FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE LARRY MILLER,

Debtor,

FIRST COMMUNITY BANK,

Plaintiff-Appellant,

v.

MAUREEN GAUGHAN, Chapter 7

Trustee,

Defendant-Appellee.

No. 14-16854

D.C. No.

2:13-cv-02050-NVW

OPINION

Appeal from the United States District Court

for the District of Arizona

Neil V. Wake, District Judge, Presiding

Argued and Submitted October 18, 2016

San Francisco, California

Filed March 31, 2017

Before: A. Wallace Tashima and Milan D. Smith, Jr.,

Circuit Judges, and Edward R. Korman,* District Judge.

Opinion by Judge Korman

* The Honorable Edward R. Korman, Senior District Judge for the

U.S. District Court for the Eastern District of New York, sitting by

designation.
2 IN RE MILLER

SUMMARY**

Bankruptcy

The panel reversed the district court’s reversal of the

bankruptcy court’s summary judgment in favor of a creditor

that brought an adversary proceeding against a chapter 7

trustee, seeking a declaration that the creditor had an

enforceable judgment lien on real property, thereby granting

it priority over the proceeds of the trustee’s sale of the

property.

The judgment on which the lien was based arose from a

guaranty signed by the debtor but not by his wife. The couple

were Arizona domiciles. The panel held that while the real

property, a San Francisco co-op apartment owned by both

spouses, was not community property under California law,

it was a tenancy-in-common. Under California law, the

interests of a co-tenant-in-common are subject to the

enforcement of a judgment lien. Applying California’s

choice-of-law rules, the panel held that California law, rather

than Arizona law, governed. Therefore, the debtor’s interest

in the co-op was subject to enforcement of the judgment lien. 

The panel rejected the argument that the creditor’s

registration of the judgment in the Northern District of

California was sufficient, by itself, to create an enforceable

lien against the co-op.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
IN RE MILLER 3

COUNSEL

Joseph E. Cotterman (argued), Andante Law Group PLLC,

Scottsdale, Arizona, for Plaintiff-Appellant.

Steven J. Brown (argued), Steven J. Brown & Associates

LLC, Phoenix, Arizona, for Defendant-Appellee.

OPINION

KORMAN, District Judge:

Larry and Kari Miller, both Arizona domiciliaries, owned

a cooperative apartment located at 2170 Jackson Street in San

Francisco, California. The co-op was held in each of their

names, as husband and wife. First Community Bank, a

judgment creditor of Larry Miller, obtained a lien against the

Millers’ co-op.

Under Arizona law, the co-op would be treated as

community property. See A.R.S. § 25-211. If Arizona law

applies, FCB’s judgment lien could not be enforced against

the co-op, because the judgment upon which the lien was

based arose from a guaranty signed by Larry Miller and not

Kari Miller, and a guaranty that is signed by only one of two

spouses is not binding on the couple’s community property

under Arizona law.

Under California law, the co-op would not constitute

community property because it was not acquired by the

Millers while they were domiciled in California. See CAL.

FAM. CODE § 760. Instead, it would constitute a tenancy-incommon. See CAL. CIV. CODE § 685. The application of
4 IN RE MILLER

California law would permit the judgment lien to be enforced

against Larry Miller’s sole and separate interest in the co-op,

because “[t]enants in common may each unilaterally alienate

their shares through sale or gift or place encumbrances upon

these shares.” United States v. Craft, 535 U.S. 274, 280

(2002) (emphasis supplied). Thus, if California law applies,

a judgment against Larry Miller would be enforceable only

against his interest in the apartment, but not Kari Miller’s

separate interest.

FACTUAL BACKGROUND

Against this backdrop for the choice-of-law issue

presented by this case, we turn to a more detailed discussion

of the underlying facts. Larry Miller was the President of

Miller Holding Investments, Inc., which in turn was the

General Partner of both El Paseo Partners, L.P. and El

Rancho Partners, LP, both limited partnerships organized

under California law. First Community Bank (“FCB”) is a

California corporation, doing business in the State of

California, with its principal place of business in Sonoma

County, California.

