESSEL and VAN VOORHIS, JJ., concur with BURKE, J. FULD, J., dissents in a separate opinion.

Order reversed, etc.

[1324] Sutin, Thayer & Browne, Ronald E. Segel, Mary E. McDonald, Albuquerque, for defendants-appellants.

Roth, VanAmberg, Gross & Rogers, F. Joel Roth, Santa Fe, for plaintiff-appellee.

OPINION

FRANCHINI, Justice.

We have granted appellee's motion for rehearing. The opinion filed September 24, 1991, is hereby withdrawn, and this opinion is substituted therefore. Defendant below, Villa Linda Mall (Mall), in Santa Fe, New Mexico, celebrated its grand opening on July 31, 1985. In October of that year, plaintiff Golden Cone Concepts, Inc. (Golden Cone) signed a ten-year lease for space in the Mall's food court. Golden Cone operated an ice cream business for four months before filing suit against the Mall to rescind the lease and recover damages.^[1] Following a bench trial^[2], the district court rescinded and canceled the lease, awarded $105,723.00 in restitutionary special damages, $22,000.00 in attorney fees, and $1,190.77 in costs. In addition, the court awarded $50,000.00 in punitive damages based upon the court's conclusion that the Mall committed fraud, negligent misrepresentation, and constructive fraud upon Golden Cone in executing the lease. The Mall's counterclaim for rent was dismissed by the district court. We affirm in part and reverse in part.

Prior to executing the lease, the parties held many meetings, discussions, and negotiations concerning the food court facilities and lease terms. The district court entered numerous findings of fact regarding representations made to the Golden Cone principals by the Mall's leasing agent and marketing director, concerning the planning and development of the mall, past development successes, the trade area and "regional mall" idea, the food court concept, location of the ice cream business within the mall in relation to the movie theater, other prospective food court tenants including national fast food chains, and projected gross annual sales for the ice cream business [1325] based on the agent's knowledge of sales of other food vendors. The leasing agent assured Golden Cone that it would be the only ice cream business in the food court and that it could remain open past 9:00 p.m. to serve late movie goers.

The district court also found that Golden Cone's reliance on the representations led to its willingness to pay high rent, make leasehold improvements, and purchase equipment. Golden Cone's gross sales and the number of customers visiting the Mall were below the projections made by the Mall's agents. After closing its business Golden Cone owed rent and other charges to the Mall in the amount of $10,939.32. The Mall relet the premises as of December 1, 1987.

The following issues are raised on appeal:

(1) Whether the district court erred in allowing Golden Cone to proceed on its claims of fraud, negligent misrepresentation, and constructive fraud in light of an integration and exculpatory clause in Article 33 of the lease;

(2) Whether the district court erred in ruling that the representations concerning projected revenues were actionable as a matter of law;

(3) Whether nondisclosure of complaints of low mall traffic is a sufficient basis upon which to rescind the lease;

(4) Whether substantial evidence exists to support the findings of fact regarding representations regarding the identity of other food court tenants, traffic flow at the mall, the role of a food court, and Golden Cone's justifiable reliance upon representation concerning projected revenues;

(5) Whether the court erred in dismissing the Mall's counterclaim for unpaid rent;

(6) Whether the judgment amount is consistent with the court's finding of an offset for "minimum annual rental and other charges not paid" during Golden Cone's occupancy; and

(7) Whether substantial evidence supports the awards of punitive damages and attorney fees to Golden Cone.

LEASE PROVISION

The Mall asserts the following provision in the lease bars the misrepresentation claims made by Golden Cone:

It is understood and agreed by Tenant that Landlord and Landlord's agents have made no representations or promises with respect to the leased premises or the making or entry into this lease, except as in this lease expressly set forth, and that no claim or liability, or cause for termination, shall be asserted by Tenant against Landlord for, and Landlord shall not be liable by reason of, the breach of any representations or promises not expressly stated in this lease.

With regard to this provision, Golden Cone contends that the exculpatory clause argument by the Mall is being raised for the first time on appeal. The district court, however, entered a finding of fact relating to the lease provision, identical to the Mall's requested finding, stating:

The attorney for [Golden Cone] specifically brought to [its] attention the provisions of Article 33 of the lease which states, among other things, that no representations have been made to the tenant by the landlord unless specifically set forth in the lease.

The finding demonstrates that the provision was brought to the court's attention and was considered before it decided to rescind the lease. Additionally, in New Mexico exculpatory clauses do not preclude liability. Western States Mechanical Contractors, Inc. v. Sandia Corp., 110 N.M. 676, 798 P.2d 1062 (Ct.App.), cert. denied, 110 N.M. 653, 798 P.2d 1039 (1990).

Where one party to the contract has perpetrated a fraud upon the other, by means of which the latter was induced to enter into the contract, [one] cannot be precluded from seeking redress by a provision inserted in the contract by the party perpetrating the fraud, designed to shut the mouth of the adverse party as to such fraudulent representations which led up to the making of the contract. And this is true, whether the action be [1326] for rescission of the contract or for damages for deceit.

Berrendo Irrigated Farms Co. v. Jacobs, 23 N.M. 290, 296, 168 P. 483, 484 (1917). After the district court ordered Golden Cone to elect its remedy, it correctly permitted Golden Cone to proceed on its claims despite the language in Article 33 of the lease.

REPRESENTATIONS OF PROJECTED REVENUES

The district court found that the Mall's leasing agent represented to Golden Cone that its gross sales in the first year of business would be $300,000.00. This statement was found to be reckless and misleading and that Golden Cone justifiably relied thereon in entering into the lease. The court concluded that the representation was one of fact rather than opinion, justifiably relied upon by Golden Cone, which gave rise to the right to rescind the lease.

We disagree with the Mall's contention that the court erred as a matter of law in its ruling that fraud could be premised upon promises or conjectures as to future acts or events. When a party is challenging a legal conclusion, the standard for review is whether the law correctly was applied to the facts, viewing them in a manner most favorable to the prevailing party, indulging all reasonable inferences in support of the court's decision, and disregarding all inferences or evidence to the contrary. Texas Nat'l Theatres, Inc. v. City of Albuquerque, 97 N.M. 282, 639 P.2d 569 (1982).

Unlike the circumstances presented by this case, the Mall's reliance on Berrendo and those cases cited from other jurisdictions are distinguishable in that they involved the sales of existing businesses with representations made by the seller concerning future income, rather than representations concerning projected revenues for a new business enterprise under circumstances such as these. Register v. Roberson Construction Co., 106 N.M. 243, 741 P.2d 1364 (1987), stated the following on promises concerning future events to support an action for fraud:

While it is true that an action for fraud will ordinarily not lie as to a pattern of conduct based on promises that future events will take place, there are nonetheless the following well-established exceptions to this rule ... where the promises are based on contrary facts peculiarly within the promisor's knowledge, or where the promise is based on a concealment of known facts. Further, if the promise as to future events is part of an overall pattern designed to lead a party to act to his/her detriment, and in such a way as harmfully to alter a legal right possessed by the party, then promises as to future actions will support an action for fraud, especially in a situation where the defendant states an opinion or belief as to future occurrences which are shown to have had no support by the facts at the time the opinions or beliefs were given.

Id. at 246, 741 P.2d at 1367 (citations omitted). Accordingly, the district court was correct to permit the representations of projected revenues to serve as a basis for Golden Cone's claims.

NONDISCLOSURE AS A BASIS FOR RESCISSION

The Mall claims that nondisclosure to Golden Cone of complaints of low mall traffic is insufficient as a matter of law to rescind the lease. The uncontested finding of fact, however, that the Mall had a pattern of conduct of gaining prospective tenants' confidence, triggered the Mall's duty to disclose information about low levels of mall traffic under R.A. Peck, Inc. v. Liberty Federal Savings Bank, 108 N.M. 84, 766 P.2d 928 (Ct.App. 1988).

Whether a duty exists is generally a question of law for the trial court to decide. Schear v. Board of County Comm'rs, 101 N.M. 671, 687 P.2d 728 (1984). Several types of relationships between parties give rise to the duty to disclose — one being where it appears that one or each of the parties to the contract expressly reposes a trust and confidence in the other. Peck, 108 N.M. at 89, 766 P.2d at 933. Other findings of fact entered by the court indicate that the Mall had received reports [1327] from several food vendors regarding lack of traffic before signing the lease with Golden Cone. The court found that:

Prior to [Golden Cone] signing its lease, the [Mall] had already received complaints from a food court tenant about the lack of customers in the Mall and food court, which they did not tell [Golden Cone.] While [Golden Cone] continued to construct its leasehold space and purchase equipment, the [Mall was] receiving many complaints from various food court tenants and other tenants at the Mall about the lack;ack [sic] of customers coming to the Mall and low gross sales, which they did not tell [Golden Cone].

One month after opening, the Mall offered Golden Cone rent relief due to a lack of customers. As found by the court, Golden Cone "was shocked to find out that [the Mall] had been receiving complaints about the lack of customers and low sales before it had signed the lease and during the construction of its leasehold space and that the information had not been told to [Golden Cone]." As discussed in the following section, the owners of Golden Cone were newcomers to the food vending business, and, where traffic flow information was peculiarly within the Mall's knowledge, a continuing duty on the part of the Mall existed to disclose these material facts to the prospective lessee. Therefore, under these circumstances, nondisclosure was a proper basis for rescission.

SUBSTANTIAL EVIDENCE ISSUES

The Mall alleges that Golden Cone offered no substantial evidence of misrepresentations or justifiable reliance. The Mall also challenges the punitive damages award, which will be discussed later in this opinion, and alleges conflict between the court's findings and its conclusion that the Mall committed negligent misrepresentation, constructive fraud, and fraud against Golden Cone. Our review of the record proper and proceedings indicate that substantial evidence exists to support the court's findings of negligent misrepresentation, constructive fraud and fraud based upon the representations made and nondisclosure of facts concerning traffic at the Mall.

"A negligent misrepresentation is one where the speaker has no reasonable ground for believing that the statement made was true." SCRA 1986, 13-819. The degree of proof required of a party asserting negligent misrepresentation is a preponderance of the evidence. State ex rel. Nichols v. Safeco Ins. Co., 100 N.M. 440, 671 P.2d 1151 (Ct.App.), cert. denied, 100 N.M. 327, 670 P.2d 581 (1983). Negligent misrepresentation is grounded in negligence rather than an intent to deceive. Id. The district court's findings that the principals of Golden Cone "had no retail operating experience with shopping malls," that the representations made by the Mall's agents concerning daily car traffic, national food chains, and the food court's function as an anchor store encompassed information only within its scope of knowledge, and that the Golden Cone principals were justified in their reliance thereon, all are supported by substantial evidence and support the court's conclusion of negligent misrepresentation.

Breach of a legal or equitable duty is constructive fraud and it is not necessary to prove actual dishonesty of purpose nor intent to deceive. Archuleta v. Kopp, 90 N.M. 273, 276, 562 P.2d 834, 837 (Ct.App.) cert. denied, 90 N.M. 636, 567 P.2d 485 (1977). A finding of constructive fraud need not be based upon a fiduciary relationship between the parties, as constructive fraud is defined as "acts contrary to public policy, to sound morals, to the provisions of a statute, etc., however honest the intention with which they may have been performed." Wolf & Klar Cos. v. Garner, 101 N.M. 116, 118, 679 P.2d 258, 260 (1984). Although not required as proof of a claim of constructive fraud, several of the court's findings indicate that the representations at issue were made with the intent to deceive. Another uncontested finding refers to the Mall's pattern of conduct of making representations for the purpose of gaining confidence of prospective tenants and inducing them into entering a lease contrary to equitable principles of [1328] fairness, justice, and right dealing that dominate all commercial practices and dealings. See Newman v. Basin Motor Co., 98 N.M. 39, 644 P.2d 553 (Ct.App. 1982).

