Court Opinion

ID: 9539036
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:45:44.312704+00
Date Added: 2024-06-11T14:58:23.966063
License: Public Domain

MOSK, J.
I dissent. The majority predict their result by improperly framing the question: they repeatedly refer to the produce grower’s “illegal farming operations.” It is my opinion that this grower did nothing illegal, and that his operation was consistent with the method of land holding used by thousands of American investors and residents in Mexico.
*139Furthermore, from the outset Tenneco was completely familiar with Wong’s operation and acquiesced in its technique. Only when the farming project failed to make money did Tenneco become strangely righteous.
I.
The majority rely on sections of the Mexican Constitution which purport to restrict land ownership to Mexicans by birth or naturalization. At the same time, Mexico encourages foreign investment. A report published for distribution in Mexican consulates declares: “Mexico welcomes foreign investment, provided that the prospective foreign investors comply with laws and regulations which control such investments in accordance with the needs of the Mexican economy. The applicable legal provisions are the following: Law to Promote Mexican Investment and to Regulate Foreign Investment (published on March 9, 1973 Official Journal of the Federal Government in force since May 8, 1973); Regulations of the National Registry of Foreign Investment (Of. Jour. XI/6/75-VII/27/77-IX/6/77); Mexican Immigration Law (Ley General de Población Of. Jour. 1/7/74); Regulations to the Immigration Law (Of. Jour. XI/17/76).”
There are specific areas in which foreign investment is prohibited and funding is reserved to the government in accordance “with the needs of the Mexican economy.” These are oil, basic petrochemicals, radioactive products, nuclear energy, direct mining, electric power, railroads, radio and wire communications. Other areas are reserved to Mexican investors exclusively: radio and television, bus transportation, air and sea transportation, forestry, distribution of gas and liquified gas. Conspicuously absent from those reserved occupations is farming, the occupation involved herein.
Thousands of Americans, many of them retired persons, live in Mexico. They invest in, and occupy, homes and farms, but in order not to offend the Mexican constitutional restriction, title is held in trust for them by a Mexican bank, title company, or individual. This is not done covertly, but openly, and it is accepted as an appropriate policy by Mexican officials. Indeed, the process is frequently advertised in publications in order to encourage Americans to live south of our border and to help stimulate the Mexican economy.
As the majority relate, Wong invested in Mexican farm land, though title was held as an accommodation by one Mario Cota, a Mexican citizen. Wong and Cota then formed a Mexican corporation, with stock held by Mexican nationals, to run the farming operation. There was nothing improper, immoral or illegal about that enterprise. And Tenneco, which entered into marketing agreements in California for the produce of the enterprise, was *140fully aware of the manner in which title was held. Until Wong’s financial fortunes waned, Tenneco was happy to accept the benefits of successive marketing contracts. Its sense of misguided morality appears to have risen in direct proportion to its decline in revenue.
The trial court’s procedure is puzzling. It originally declined to dismiss the complaint on defendant’s motion on the ground of illegality. An entire trial was held, and the matter submitted to a jury. Only after the jury returned a substantial verdict for plaintiff did the purported illegality of the transaction suddenly appear to the court. While one must accept wisdom even if it appears late, I cite the foregoing sequence to show that any purported illegality of the transaction was too subtle to be readily manifest.
II.
Assuming arguendo that there had been some illegality in Wong’s original operation in Mexico—a fact I do not concede—the transaction there has long since terminated. This is not a situation in which California courts have been asked to lend their dignity to a continuing transaction. “[Wjhen the illegal transaction has been consummated; when no court has been called upon to give aid to it; when the proceeds of the sale have actually been received, and received in that which the law recognizes as having had value; and when they have been carried to the credit of the plaintiffs, the case is different. The court is there not asked to enforce an illegal contract.” (Planters’ Bank v. Union Bank (1872) 83 U.S. 483, 499-500 [21 L.Ed. 473, 479-480], cited with approval in Denning v. Taber (1945) 70 Cal.App.2d 253, 257 [160 P.2d 900], and in Norwood v. Judd (1949) 93 Cal.App.2d 276, 287 [209 P.2d 24].)