In December 2006, FCB extended credit to Paseo and

Rancho in exchange for a Business Loan Agreement, a

Promissory Note in the original principal amount of

$5,744,000, and a Commercial Guaranty from Miller that

personally secured repayment of all obligations owed to FCB

under the Note and the Loan Agreement. All three of these

contracts selected California’s local law as the governing law. 

The Business Loan Agreement and the Promissory Note both

stated on their face that they were accepted by FCB in

California. Indeed, the guaranty given by Miller not only

selected California as the governing law, it also provided that
IN RE MILLER 5

“[a]ny married person who signs this Guaranty hereby

expressly agrees that recourse under this Guaranty may be

had against both his or her separate property and community

property.” Unfortunately, Paseo and Rancho could not live

up to their obligations on the loans, and Miller defaulted on

the guaranty.

PROCEDURAL HISTORY

On October 24, 2008, FCB sued Larry and Kari Miller in

the United States District Court for the District of Arizona. 

FCB moved for summary judgment as to liability and

damages on Larry Miller’s breach of the Commercial

Guaranty, and also requested a “[r]uling that Kari Miller has

received notice and due process in connection with this legal

action, to the extent that any of the property subject or

potentially subject to enforcement and execution upon the

judgment, whether located in the State of Arizona, the State

of California or elsewhere, is asserted to belong in whole or

in part to her marital community.” Complaint at 7, First

Community Bank v. Larry L. Miller and Kari Miller, No.

2:08-cv-01952-NVW (D. Ariz. 2009), ECF No. 1. While the

answer filed to the complaint alleged that neither the

“Miller[s’] marital community property, nor Kari Miller’s

sole and separate property, is subject to the claims in [First

Community] Bank’s complaint,” Answer at ¶ 4, id., ECF No.

11, the Millers’ “only legal opposition” to FCB’s motion for

summary judgment was that “California law requires [FCB]

first to execute on collateral securing the loan,” before

making their motion. Order Granting Motion for Summary

Judgment as to Liability at 2–3, id., ECF No. 23.

The district court rejected this argument, and entered

judgment against Larry Miller for the principal amount of
6 IN RE MILLER

$5.744 million plus accrued interest and ancillary damages,

for a total judgment of $6.373 million (the “Arizona

judgment”). Judgment, id, ECF No. 36. The judgment made

no reference to the Millers’ community property, although the

order granting the motion observed, in dictum and without

undertaking a choice-of-law analysis, that “any [liability of

the marital community] appears to be precluded by A.R.S.

§ 25-214(C)(2).” Order Granting Motion for Summary

Judgment as to Liability at 3, id., ECF No. 23. FCB

registered this judgment in the United States District Court

for the Northern District of California pursuant to 28 U.S.C.

§ 1963. See Certification of a Judgment to be Registered in

Another District, First Community Bank v. Miller, No. 09-

mc-80131-PJH (N.D. Cal. 2009), ECF No. 1.

As of the time that FCB registered its judgment in

California, Larry and Kari Miller held an ownership interest,

to which reference was made earlier, in real property located

at 2170 Jackson Street, San Francisco, California, which

consisted of their ownership share in Twenty-One Seventy

Jackson Street Corporation and a leasehold in an apartment

owned by the co-op.1 On June 23, 2009, consistent with the

manner in which a judgment lien is obtained, FCB recorded

the California judgment in the Official Records of the San

Francisco County Recorder’s Office.

1 California law treats corporations formed “primarily for the purpose

of holding title to . . . improved real property, and [in which] all or

substantially all of the shareholders of the corporation receive a right of

exclusive occupancy in a portion of the real property,” as real property. 

CAL. CIV. CODE § 6566. “[T]he correlative interest in the stock

cooperative corporation” is also treated as an interest in real property. See

CAL. CIV. CODE § 783.1.
IN RE MILLER 7

Several years later, Larry Miller filed a petition for

reorganization under Chapter 11 of the Bankruptcy Code in

the District of Arizona. Miller’s proceeding was later

converted to a Chapter 7 liquidation. In the course of

administering the Miller estate, the Chapter 7 Trustee,

Maureen Gaughan, sold the Millers’ co-op. FCB filed an

adversary proceeding seeking a declaration that it held an

enforceable judgment lien on the co-op, thereby granting it

priority over the proceeds of the sale.

