Opinion ID: 1801442
Heading Depth: 1
Heading Rank: 2

Heading: california law applies to this transaction

Text: Any discussion of the law which should be applied to this agreement must begin with a consideration of SDCL 53-1-4. That statute provides: A contract is to be interpreted according to the law and usage of the place where it is to be performed or, if it does not indicate a place of performance, according to the law and usage of the place where it is made. Therefore, our first task is to determine where this contract was to be performed. This court has held that the negotiability of a promissory note is to be determined according to the law of the state where the note is payable. See Barry v. Stover, 20 S.D. 459, 107 N.W. 672 (1906) and Sioux National Bank of Sioux City, Iowa v. Lundberg, 54 S.D. 581, 223 N.W. 826 (1929). Consequently, the validity of the agreement between Taurus and Anderson must be measured by the laws of the state where the periodic payments were due, i. e., California. Therefore, California constitutes the place of performance. SDCL 53-1-4 also states that if a place of performance cannot be discerned from the contract, the contract should be interpreted according to the law of the place where it was made. Assuming that a place of performance could not be gleaned from this contract, California law would still be applied. Under South Dakota law, the test of where a contract is made is the situs of the last act necessary, to give the contract validity. Briggs v. United Services Life Insurance Co., 80 S.D. 26, 117 N.W.2d 804 (1962). California is the place where the last act to make the agreement between Taurus and Anderson a valid and binding contract occurred. That act was the signing of the contract by Taurus' representative. While the Eighth Circuit Court of Appeals has been critical of South Dakota's adherence to the last act rule for determining where a contract was made, see American Service Mutual Insurance Co. v. Bottum, 8 Cir., 371 F.2d 6, 9 n. 2 (1967), this court declines to change that rule in the absence of legislative action. The trial court erred in using the theory of significant contacts to determine what law should apply to this transaction. Another principle of law bolsters this court's decision to apply California law to this agreement. Where a contract is susceptible of two constructions or to the application of the law of two different states, one which would render the contract usurious and the other which would not, the law of the state upholding the amount of interest reserved is applied. Subject to the restrictions of SDCL 54-6-42, we adopt this rule. See Green v. Northwestern Trust Co., 128 Minn. 30, 150 N.W. 229 (1914); Mueller v. Ober, 172 Minn. 349, 215 N.W. 781 (1927); State v. Rivers, 206 Minn. 85, 287 N.W. 790 (1939); Blackford v. Commercial Credit Corp., 5 Cir., 263 F.2d 97, 112-113 (1959), cert. denied, 361 U.S. 825, 80 S.Ct. 74, 4 L.Ed.2d 69 (1959). This presumption in favor of the validity of a contract is particularly appropriate under these circumstances, where Anderson was not making these arrangements because he was lacking any of the necessities of life but simply because he was seeking some savings on his federal income taxes. Anderson has also argued that SDCL 53-9-1 and SDCL 53-9-3 preclude any South Dakota court from enforcing this contract because it is contrary to the public policy of the state of South Dakota. In Grady v. Denbeck, 198 Neb. 31, 33, 251 N.W.2d 864, 865 (1977), the Nebraska Supreme Court made these observations about a similar public policy argument, citing its previous decision in Kinney Loan & Finance Co. v. Sumner, 159 Neb. 57, 61, 65 N.W.2d 240, 245 (1954): `Usury laws are not so distinctive a part of the public policy of the forum that the courts will, on the ground of public policy, decline to enforce any contract which would be invalid, if tested by them, though valid according to its proper law.' Because the parties have agreed, and it is apparent, that this transaction is valid under California law, the second issue, i. e., whether the agreement is a valid sale and leaseback or a disguised loan, need not be reached.