Here the contractual relation had ended five and a half years before the judgment. The breaches of contract and the torts terminating the relationship between the parties occurred on January 10, 1975. The trial court found the purported illegality in June of 1981. Wong had been dead five years when the court ruled. Those facts do not indicate the court is condoning a continuation of illegality, even if there had been such conduct previously.
In Asdourian v. Araj (1985) 38 Cal.3d 276 [211 Cal.Rptr. 703, 696 P.2d 95], a majority of this court, including the author of the present majority opinion, held that illegal conduct in the form of violation of a statute does not necessarily deprive a party of the benefit of his contractual arrange- ■ ments. As the chief justice wrote at page 289, “Defendant attempts to rely on a technicality to defeat plaintiff’s claims. This technicality is unrelated to defendant’s real dispute with plaintiff—the terms of the . . . agreements. That dispute was resolved by the trial court [here the jury] in plaintiff’s *141favor. To allow defendant to prevail on a technicality would be to allow [the law] to be used as a 1 “shield for the avoidance of a just obligation.” ’ ” (Accord, Poorman v. Mills & Co. (1870) 39 Cal. 345, 353.)
The majority in Asdourian found there was nothing malum in se about the contract between the parties, that the defendant was a sophisticated businessman, and that to deprive the plaintiff of his remedy would provide the defendant with unjust enrichment. (Asdourian v. Araj, supra, 38 Cal.3d at p. 293.) The case before us is much stronger. The California parties violated no California law, and even in Mexico their conduct was, under the majority’s theory, at most arguably malum prohibitum. Tenneco was hardly an unsophisticated victim of the plaintiff, a struggling grower. And to deprive this plaintiff of the verdict reached by a jury that heard all the evidence produced by both sides would indeed magnanimously bestow an unjust enrichment on Tenneco. The unjust enrichment is substantial: remission of a jury verdict of more than a million and a half dollars. Under any standard, that is an egregious sanction to impose on a Californian who violated no law of California and whose contractual dealings in California were undertaken with a knowledgeable California corporation fully advised of all his operations.
III.
I sharply disagree with the majority’s reliance on Mexican law to uphold Tenneco’s defense of illegality under a theory of comity.
Comity is based on the concept of interstate courtesy, by which a forum state will permit application of a foreign law in the interest of promoting justice or out of respect for the laws and institutions of a foreign state. (Estate of Lund (1945) 26 Cal.2d 472, 489 [159 P.2d 643, 162 A.L.R. 606].) However, a well established exception to the rule of comity precludes application of foreign laws that are contrary to the public policy of the forum state.
Comity does not require application of Mexican law in this case. California’s public policy, as expressed in its Constitution and statutes, is to allow ownership of property without regard to citizenship. (Cal.Const., art. I, § 20: “Noncitizens have the same property rights as citizens”; Civ. Code, § 671: “Any person, whether citizen or alien, may take, hold, and dispose of property, real or personal, within this state.”) We have come a long way since the days of alien land laws (Sei Fujii v. California (1952) 38 Cal.2d 718 [242 P.2d 617]) and must not retreat now by submitting to xenophobia from any source, however well intentioned.
*142The citizenship-based Mexican law invoked by the trial court and the majority is directly contrary to the foregoing California policy, under which a Mexican citizen may own property in California. The “rule of comity is subject to the principle that foreign laws will not be given effect when contrary to the settled public policy of the forum.” (Biewend v. Biewend (1941) 17 Cal.2d 108, 113 [109 P.2d 701, 132 A.L.R. 1264], overruled on another ground in Worthley v. Worthley (1955) 44 Cal.2d 465 , 470 [283 P.2d 19); accord, Severn v. Adidas Sportschuhfabriken (1973) 33 Cal.App.3d 754, 763 [109 P.2d 328]; Victor v. Sperry (1958) 163 Cal.App.2d 518, 525 [329 P.2d 728]; Thome v. Macken (1943) 58 Cal.App.2d 76, 78-81 [136 P.2d 116]; see also 15 Williston on Contracts (3d ed. 1972) § 1748, pp. 124-126, § 1792, pp. 371-373.)