A successful fraud claim must prove a misrepresentation of fact, known by the maker to be untrue, made with the intent to deceive and to induce the other party to act upon it, and upon which the other party relies to his detriment. See Poorbaugh v. Mullen, 96 N.M. 598, 601, 633 P.2d 706, 709 (Ct.App. 1981) (Poorbaugh I). Though each element of fraud must be shown by clear and convincing evidence, if disputed, a reviewing court will resolve all conflicting evidence in favor of the prevailing party. Poorbaugh v. Mullen, 99 N.M. 11, 653 P.2d 511 (Ct.App.), cert. denied, 99 N.M. 47, 653 P.2d 878 (1982) (Poorbaugh II). On appeal, our duty is to liberally construe the trial court's findings in order to sustain a judgment. Arnold v. Ford Motor Co., 90 N.M. 549, 566 P.2d 98 (1977). Based upon our review of the record, and as discussed above, we find that the required level of proof was established and the evidence supports the court's findings of fraud by representations and nondisclosure.

The Mall also challenges the court's findings that Golden Cone justifiably relied upon the representations regarding projected revenues of $300,000.00 per year. Our review of the record, as well as the unchallenged findings of fact, support the court's findings on this point. The principals of Golden Cone had never operated a business in a food court of a shopping mall and were entitled to rely on the Mall's representations regarding material facts peculiar to this type of location. See Ledbetter v. Webb, 103 N.M. 597, 602, 711 P.2d 874, 879 (1985). Misrepresentation of a material fact, even if innocently made, will entitle the party who has justifiably relied thereon to rescind the contract. Prudential Ins. Co. v. Anaya, 78 N.M. 101, 428 P.2d 640 (1967). Ordinarily the question of materiality is one of fact. Modisette v. Foundation Reserve Ins. Co., 77 N.M. 661, 427 P.2d 21 (1967). The finding of reliance upon the Mall's representation of projected revenues is supported by substantial evidence.

DISMISSAL OF COUNTERCLAIM

The Mall grounds its argument that it is entitled to judgment on its counterclaim for unpaid rent upon the premise that the lease was enforceable and not subject to rescission. Based upon all of the above, however, we find no abuse of discretion by the district court and affirm the dismissal of the counterclaim.

OFFSET OF JUDGMENT

The evidence supports the Mall's claim that the court's judgment failed to incorporate the finding of fact that "[a]ny rescission damages will be offset by $10,939.32." Accordingly, we remand with instruction to reduce the restitutionary special damages by this amount. See Mendez v. Southwest Community Health Servs., 104 N.M. 608, 612, 725 P.2d 584, 588 (Ct. App.), cert. quashed, 104 N.M. 632, 725 P.2d 832 (1986) (when finding conflicts with conclusion or judgment, finding will prevail as long as it is supported by substantial evidence).

PUNITIVE DAMAGES

The district court awarded punitive damages based on the reckless or grossly negligent acts of the Mall. The court found that representations made by the Mall concerning projected revenues and car counts were made recklessly with the intent to deceive and the representations made concerning national chain food vendors were untrue and made with the intent to deceive. As to the representation the food court would serve the same as an anchor store, the district court found the statement to be recklessly made and misleading. The Mall argues that the court made no specific findings of fact of gross negligence and further claims that the award of punitive damages is not supported by substantial evidence.

We stated in Romero v. Mervyn's, 109 N.M. 249, 784 P.2d 992 (1989), that "punitive damages may be recovered for breach of contract when the defendant's conduct was malicious, fraudulent, oppressive, [1329] or committed recklessly with a wanton disregard for plaintiff's rights." Id. at 255, 784 P.2d at 998. Any of the listed terms, standing alone, will support an award of punitive damages. Id. The substantial evidence that supports the district court's finding of fraud, as stated herein, also supports the court's finding of intentional deceit because intentional deceit is one of the elements of fraud. See Poorbaugh I, 96 N.M. at 601, 633 P.2d at 709. In addition, there is substantial evidence to support the trial court's findings as to the Mall's reckless conduct. Accordingly, we affirm the district court's award of punitive damages.

ATTORNEY FEES

We reverse the court's award of attorney fees. Rescission of the lease, which contained a provision for attorney fees, precluded any basis for such an award. Absent a specially authorizing statute or agreement, each party to a lawsuit bears its own attorney fees. First Nat'l Bank of Clovis v. Diane, Inc., 102 N.M. 548, 698 P.2d 5 (Ct.App. 1985). The trial court incorrectly relied upon the lease provision in making its awards, and, accordingly, we reverse.

Based upon the above, the judgment is affirmed in part, reversed in part, and remanded to the district court for entry of judgment consistent with this opinion.

IT IS SO ORDERED.

RANSON, C.J., and BACA, J., concur.

[1] Golden Cone's complaint alleged six counts — three based upon rescission of the lease and three seeking compensatory damages for alleged fraud, negligent misrepresentation and constructive fraud. The court granted the Mall's motion to compel an election of remedies with Golden Cone electing to pursue the remedy of rescission. See Smith v. Galio, 95 N.M. 4, 8, 617 P.2d 1325, 1329 (Ct.App. 1980) (when one remedy depends upon affirmance of a contract and another remedy depends upon the opposite, the remedies are inconsistent and the party seeking relief must elect one of them).

[2] Rescission is an equitable remedy to be tried by the court without a jury. SCRA 1986, 13-814 committee commentary.

Charles S. Desmond, Stuart A. Jackson and John M. Cochran, III, for appellant.

Charles C. Parlin, Jr. and James A. Quaremba for respondent.

Judges SCILEPPI, BERGAN and BREITEL concur with Judge JASEN; Chief Judge FULD concurs in a separate opinion in which Judge BURKE concurs; Judge KEATING taking no part.

[375] JASEN, J.

The plaintiff, Intercontinental Planning, Limited is a New York corporation engaged in the business of bringing together European and American firms desiring to enter into business relationships. By this action plaintiff seeks to recover a finder's fee of $2,781,848 for its alleged services with respect to the acquisition in 1962 of a New Jersey electronics corporation, Daystrom, Incorporated, by defendant Schlumberger, Limited.^[1] Defendants deny that plaintiff played any role with respect to this acquisition, and assert that neither they nor Daystrom ever requested or agreed to pay compensation for any services plaintiff may have rendered concerning this particular acquisition.

[376] This appeal is limited solely to plaintiff's cause of action in contract for recovery as a finder. Special Term granted defendants' motion for summary judgment upon the ground that plaintiff's action was barred by the New York Statute of Frauds. The Appellate Division unanimously affirmed the dismissal of plaintiff's cause of action in contract.^[2]

It is firmly established, of course, that summary judgment may not be granted whenever the pleadings raise material and triable issues of fact. (Sillman v. Twentieth Century-Fox, 3 N Y 2d 395, 404.) We consider the evidentiary facts alleged in the light most favorable to plaintiff on this appeal from the grant of summary judgment to defendants. We conclude, however, that no triable issue of fact is raised when the evidentiary facts are so weighed.

The affidavits submitted upon the motion for summary judgment show that plaintiff's president, Salomon Jakob^[3], met Jean Royer, the president of a small French electronics firm, Rochar Electronique, at a trade fair in New York City in May, 1960. Mr. Royer requested Mr. Jakob to introduce him to "American companies which had similar manufacturing capabilities and desired a foreign affiliation." Mr. Jakob undertook to locate interested American firms by placing an advertisement in the May 9, 1960 issue of the Wall Street Journal. Daystrom responded to this advertisement.

On May 20, 1960, Mr. Jakob introduced the presidents of Daystrom and Rochar at a luncheon meeting at the Pinnacle Club in New York City. Prior to this meeting, Daystrom agreed in principle to pay plaintiff a finder's fee should a suitable business relationship be established with Rochar. Negotiations were held at this meeting concerning the establishment of a business relationship between Daystrom and Rochar. Both principals indicated their readiness to pay plaintiff a finder's fee should an "active business relationship" be concluded between the two firms.^[4]

[377] Between May 20, 1960 and June 20, 1960, several letters and telephone calls passed between Mr. Jakob in his New York office and Daystrom's president in his New Jersey office concerning the amount of the finder's fee to which plaintiff would be entitled should the business relationship be concluded. Daystrom's attorney drafted a proposed agreement, dated June 20, 1960, establishing the terms and amount of the finder's fee. This draft agreement was mailed to plaintiff's New York office. Mr. Jakob then traveled to New Jersey on June 27, 1960, and signed the agreement in Daystrom's New Jersey office. In pertinent part, this agreement states:

"As you requested, I am writing to confirm my understanding of the terms of our agreement reached through our discussions and telephone conversations by reason of which you have been acting in behalf of Daystrom, Incorporated with a view toward the acquisition of Rochar Electronique.

"Should we acquire the company in question by purchase of its stock or assets, we shall pay you a commission equal to * * *

"This shall be the entire agreement between us and if the foregoing is acceptable to you, please execute the acceptance noted below on one copy of this letter and return the same to us, whereupon it shall constitute an agreement on the terms stated herein.

Very truly yours, /s/ THOMAS ROY JONES Thomas Roy Jones President Accepted: By S. Jakob June 27, 1960"

The proposed acquisition of Rochar by Daystrom did not take place, however, as Rochar was acquired instead by defendant Schlumberger in July, 1960. Thereafter, Mr. Jakob "encouraged" Daystrom to negotiate with defendant Schlumberger.

Plaintiff alleges that, on November 22, 1960, Daystrom's president orally agreed to extend the terms of the written agreement to include a merger between defendant Schlumberger and Daystrom.^[5] [378] Defendant Schlumberger acquired Daystrom in February, 1962, by purchasing its assets.

Plaintiff contends that the written finder's fee agreement, dated June 20, 1960, when interpreted in the light of other documents, establishes its right to compensation for the merger of defendant Schlumberger and Daystrom and constitutes an agreement sufficient to meet the New York Statute of Frauds. We note that plaintiff concedes that none of these other writings satisfies the applicable section of the Statute of Frauds (Personal Property Law, former § 31, subd. 10, now General Obligations Law, § 5-701, subd. 10) independent of the written agreement.

At the time the events in dispute occurred, subdivision 10 of former section 31 of the Personal Property Law read:

"Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking;

* * *

"10. Is a contract to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest. This provision shall not apply to a contract to pay compensation to an auctioneer, an attorney at law, or a duly licensed real estate broker or real estate salesman."

It is settled that former section 31 (subd. 10) applies to claims for fees by finders as well as brokers. (Minichiello v. Royal Business Funds Corp., 18 N Y 2d 521, 527.) Plaintiff's contract cause of action is, therefore, encompassed by former section 31 (subd. 10), the applicable section of the Statute of Frauds.

We conclude that the writings relied upon by plaintiff are insufficient to constitute an enforceable agreement under subdivision 10 of former section 31.

"[I]n a contract action a memorandum sufficient to meet the requirements of the Statute of Frauds must contain expressly [379] or by reasonable implication all the material terms of the agreement, including the rate of compensation if there has been agreement on that matter". (Cohon & Co. v. Russell, 23 N Y 2d 569, 575; Poel v. Brunswick-Balke-Collender Co., 216 N.Y. 310, 314; Restatement, 2d, Contracts, § 207 [Tent. Draft No. 4, 1968]; cf. Matter of Levin, 302 N.Y. 535, 541; cf. Stulsaft v. Mercer Tube & Mfg. Co., 288 N.Y. 255, 258.) It is true that a memorandum sufficient to satisfy the Statute of Frauds need not be contained in a single document. Thus, the terms of an agreement between the parties may be established by a combination of signed and unsigned documents, letters or other writings provided "at least one writing, the one establishing a contractual relationship between the parties, must bear the signature of the party to be charged [or his authorized agent], while the unsigned document must on its face refer to the same transaction as that set forth in the one that was signed." (Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 56.) Nevertheless, it is equally well settled that extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face. (Tramco Ind. v. Broad Hollow Assoc., 23 N Y 2d 841; Rodolitz v. Neptune Paper Prods., 22 N Y 2d 383; Tobin v. Union News Co., 18 A D 2d 243, affd. 13 N Y 2d 1155; cf. General Phoenix Corp. v. Cabot, 300 N.Y. 87, 92; cf. Laskey v. Rubel Corp., 303 N.Y. 69, 71.)

