Walton School of Commerce v. Stroud , 248 Mich. 85 ( 1929 )

Defendant signed applications for three correspondence courses offered by the Walton School of Commerce, an Illinois corporation, sent the applications to plaintiff at Chicago, where they were accepted in due form by the assistant secretary of the school, and defendant so advised. Defendant received and paid for one course of instruction, was tendered and refused to accept and pay for the other two courses. This suit was brought upon the contracts to recover the agreed price for the two courses refused. The facts are not in dispute. In the circuit the trial was by the court, and judgment was entered for defendant upon the following conclusion of law:

"That the above-named plaintiff cannot recover judgment for the tuition for the two courses of instruction which were not taken by the defendant, since it has failed to prove that it has suffered any actual damage by the defendant's failure to perform according to the terms of the contract."

The court held that the contract was executory, could be terminated by defendant, subject, however, to liability for damages, and held plaintiff to the measure and proof of damages under the Michigan rule. Plaintiff reviews by writ of error, claims the contract was an Illinois contract, and the liability of defendant is to be governed in the Michigan forum by the rule adjudged in Illinois. The contract was an Illinois contract. Dudley A. Tyng Co. v. Converse, 180 Mich. 195;Schantz v. Mott, 242 Mich. 642. In Chicago, upon acceptance of the applications, the minds of the parties met, and the contract fixed rights and liability under Illinois law.

Plaintiff invokes the lex loci upon the nature and extent of defendant's liability under the contract as held inInternational Accountants Soc. v. Maxwell, 236 Ill. App. 627, and defendant relies upon the lex fori as applied by the circuit judge and announced in Wigent v. Marrs, 130 Mich. 609;International Textbook Co. v. Schulte, 151 Mich. 149;International Text-Book Co. v. Jones, 166 Mich. 86;International Text-Book Co. v. Marvin, 166 Mich. 660. If thelex fori governs, the judgment should be affirmed, and if thelex loci governs, the judgment should be reversed.

It will be observed, from what we have said, that we must give consideration to the doctrine of comity in its relation to conflict of laws. The rule is well settled that a substantive right, growing out of contract, or inhering in it or attaching to it, is governed by the law of the contract. The remedy, however, is governed by the lex fori. The term "remedy" has a well-defined legal significance. There must be kept in mind the distinction between remedial procedure, governed by the law of the forum, and matter of substance, involving rights, and, therefore, governed by the law of the contract.

In Pritchard v. Norton, 106 U.S. 124 (1 Sup. Ct. 102), it was said:

"The principle is, that whatever relates merely to the remedy and constitutes part of the procedure is determined by the law of the forum, * * * but whatever goes to substance of the obligation and affects the rights of the parties, as growing out of the contract itself, or inhering in it or attaching to it, is governed by the law of the contract."

The obligation of the defendant, under the contracts, was to perform his promises and undertakings contained therein, with liability for nonperformance thereof under the law of the contract. The cause of action is a substantive right. Theremedy, in the lex fori, is the procedure for obtaining relief. Defendant's nonperformance gave plaintiff a cause of action, and the rule of comity permitted plaintiff to have relief in the courts of this State.

In Cockburn v. Kinsley, 25 Colo. App. 89, 97 (135 P. 1112), it was said:

"In 9 Current Law, 596, it is stated that, 'All matters bearing upon the execution, interpretation, and validity of a contract, and measure of damages for breach thereof, are determined by the law of the place where the contract is made.' "

In Central Vermont R. Co. v. White, 238 U.S. 507 (35 Sup. Ct. 865, Ann. Cas. 1916 B, 252), it was said:

"There can, of course, be no doubt of the general principle that matters respecting the remedy — such as the form of the action, sufficiency of the pleadings, rules of evidence, and the statute of limitations — depend upon the law of the place where the suit is brought. McNiel v. Holbrook, 12 Pet. (37 U.S.) 84, 89. But matters of substance and procedure must not be confounded because they happen to have the same name."

This also seems to be the rule in Georgia:

"As to all matters affecting the remedy, including the evidence, and therefore the burden of proof, the laws of the forum govern, even as to suits on contracts made or torts committed in other States. Richmond D. R. Co. v. Mitchell,92 Ga. 77, 80 (18 S.E. 290); Massachusetts Benefit Life Ass'n v.Robinson, 104 Ga. 256 (8), 286 (30 S.E. 918, 42 L.R.A. 261)."Atlanta, etc., R. Co. v. Broome, 3 Ga. App. 641 (60 S.E. 355).

It has been held in Illinois.

"It is undoubtedly well settled that the law of the place where the contract is made must govern the contract as to its validity and construction. But the law of the remedy is no part of the contract. Wood v. Child, 20 Ill. 209. 'When the question is settled that the contract of the parties is legal, and what is the true interpretation of the language employed by the parties in framing it, the lex loci ceases its functions, and the lex fori steps in and determines the time, the mode and extent of the remedy.' Burchard v. Dunbar, 82 Ill. 450." Reid,Murdock Co. v. Northern Lumber Co., 146 Ill. App. 371, 377.

If by "extent of the remedy" is meant the measure of damages for breach of contract, like in the case at bar, we entertain a different opinion. We hold that the law of the forum governs the remedy; the remedy clearly covers the character and form of action, evidence appropriate thereto, and rules of procedure, but damages for breach of contract pertain to a substantive right and not to remedy. Evidence at the trial to sustain the action relates to liability in accord with the lex loci.

Defendant obligated himself to accept the instruction contracted for and to make the agreed payments. Under the contract he was to pay in Illinois, and plaintiff was to send the instruction to him in Michigan. If we say that, under such circumstances, one party was to perform his part in Illinois and the other in Michigan, then which law is to control?

Goodrich on Conflict of Laws, p. 232, says of such an instance:

"There seems nothing left but to apply the local contract rules of the lex loci contractus. * * * The test of the law of the place of performance thus fails to work in a frequently encountered and important class of cases."

Defendant refused to accept instruction. This excused plaintiff from sending the same to him. When defendant stopped performance by plaintiff, his liability as promisor remained.

At the trial plaintiff offered a certified copy of a decision of the Illinois appellate court in the case ofInternational Accountants Soc. v. Maxwell, supra, "for the purpose of showing that the law in Illinois permits a school to recover the balance due under the terms of contracts with students, if the course is not completed by the student, and it is through no fault of the school that the student does not receive the full course." The cited appellate court report does not contain the opinion, and, therefore, it was necessary to obtain and offer the certified copy. Under the doctrine of comity, the rights of plaintiff and the liability of defendant, under and by virtue of the contract, are determined by the lex loci. Procedure employed to obtain such redress is ruled by the lexfori. The action at bar arose out of defendant's breach of an Illinois contract, and the measure of the relief to be awarded plaintiff is gauged by the lex loci, as adjudged in the mentioned case, and not by the lex fori. The substantive rights of plaintiff accrued by reason of defendant's breach of an Illinois contract. For such breach defendant must respond under the law of the contract and have his liability for breach thereof so measured.

Counsel for defendant contend that an opinion of the Illinois appellate court, not being a court of last resort, should not be accepted as an authoritative exposition of Illinois law. The opinion of that court was accepted by this court inRice v. Rankans, 101 Mich. 378. The point is without merit. See 3 Comp. Laws 1915, § 12515.

The judgment should be reversed and a new trial granted, with costs to plaintiff.

The late Justice FELLOWS took no part in this decision.