Under the majority’s inflexible concept of comity, we would be required to recognize and enforce in our courts the racial laws of South Africa, the religious laws of Iran and the sexually discriminatory laws of Saudi Arabia. But discrimination on the basis of nationality is just as repugnant to our public policy as discrimination because of race, religion or sex. Indeed, the Unruh Civil Rights Act specifically prohibits discrimination on the basis of “sex, race, color, religion, ancestry or national origin” in all business enterprises. (Civ. Code, § 51, italics added.)
IV.
The citizenship-based law of Mexico is also suspect under controlling international instruments. The Universal Declaration of Human Rights was adopted by the General Assembly of the United Nations on December 10, 1948. It was subsequently ratified by both the United States and Mexico. A treaty, of course, is universally recognized as the highest law of the land. Article 17 of the Universal Declaration provides in section 1 that “Everyone has the right to own property alone as well as in association with others.” (Italics added.) No limitation as to citizenship is provided as an exception. Section 2 of the article declares further that “no one shall be arbitrarily deprived of his property.”
The United States and California are plainly in conformity with the foregoing declaration: we permit no nationality or citizenship barrier to the ownership of property. By contrast, there is a serious question whether Mexico’s restrictions remain consistent with its international obligations.
V.
The judgment cannot be affirmed under California’s governmental-interest approach to conflict of law issues. “The governmental interests approach is *143applicable not only to situations involving multistate contacts but also to those involving a state of the United States vis-á-vis a political entity of a foreign country.” (Hurtado v. Superior Court (1974) 11 Cal.3d 574, 580, fn. 2 [114 Cal.Rptr. 106, 522 P.2d 666].) The 1973 marketing contract was legal and enforceable under California law but arguably, according to the majority, not under Mexican law. In light of these differing laws, we first examine the underlying policies to determine whether both California and Mexico have an interest in application of their respective laws. (Offshore Rental Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 163 [148 Cal.Rptr. 867, 583 P.2d 721]; Bernhard v. Harrah’s Club (1976) 16 Cal.3d 313, 317-318 [128 Cal.Rptr. 215, 546 P.2d 719].)
California’s policy of allowing ownership of property without regard to citizenship is involved here more as a matter of principle than as a practical matter, given the foreign location of Wong’s farming operation. However, California’s general policies of affording relief to its citizens who have suffered a breach of contract or a tort (see Civ. Code, §§ 3300, 3333) and of punishing and deterring wrongful conduct (see Civ. Code, § 3294, subd. (a)) give it a strong interest in application of its law. Similarly, Mexico could contend its policy preserving domestic ownership and control of its natural resources gives it an interest in application of its law. Thus it can be argued that there is a true conflict.
“Once [a] preliminary analysis has identified a true conflict of the governmental interests involved as applied to the parties under the particular circumstances of the case, the ‘comparative impairment’ approach to the resolution of such conflict seeks to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state. This analysis proceeds on the principle that true conflicts should be resolved by applying the law of the state whose interest would be the more impaired if its law were not applied.” (Bernhard v. Harrah’s Club, supra, 16 Cal.3d at p. 320; also see Reich v. Purcell (1968) 67 Cal.2d 551, 553-554 [63 Cal.Rptr. 31, 432 P.2d 727].) Application of Mexican law in this case would completely impair California’s interests in compensation, punishment and deterrence. Application of California law, however, would not affect Mexico’s interests in any respect.
Even if Mexico has a governmental interest in protecting land holdings within its borders, in the present instance it has given no indication that it regards this business, or any similar operations, improper. If the government of Mexico had any concern about this litigation, it could have requested participation. No Mexican interest has been asserted in this lawsuit except by Tenneco, a wholly unaffected non-Mexican entity.