The June 20, 1960 written agreement purports to be the complete agreement of the parties concerning plaintiff's right to a finder's fee and is signed by both parties. This agreement is clear and unambiguous on its face and specifically refers to the acquisition of "Rochar Electronique" by "Daystrom, Incorporated" — and not to the later purchase of Daystrom by defendant Schlumberger, Limited in February, 1962. It follows that plaintiff receives no support for its claim to a finder's fee for the merger of Daystrom and Schlumberger from the terms of the June 20 written agreement. Plaintiff cannot resort to extrinsic writings, none of which independently satisfies the Statute of Frauds, to create an ambiguity in the unambiguous and complete written agreement. (Tramco Ind. v. Broad Hollow Assoc., supra.)

Plaintiff, however, also alleges that Daystrom later orally agreed on November 22, 1960, to extend the terms of the June, [380] 1960 written finder's fee agreement to include its proposed acquisition by defendant Schlumberger, Limited.^[6] A fortiori, this oral modification of the written agreement also fails to comply with the Statute of Frauds (Personal Property Law, former § 31, subd. 10) and cannot be enforced.

Special Term correctly concluded, therefore, that there was "no written note or memorandum evidencing any agreement with respect to the acquisition in question signed by the party to be charged, other than a document which, in clear and unambiguous language, refers solely to a prior contemplated acquisition."

Plaintiff's contract cause of action is inadequate, therefore, if New York law is applied. Plaintiff, alternatively, contends, however, that New Jersey's laws contain no Statute of Frauds applicable to this case, and should be applied under a "grouping of contacts" analysis of the choice of law. In any event, plaintiff argues, it is entitled to a full trial to show which jurisdiction has the most significant contacts with the litigation.

Our research indicates that New Jersey's Statute of Frauds does not apply to finder's fee agreements pertaining to the sale of businesses. (Cf. N. J. Stat. Ann. 25:1-5; 25:1-9; Tanner Assoc. v. Ciraldo, 33 N. J. 51; Fontana v. Polish Nat. Alliance of Brooklyn, 130 N. J. L. 503.) Therefore, plaintiff's agreements are unenforceable under New York law while New Jersey's Statute of Frauds does not bar an action on such an agreement.^[7]

The contacts of the parties with New York and New Jersey are essentially undisputed, except for the alleged oral modification of the written agreement in November, 1960, to include the proposed Daystrom-Schlumberger merger. However, we conclude that New York law should be applied when the facts relating to the choice of law issue are considered in the light most favorable to plaintiff. It follows that the matter is determinable on the affidavits, as a matter of law, and there is no issue of [381] fact requiring a hearing concerning the applicable law (Cf. Matter of Bulova, 14 A D 2d 249.)

Whether or not a contract, valid and enforceable in the jurisdiction where made, is subject to the Statute of Frauds of a jurisdiction where an action is brought upon the contract is a question not yet settled in this State. This court has recognized the existence of the problem and the conflict of authority on this point, but thus far has not found it necessary to resolve it. (Rubin v. Irving Trust Co., 305 N.Y. 288, 297-298; Russell v. Societe Anonyme des Etablissements Aeroxon, 268 N.Y. 173, 180-181; Reilly v. Steinhart, 217 N.Y. 549, 553; cf. 49 Am. Jur., Statute of Frauds [1968 Supp.], §§ 3.1, 3.2, 3.3; cf. Ann., Statute of Frauds and Conflict of Laws, 105 A. L. R. 652-681, supp. 161 A. L. R. 820-824; cf. Currie, Ehrenzweig and the Statute of Frauds: An Inquiry into the "Rule of Validation", 18 Okla. L. Rev. 243 [1965]; cf. Ehrenzweig, The Statute of Frauds in the Conflict of Laws: The Basic Rule of Validation, 59 Col. L. Rev. 874 [1959].)

Traditionally courts have arrived at their conclusion concerning the applicable law, i.e., lex loci or lex fori, by characterizing the Statute of Frauds as substantive or procedural and evidentiary. "If it is substantive, then the law of the place of contracting applies, and though the forum has its own Statute of Frauds, the latter would not be applicable. If it is procedural or evidentiary then the law of the forum applies though the contract was valid and enforceable where made." (Russell v. Societe Anonyme des Etablissements Aeroxon, supra, p. 181.) "Indeed the statute may even be regarded as having a dual nature — both substantive and procedural." (Rubin v. Irving Trust Co., supra, p. 298.) But this attempt to characterize the Statute of Frauds as procedural or substantive, concerned as it is with amorphous legal conclusions, does little more than restate the problem and has even less relevance to our modern approach to the conflict of laws.

However, as we view this case, it is unnecessary to characterize the Statute of Frauds as either substantive or procedural since New York law should be applied in either event. If the statute be viewed as procedural, there is no problem since the law of the forum would be applied. Likewise, New York's Statute of Frauds would be applied as the law of the State whose [382] law governs generally if the statute be considered substantive since New York has the paramount interest in the application of its law in this case. (Cf. Matter of Crichton, 20 N Y 2d 124, 133; Matter of Clark, 21 N Y 2d 478, 486; cf. Miller v. Miller, 22 N Y 2d 12, 15-16.)

The traditional view of the choice of law rules concerning contracts where the parties have not expressed their choice of law in their agreement was that matters bearing upon the execution, interpretation, and validity of contracts are determined by the law of the place where the contract is made while matters concerned with its performance are regulated by the law of the place where the contract, by its terms, is to be performed. (Swift & Co. v. Bankers Trust Co., 280 N.Y. 135, 141; Union Nat. Bank v. Chapman, 169 N.Y. 538, 543; cf. Restatement, Conflict of Laws, §§ 332, 358; cf. Goodrich, Conflict of Laws [3d ed., 1949], §§ 109, 114.) A contract was deemed made in the State where the last act necessary to make it binding takes place according to the law of contracts. (Cf. Goodrich, supra, § 107.)

However, the traditional view has been rejected by this court in favor of an approach which "gives to the place `having the most interest in the problem' paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction `most intimately concerned with the outcome of [the] particular litigation'". (Auten v. Auten, 308 N.Y. 155, 161.) "[T]he rule which has evolved clearly in our most recent decisions is that the law of the jurisdiction having the greatest interest in the litigation will be applied and that the facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict." (Miller v. Miller, supra, pp. 15-16; Matter of Crichton, supra, p. 133; Matter of Clark, supra, pp. 485-486.)

It is clear that New York has the paramount interest in the application of its law when the contacts which New Jersey and this State have with the instant controversy are examined in relation to the policies and purposes to be vindicated by the conflicting laws.

The purpose of the New York statute is manifest from an examination of its legislative history. The provision extending the Statute of Frauds to cover business brokerage contracts [383] and agreements for finder's fees (Personal Property Law, former § 31, subd. 10, now General Obligations Law, § 5-701, subd. 10) was first enacted in 1949 upon the recommendation of the Law Revision Commission. In its report to the Legislature, the commission stated its reason for proposing subdivision 10 of section 31: "In recent years there have been a substantial number of reported cases of claims for commissions for services rendered in the sale of a going business or a business opportunity. Under existing law there is no requirement that business brokers' contracts for commissions be in writing. The nature of the transactions is such that, in the absence of the requirement of a writing, unfounded and multiple claims for commissions are frequently asserted, and employers often seek to escape liability by denying the fact of employment. These controversies are commonly resolved by juries on conflicting testimony, with the consequent danger of erroneous verdicts." (1949 Report of N. Y. Law Rev. Comm. [N. Y. Legis. Doc., 1949, No. 65 (G)], p. 615.)

We recently reviewed the legislative history of subdivision 10 of former section 31 and concluded that the report of the Law Revision Commission reflects the purpose of the statute. (Minichiello v. Royal Business Funds Corp., supra, 526-527.) It thus appears that the statute was based at least in part upon the premise that the "danger of erroneous verdicts" in allowing juries to determine claims for brokerage and finder's fees on oral testimony warranted the writing requirement. (Cf. Minichiello v. Royal Business Funds Corp., supra, pp. 526-527.) It follows from the purpose of the statute that one of the policies embraced by this provision is to protect the principals in the sale of a business interest from the type of claim being asserted here — a claim for a $2,780,000 finder's fee not supported by the written evidence.

This policy would include foreign principals who utilize New York brokers or finders because of the nature of the brokerage business as it is conducted here. It is common knowledge that New York is a national and international center for the purchase and sale of businesses and interests therein. We conclude therefore that the Legislature in enacting subdivision 10 of former section 31 intended to protect not only its own residents, but also those who come into New York and take advantage of our [384] position as an international clearing house and market place. This is true because of all the jurisdictions involved, New York law affords the foreign principals the greatest degree of protection against the unfounded claims of brokers and finders. This encourages the use of New York brokers and finders by foreign principals and contributes to the economic development of our State. Our brokers and finders need only ensure that their agreements for compensation comply with the Statute of Frauds to receive the benefits of New York's position as a business center.

It is clear that the instant dispute has sufficient contacts with New York to give our State a substantial interest in applying its policy. Plaintiff is a New York corporation and its international finder's business centers in this State. Moreover, plaintiff's representation of Rochar derived from a New York meeting with Rochar's president. Plaintiff solicited Daystrom's interest in Rochar through an advertisement placed in a New York newspaper, and Mr. Jakob introduced the presidents of the two original principals (Rochar and Daystrom) at a meeting in a New York restaurant. At this New York meeting the principals agreed to compensate plaintiff with a finder's fee if a business relationship was concluded between Rochar and Daystrom. The remaining contacts leading up to the execution of the written finder's fee agreement involve letters and telephone calls emanating from plaintiff's New York office and the New Jersey office of Daystrom. It is therefore clear that the services for which plaintiff claims compensation were substantially rendered in New York, and that our State has a substantial relationship with the formation and negotiation of the finder's fee agreement.^[8] In fact, plaintiff concedes in its brief, "Were it not for the ordinary writing requirement of the Statute of Frauds, there can be no question but that a competent agreement [to compensate plaintiff] existed by June 17, 1960."^[9] These contacts give New York a substantial interest [385] in applying its own law in view of the policy underlying the applicable provision of our Statute of Frauds to protect principals in business transactions from unfounded claims and thereby encourage use of New York as a national and international business center. (Cf. Restatement 2d, Conflict of Laws [Proposed Official Draft, Part II, 1968, § 188, Comment on subsection (2), pp. 206-210].)

On the other hand, New Jersey's Statute of Frauds does not apply to brokerage or finder's fee agreements pertaining to the sale of businesses. (Cf. N. J. Stat. Ann. 25:1-5; 25:1-9; Tanner Assoc. v. Ciraldo, supra; Fontana v. Polish Nat. Alliance of Brooklyn, supra.) The general purpose underlying a Statute of Frauds can be characterized as the protection of parties who are sued for alleged promises informally made or to protect the enacting State's courts from perjury and prevent their use as instruments of extortion. (Cf. Fontana v. Polish Nat. Alliance of Brooklyn, 130 N. J. L. 503 supra; cf. Currie, Ehrenzweig and the Statute of Frauds: An Inquiry into the "Rule of Validation", 18 Okla. L. Rev. 243, 248-249, supra.) The latter policy, that of regulating the administration of justice in the courts of the enacting State, is inapplicable when the action is brought in another State. New Jersey, therefore, has no interest in protecting the New York courts from perjury. The policy of protecting the enacting State's defendants, of course, survives even though a contract action be brought in another jurisdiction. Here, Daystrom was incorporated in New Jersey and had its business office in that State. However, New Jersey has no interest in having its lack of protection for its residents used to establish their liability in a suit brought by residents of other jurisdictions when the laws of the forum State offer a complete defense to the action. It follows from this analysis that no true conflict of law exists since the proposed exception to the local law of the forum would defeat a legitimate interest of the forum State without serving a legitimate interest of any other State. (See, e.g., Traynor, Is This Conflict Really Necessary?, 37 Texas L. Rev. 657 [1959]; Currie, Survival of Actions: Adjudication versus Automation in the Conflict of Laws, 10 Stan. L. Rev. 205 [1958]; Currie, On the Displacement of The Law of The Forum, 58 Col. L. Rev. 964 [1958]; Currie, Selected Essays on the Conflict of Laws; Cavers, The Choice of Law Process [386] [1965]; Currie, Comments on Babcock v. Jackson, 63 Col. L. Rev. 1212 [1963].)

The courts below, therefore, properly applied the New York Statute of Frauds to bar plaintiff's cause of action.

Accordingly, the order appealed from should be affirmed, with costs.

