BERNHARD v. Harrah's Club a Novada corporation, Defendant and Respondent.

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Court of Appeal, Third District, California.

Richard Alton BERNHARD, Plaintiff and Appellant, v. Fern Virginia MYERS et al., Defendants, Harrah's Club a Novada corporation, Defendant and Respondent.

Civ. 14030.

Decided: November 08, 1974

Frederick W. Stephenson, Sacramento, for plaintiff and appellant. Hardy, Erich & Brown, Sacramento, for defendant and respondent.

This is an appeal from a judgment of dismissal entered by the court below following an order sustaining a general demurrer without leave to amend.1

FACTS2

On July 24, 1971, in response to the advertisements and solicitations of defendant, Fern and Philip Myers3 drove their automobile from the State of California, where they resided, to a gambling and drinking establishment owned by defendant in the State of Nevada. The Myers remained at defendant's club until the early morning hours of July 25, 1971. During the course of their stay the Myers were served numerous alcoholic beverages by employees defendant. By virtue of the consumption of the alcoholic beverages served, the Myers reached a point of obvious intoxication, rendering them incapable of safely driving a motor vehicle. Despite this fact, defendant continued to sell, furnish and give additional alcoholic beverages to the Myers.

While in this intoxicated state, the Myers left defendant's club and drove to Nevada County, California. While driving on Highway 49, the Myers car drifted across the center line into the lane of oncoming traffic and collided head-on with plaintiff who was riding a motorcycle. As a result of the accident, plaintiff suffered severe injuries.

CHOICE OF LAW

In Vesely v. Sager (1971), 5 Cal.3d 153, 95 Cal.Rptr. 623, 486 P.2d 151, the California Supreme Court considered the question of whether civil liability may be imposed upon a vendor of alcoholic beverages for providing alcoholic drinks to a customer who, as a result of intoxication, injures a third person. The court determined that the common law rule denying liability is unsound; it held that civil liability results when (1) a vendor furnishes alcoholic beverages to a customer in violation of Business and Professions Code section 256024 and (2) a third person is proximately injured or damaged thereby.

In 1969, the Supreme Court of Nevada considered the same question. In Hamm v. Carson City Nugget, Inc. (1969), 85 Nev. 99, 450 P.2d 358, the court refused to abrogate the common law rule and held that a somewhat similar Nevada statute5 did not create civil liability of tavern keepers to injured third parties. The court stated that the matter was one for legislative action and not court pronouncement (450 P.2d at pp. 359–360.) and that the Nevada Legislature has expressed itself clearly in favor of no civil liability.

Thus the primary question before us is one of the proper choice of law, given the conflicting rules of Nevada and California. Which law should apply? If Nevada law, no cause of action is stated; and if California law, the trial court erred.

Forty years ago the decision would have been a relatively simple one. ‘For many years courts applied the law of the place of the wrong in tort actions regardless of the issues before the court, e. g., whether they involved conduct, survival of actions, applicability of a wrongful death statute, immunity from liability, or other rules determining whether a legal injury has been sustained.’ (Reich v. Purcell (1967) 67 Cal.2d 551, 553, 63 Cal.Rptr. 31, 33, 432 P.2d 727, 729.) The original Conflicts Restatement of 1934 so provided in section 378. Section 379 more specifically detailed the applicability of the law of the place of the wrong in torts arising out of intentional conduct, negligent conduct, and conduct giving rise to absolute liability; while section 377 defined the place of the wrong as ‘the state where the last event necessary to make an actor liable for an alleged tort takes place.’ Applying that rule, which until Reich v. Purcell, supra, p. 555, 63 Cal.Rptr. 31, 432 P.2d 727, was the California rules as well (see Loranger v. Nadeau (1932) 215 Cal. 362, 10 P.2d 63), this case would be resolved in favor of plaintiff.6 Although the defendant's actions giving rise to liability occurred in the State of Nevada, the accident occurred in California and this is the last event necessary to create the tort. Thus California is the place of the wrong and California law would apply.

But in the past forty years the law of conflicts has undergone much development. In Reich v. Purcell, supra, the California rule was redefined by Justice Traynor as follows: ‘In a complex situation involving multi-state contacts, however, no single state alone can be deemed to create exclusively governing rights. . . . The forum must search to find the proper law to apply based upon the interest of the litigants and the involved states. . . . Accordingly, when application of the law of the place of the wrong would defeat the interests of the litigants and of the states concerned, we have not applied that law. . . . As the forum we must consider all of the foreign and domestic elements and interests involved . . . to determine the rule applicable.’ (Reich v. Purcell, supra, 67 Cal.2d pp. 553–555, 63 Cal.Rptr. p. 33, 432 P.2d p.729.) Justice Traynor's approach has been termed ‘the governmental interest approach’, ‘the objective of which is ‘to determine the law that most appropriately applies to the issue involved.’' (Hurtado v. Superior Court (1974) 11 Cal.3d 574, 579–580, 114 Cal.Rptr. 106, 109.)