*144On the other hand, California has an overwhelming governmental interest in this case. The contract was made in California, between California citizens, with respect to a loan made in California, secured by real property situated in California. The receipt and sale of the produce, the essential part of performance, took place in California. The negligence of Tenneco, as found by the jury, occurred in California. The intentional interference with business relations occurred in California. The forum, selected by the parties, was California. To maintain that conflict of law principles compel application of the law of Mexico is to ignore all the foregoing facts as well as unwavering California policy. Worse, such conclusion is regressive and does violence to basic principles of conflicts developed over the years by experts in the field. I doubt that any would sanction the curious result of the present majority. (See, e.g., Justice Traynor’s opinion in Grant v. McAuliffe (1953) 41 Cal.2d 859 [264 P.2d 944, 42 A.L.R.2d 1162]; Cavers, The Choice-of-Law Process (1965) p. 139; Juenger, Conflict of Laws (1984) 32 Am.J.Comp.L. 1, 17-18.)
In reality, however, there is no genuine conflict of law here, but rather a false conflict. When only one state has an interest in applying its law, the conflict is false. (Ashland Chemical Co. v. Provence (1982) 129 Cal.App.3d 790, 793-794 [181 Cal.Rptr. 340].) California has a prime interest in applying its law to protect the rights of its citizens to engage in business, to enforce contractual rights, and to seek redress for tortious conduct committed within its borders. The interest of Mexico is in no way realistically advanced by frustrating California’s protection of its citizens. Under such circumstances, California, the only state with a true governmental interest, should apply its law, not that of Mexico. “When one of two states related to a case has a legitimate interest in the application of its law and policy and the other has none, there is no real problem; clearly the law of the interested state should be applied.” (Currie, The Constitution and the Choice of Law: Governmental Interests and the Judicial Function (1958) 26 U.Chi.L.Rev. 9, 10.)
VI.
Finally, when the purpose of the Mexican law is to protect a segment of the public, an alleged violation of the law does not affect a claim arising between two parties neither of whom is in the protected segment of the public. Tenneco must be a member of the class meant to be protected by that law before it may successfully invoke the defense of illegality. (Gatti v. Highland Park Builders, Inc. (1946) 27 Cal.2d 687, 690 [166 P.2d 265]; Norwood v. Judd, supra, 93 Cal.App.2d at pp. 283-284.) When this exception is applied to the case before us, it is apparent that the purpose of the Mexican law is to protect Mexican citizens. Tenneco is certainly not within *145that protected class. The objectives of Mexican law cannot be advanced by refusing to enforce a contract between two California citizens, when the breach occurred in California, the issues are tried in a California court, and no Mexican citizen is before that court. The purpose of the Mexican law can neither be advanced nor retarded by any action taken by the trial court in California. For the defendants to gratuitously wrap themselves in the cloak of Mexican law and seek its protection is contrary to California authority. A law to protect a segment of the public should not become an unwarranted shield for the avoidance of a just obligation by those outside the class. (Gatti v. Highland Park Builders, Inc., supra, 27 Cal.2d at p. 690.)
To summarize, the majority opinion is in error for all of the following reasons: (1) the grower’s operations were not illegal under Mexican law; (2) even if by some strained interpretation there was an illegal transaction originally, it had long since been consummated; (3) comity does not require application of foreign law that is clearly contrary to public policy in the United States and in California; (4) if Mexican law prohibits land ownership or holding by noncitizens, it is in conflict with international human rights doctrine; (5) if there is deemed to be a conflict of laws, under the facts of this case California law should prevail; (6) there is no real conflict of law, but only a false conflict and under that doctrine California law applies; (7) the parties herein are not in the class purportedly protected by Mexican law.
The judgment should be reversed.
The petition of plaintiffs and appellants for a rehearing was denied September 26, 1985, and the opinion was modified to read as printed above. Lucas, J., did not participate therein. Mosk, J., was of the opinion that the petition should be granted.