Chief Judge FULD (concurring).

Although I agree that we should affirm the grant of summary judgment to the defendants, I find it unnecessary to approach the case as if it were a normal, albeit intricate, problem in choice of law. The conceded facts stamp the issue before us as quite unusual and, in my view, any attempt to solve such a problem by applying our usual conflicts analysis is apt to produce needless confusion. The factor which sets this case apart is that the plaintiff early recognized the need for a writing and joined in executing one. The memorandum, signed in June, 1960, which established the terms and amount of the finder's fee, covered the abortive Rochar deal. In the plaintiff's claim, there is no circumstance to warrant enforcement of an oral agreement assertedly made five months later "extend[ing] the terms of the written agreement" (opn., p. 377).

To begin with, there is no doubt that this State's Statute of Frauds requires that a finder's fee agreement be in writing (Personal Property Law, former § 31, subd. 10 [now General Obligations Law, § 5-701, subd. 10]) and that the written memoranda upon which the plaintiff relies are insufficient to constitute an enforceable agreement. (See, e.g., Minichiello v. Royal Business Funds Corp., 18 N Y 2d 521; Cohon & Co. v. Russell, 23 N Y 2d 569, 572.) Consequently, there is no way under the law of New York for the plaintiff to prevail on the claim.

This does not mean that our courts will not enforce a contract, made in conformity with foreign law when, under our conflict of law rules, our State lacks a sufficient interest in the application of its own law. (Cf. Anderson v. A/S Berge Sigval Bergesen, 22 N Y 2d 944, affg. 29 A D 756.) But the case before us presents no such situation. With eyes open and apparently fixed upon the requirements of our Statute of Frauds, the plaintiff joined with Daystrom in executing a written agreement covering the main terms of the deal. Having thus wittingly acknowledged the controlling force of our statute upon the form [387] of their agreement, the plaintiff should not be allowed to turn away from it and obtain enforcement of an oral agreement "extending" — and, thereby, radically altering — the original contract.

In short, then, in these special circumstances, I would affirm the summary judgment awarded the defendants on the ground that our Statute of Frauds prevents enforcement of an oral extension of a complete written contract intentionally executed in accordance with the provisions of that statute.

Order affirmed.

[1] Daystrom was liquidated subsequent to the transactions at issue in this case. Defendant Daystrom, Incorporated, a Texas corporation, has assumed its liabilities and defendant Schlumberger has guaranteed them. Daystrom (New Jersey) is hereafter referred to as Daystrom since defendant Daystrom (Texas) has no connection with the facts giving rise to this action.

[2] The Appellate Division modified portions of Special Term's order relating to other causes of action not pertinent on this appeal.

[3] Mr. Jakob was also plaintiff's sole stockholder and conducted its business from his Manhattan office.

[4] At this time, Rochar was engaged in advanced merger negotiations with defendant Schlumberger.

[5] This allegedly occurred at a meeting in Daystrom's New Jersey offices.

[6] The contemplated acquisition of Rochar by Daystrom to which the June written finder's fee agreement refers was impossible at this time since Rochar had been merged into defendant Schlumberger, Limited in July, 1960.

[7] Defendant Schlumberger, Limited is a Netherlands Antilles corporation and Rochar Electronique was a French corporation. No party, however, contends that the law of France or the Netherlands Antilles should be applied in this case.

[8] The place of the actual merger negotiations between the principals is of no significance, since our sole concern in this case is with the agreement concerning plaintiff's right to a finder's fee and not the eventual merger of defendant Schlumberger, Limited and Daystrom.

[9] This is prior to the execution of the written finder's fee agreement, dated June 20, 1960, by plaintiff in New Jersey on June 27, 1960.

Present: WILKINS, LIACOS, NOLAN, LYNCH, & O'CONNOR, JJ.

Alan D. Rose (R. Reed Baer with him) for the plaintiffs.

Neal C. Tully (Dana C. Hanson with him) for the defendant.

WILKINS, J.

We deal with questions certified to us by the United States Court of Appeals for the First Circuit, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981). The principal question involves a conflict of laws issue: whether the [623] Massachusetts or the New York Statute of Frauds should be applied in this action involving an alleged oral agreement between the plaintiff Bushkin, a New York resident, and his New York corporation, on the one hand, and the defendant Raytheon Company (Raytheon), a Massachusetts based corporation, on the other. An action based on such an oral agreement would be barred under the New York Statute of Frauds (N.Y. Gen. Oblig. Law § 5-701[a][10] [McKinney 1978 & Cum. Supp. 1984]), but would not be barred under the Massachusetts Statute of Frauds (G.L.c. 259, § 1).

The Court of Appeals understandably concluded that it was not "confident of the choice that would be made by the Supreme Judicial Court in this important case." Our cases have not indicated with any certainty how this court would resolve the choice-of-law question presented to us (nor indeed the other questions certified to us, which concern G.L.c. 93A).

The three questions certified are:

"1. On the facts of this case, should New York or Massachusetts law determine the issue of validity of the alleged oral agreement between the parties?

"2. Does Massachusetts General Laws chapter 93A apply to the allegations of deceptive acts and practices?

"3. If the answer to question 2 is in the affirmative, is defendant entitled to the exemption of G.L.c. 93A, § 3 (1) (b) (i) in that the alleged actions forming the basis of the chapter 93A claim did not occur `primarily and substantially' in Massachusetts?"^[2]

The Court of Appeals appended to its certification "the summary of relevant facts as set forth by the district court in its opinion." We quote those facts in the paragraphs immediately hereafter.

[624] "Factual Background.[fna]

"[a] Although Raytheon disputes many aspects of Bushkin's account of the facts relevant to this case, Raytheon is willing to, and indeed must, resolve any genuine disputes of fact in Bushkin's favor for the purposes of its motion for summary judgment. The following factual background, therefore, adopts Bushkin's version of any genuinely disputed facts."

"Bushkin, a New York resident, is an investment banker specializing in mergers and acquisitions. He is the president of Bushkin Associates, a corporation organized and based in New York. Raytheon is a Delaware corporation with its principal place of business in Massachusetts.

"Bushkin's dealings with Raytheon concerning possible mergers and acquisitions began in 1971. In 1974, Bushkin discovered that Beech [Aircraft Corporation] might be available for acquisition. He attended a meeting in January, 1974, with Olive Ann Beech and Frank Hedrick, the president and vice president respectively of Beech, at which he learned some information regarding the type of merger that might interest them.[fnb>]

"[fnb] This meeting was arranged by Howard Suslak and Fred Schreier, principals of MacDonald & Co., Inc. MacDonald & Co. has an agreement with Bushkin whereby it will receive a share of any award Bushkin might recover from Raytheon."

"On May 21, 1974, Bushkin, in New York, telephoned Robert Seaman, a vice president of Raytheon, in Massachusetts, to ask if Raytheon would be interested in acquiring a general aviation company. Seaman replied that Raytheon might be interested if the company were either Cessna or Beech. Seaman followed up with a May 24 letter to Bushkin, stating that Raytheon's interest in a general aviation company was uncertain. During a July 19, 1974, telephone conference, Seaman told Bushkin that it was unlikely that Raytheon would have an interest in a general aviation company.

"The next conversation on the subject, and the one in which Bushkin alleges the oral fee agreement was made, occurred on January 28, 1975. Bushkin apparently telephoned Seaman (or Seaman returned Bushkin's call). In either event, Bushkin was in New York and Seaman in Boston. Bushkin asked if Raytheon were still interested in general aviation. Seaman [625] replied yes, if the company were Beech or Cessna. Bushkin stated that he could reveal the name of the company, but first wanted to discuss a fee arrangement. Seaman told Bushkin that if Raytheon consummated an acquisition of the company Bushkin was discussing, Raytheon would pay a fee of one percent of the value of the transaction. Bushkin replied, `fine,' and then identified the company as Beech.[fnc] He went on to disclose information as to his understanding of the kind of acquisition or merger that Beech wanted.

"[fnc] The day before this conversation, Bushkin discussed Beech as a possible acquisition candidate, and allegedly entered into an oral fee agreement, with another company, Northwest Industries. After his conversation with Seaman, up until August 1979, Bushkin sought to interest several other companies in Beech."

"Seaman and Bushkin had a few more contacts with regard to Beech and, on June 27, 1975, Seaman presented Beech as a possible acquisition candidate to Thomas Phillips, Raytheon's chairman of the board. An internal Raytheon `acquisition log,' dated June 19, 1975, identifies Bushkin as the person who offered or suggested Beech as a candidate. On June 30, Seaman called Bushkin to report on the presentation, and to discuss various aspects of a possible Raytheon acquisition of Beech. Later that day, Seaman sent a memo to Phillips summarizing relevant aspects of his conversation with Bushkin.[fnd] In the memo, Bushkin was identified as `our contact in this matter.'

"[fnd] Bushkin told Seaman that Mrs. Beech was interested in a tax-free transaction, and dividend payouts to her and members of her family; that Beech was looking to develop a jet of its own; and believed that this kind of project could be better accomplished if it had the backing of a larger and financially stronger company; and that Beech wanted the Beech name to survive."

"In a telephone conversation on July 29, 1975, Seaman told Bushkin that Raytheon had decided it was not interested in pursuing Beech as an acquisition candidate. Bushkin had subsequent contacts with Seaman and Phillips with regard to possible acquisition candidates other than Beech. On one occasion in November 1975 Bushkin broached the subject of Beech with Phillips (in the course of discussions about another candidate), and Phillips replied that he was not interested.

[626] "On September 1, 1976, Raytheon entered into a written agreement with Lonsdale Enterprises, Inc., and its principals Royal Little and James Robison, for consulting services in connection with Raytheon's interest in mergers and acquisitions. About three months later, in letters to Phillips dated November 29 and December 9, 1976, Little and Robison suggested Beech as a possible acquisition candidate. Phillips' first reaction was not enthusiastic, but by February 16, 1977, Phillips indicated that he wanted to meet with Olive Beech. On February 28, while Bushkin was meeting with Phillips concerning another company, Bushkin again mentioned Beech, but Phillips said he was not interested. Nonetheless, on March 3, Phillips authorized Little and Robison to contact Beech through their business associate Angus MacDonald. In June, 1977, it became public knowledge that Beech was negotiating a merger with General Dynamics, and Raytheon, therefore, dropped the matter until those negotiations fell through.

"Phillips finally met with Frank Hedrick, vice president of Beech, on January 24, 1978, and with Olive Beech on July 12, 1978. After further negotiations and studies, Raytheon and Beech reached a preliminary agreement on October 1, 1979. Raytheon subsequently entered written agreements, dated November 26, 1979, to pay Lonsdale and MacDonald $600,000 and $500,000 respectively for their services in connection with the merger. The agreements were contingent on its consummation.

"In February, 1980, Raytheon acquired Beech. The value of the transaction was approximately $800,000,000.00."

The action came before the Court of Appeals on Bushkin's appeal following a Federal District Court judge's allowance of Raytheon's motion for summary judgment. In allowing that motion, the judge recognized that, in this diversity action, his obligation was to apply the choice-of-law rules of Massachusetts. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). He concluded that this court would not apply the principle that the choice of law would be governed by the place of contracting and concluded further that the principles stated in the Restatement (Second) of Conflict of Laws (1971) [627] were "not an effective means for resolving the choice of law problem in this case." In his view, "[d]etermining the projected scope of a law by application of an expanded interest analysis" helped to resolve the choice-of-law issue. Applying this analysis, he ruled that New York had a strong interest in protecting defendants against unfounded claims, even when New York brokers and finders sued non-New Yorkers. He said "Massachusetts, in contrast, has at most a minimal interest in applying its law to this case." He concluded that Bushkin could not avoid the laws of New York and should not benefit from forum shopping, and held that "[e]xpanded interest analysis clearly tips the scale in favor of applying New York law to the facts of this case."^[3]

The judge further concluded that Bushkin's G.L.c. 93A claim merely restated his contract claim, believing that it was based solely on Raytheon's failure to abide by its agreement with Bushkin and its use, without payment, of information acquired pursuant to that agreement. Because the contract was unenforceable, it was his view that Bushkin's G.L.c. 93A claims must necessarily fail. He thus allowed Raytheon's motion for summary judgment and dismissed Bushkin's complaint.