In addition to California, numerous jurisdictions throughout the United States departed from the place of the wrong approach (see cases cited in Reich v. Purcell, supra, 67 Cal.2d p. 555, 63 Cal.Rptr. 31, 432 P.2d 727), and in 1969 the American Law Institute rejected the place of wrong rule and in its place adopted the principle of applying the law of the state which ‘has the most significant relationship to the occurrence and the parties. . . .’ (Rest., Conflicts 2d, § 145 et seq.) A number of legal scholars have contributed their views, not by any means with unanimity of thought. (See Comments on Reich v. Purcell, 15 U.C.L.A.L.Rev. 551; Synposium on Cipolla v. Shaposka, 9 Duquesne L.Rev. pp. 347–465; Kasel v. Remington Arms Co. (1972) 24 Cal.App.3d 711, 729, 730, 101 Cal.Rptr. 314.)

Applying the governmental interest approach to this case and comparing it to other authorities in California, we find it totally unique. There are but two states involved, as well as two parties. The interests of the parties cancel each other out, plaintiff being interested in recover, defendant being interested in no recovery. The State of California is the place of the residence of the plaintiff and the place where the automobile collision occurred. The State of Nevada is the state of residence of the defendant and the place where the act occurred which it is claimed gave rise to liability. California has an interest in compensating its resident defendant from a money judgment in these circumstances and thus in not compensating the foreign plaintiff. Both states have an interest in regulating the conduct of tavern owners and operators to the end that the service of liquor to obviously intoxicated persons and habitual drunkards is to be discouraged; indeed both have enacted penal statutes to serve this interest. By judicial interpretation California has fortified this interest through civil liability; by judicial interpretation, Nevada has not so fortified the interest. Both states have an equal right to expend or limit their public policy in this area, and the decision of each is to be respected by the other.

Thus the interests, both individual and governmental are equal.

In Reich v. Purcell, supra, application of the governmental interest approach resulted in the obvious conclusion that the state of the place of the wrong (Missouri) had no interest in applying its law, where the plaintiff was a resident of Ohio and the defendant a resident of California.

In Hurtado, supra, California and Mexico were involved, but the place of the accident was California and Mexico had absolutely no interest to be protected by a refusal to apply California law. In other words the interests of the two governments showed upon analysis that Mexico was not at all interested but California was.

In Kasel v. Remington Arms Co., supra, again there were two states involved, California and Mexico. Mexico was the place of the wrong, but the plaintiff was a California resident and the defendant was a Delaware corporation with its home office in Connecticut. Again the court ruled that as between Mexico and California, California's law was the proper choice; Mexico had no interest to protect.

In Grant v. McAuliffe (1953), 41 Cal.2d 859, 264 P.2d 944, all the parties, plaintiff and defendant, were residents of California, and the accident occurred in Arizona; which was held not to have such an interest as should be given consideration when compared to the interest of California in its own residents. Virtually the same factual situation existed in Emery v. Emery (1955), 45 Cal.2d 421, 289 P.2d 218.

What distinguishes this case from those aforementioned is that we are really dealing with two distinct torts. The particular tort of the Nevada defendant is separate from the tort which more proximately caused the plaintiff's injury, that of the Myers', the California residents. In the other cases, the tortious conduct and the injury occurred in the same state; which is generally so. Here the alleged tortious conduct of the Nevada defendant occurred in Nevada, while the accident and injury (and the second tort) occurred in California. While California may thus be treated as the ‘place of the wrong’, actually and in reality the place of the wrong insofar as the defendant's conduct is concerned is the State of Nevada. That the injury occurred in California is in a sense fortuitous. (See Rest.2d, Conflict of Laws, § 145, com. 2, p. 419.) This case is unique in that respect, and we find no comparable case in California.