The bankruptcy court held that, “[b]ecause the Miller

Judgment was registered in California, California lawgoverns

the enforceability of the Miller Judgment against Debtors’

community property located in California, and under

California law, Debtors’ community property located in

California is liable for satisfaction of the Miller Judgment.” 

Judgment in Favor of First Community Bank at 4, First

Community Bank v. Miller, No. 2:13-ap-00436-EPB (Bankr.

D. Ariz. 2013), ECF No. 25. The Millers appealed to the

district court.

THE DISTRICT COURT’S DECISION

The district court framed the issue presented as “whether

an Arizona judgment against a husband on his sole and

separate debt may be executed against the Arizona couple’s

community property in California.” In re Miller, 517 B.R.

145, 147 (D. Ariz. 2014). Answering this question in the

negative, the district court held that “the Arizona federal

judgment against the husband alone, later registered in a

California federal court and recorded in California, does not

lien their community real property in California.” Id.

Moreover, it continued that “[t]his is the rule by Arizona

statute, and California choice of law principles yield to the
8 IN RE MILLER

Arizona rule concerning Arizona domiciliaries.” Id.

Presumably drawing upon those principles, the district court

concluded that “California has no interest in ousting Arizona

marital law concerning obligations between husband and wife

and of persons contracting with one spouse, and the

California community property statute by its terms does not

purport to do so.” Id.

We reverse the judgment of the district court. While we

agree that the co-op apartment does not come within the

definition of community property, as that term is defined in

Section 760 of the California Family Code, it does come

within the definition of a tenancy-in-common. See CAL.CIV.

CODE § 685. The interests of a co-tenant in such tenancies,

which are presumed to be held in equal shares, see Caito v.

United California Bank, 20 Cal. 3d 694, 705 (1978), are

subject to the enforcement of a judgment lien. The issue,

then, is whether California should yield to Arizona’s

community property law, and treat the Millers’ co-op as

community property not subject to the enforcement of a

judgment. Applying California’s choice-of-law rules, we

hold that California law governs, and that the co-op would be

treated as a tenancy-in-common, as defined in Section 685 of

the California Civil Code, making Larry Miller’s interest in

the co-op subject to enforcement of the judgment lien.2

2 The district court and the trustee relied on Grappo v. Coventry

Financial Corp., 235 Cal. App. 3d 496 (1991), for the proposition “that

the property rights of a husband and wife are governed by the law of the

couple’s matrimonial domicile at the time of the acquisition of the

property regardless of[where] the property is located.” Grappo, however,

involved a dispute between a husband and wife regarding their respective

rights under family law in a piece of real property held in the wife’s name,

although claimed by the husband to be community property. After

conducting a choice-of-law analysis, id. at 505–06, the California Court
IN RE MILLER 9

DISCUSSION

I. 28 U.S.C. § 1963 Does Not Obviate the Need for a

Choice-of-Law Analysis

FCB’s principal argument on appeal is that the

registration of the judgment against Larry Miller, pursuant to

28 U.S.C. § 1963, in the Northern District of California, was

sufficient, by itself, to create an enforceable lien against the

co-op. While FCB is correct that § 1963 requires the use of

California’s lien creation rules, it does not do away with the

task of conducting a choice-of-law analysis in the event that

another state has an interest in application of its law.

A party may register and enforce a federal judgment in

another district, and “[a] judgment so registered shall have

the same effect as a judgment of the district court of the

district where registered and may be enforced in like

manner.” 28 U.S.C. § 1963. “This system of enforcing

federal judgments parallels the California and Arizona

systems for enforcing sister state judgments.” In re Miller,

517 B.R. at 154. Moreover, “[e]nforcement measures do not

travel with the sister state judgment as preclusive effects do;

such measures remain subject to the even-handed control of

forum law.” Baker v. Gen. Motors Corp., 522 U.S. 222, 235

(1998).

of Appeal rejected the husband’s claim, based on its conclusion “that

California, and not Nevada [where the property was located], is the state

which has the most significant relationship to the parties and issues in this

case.” Id. at 506. The dispute in the present case involves a claim by a

California-based third-party creditor, on property located in California,

giving California an interest in the application of its law.
10 IN RE MILLER

Thus, under California’s enforcement procedures, when

FCB registered the judgment rendered by the federal district

court in Arizona in the Northern District of California, and

formally recorded such judgment with the San Francisco

County Recorder’s Office, it acquired a judgment lien on the

Millers’ co-op. See CAL. CIV. PROC. CODE § 697.310(a). 