We conclude that the alleged oral fee agreement is not barred by the New York Statute of Frauds because the law of Massachusetts determines the enforceability of the alleged oral agreement. We further decide that Raytheon is entitled to the exemption from G.L.c. 93A provided by G.L.c. 93A, § 3 (1) (b) (i), because Bushkin's G.L.c. 93A claim is not based on transactions and actions that occurred primarily in Massachusetts. We thus answer question three in the affirmative. Because Raytheon is exempt from liability under G.L.c. 93A, we need not answer question two, which inquires whether G.L.c. 93A applies to Bushkin's allegations of deceptive acts and practices.

[628] 1. On the facts of this case, should New York or Massachusetts law determine the issue of validity of the alleged oral agreement between the parties?

The plaintiff does not contend that his oral agreement would be enforceable under the substantive law of New York. The agreement would be held void under the New York Statute of Frauds. N.Y. Gen. Oblig. Law § 5-701(a)(10) (McKinney 1978 & Cum. Supp. 1984). The protection of the New York statute extends not only to residents, but also to "foreign principals who utilize New York brokers or finders." Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 383 (1969). According to the Court of Appeals "[i]t is common knowledge that New York is a national and international center for the purchase and sale of businesses and interests therein. We conclude therefore that the Legislature in enacting subdivision 10 of former section 31 [now N.Y. Gen. Oblig. Law § 5-701 (a)(10)] intended to protect not only its own residents, but also those who come into New York and take advantage of our position as an international clearing house and market place. This is true because, of all the jurisdictions involved, New York law affords the foreign principals the greatest degree of protection against the unfounded claims of brokers and finders. This encourages the use of New York brokers and finders by foreign principals and contributes to the economic development of our State. Our brokers and finders need only ensure that their agreements for compensation comply with the Statute of Frauds to receive the benefits of New York's position as a business center." Id. at 383-384.^[4]

[629] It is also reasonably certain that, if this action had been commenced in New York, the New York courts under that State's choice-of-law rules would have looked to New York, and not to Massachusetts, substantive law. Decisions subsequent to the Daystrom case suggest that New York claims a paramount "interest" in applying its Statute of Frauds, even when defendants (like Raytheon) do not "come into New York." See Pallavicini v. International Tel. & Tel. Corp., 41 A.D.2d 66, 69 (1973), aff'd, 34 N.Y.2d 913 (1974). See also William J. Conlon & Sons v. Wanamaker, 583 F. Supp. 212, 215-216 (E.D.N.Y. 1984); O'Keeffe v. Bry, 456 F. Supp. 822, 827-828 (S.D.N.Y. 1978).

Another court has given a broad reach to the New York Statute of Frauds. In Denny v. American Tobacco Co., 308 F. Supp. 219 (N.D. Cal. 1970), the judge applied the "interest analysis" test used by California (see Bernkrant v. Fowler, 55 Cal.2d 588 [1961]), and held that the New York Statute of Frauds barred a quantum meruit action brought by a California "finder" against a New York defendant demanding compensation for information contained in a letter concerning the possible sale of a California company. Although both the plaintiff and the acquired company were from California, he concluded that California's interest in protecting the reasonable expectations of its residents was much less apparent than New York's clear interest "in protecting its residents from just the sort of claim as is involved here." Denny v. American Tobacco Co., supra at 223. The judge also commented that California law followed neither the first nor the second Restatement of Conflict of Laws and noted that "[a] practitioner of the second Restatement would be hard put to say which of these states [California or New York] had `the most significant relationship' with the `contract' involved herein." Id. at 222. He concluded nevertheless that, under the second Restatement, New York law "might well be said to have the most significant contacts with the transaction here." Id. at 223.

[630] Courts in other jurisdictions, however, have rejected the Empire State's imperial reach. In three decisions applying the "most significant relationship" test, courts, faced with a defense of the New York Statute of Frauds pleaded against a New York plaintiff, have chosen forum and not New York law. See Havenfield Corp. v. H & R Block, Inc., 509 F.2d 1263 (8th Cir.), cert. denied, 421 U.S. 999 (1975); Ehrman v. Cook Elec. Co., 468 F. Supp. 98 (N.D. Ill. 1979); Edwin F. Armstrong & Co. v. Ben Pearson, Inc., 294 F. Supp. 163 (E.D. Ark. 1967), aff'd sub nom. Leisure Group, Inc. v. Edwin F. Armstrong & Co., 404 F.2d 610 (8th Cir.1968). These cases are not directly on point because each case, but in varying degrees, presents "significant" contacts more strongly associated with the forum State than are the Massachusetts contacts in this case.

We surmise that the District Court judge in the case before us, by his reference to an expanded interest analysis, anticipated that we would adopt an approach to choice of law not unlike that of the California and New York courts. Of course, in the Denny case, the California Federal District Court applied New York law to protect a New York resident against a "finder" who "came into" New York. In our case, the question is whether the law of New York should be applied to protect a "resident" of Massachusetts from the claim of a New York broker or "finder."

The Court of Appeals and the District Court judge in this case were correct in concluding that this court would not permit the choice-of-law question to turn on where the contract was made. See McKinney v. National Dairy Council, 491 F. Supp. 1108, 1112 (D. Mass. 1980), to the same effect. See also Emery Corp. v. Century Bancorp., Inc., 588 F. Supp. 15, 17 (D. Mass. 1984) (tort case); Rudow v. Fogel, 12 Mass. App. Ct. 430, 436-437 (1981) (New York law governs question of constructive trust of Massachusetts real estate). We rejected that simple rule in Choate, Hall & Stewart v. SCA Servs., Inc., 378 Mass. 535, 540-541 (1979), and not solely for those cases in which reference to the law of the place of making would produce "awkward or arbitrary results." Id. at 541. Almost all [631] States have abandoned the lex loci rule (id.) and, as this case demonstrates, with good cause. Although for summary judgment purposes we must accept Bushkin's assertion that the contract was made in Massachusetts, the governing principles of law should hardly turn on a parsing of the disputed content of a telephone call or, more importantly, on the fortuitous fact that an oral offer was accepted orally in one State rather than in the other.

In our Choate, Hall & Stewart opinion, we noted that there were various doctrines that had replaced "one-factor tests with a more functional approach," but because of the particular facts of that case we were deprived "of an opportunity to elect among the extant doctrines." Id. at 541. In our opinions issued since the Choate, Hall & Stewart case, we have not dealt with choice-of-law questions in a contract case and, in the area of tort law, we have not elected by name any particular choice-of-law doctrine. See Cohen v. McDonnell Douglas Corp., 389 Mass. 327, 333-337 (1983).

The facts of this case present us with the "opportunity" unavailable in the Choate, Hall & Stewart case. As with our tort cases, we decide here not to tie Massachusetts conflicts law to any specific choice-of-law doctrine, but seek instead a functional choice-of-law approach that responds to the interests of the parties, the States involved, and the interstate system as a whole. Having surveyed the academic commentary and recent decisional law, we agree with Professor Leflar's perception that, despite the rhetoric of choice-of-law scholars, the courts and commentators "are arriving at results broadly consistent with each other's holdings." R.A. Leflar, American Conflicts Law § 99, at 198 (3d ed. 1977).

We, therefore, determine the choice-of-law question by assessing various choice-influencing considerations. It is, of course, obvious that, when courts turn to such considerations, they undertake to reach a fair result in a given case but may provide little guidance for anticipating the "fair result" in other cases. By considering a variety of factors and not simply, as some have argued, choosing the State with the greatest "interest" in the particular issue, some vagueness in the formulations [632] applied is probably unavoidable. Reese, The Second Restatement of Conflict of Laws Revisited, 34 Mercer L. Rev. 501, 518 (1983). Our approach, however, while producing less predictability, rejects artificial constructions. This, after all, was the primary reason for rejecting the traditional lex loci approach in favor of more modern methods. It makes little sense to reject one artificial approach only to replace it with another.

One obvious source of guidance is the Restatement (Second) of Conflict of Laws (1971). Under that Restatement, a choice-of-law question involving a Statute of Frauds is resolved according to the choice-of-law principles applicable to all substantive contract issues (§ 141). The principles contained in § 186 and § 187 provide that, in the absence of a choice of law by the parties, their rights "are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6." Id. at § 188(1). "[T]he contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties." Id. at § 188(2). Factors under § 6 that are said to be relevant to the choice of the applicable rule of law include: "(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." Id. at § 6(2).

We do not view the process, intended under § 188, for determining the State with the most significant relationship to the issue as simply adding up various contacts. Each side has argued to us that the contacts with the State whose law it wishes [633] applied are greater in quantity.^[5] Understandably they do not agree on which contacts are important or even relevant, such as events occurring after the date of the alleged contract.^[6] In [634] any event, the contacts analyzed by themselves (without regard to § 6 principles) lead us neither to Massachusetts nor to New York as the State with the more significant relationship to the transaction or the parties. No simple and objective test can provide an acceptable choice-of-law answer in this case, nor should it.

We choose, instead, to emphasize the choice-influencing factors listed in § 6 (2) of the Restatement (Second) of Conflict of Laws, quoted above. Alternatively, we could consider the five considerations proposed by Professor Leflar in American Conflicts Law, supra at 195, on which we have previously relied. Saharceski v. Marcure, 373 Mass. 304, 312 n. 7 (1977).^[7] We agree with Professor Leflar that these five considerations generally parallel the considerations contained in longer lists, including § 6 (2) of the Second Restatement. R.A. Leflar, American Conflicts Law, supra at 194-195. We feel free, however, to borrow from any of the various lists to help focus our attention on the considerations particularly relevant to the case before us.

We begin by noting that the laws of both Massachusetts and New York favor the enforcement of contracts. The difference is that New York believes that the protection of defendants' rights requires that, in the circumstances of this case, there be a writing to prove the defendant's promise, while the law of Massachusetts does not (G.L.c. 259, § 1).^[8] New York has [635] given focused attention to this question and its conscious adoption of a position on the question is obvious. Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 383 (1969). However, one would hardly expect the Massachusetts Legislature to state affirmatively that no writing is required in the circumstances of an oral agreement to pay such a broker's or finder's fee when the Massachusetts Statute of Frauds already achieves that result. The choice by Massachusetts to permit a trier of fact to resolve conflicts in testimony, as is true in many cases involving large sums of money, is a policy that should be balanced against the policy of New York. We find, therefore, that the "relative interests [of New York and Massachusetts] in the determination of the particular issue" in this case, Restatement (Second), supra at § 6 (2) (c), point clearly toward neither State.

We find similarly that other important considerations, such as uniformity of result, maintenance of interstate order, and simplification of the judicial task, R.A. Leflar, American Conflicts Law, supra at 195, point toward neither Massachusetts nor New York. Uniformity and interstate order could be advanced only if all States accepted New York's extrajurisdictional reach, but other jurisdictions have not done so. See, e.g., Havenfield Corp. v. H & R Block, Inc., 509 F.2d 1263 (8th Cir.1975).

One significant consideration, the justified expectations of the parties, militates for Massachusetts law. Restatement (Second), supra at § 6 (2) (d); § 141, comment (g); § 188 comment (b); R.A. Leflar, American Conflicts Law, supra at § 103. Here Bushkin and Raytheon expected that any oral agreement would be enforced. Raytheon had made other, similar oral agreements to which it expected to be bound, including others with Bushkin. Since Bushkin is not in the business of supplying free information, we may assume he expected any agreement for such information to be enforced as well.

Finally, we note that, although the Statute of Frauds involves a question of substantive law and is not a procedural rule governed by the law of the forum (but see Emery v. Burbank, 163 Mass. 326, 329 [1895]), the Statute of Frauds concerns the [636] necessary proof of a case and not the substantive merits of a plaintiff's claim. Cf. Twerski & Mayer, Toward a Pragmatic Solution of Choice-of-Law Problems — At the Interface of Substance and Procedure, 74 Nw. U.L. Rev. 781, 784-786 (1979). Where relevant contacts and considerations are balanced, or nearly so, we are inclined to resolve the choice by choosing that law "which would carry out and validate the transaction in accordance with intention, in preference to a law that would tend to defeat it" (footnotes omitted). Boston Safe Deposit & Trust Co. v. Paris, 15 Mass. App. Ct. 686, 691 (1983). In this case, the law that will validate the agreement, if indeed there was an agreement, is that of Massachusetts.