Looking outside California, we note three cases with some similarity. In Cipolla v. Shasposka (1970), 439 Pa. 563, 267 A.2d 854, the plaintiff automobile guest was a resident of Pennsylvania (the forum), while the defendant driver was a resident of Delaware where the accident and injury occurred. The court applied Delaware law whose guest statute denied recovery, a proper result under our governmental interest approach. But the distinguishing feature is obvious—the only interest of Pennsylvania was its resident plaintiff. In Williams v. Rawlings Truck Line, Inc. (1965), 123 U.S.App.D.C. 121, 357 F.2d 581, the defendant's conduct took place in New York, where the plaintiff and defendant both resided; the accident and injury occurred in the District of Columbia (the forum). New York law was held to apply, for the same reasons as were involved in Grant v. McAuliffe, supra; the place of the accident was wholly fortuitous and the case was treated as one of ‘false conflicts' (See Williams v. Rawlings Truck Lines, supra, p. 586.)

In Schmidt v. Driscoll Hotel (1957), 249 Minn. 376, 82 N.W.2d 365, the forum state was Minnesota. Minnesota had a dram shop act which by statute imposed liability upon tavern owners for injuries sustained by third persons as a result of conduct of intoxicated persons who were furnished liquor in violation of a statute similar to the penal statutes of California and Nevada. Our court having construed Business and Professions Code, § 25602 as creating civil liability, we are in the same legal position as Minnesota. The defendant in Schmidt v. Driscoll Hotel served alcohol to one Sorrenson in violation of the statute. Sorrenson then proceeded to drive his vehicle, in which plaintiff was a passenger, into the State of Wisconsin where the automobile accident occurred, injuring the plaintiff. The question for the Minnesota court was which law to apply; its own, which gave civil liability against the defendant; or that of Wisconsin where the accident took place, but where there was no dram shop law. The case is similar on its facts to the case at bench both because of the dram shop aspect, and because of the dram shop aspect, and because the wrongful conduct and the injury were in different states. The differences are that both plaintiff and defendant were residents of the State of Minnesota, which is also the state where the wrongful act occurred. The only thing that happened in Wisconsin was the accident, which really was fortuitous; from the point of view of both parties it could have happened anywhere.7 The law of Minnesota was applied.

Thus even after looking outside California, we still find this case unique on its facts. The Williams and Schmidt cases are indicative of stress upon the state of the defendant's conduct as the source of the applicable law, because the ultimate place where the injury occurs is fortuitous. In Reich v. Purcell, supra, 67 Cal.2d p. 556, 63 Cal.Rptr. p. 34, 432 P.2d p. 730, Justice Traynor appears to support this emphasis when he states: ‘Missouri is concerned with conduct within her borders and as to such conduct she has the predominant interest of the states involved.’ (Emphasis added). Here however we do not conclude that the Nevada conduct makes the Nevada interest predominant; for to do so would be to necessarily concede that the happening of the accident in California was fortuitous. From the plaintiff's point of view the occurrence of the accident in California was not fortuitous. This is where the plaintiff lives and where he has a perfect right to use the highways, expecting that duties and liabilities flowing from an accident will be governed by California law. To him, the place of dispensing liquor is fortuitous, not the place of the injury.

The governmental interests as we note them are sufficiently equal that we cannot say that the interest of either state predominates. We find ourselves ambivalently wanting to apply California law for the benefit of our resident and wanting to apply Nevada law in order not to offend a sister state's concept of proper conduct of its citizens. We have concluded that the ambivalence is to be resolved by applying California law; we believe that this brings about both the more equitable and the legally correct result. We rely upon three precedents, whose rationale we accept, to justify such resolution of the conflict (which in our view is a true conflict of laws under which the interests of one state must suffer while those of the other be enhanced).

Our first authority is Kasel v. Remington Arms Co., supra, 24 Cal.App.3d at p. 731, 101 Cal.Rptr. at p. 327, where the court states ‘the forum has a definite interest in applying its own law. The law of the forum, ‘will be displaced only if there is a compelling reason for doing so.’ It is ‘applicable unless either the plaintiff or the defendant has been forced into a forum devoid of any such contact as would justify application of its own law.’ Ehrenzweig, Conflict of Laws (1962) § 213, page 555.' (See also Hurtado v. Superior Court, supra, 11 Cal.3d p. 581, 114 Cal.Rptr. 106.) This is but another way of saying that if the interests are evenly divided between conflicting states, and if one of those states is the forum, the law of the forum should be applied. In this case that would be the law of California, because we do find that the interests of California and Nevada in this case are of equal dignity.

The second source of authority for our conclusion is in Restatement 2d, Conflict of Laws, section 146 which reads in part as follows: ‘In an action for a personal injury, the local law of the state where the injury occurred determines the rights and liabilities of the parties, unless, with respect to the particular issue, some other state has a more significant relationship . . . to the occurrence and the parties, in which event the local law of the other state will be applied.’ Comment (e) to section 146 reads in part as follows: ‘On occasion, conduct and personal injury will occur in different states. In such instances, the local law of the state of injury will usually be applied to determine most issues involving the tort. . . . One reason for the rule is that persons who cause injury in a state should not ordinarily escape liability imposed by the local law of that state on account of injury. . . .