Nevertheless, perfection of a lien alone does not ensure that

such a lien can be enforced against a particular piece of

property—the property must be “subject to enforcement of

the money judgment.” See Lezine v. Sec. Pac. Fin., 14 Cal.

4th 56, 65 (1996). Under California law, “[e]xcept as

otherwise provided by law, all property of the judgment

debtor is subject to enforcement of a money judgment.” CAL.

CIV. PROC. CODE § 695.010(a) (emphasis supplied).

While we are not aware of any California case that

construes the term “except as otherwise provided by law” in

a comparable context, the most reasonable construction

suggests that it refers not just to the local law of California,

but also to the laws of other states that may apply as a result

of the application of California’s choice-of-law rules. Our

construction of the term is informed by a comparison with a

similar term, which appears in the same Article of the

California Code of Civil Procedure (“Enforcement of Money

Judgments”) as does § 695.010. California Code of Civil

Procedure § 697.310(a), which provides the rule on the

creation of judgment liens, contains an exception for

circumstances “as otherwise provided by statute,” rather than

“as otherwise provided by law.” CAL. CIV. PROC. CODE

§ 697.310(a) (emphasis supplied). This difference suggests

to us that while the California Legislature intended to limit

the exception in § 697.310(a) to certain express statutory

carve-outs, it intended to make the exception contained in

§ 695.010(a) encompass California’s whole law, including its
IN RE MILLER 11

choice-of-law rules. Cf. RESTATEMENT (SECOND) OF

CONFLICT OF LAWS (1971) (“Restatement”) § 4(2) (“As used

in the Restatement of this Subject, the ‘law’ of a state is that

state’s local law, together with its rule of Conflict of Laws.”).

Our discussion would end here if this case were being

litigated in California. Some additional discussion, however,

is required. While California’s choice-of-law rules apply

here, they do so as a result of a somewhat indirect path, which

we now trace. “In federal question cases with exclusive

jurisdiction in federal court, such as bankruptcy,” including

this case, we apply federal choice-of-law rules. See In re

Lindsay, 59 F.3d 942, 948 (9th Cir. 1995). Federal choice-oflaw rules are based on the Restatement (Second) of Conflict

of Laws. See In re Vortex Fishing Sys., Inc., 277 F.3d 1057,

1069 (9th Cir. 2001). Restatement § 230 provides that,

“[w]hether a lien creates an interest in land and the nature of

the interest created are determined by the law that would be

applied by the courts of the situs.” Moreover, if the court of

the situs “would have decided the particular question by

reference to the local law of some other state, the forum will

do likewise.” Restatement § 230, cmt. b. As noted

previously, California is the situs of the real property at issue,

so we apply its choice-of-law rules to resolve the conflict in

this case.

II. Choice-of-Law Analysis

California applies the governmental interests mode of

analysis to resolve choice-of-law problems. See McCann v.

Foster Wheeler LLC, 48 Cal. 4th 68, 87 (2010). Under this

approach, we analyze three related questions: (1) does

relevant law vary between the potentially affected

jurisdictions?; (2) If there is a difference in law, does a true
12 IN RE MILLER

conflict exist such that “each of the states involved has a

legitimate but conflicting interest in applying its own law[?]”;

(3) If there is a true conflict, “which state’s interest would be

more impaired if its policy were subordinated to the policy of

the other state[?]” See Kearney v. Salomon Smith Barney,

Inc., 39 Cal. 4th 95, 111–12 (2006) (citations omitted).

We begin our analysis with Arizona law, and more

specifically its community property law, and then proceed to

discuss California law.