In answer to the first question, we conclude that the law of Massachusetts should determine the issue of the validity of the alleged oral agreement between the parties.

2. Does Massachusetts General Laws chapter 93A apply to the allegations of deceptive acts and practices?

We construe question two as inquiring about the extent to which, apart from any exemption, G.L.c. 93A applies to allegedly unfair or deceptive acts or practices of the sort alleged in this interstate transaction.^[9] Because we conclude in our answer to the third question that Raytheon is exempt from Bushkin's G.L.c. 93A claim, we need not answer the question.

[637] 3. If the answer to question 2 is in the affirmative, is defendant entitled to the exemption of G.L.c. 93A, § 3 (1) (b) (i) in that the alleged actions forming the basis of the chapter 93A claim did not occur "primarily and substantially" in Massachusetts?

Under G.L.c. 93A, § 3 (1) (b), as amended by St. 1969, c. 814, § 2,^[10] Raytheon is exempt from Bushkin's G.L.c. 93A claim unless that claim involved "transactions and actions which (i) occur[red] primarily and substantially within the commonwealth." This exemption represents a legislative determination that G.L.c. 93A should not apply to certain transactions and actions that do not occur principally and significantly in Massachusetts. This court has had little occasion to consider the scope of the exemption. In Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 580 (1982), we noted that the facts of the case did "not require us to define the outer boundaries of those transactions and actions which may be held to have occurred primarily and substantially within the Commonwealth." Federal cases have involved this general issue, but on the facts the various judges have been able to determine with relative ease whether particular actions and transactions occurred primarily and substantially in Massachusetts or elsewhere.^[11]

[638] Bushkin's G.L.c. 93A claim is based on alleged representations made during a telephone call or calls in 1975 between a Raytheon officer in Massachusetts and Bushkin in New York. Bushkin asserts that Raytheon's officer obtained information from Bushkin concerning Beech by falsely representing that Raytheon would pay for Bushkin's services.^[12] Bushkin in New York then relied on those representations and from New York disclosed the name of Beech and provided information about Beech. Thereafter, Bushkin alleges he sustained a loss.

Raytheon has met its burden of showing that the transactions and actions on which Bushkin relies did not occur primarily in Massachusetts. G.L.c. 93A, § 3 (2). The telephone conversations were between New York and Massachusetts. The alleged unfair or deceptive acts or practices were statements made in Massachusetts but received and acted on in New York. Any loss was incurred in New York.

If it were proper (and we need not decide the point)^[13] to engage in a broader analysis of this issue, similar to the functional [639] approach we used to decide the choice-of-law question in this action, the result would be the same. The significant contacts in this action are approximately in balance (see note 5 above) and thus show no primary involvement with Massachusetts. Further, the choice-influencing factors on which we relied to answer the first question (expectations of the parties and the presumption of a contract's validity) are not relevant to the G.L.c. 93A claim and provide no basis for resolving this third question.

We therefore answer Question three in the affirmative.

4. Our answer to the first question is that the law of Massachusetts should determine the issue of the validity of the alleged oral agreement between the parties. We answer the third question in the affirmative, and thus need not answer the second question.

---------

[1] Merle J. Bushkin. We shall sometimes refer to the plaintiffs collectively as Bushkin but intend to refer to Merle J. Bushkin himself when we describe personal conduct.

[2] As to the third question, the Court of Appeals pointed out that the District Court did not reach it but that they added it "having in mind that the Supreme Judicial Court had only a limited opportunity to address the scope of `primarily and substantially' in Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 580 (1982)."

[3] Neither party has suggested that the law of Kansas, the State in which Beech's operations were principally located, or the law of Delaware, the State of Raytheon's incorporation, are relevant to the choice-of-law question.

[4] The court noted that the law was enacted in 1949 on the recommendation of the Law Revision Commission which stated its reasons for proposing it. "In recent years there have been a substantial number of reported cases of claims for commissions for services rendered in the sale of a going business or a business opportunity. Under existing law there is no requirement that business brokers' contracts for commissions be in writing. The nature of the transactions is such that, in the absence of the requirement of a writing, unfounded and multiple claims for commissions are frequently asserted, and employers often seek to escape liability by denying the fact of employment. These controversies are commonly resolved by juries on conflicting testimony, with the consequent danger of erroneous verdicts. (1949 Report of N.Y. Law Rev. Comm['n] [N.Y. Legis. Doc., 1949, No. 65 (G)], p. 615.)" Id. at 383.

[5]In support of his view that Massachusetts has the "more significant contacts," Bushkin points to the facts that (1) Raytheon has its principal place of business in Massachusetts, (2) Raytheon's corporate officers who dealt with Bushkin and worked out the merger with Beech lived and worked in Massachusetts, (3) Bushkin's offer of a fee agreement was orally accepted in Massachusetts, (4) information concerning Beech was delivered to Raytheon in Massachusetts, and (5) the place of performance (according to Bushkin) was Massachusetts. In turn, Bushkin argues that New York contacts "are almost absent."

Raytheon in turn points to the following contacts with New York: (1) Bushkin Associates, Inc., is a New York corporation with its sole place of business in New York, (2) Merle J. Bushkin is a resident of New York, (3) he learned of the availability of Beech from another New York broker, (4) Bushkin's contacts with Raytheon were initiated from New York, (5) Bushkin's services were performed in New York, (6) any loss Bushkin sustained occurred in New York, and (7) numerous aspects of the arrangement for the merger were carried out for Raytheon (and Beech) in New York, including the efforts of Raytheon's (and Beech's) legal counsel and investment bankers.

[6] The extent to which posttransaction events properly may be considered as decision-influencing contacts no doubt depends on the particular issue and the circumstances. R.A. Leflar, American Conflicts Law § 109, at 221 (3d ed. 1977). For the purpose of determining the constitutionality of choice-of-law decisions, a majority of the Supreme Court have viewed as acceptable a State's reliance on posttransaction events. Allstate Ins. Co. v. Hague, 449 U.S. 302, 319 (1981). Opinions involving the New York Statute of Frauds defense in broker's fee cases have considered events subsequent to the time of the fee agreement (Ehrman v. Cook Elec. Co., 468 F. Supp. 98, 100 [N.D. Ill. 1979]; Edwin F. Armstrong & Co. v. Ben Pearson, Inc., 294 F. Supp. 163, 167 [E.D. Ark. 1967], aff'd sub nom. Leisure Group, Inc. v. Edwin F. Armstrong & Co., 404 F.2d 610 [8th Cir.1968]), and one opinion explicitly recognized as relevant the circumstances of the making of the agreement between the broker's customer (the defendant) and the third party. See Havenfield Corp. v. H & R Block, Inc.,509 F.2d 1263, 1268 (8th Cir.), cert. denied, 421 U.S. 999 (1975) ("it is the fact that the acquisition was consummated that gives rise to liability on the finder's fee contract, so the two contracts are very closely connected").

Reliance on posttransaction events, even ones not under the control of the parties, as an element in a choice-of-law decision injects an ambulatory quality into the issue that discourages certainty. Leflar, The Nature of Conflicts Law, 81 Colum. L. Rev. 1080, 1085 (1981). Particularly in a choice-of-law case involving the applicability of the Statute of Frauds, it seems appropriate "to give greater weight to contacts in existence at the time of contracting than to contacts which arise after that time." McKinney v. National Dairy Council, 491 F. Supp. 1108, 1114 (D. Mass. 1980). We think, for example, that the Statute of Frauds question should not be influenced by a postcontract decision by Raytheon and Beech to use professional advisors in New York rather than in Chicago, Boston, or Topeka to carry out the negotiations and closing of the transaction.

[7] These five factors are: "(A) Predictability of results; (B) Maintenance of interstate and international order; (C) Simplification of the judicial task; (D) Advancement of the forum's governmental interests; (E) Application of the better rule of law." R.A. Leflar, supra at 195.

[8] By St. 1984, c. 321, G.L.c. 259 was amended by adding § 7, which provides that a writing is required to enforce an agreement to pay compensation for services of the type Bushkin alleges he performed in this case. That statute has no direct application to this case. We do not view its enactment as having any significant bearing on the policy considerations that guide us to the answers in this case.

[9] Although it urges us to answer the second question in the negative, Raytheon makes no argument in its brief that, if the New York Statute of Frauds does not apply to this case, G.L.c. 93A does not apply to the alleged unfair or deceptive acts or practices on which Bushkin relies. It argues, however, that it is exempt from G.L.c. 93A, an issue presented in the third question.

[10] "Section 3 (1). Nothing in this chapter shall apply to ... (b) trade or commerce of any person of whose gross revenue at least twenty per cent is derived from transactions in interstate commerce, excepting however transactions and actions which (i) occur primarily and substantially within the commonwealth, and (ii) as to which the Federal Trade Commission or its designated representative has failed to assert in writing within fourteen days of notice to it and to said person by the attorney general its objection to action proposed by him and set forth in said notice."

By St. 1983, c. 242, the exemption provided by § 3 and involved in this question was eliminated. The events involved in the G.L.c. 93A claim occurred in 1975.

[11] See Computer Syss. Eng'g, Inc. v. Qantel Corp., 571 F. Supp. 1365, 1371-1372 (D. Mass. 1983), aff'd, 740 F.2d 59 (1st Cir.1984); Evans v. Yegen Assocs., 556 F. Supp. 1219, 1228 (D. Mass. 1982); Turner v. Johnson & Johnson, 549 F. Supp. 807, 813 (D. Mass. 1982); American Hosp. Supply Corp. v. Roy Lapidus, Inc., 493 F. Supp. 1076, 1078 (D. Mass. 1980); Boston Super Tools, Inc. v. RW Technologies, Inc., 467 F. Supp. 558, 562 (D. Mass. 1979); U.S. Broadcasting Co. v. National Broadcasting Co.,439 F. Supp. 8, 11 (D. Mass. 1977).

Only two of these opinions involved any discussion of the circumstances leading to the judges' conclusions. In the Evans case, the judge ruled that, while unfair and deceptive acts took place both in Florida and in Massachusetts, the communication of the misrepresentation occurred while the defendant's agent was speaking with the plaintiff in Massachusetts. 556 F. Supp. at 1228. The court ruled, therefore, that "more" of the transactions occurred in Massachusetts than elsewhere, "thus satisfying the requirement that they `occur primarily and substantially within this [sic] commonwealth.'" Id. In the Qantel case, the analysis was similar, with the judge finding that the actual misrepresentations occurred "mainly" while the defendant's agents were in Massachusetts. 571 F. Supp. at 1372. The court ruled that "Qantel has failed to meet its burden of proving an exemption under § 3." Id.

There is no legislative history that serves as an aid to the construction of G.L.c. 93A, § 3 (1) (b) (i).

[12] Bushkin disclaims any G.L.c. 93A violation on Raytheon's refusal to honor a contract. Other allegations of Raytheon's unfair or deceptive acts or practices suggested by Bushkin cannot have caused Bushkin any loss of money or property. See G.L.c. 93A, § 11.

[13] See Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 580 n. 9 (1982).

[1399] Lawrence B. Steinberg, Wyman, Bautzer, Kuchel & Silbert, Los Angeles, Cal., for plaintiff-appellant.

Stanton L. Stein, Stein & Kahan, Santa Monica, Cal., for defendant-appellee.

Before FLETCHER, CANBY and O'SCANNLAIN, Circuit Judges.

CANBY, Circuit Judge:

Richard Rosenthal appeals the district court's grant of summary judgment in favor of Jane Fonda and four of her related corporations. The district court determined that New York law controlled this dispute and that New York's statute of frauds barred Rosenthal's claim against Fonda for breach of an oral contract. On appeal, Rosenthal contends that California, not New York, law should control this action and that California's statute of frauds does not bar his oral contract claim against Fonda. In addition, Rosenthal contends that even if New York law does properly control, his contract with Fonda is not barred by New York's statute of frauds. We affirm the district court's holding that New York's statute of frauds controls and that it serves to bar Rosenthal from enforcing this oral contract against Fonda.