The local law of the state where the personal injury occurred is most likely to be applied when the injured person has a settled relationship to that state, either because he is domiciled or resides or because he does business there.' (Emphasis added).

Again comment (b) to section 156, Restatement 2d states in part: ‘If conduct and injury occur in different states, the local law of the state of injury will be applied unless some other state, which would usually be the place of conduct, has a more significant relationship to the occurrence and the parties with respect to the particular issue. . . . This is so for the reason, among others, that persons who cause injury in a state should not ordinarily escape liability imposed by the local law of that state on account of the injury.’ Illustration no. 1 under section 156 then furnishes facts very comparable to those of our case. It determines as we do that the interests of both states, the state of the action and the state of the result, are equally important, but that neither is any greater than the other. The illustration concludes that the law of the place of injury should apply, saying ‘. . . ordinarily, at least, one should not be allowed to escape liability imposed upon him by the local law of the state where his act caused injury.’

The same confirming language is to be found in the comments and illustration to Restatement 2d of Conflicts, section 159.

The third source of authority for our conclusion is to be found in the work of Professor Cavers and his principles of preference (see Cavers, The Choice of Law Process, page 139, et seq.) The first principle reads in appropriate part: ‘Where the liability laws of the state of injury set a higher standard of conduct . . . against injury than do the laws of the state where the person causing the injury has acted, . . . the laws of the state of injury should determine the standard . . . applicable to the case . . .’ Referring to the plight of the defendant to whom this rule is applied, Professor Cavers states at page 141: ‘If he has not entered the state but has caused harm within it by his act outside it, then, save perhaps where the physical or legal consequences of his action were not foreseeable, it is . . . fair to hold him to the standards of the state to which he sent whatever harmful agent . . . caused the injury.’ Surely it is foreseeable to any dispenser of alcoholic beverages in Reno or the Nevada side of Lake Tahoe that an intoxicated customer may drive his automobile into adjoining California and injure a third person because of incompetent driving.

While the choice of law in this case is not clear, as it has been in others where application of governmental interests principles has resulted in an unequivocal indication of an interest in one state with a corresponding lack of interest in another state, we nonetheless are persuaded by the foregoing that the rule to be applied by California in this case is that one which favors California law and California public policy. We recognize the awkwardness of our ruling vis-a-vis the public policy of the State of Nevada. In that regard we emphasize that our ruling is not based upon the application of any ‘better law’ concept, by which we would consider our law on this subject somehow wiser or ‘better’ than that of Nevada. (See Professor Seidelson's Analysis of this theory in 9 Duquesne Law Review 428 to 434.) Our ruling is simply based upon what we consider to be sound legal authority, applicable where the governmental interests as expressed in Reich v. Purcell are equal.

WAS THERE A TORT?

Despite our conclusion regarding choice of law, we find ourselves compelled to consider an argument regarding the substantive law applicable to this case. The argument states: in Vesely v. Sager, supra, liability of the dispenser of alcohol was founded upon a combination of Business and Professions Code section 25602 and Evidence Code section 669. The most serious question of concern to the court was whether the cafe proprietor owes a duty of care to the third person who is injured by the automobile accident brought about by the negligence of the intoxicated patron. The court noted that a duty of care and the attendant standards of conduct required of a reasonable man may be found in a legislative enactment which does not expressly provide for civil liability; that negligence in presumed from the violation of a statute intended to protect a class of persons of which the plaintiff is a member against the type of harm which the plaintiff suffered as a result of the violation of the statute; and that the Legislature had codified this presumption in Evidence Code section 669. The Supreme Court then noted that Business and Professions Code section 25602 imposed the duty of care upon the defendant because it was adopted by the Legislature ‘for the purpose of protecting members of the general public from injuries . . . resulting from the excessive use of intoxicating liquor.’ (Vesely v. Sager, supra, 5 Cal.3d p. 165, 95 Cal.Rptr. p. 631, 486 P.2d p. 159.) The court's conclusion was fortified by citing Business and Professions Code, section 23001. Finding that the plaintiff was within the class of persons for whose protection section 25602 was enacted and that the injuries she suffered resulted from an occurrence that the statute was designed to prevent, the court concluded that the presumption of Evidence Code section 669 applies, provided that in addition there is in fact a violation of the statute and that it proximately causes injury to the plaintiff.