Community property rests on a notion that

husband and wife are a marital partnership

(a ‘community’) and should share

accordingly. . . . Because it can exist only

between husband and wife and cannot be

converted into separate property without the

consent of both spouses, community property

can be conveyed to a third person only as an

undivided whole. . . . Prior to the 1960s, the

husband was deemed to be manager of the

community, but beginning in the late 1960s,

all . . . community property states enacted

statutes giving the husband and wife equal

management powers. These statutes,

however, differ in many details.

JESSE DUKEMINIER, PROPERTY 354–55 (2d ed. 1988).

Although Arizona and California both have community

property laws, there is one difference between the two that

gives rise to the necessity of a choice-of-law analysis. In

Arizona, “[a]ny transaction of guaranty, indemnity or

suretyship” requires the “joinder of both spouses”—a
IN RE MILLER 13

requirement that has been construed to mean the signature of

both spouses on the guaranty contract. Ariz. Rev. Stat.

(“A.R.S.”) § 25-214(C)(2). Thus, the statute “bars collection

of the guaranteed debt from the community’s property,”

unless both spouses sign the guaranty. See Rackmaster Sys.,

Inc. v. Maderia, 219 Ariz. 60, 64 (Ct. App. 2008).

California has no such dual-signature requirement with

respect to either community property, joint property, or a

tenancy-in-common. Cf. CAL. FAM. CODE § 1102(a); CAL.

CIV. PROC. CODE § 695.010. Thus, all such property is

subject to the enforcement of a money judgment, even where

a guaranty underlying the judgment is signed by only one of

two spouses. The difference between Arizona and California

law, however, does not compel the conclusion that there is a

“true conflict,” as that term is understood in the choice-of-law

context. The existence of such a conflict turns on whether the

circumstances of the case implicate the policies underlying

the ostensibly conflicting laws.

Hamada v. Valley National Bank, 27 Ariz. App. 433

(1976), contains a helpful discussion of the history and

purpose of Arizona’s dual-signature requirement. In

Hamada, the Arizona Court of Appeals explained that “[t]he

husband, as a member of the community, has no power under

the law without the knowledge and consent of his wife, to use

community assets to guarantee the payment of a debt of a

stranger to the community, it deriving no benefit therefrom.” 

Id. at 436 (emphasis supplied). It continued, “[t]his law has

now been codified in A.R.S. Sec. 25-214(C)(2) which

requires both spouses to join in any transaction of guaranty,

indemnity or suretyship.” Id. Thus, Hamada makes clear

that the policy underlying Arizona’s dual-signature

requirement is to ensure that a spouse who lacks knowledge
14 IN RE MILLER

of, and does not acquiesce to, a guaranty is not bound. See

also Vance-Koepnick v. Koepnick, 197 Ariz. 162, 163 (Ct.

App. 1999) (“The purpose of such statutes is to protect one

spouse against obligations undertaken by the other spouse

without the first spouse’s knowledge and consent.”).

The absence of the signature of one spouse, however,

does not necessarily indicate that the non-signing spouse did

not know of, or consent to, the execution of the guaranty. 

The signature requirement is simply the mechanism for

avoiding a dispute as to this issue. See All-Way Leasing, Inc.

v. Kelly, 182 Ariz. 213, 216 (Ct. App. 1984). A guaranty

without both required signatures is “not per se void, only

voidable by the nonsigning spouse.” Geronimo Hotel &

Lodge v. Putzi, 151 Ariz. 477, 479 (1986). Thus, the Arizona

Court of Appeals has recognized that “there may be

circumstances where a spouse may be estopped from

disaffirming a contract.” Consol. Roofing & Supply Co., Inc.

v. Grimm, 140 Ariz. 452, 458 (Ct. App. 1984).3

The complaint filed byFCBin Arizona, which ended with

the judgment against Larry Miller that underlies the lien at

issue, put the Millers on notice that FCB planned to go after

their community property. Nevertheless, the Millers did not

3 Other community property jurisdictions with statutes similar to

A.R.S. § 25-214 also recognize that estoppel principles may apply. See,

e.g., Miller v. Johnston, 270 Cal. App. 2d 289, 300 n.6 (1969) (holding

that a spouse was bound by a conveyance of community property to which

she was not a party, because of her “knowledge and acquiescence” to the

conveyance); Colo. Nat’l Bank of Denver v. Merlino, 35 Wash. App. 610,

616 (1983) (“A community is estopped to deny liability due to the failure

of one spouse to join a transaction when one spouse permits the other to

conduct the transaction, both have a general knowledge of the transaction,

and both are ready to accept the benefits which may come from it.”).
IN RE MILLER 15