FACTUAL BACKGROUND

This action arises out of the twelve year relationship between Jane Fonda and her former attorney and general business manager, Richard Rosenthal. In 1968, Fonda, a California resident, retained the services of a New York law firm. She entered into an oral agreement with the firm that she would pay five percent of her earnings as compensation for the firm's services. Rosenthal, an attorney with the firm, assumed responsibility for a large share of the firm's activities on Fonda's behalf. In 1971, the law firm dissolved and in 1972, Rosenthal began to represent Fonda as an independent private practitioner. Rosenthal alleges that in April of 1972, he and Fonda entered into an oral contract whereby [1400] he agreed to continue performing a variety of services for Fonda and she, in turn, agreed to pay him ten percent of all gross professional income derived from the projects that were initiated during his tenure.

Rosenthal continued to represent Fonda from his New York office. In 1978, Rosenthal and his family moved to California, at Fonda's request, so that he could be closer to her and represent her more efficiently. Despite relocating, Rosenthal maintained a home and an office in New York. Fonda discharged Rosenthal approximately two years later, on May 30, 1980.

Rosenthal brought suit against Fonda in California district court to recover commissions on projects that were initiated during his tenure and produced or continued to produce income after his termination. The district court granted Fonda's motion for partial summary judgment, holding that New York's statute of frauds applied and served to bar Rosenthal's oral contract claim unless Fonda was equitably estopped from asserting the statute as a defense. After a bench trial on the equitable estoppel issue, the district court granted Fonda's motion for a directed verdict, ruling that she was not equitably estopped from asserting the defense.^[1] Accordingly, the court entered judgment for Fonda.

DISCUSSION

We have jurisdiction pursuant to 28 U.S.C. § 1291. Rosenthal appeals the district court's grant of summary judgment in favor of Fonda, thus, we review the court's decision de novo. KL Group v. Case, Kay & Lynch, 829 F.2d 909, 914 (9th Cir.1987). See also Ledesma v. Jack Stewart Produce, Inc., 816 F.2d 482, 484 (9th Cir.1987) (district court's conflict of law determination is reviewed de novo). Rosenthal contends that the district court should have applied California, not New York, law to resolve this dispute. The district court correctly recognized that a federal court sitting in diversity must apply the conflict of law rules of the forum. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). This case comes from the United States District Court for the Central District of California; therefore, California's conflict of law rules apply to determine whether California or New York law should properly control this case. California utilizes the "governmental interest" analysis in deciding conflicts of law. See Liew v. Official Receiver and Liquidator, 685 F.2d 1192, 1195-96 (9th Cir.1982).

The application of California's governmental interest analysis requires three steps. Liew, 685 F.2d at 1196. First, the substantive law of each state must be examined to assure that the laws differ as applied to this transaction. Second, if the laws do differ, the court must determine whether a "true conflict" exists in that both New York and California have an interest in having its law applied. Finally, if a true conflict exists, the court must determine which state's interest would be more impaired if its policy were subordinated to the policy of the other. Id. The conflict is resolved by applying the law of the state whose interest would be most impaired if its law were not applied. Id.

I. Do The Laws of the Two States Differ?

The principal issue in this dispute is whether Rosenthal's breach of oral contract claim is barred under the statute of frauds provision that requires that all contracts not to be performed within one year be in writing. Textually, the relevant New York and California provisions of the statute of frauds are essentially identical. New York's statute of frauds provides that "[e]very agreement, promise or undertaking is void or unenforceable unless it or some note or memorandum thereof be in writing and subscribed by the party to be charged therewith, or his agent, if such agreement, promise or undertaking, by its terms is not to be performed within one year from making thereof ..." N.Y.Gen.Oblig.Law § 5-701. Similarly, California's statute provides that "[t]he following contracts [1401] are invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged or by his agent: 1. An agreement that by its terms is not to be performed within a year from the making thereof ..." Cal.Civ.Code § 1624.1.

The district court found that while these two provisions are facially identical, they are interpreted differently. The court correctly determined that in California, Rosenthal's employment contract with Fonda, terminable at the will of either party, would fall outside the bar of the state's statute of frauds because it is capable of being performed within a year. See Eisenberg v. Insurance Company of North America, 815 F.2d 1285, 1291 (9th Cir.1987). California's one year provision is interpreted literally and narrowly. Plumlee v. Poag, 150 Cal.App.3d 541, 198 Cal.Rptr. 66, 71 (1984). Only those oral contracts which "expressly preclude performance within one year" or that "cannot possibly be performed within one year" are unenforceable. Id.; White Lighting Co. v. Wolfson, 68 Cal.2d 336, 66 Cal.Rptr. 697, 701, 438 P.2d 345, 349 (1968); see Robards v. Gaylord Brothers, Inc., 854 F.2d 1152 (9th Cir.1988). In this case, Fonda could have discharged Rosenthal after he had worked for her for six months; therefore, this contract was capable of being performed within one year. Moreover, California's statute of frauds does not invalidate oral employment contracts that call for the payment of commissions after one year or upon termination of the employment relationship. White Lighting, 66 Cal.Rptr. at 701-02, 438 P.2d at 349-50. Thus, Rosenthal's oral contract with Fonda would not be barred under California's statute of frauds.

In New York, however, while a typical employment contract with no fixed term is not barred by the statute of frauds, Fisher v. Ken Carter Industries, Inc., 127 A.D.2d 817, 512 N.Y.S.2d 408, 409 (1987), a commission sales arrangement that extends beyond the employee's termination or that has no specific time frame has repeatedly been held to be one that cannot be performed within one year. See Zupan v. Blumberg, 2 N.Y.2d 547, 161 N.Y.S.2d 428, 429, 141 N.E.2d 819, 822 (1957); Urvant v. Imco Poultry, Inc., 325 F.Supp. 677, 683-85 (E.D.N.Y.1970), aff'd, 440 F.2d 1355 (2d Cir.1971) (summarizing New York case law applying the one year provision to continuing commission arrangements). The New York rule was enunciated in McCollester v. Chisholm, 104 A.D.2d 361, 478 N.Y.S.2d 691 (1984), aff'd, 65 N.Y.2d 891, 493 N.Y.S.2d 310, 482 N.E.2d 1226 (1985):

A service contract of indefinite duration, in which one party agrees to procure customers, or accounts, or orders on behalf of the second party, is not by its terms performable within one year — and hence must be in writing and signed by the party to be charged — since performance is dependent, not upon the will of the parties to the contract, but on that of a third party.

Id. at 692.

The key element in deciding whether New York's statute of frauds applies to bar a commission sales agreement is whether the defendant can unilaterally terminate the contract, discharging all promises made to the plaintiff including the promise to make commission payments. See North Shore Bottling Co. v. C. Schmidt & Sons, Inc., 22 N.Y.2d 171, 292 N.Y.S.2d 86, 90, 239 N.E.2d 189, 191 (1968). If commission payments are due under the contract after one party has fully performed, the contract, by its own terms, cannot be performed within a year because there is no way the defendant can unilaterally terminate the contract. See Shirley Polykoff Advertising, Inc. v. Houbigant, Inc., 43 N.Y.2d 921, 403 N.Y.S.2d 732, 733, 374 N.E.2d 625, 626 (1978) (contract providing that advertising agency receive $5,000 a year for every year the advertisement is used cannot be performed within one year). See also Urvant, 325 F.Supp. at 685-86 (Under New York law, the statute of frauds is applicable "where nothing in the commission contract contemplates its fulfillment within a year and no term or event controlled by the parties will bring the contract to an end with its promises discharged.").

[1402] In the present case, Rosenthal contends that Fonda promised him a percentage fee every time a project initiated during his tenure generated income. Fonda could not unilaterally terminate this contract once Rosenthal performed because she would continue to owe Rosenthal money under the contract for as long as his projects generated income. Moreover, Fonda's liability to perform under the contract and make commission payments to Rosenthal is dependent not upon her will, but upon the will of others who may elect, for example, to exhibit her works. This contract, therefore, would be barred under New York's statute of frauds as one that by its own terms could not be performed within a year.

II. Does A "True Conflict" Exist?

Because the substantive law of California and that of New York differ when applied to this oral contract, we must next determine whether both New York and California have an interest in having their own law applied. Liew, 685 F.2d at 1196. If only one state has a legitimate interest in the application of its law, there is no real problem; the law of the interested state should control. Hill v. Hill, 193 Cal.App.3d 1118, 238 Cal.Rptr. 745, 748 (1987).

California, as the forum state, has an interest in having its law applied to this case. See Hill, 238 Cal.Rptr. at 749. "Generally, the preference is to apply California law, rather than choose the foreign law as a rule of decision." Strassberg v. New England Mut. Life Ins. Co., 575 F.2d 1262, 1264 (9th Cir.1978). As the forum, a California court will conclude that a conflict is "false" and apply its own law unless the application of the foreign law will "significantly advance the interests of the foreign state." Id. See also S.A. Empresa de Viacao Aerea Rio Grandense v. Boeing Co., 641 F.2d 746, 749 (9th Cir.1981). California presumably also has an interest in the enforcement of oral contracts involving one of its domiciliaries, although it may be questioned whether it is interested in applying its rule to protect a domiciliary of New York when New York would not protect him.

New York can be said to have an interest if the policies underlying its statute of frauds would be advanced when the law is applied to this transaction. See Fleury v. Harper & Row, Publishers, Inc., 698 F.2d 1022, 1025 (9th Cir.), cert. denied, 464 U.S. 846, 104 S.Ct. 149, 78 L.Ed.2d 139 (1983). The district court correctly found that New York's statute of frauds is meant to protect not only the state's residents, but also nonresidents who employ New York agents. See e.g., Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 300 N.Y.S.2d 817, 826, 248 N.E.2d 576, 582 (1969) (construing policy behind provision of New York's statute of frauds requiring that finder's fee agreements be in writing). In O'Keeffe v. Bry, 456 F.Supp. 822 (S.D.N.Y.1978), the court found that Georgia O'Keeffe, a New Mexico resident who had employed the services of a New York agent, had brought her business to New York and was thus entitled to the protections of New York's statute of frauds. Id. at 828. See also Haydu v. Hospital For Joint Diseases Orthopaedic Institute, 557 F.Supp. 577, 580 (S.D.N.Y.1983) (New York is interested in protecting nonresidents to create a stable financial center that will attract out-of-state business). Thus, New York has an expressed interest in extending the protections of its statute of frauds to nonresidents, like Fonda, who choose to employ or do business with New York residents.

In addition, New York has sufficient contacts with this transaction to justify a significant interest in having its own law applied. See Robert McMullan & Son, Inc. v. U.S. Fidelity & Guaranty Co., 103 Cal.App.3d 198, 162 Cal.Rptr. 720, 723 (1980)" `[w]ith the governmental interest approach, "relevant contacts"... are not disregarded, but are examined in connection with the analysis of the interest of the involved state in the issues....'" (quoting Dixon Mobile Homes, Inc. v. Walters, 48 Cal.App.3d 964, 972, 122 Cal.Rptr. 202, 207-08 (1975)). Rosenthal was a New York resident, licensed to practice law only in New York, at the time he entered into the contract with Fonda. In addition, he performed [1403] many years of service under the contract from his New York office; it was not until 1978 that Rosenthal became licensed to practice law in California and moved to Los Angeles. Even after he moved, Rosenthal maintained a home and office in New York. These contacts with New York serve to support New York's interest in having its own law apply to govern this transaction. Thus, both California and New York have a legitimate interest in having their own law apply to this case.

III. The "Comparative Impairment" Analysis.

Under the third step in California's governmental interest analysis, the conflict between New York and California law must be resolved by applying the law of the state whose interest would be most impaired if its law were not applied. Liew, 685 F.2d at 1196. The district court held that New York's stricter statute of frauds should be applied because New York has an interest in protecting more people than California and California's interest would not be frustrated by the application of New York law.

New York courts have made it clear that New York has a strong interest in protecting out-of-state residents, even while making it easier to prove liability against its own residents, in order to encourage the national use of New York services. See O'Keeffe, 456 F.Supp. at 828.