The argument proceeds: it is emphasized that the Vesely court specifically treated of the presumption of negligence embodied in Evidence Code section 669, together with the provisions of Business and Professions Code section 25602, and found a consequent duty of the defendant to the plaintiff. It did not hold, and indeed could not hold that the defendant there violated a Nevada penal statute or any other state's penal statute. What do we then have where the defendant in the case before us has not violated section 25602 or any other California statute? What he violated was a Nevada statute which the Nevada Supreme Court has said creates criminal liability, but no civil liability.

The argument states further: in the case at bench, obviously there is no way that a Nevada resident, acting at all times in Nevada, could violate a penal statute of California. The only way therefore that the plaintiff can assert liability on the part of the defendant is to assert that defendant violated a statute of his own state, a penal statute, which in turn creates civil liability. Obviously if the California courts were to accept this, they would be telling the Nevada courts precisely the opposite of what the Nevada courts told the world regarding Nevada's own penal statute.

Thus the argument concludes that the plaintiff has stated no cause of action, not because of choice of law, but because there was no violation of a duty by the defendant to the plaintiff. Neither thee California statute (which creates a civil duty) was violated by the defendant nor any Nevada statute creating a civil duty. So the defendant simply did not wrong the plaintiff.

The argument is logical and persuasive, and would have merit but for the fact that Vesely v. Sager, supra, want beyond pure statutory construction in its determination of liability. It reviewed the common law which had theretofore precluded civil liability of a dispenser of alcoholic beverages and overruled the cases enunciating that common law. The court stated, 5 Cal.3d at p. 166, 95 Cal.Rptr. at p. 632, 486 P.2d at p. 160: ‘. . . liability has been denied in cases such as the one before us solely because of the judicially created rule that the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication. . . . this rule is patently unsound and totally inconsistent with the principles of proximate cause established in other areas of negligence law. Other common law tort rules which were determined to be lacking in validity have been abrogated by this court (see Gibson v. Gibson (1971), 3 Cal.3d 914, 92 Cal.Rptr. 288, 479 P.2d 648; Muskopf v. Corning Hospital Dist. (1961), 55 Cal.2d 211, 11 Cal.Rptr. 89, 359 P.2d 457), and there is no sound reason for retaining the common law rule presented in this case.’

Thus the civil duty of the purveyor of alcholic beverages spelled out in Vesely v. Sager arises not only from the statute but also from the common law of California as it now exists, and as it has existed from and after June 24, 1971, the date of the Vesely decision. On the date of the accident, July 24, 1971, defendant therefore owed a common law duty to the California plaintiff using California highways not to cause him injury by selling alcohol to an intoxicated person or know habitual drunkard. It was this duty that was violated according to the allegations of the first amended complaint.

The order sustaining demurrer and the judgment of dismissal are reversed.

FOOTNOTES

1.  The defendant Harrah's Club, a Nevada Corporation, was the only defendant named in the complaint to appear below. It filed a demurrer alleging that the complaint failed to state facts sufficient to constitute a cause of action against Harrah's.

2.  The facts are taken from the allegations of the first amended complaint.

3.  The Myers were named as defendants but are not parties to this appeal. Hereinafter the word ‘defendant’ shall be used to designate the defendant and respondent Harrah's Club.

4.  This section reads: ‘Every person who sells, furnishes, gives, or causes to be sold, furnished, or given away, any alcoholic beverage to any habitual or common drunkard or to any obviously intoxicated person is guilty of a misdemeanor.’

5.  N.R.S. 202.100(1) reads in part: ‘It shall be unlawful for the proprietor, bartender or person in charge of any saloon or bar to sell or give, or to permit to be sold or given, any intoxicating liquor to any person who is drunk, or to any person known by such proprietor, bartender or person in charge to be an habitual drunkard or dipsomaniac. . . .’

6.  Restatement of Conflicts, (original) section 382, subdivision (2) might at first glance appear to make an exception whereas here the act is not tortious in Nevada where it takes place but is in California where the place of the wrong is. But a more careful reading of section 382, subdivision (2) together with the comment thereto dispels any such doubt.

7.  The Minnesota court cited but refused to follow the original Restatement rule of applying the law of the place of the wrong. The court uttered the following dictum at page 367: ‘But, even if at the time of the accident there had been in effect in Wisconsin a statute similar to § 340.95, it is doubtful if it could be applied to ascertain plaintiff's rights against defendant since there is nothing here to support a claim that defendant ever consented to be bound by Wisconsin law.’ (Emphasis added) The dubious reasoning destroys any precedential value the statement might otherwise have had.

PARAS, Associate Justice.

RICHARDSON, P. J., and REGAN, J., concur.