defend on the ground that Kari Miller lacked“knowledge and

acquiescence” sufficient to enable the Millers to rely on the

absence of her signature on the guaranty. Indeed, as we

explained earlier, rather than invoking A.R.S. § 25-214 in

response to FCB’s motion for summary judgment in the

proceeding on the guaranty, their only legal opposition was

based on FCB’s alleged failure to comply with a California

procedural rule. See Order Granting Motion for Summary

Judgment as to Liability at 2–3, First Community Bank v.

Larry L. Miller and Kari Miller, No. 2:08-cv-01952-NVW

(D. Ariz. 2009), ECF No. 23. Moreover, although Larry

Miller warranted in the guaranty that he had the “full power,

right, and authority to enter into this guaranty,” the trustee

failed to come forward with any evidence in the bankruptcy

court to suggest that Kari Miller did not either know of, or

acquiesce to, the guaranty.

4

While we do not invoke the doctrines of estoppel or

waiver here, our discussion of it is intended to underscore the

fact that a guaranty, signed by only one of two spouses, does

not necessarily implicate the underlying policy of protecting

a spouse who lacks knowledge of a guaranty. Indeed, here,

because of the manner in which the Millers chose to litigate

the complaint that gave rise to the underlying judgment, we

do not know the extent that the underlying policy interest

4

“[T]he ordinary rule, based on considerations of fairness, does not

place the burden upon a litigant of establishing facts peculiarly within the

knowledge of his adversary.” Campbell v. United States, 365 U.S. 85, 96

(1961); see also Nealey v. Transportacion Maritima Mexicana, S.A.,

662 F.2d 1275, 1280–81 (9th Cir. 1980). Thus, if Kari Miller had

challenged the validity of the lien prior to bankruptcy on the ground that

she did not know of or acquiesce to the guaranty, the burden of proof

would have been on her. Because the trustee is essentially relying on her

asserted interest, the burden in bankruptcy should logically fall to her.
16 IN RE MILLER

would be impaired by the enforcement of the judgment

against the couple’s community property.

On the other hand, under the circumstances here,

California does have a significant interest in effectuating its

policy regarding enforcement of judgments in favor of

California creditors against real property located there,

whether the property constitutes community property or a

tenancy-in-common. “California, as does every state, has a

substantial interest in the economic health of corporations

which do business within its borders. It derives substantial

sales and income taxes, as well as other revenues, directly and

indirectly from a corporation’s activities within the state.” In

re Air Crash Disaster Near Chi., Ill. on May 25, 1979,

644 F.2d 594, 614 (7th Cir. 1981). Moreover, California also

has an interest in fostering the growth of commercial

activities that require ready access to credit—a policy that

would be undermined by limiting the ability of California

creditors to enforce obligations for activities undertaken in

California and made subject to the operation of California law

by consent of the parties. Indeed, when Larry Miller sought

credit in California to finance his business venture, he took

advantage of the credit environment fostered by what the

district court described as California’s “general policy

favoring creditors.” In re Miller, 517 B.R. at 149 n.1.

These considerations “reflect[]the principle articulated by

the California Supreme Court that the policy of protecting the

creditors of a spouse outweighs the policy of protecting

family income.” Ordlock v. Comm’r, 533 F.3d 1136, 1139

(9th Cir. 2008) (internal ellipses and alterations omitted). So

too does the fact that California renders the entire community

property of a married couple subject to enforcement of a

guaranty—even if the guaranty was made solely for the
IN RE MILLER 17

benefit of a single spouse. See Lezine v. Sec. Pac. Fin. Servs.,

Inc., 14 Cal. 4th 56, 64 (1996). While the co-op owned by

the Millers did not come within the definition of community

property in California, we refer to the manner in which

community property is treated there simply to illustrate the

strength of California’s interest in the enforcement of the

judgment lien against the co-op apartment located in San

Francisco.