It is true that California has some interest in applying the one year provision of the statute of frauds very narrowly to promote the enforceability of otherwise valid oral contracts. See Plumlee, 198 Cal.Rptr. at 71. It is also true that one of the parties to the oral agreement is a domiciliary of California. Nevertheless, California does not have a strong interest in applying its policy against its domiciliary in order to protect a New York plaintiff that New York has no interest in protecting.^[2]

In addition, the parties' reasonable expectations were probably that New York law would apply to their contract. See Roesgen v. American Home Products Corp., 719 F.2d 319, 321 (9th Cir.1983) (California forum will not apply California law when the facts indicate that the parties' only reasonable expectations were that the law of a foreign state would apply). Fonda sought out a New York law firm to represent her interests and Rosenthal was a New York resident, licensed to practice law in New York, when he entered into this agreement. The contract was "substantially performed" by Rosenthal from his New York office. See id. Rosenthal entered into the oral agreement with Fonda in April, 1972 and carried out his services from New York until 1978, when he moved to Los Angeles. Fonda terminated his services approximately two years later. Thus, the bulk of their agreement was performed by Rosenthal in New York. These facts indicate that the parties would have reasonably expected New York law to govern their agreement. Thus, the district court correctly concluded that New York's policies would be most impaired if its law were not applied.

CONCLUSION

Under California's three step governmental interest test, the relevant statute of frauds provisions in California and New York produce different results when applied to this transaction, each state has an interest in having its own law applied, and New York's interest would be most impaired if its policies were subordinated to California's policies. Thus, the district court correctly determined that New York's law should govern this dispute. Rosenthal's oral fee agreement with Fonda would be barred under New York's statute of frauds as an agreement that cannot, by its own terms, be performed within one year. Accordingly, the district court's [1404] grant of summary judgment in favor of Fonda is AFFIRMED.

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[1] Rosenthal does not appeal the district court's ruling on the question of estoppel.

[2] We note that under recent legislation, California now requires certain attorney-client contracts to be in writing. See Cal.Bus. & Prof.Code § 6147 (West Supp.1988) (oral contingency fee contract voidable at option of plaintiff; attorney may recover only a reasonable fee); id. at § 6148 (contract for attorney's services must be in writing in any case in which it is reasonably foreseeable that total expenses to client, including attorney's fees, will exceed $1,000).

[220] Owen M. Panner, of McKay, Panner, Johnson, Marceau & Karnopp, Bend, Or., and W. Edmund Parent, II, Santa Barbara, Cal., for plaintiff.

Pillsbury, Madison & Sutro, San Francisco, Cal., for defendants, with James Michael, George A. Sears, Robert M. Westberg and Gary H. Anderson, San Francisco, Cal., appearing.

[221] ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

WOLLENBERG, District Judge.

This is a diversity suit brought by a California plaintiff against the American Tobacco Company, a New Jersey corporation, and Sunshine Biscuits, Inc., which is incorporated under the laws of the State of Delaware. Sunshine is a wholly owned subsidiary of American; both companies are headquartered and have their principal place of business in New York.

Plaintiff's claim arises from a letter, dated June 8, 1967, which he sent to Mr. R. H. Schust, Vice-President in charge of sales for Sunshine. The letter informed Sunshine that Bell Brand Foods, a California-based snack-food company, "might be for sale `if the right people come along'". Plaintiff added that he would fill in the details if Sunshine so desired, and that Sunshine should give him a call if it were indeed interested in pursuing the matter. No answer was sent to this letter; nor was any call ever made to plaintiff relating to the information therein. Sunshine did, however, acquire Bell in December, 1968, and it is plaintiff's contention that his services were the procuring cause of this acquisition, and that he is entitled to recovery quantum meruit. Defendants move for summary judgment on alternate grounds: first, that the action is barred by the New York Statute of Frauds; and, second, that there is no genuine issue as to any material fact. Since the court finds the Frauds point to be well taken, it does not reach the second ground of the motion.

There seems to be little contest that the New York Statute of Frauds prohibits recovery of a "finder's fee" in connection with a corporate acquisition, absent a writing signed by the party against whom the fee is claimed. New York General Obligations Law, McKinney's Consol.Laws, c. 24-a, § 5-701 (10). Nor is it denied that this law has been applied by the New York courts to bar recovery, quantum meruit, such as is demanded herein. Minichiello v. Royal Business Funds Corporation, 18 N.Y.2d 521, 277 N.Y.S.2d 268, 223 N.E.2d 793, 795, 24 A.L.R.3d 1154 (1966); cert. den. 389 U.S. 820, 88 S.Ct. 41, 19 L.Ed.2d 72 (1967). What is very much in question, however, is whether it is New York's law which is to be applied to the facts of this case.

In diversity cases, the federal courts are to apply the substantive law of the states. The Statute of Frauds, having as it does a definite bearing upon the outcome of a case such as this, is considered "substantive" for the purpose of this rule. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Byrd v. Blue Ridge Rural Electric Co., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958); Stahlman v. National Lead Co., 5 Cir., 318 F.2d 388 (1963).

It is not always clear, however, which state's version of the Statute of Frauds is to be applied in a given situation, and when a federal court sitting in a diversity case finds itself faced with an apparent conflict between the relevant laws of two or more states, it must resolve the conflict in accord with the conflict of laws principles developed by the courts of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). This court must, for example, refer itself to the conflicts principles developed by the courts of California, and when it does so, it finds the rules offered by the parties herein to be inappropriate.

Both parties cite Van Rensselaer v. General Motors Corporation, D.C., 223 F.Supp. 323 (1962), which in turn relies upon the philosophy of the first Restatement, Conflict of Laws (1934). Defendant, pointing out that any "acceptance" of plaintiff's proferred information would have occurred in New York, relies on the ancient rule that the "place of acceptance" generally determines the law applicable to a contract. Plaintiff in turn claims that the crucial point is that [222] the benefit of his information was received in California, and that this state is in effect the "place of performance" of the implied obligation herein.^[1] Restatement I, Conflict of Laws, §§ 452-453.

California law, however, has for some time left behind the principles of the first Restatement, and, in contract actions such as this, asks first whether the alleged agreement has "substantial contacts" with more than one state, and whether, given such multi-state contacts, the legitimate governmental interests of one state are more crucially involved than are the interests of other states involved. Bernkrant v. Fowler, 55 Cal.2d 588, 12 Cal.Rptr. 266, 360 P.2d 906 (1961); People v. One 1953 Ford Victoria, 48 Cal.2d 595, 311 P.2d 480 (1957).

The approach taken by the California court in Bernkrant, cit. supra, has attracted considerable attention from both scholars and jurists. See, for example, Cramton and Currie, Conflict of Laws, pp. 302ff. (1968); Note, 49 Calif. L. Rev. 963 (1961); Ideal Structures Corp. v. Levine Huntsville Development Corp., 5 Cir., 396 F.2d 917 (1968); Lester v. Aetna Life Insurance Co., D.C., 295 F.Supp. 1208 (1968). It marked a clean break with the first Restatement, and a considerable departure from the "center of gravity" approach of the second Restatement, Conflict of Laws (1956-68). This Court, therefore, in considering the applicability to a transaction of two versions of the Statute of Frauds, must not only consider the "contacts" between New York, California, and the transaction, but must also ask itself whether application of the varying statutes involved to the facts of the case at hand will further the legitimate policy interests of the states. Only if two or more states are found to have their policies at stake is there said to be a "true conflict", in which case the policy of the forum, at least in theory, will prevail. See Traynor, Is This Conflict Really Necessary? in 37 Texas L.Rev. 657 (1959).

Turning then to the case at bar, we find it clear that the relationship sued on here involved both New York and California to a substantial degree. Plaintiff's letter was sent to New York, and invited a response which could be reasonably expected to emanate from New York. The "use" allegedly made of plaintiff's information took the form of negotiations in both New York and California, and a final acquisition agreement which was made subject to New York law. The "subject matter" of the negotiations was, of course, a corporation which had its principal place of business in California. A practitioner of the second Restatement would be hard put to say which of these states had "the most significant relationship" with the "contract" involved herein.

At first glance, it might also appear that both states have an interest in applying their own versions of the Statute of Frauds. New York's interest is clear, and was spelled out in Minichiello v. Royal Business Funds Corp., cit. supra:

"The Legislature amended subdivision 10 to clearly apply the section to finders and to preclude any recovery in quantum meruit. * * * The nature of the transactions is such that, in the absence of the requirement of a writing, unfounded and multiple claims for commissions are frequently asserted * * * to allow recovery for the reasonable value of these services is to substantially defeat the writing requirement." Id., 277 N.Y. S.2d at 271, 223 N.E.2d at 795.

Protection from unfounded claims is, then, the general policy behind this Statute of Frauds. Defendants, as corporate "residents" of New York, with their principal place of business in that state, had a right to rely on the Statute, and, in fact, the record indicates that their [223] reasonable expectation was that no finders fee would be payable in connection with their purchase of Bell Brand Foods.^[2]

California's interest in a contract valid under its Statute of Frauds, though invalid under the Statute of a foreign state, is primarily in upholding the reasonable expectations of its residents who are parties to agreements that would be valid and enforceable absent any Frauds restriction. Bernkrant v. Fowler, cit., 55 Cal.2d at p. 594, 12 Cal.Rptr. 266, 360 P.2d 906. We do not find that interest to be at stake here. Plaintiff was indeed a resident of California when he wrote to defendants. But plaintiff, whose sagacity and business acumen the record makes clear, sent information to a New York corporation, and himself specified that the corporation should answer — from New York — only if it were interested in pursuing the matter. Plaintiff has called this letter "just another shot in the dark" and indeed it was. On one hand, as an astute businessman, he could well be said to have been on notice that any dealings he had with defendants would be subject to New York law. On the other hand, and more importantly from the standpoint of Bernkrant, there was no clear contract, oral or written, between the parties herein. In Bernkrant, the oral contract between the parties, and performance by the plaintiffs, was clear. The agreement took place in Nevada, whose Statute of Frauds did not apply; hence the expectations of both parties were that they would be bound. This is not the case here: a letter/offer was sent to a corporation headquartered in a state whose law barred finders' fees without written agreement. No reply to the letter was sent or received, though the offer had provided that acceptance should be indicated by some sort of communication. Plaintiff, upon these undisputed facts, could not have had the kind of expectations of which the Court was so solicitous in Bernkrant and analogous cases.^[3]

In short, we find that under several alternative conflicts theories, New York's law could, and probably would be applied by the courts of California. Under the "center of gravity" approach, taken by the second Restatement, New York might well be said to have the most significant contacts with the transaction here: the offer was sent to New York, invited a New York acceptance, and the benefits allegedly derived from the offer accrued at least as much in New York as in California. Secondly, insofar as these parties, all with relatively equal bargaining power, could be said to have chosen any state's law as applicable to their dealings, that law would be the law of New York. Finally, taking the "interest analysis" approach endorsed by Justice Traynor, it seems that New York's interest is clear in protecting its residents from just the sort of claim as is involved here. California's interest in protecting the reasonable expectations of its residents is, however, much less apparent. Whether [224] it be said that there is no "true conflict" or simply that California's legislature did not intend its policy to reach cases like this, the effect is the same, and New York's law is applicable.

Accordingly, defendants' motion for summary judgment is hereby granted.

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[1] California's Statute of Frauds does not appear to bar recovery of a "finder's fee" in an action quantum meruit.

[2] Affidavit of James L. Bauchat, Member, Board of Directors, and President (1968-69) of Sunshine Biscuits, Inc.

[3] The issues raised herein are obviously far from resolved, either by scholars or by judges. One noteworthy approach, for example, would seem at first blush to run counter to the analysis herein. Professor Ehrenzweig has argued that the "true rule" behind conflicts decisions dealing with the Statute of Frauds is that the validity of contracts will be upheld whenever possible. See Ehrenzweig, The Statute of Frauds in the Conflict of Laws: Basic Rule of Validation, 59 Columbia L. Rev. 874 (1959). However, the applicability of the rule of validation depends upon the maxim that "contracting parties intend to be bound by their obligations". Id. at 874. Thus the court, if convinced that there was indeed an agreement, untainted by fraud or perjury, will have "no sympathy for a party whose only excuse for repudiation is lack of a statutory formality". Id. at 876. The Court's attitude might well be different if both parties admit that there was no acceptance of an unsolicited offer, and where the undisputed evidence is that the defendant reasonably assumed that there was no contract between it and plaintiff.