The policy interests discussed above are especially strong

where, as here, the law chosen by the parties in their various

agreements (including the guaranty) includes California’s

creditor-friendly interest described above. Indeed, the

Supreme Court of California has adopted § 187 of the

Restatement, see Nedlloyd Lines B.V. v. Superior Court,

3 Cal. 4th 459, 464–65 (1992), which upholds “[t]he law of

the state chosen by the parties to govern their contractual

rights and duties . . . , even if the particular issue is one which

the parties could not have resolved by an explicit provision in

their agreement directed to that issue.” Restatement § 187(2). 

Section 187 is a policy “providing for incorporation by

reference” that enables parties “to determine the terms of

their contractual engagements,” not a choice-of-law rule as

such. Id. § 187, cmt. c.

The purposes underlying this section “are to protect the

justified expectations of the parties and to make it possible

for them to foretell with accuracy what will be their rights

and liabilities under the contract.” Id. § 187, cmt. e. 

Moreover, the Restatement recognizes that, in multi-state

transactions such as the one at issue, “letting the parties

choose the law to govern the validity of the contract and the

rights created thereby” is the better route to ensure “certainty

and predictability of result.” Id. Indeed, an even more
18 IN RE MILLER

specific provision, Restatement § 194, provides that “[t]he

validity of a contract of suretyship and the rights created

thereby are determined, in the absence of an effective choiceof-law by the parties, by the law governing the principal

obligation which the contract of suretyship was intended to

secure,” subject to exceptions similar to those applicable to

§ 187.5 Again, there was an effective choice-of-law made by

the parties. Moreover, “the principal obligation that the

contract of suretyship was intended to secure”—the

Promissory Note —was governed by “the laws of the State of

California without regard to its conflicts of law provisions.” 

Those laws would make the lien enforceable against Larry

Miller’s ownership interest as a co-tenant of the co-op

apartment.

Neither of the exceptions to the incorporation by

reference rule of § 187, which also apply to the rule of § 194,

is present here. Specifically, this is not a case in which “the

chosen state has no substantial relationship to the parties or

the transaction,” Restatement § 187(2)(a), nor would the

chosen law “be contrary to a fundamental policy of a state

which has a materially greater interest than the chosen state

in the determination of the particular issue.” Id. § 187(2)(b). 

While Arizona may have an interest in the determination of

this issue, we cannot say that its interest is “materially greater

. . . than [that of] the chosen state,” particularly where the

record does not adequately show whether or not Kari Miller

had knowledge of, or consented to, the guaranty. Nor, to use

the test applied in cases of a true conflict, is Arizona’s

interest more substantially impaired than that of California.

5

“‘Suretyship,’ as here used, includes ‘guaranty,’ for . . . there has

never been general agreement as to what distinction, if any, should be

drawn between the two terms.” Restatement § 194, cmt. a.
IN RE MILLER 19

We recognize that Larry Miller’s agreement to the

application of California law does not bind Kari Miller. 

Nevertheless, the agreement should bind Larry Miller, and

permit the enforcement of that agreement against him as a

tenant-in-common. Moreover, the enforcement of the

agreement in that way protects Kari Miller’s one-half interest

in the property as a co-tenant. Thus, the underlying purpose

of A.R.S. § 25-214(C)(2), which is “to protect one spouse

against obligations undertaken by the other spouse without

the first spouse’s knowledge and consent,” see VanceKoepnick, 197 Ariz. at 163, is accommodated to a significant

degree, rather than substantially impaired, by application of

California law.

California’s interest is similarly accommodated, because

FCB, the California creditor that was the beneficiary of the

guaranty, is able to recover the share of proceeds from the

sale of the co-op attributable to Larry Miller’s interest. 

Application of Arizona law would defeat that interest

entirely. Under these circumstances, even if there were a true

conflict, we would apply California law because its “interest

would be more impaired if its policy were subordinated to the

policy of the other state.” See Kearney, 39 Cal. 4th at 112. 

In sum, we agree with FCB “that California [has] a

compelling interest in applying its law,” under the

circumstances presented here.

CONCLUSION

The judgment of the district court is REVERSED AND

REMANDED for proceedings consistent with this opinion.