## Facts

- An Oregon court adjudicated Leonard I. Kaufman Jr. a statutory “spendthrift” and appointed an Oregon guardian to manage his affairs.
- Oregon law provided that, after appointment of a spendthrift’s guardian, the spendthrift’s contracts (except for necessaries) are voidable during the guardianship.
- Kaufman traveled to California and persuaded Phillip N. Lilienthal III, a California resident, to advance money for a business venture.
- In California, Kaufman executed and delivered two promissory notes to Lilienthal in exchange for the funds.
- Lilienthal did not know Kaufman was under an Oregon spendthrift guardianship.
- After the transaction, Kaufman’s Oregon guardian elected to avoid the promissory-note obligations under Oregon’s spendthrift statute.
- Lilienthal sued in Oregon to collect on the notes, contending California law should govern because the notes were made in California and California did not recognize a spendthrift disability.

## Issues

1. In an Oregon action to enforce promissory notes executed and delivered in California by an Oregon ward under a spendthrift guardianship, should validity be governed by California law (place of contracting) or Oregon law (domicile, guardianship, and forum)?
2. When two states have substantial and roughly equal governmental interests in applying their own law to an interstate contract dispute, may the forum apply its own law to advance its public policy?

## Decision

- The Oregon Supreme Court affirmed judgment for Kaufman.
- The court applied Oregon law, treating the notes as voidable and effectively avoided by the guardian.
- The court held that where the involved states’ interests are in balance, the forum may apply its own law to carry out its public policy.
- A concurrence agreed in the result but expressed concern about the breadth of the majority’s forum-preference formulation.
- A dissent would have applied California law and enforced the notes to protect contracting expectations and the place-of-contracting policy.

## Legal Principles

- A spendthrift-guardianship statute that renders a ward’s post-guardianship contracts voidable (except for necessaries) affects the substantive validity of the obligation, not merely the remedy.
- Although contract validity is often governed by the law of the place of making, that rule may yield when competing state policies are weighed.
- Oregon’s protective policy for adjudicated spendthrifts and their families can justify applying Oregon law to transactions made outside Oregon when the ward remains under an Oregon guardianship.
- In an interstate contract dispute where the competing states’ interests are substantially equal, the forum may apply its own law to advance its public policy.

## Conclusion

The court refused to enforce promissory notes executed in California by an Oregon spendthrift ward, holding that Oregon’s guardian could avoid the contracts under Oregon statute and that, when state interests are evenly balanced, an Oregon court may apply Oregon law to effectuate Oregon’s protective policy.


Lilienthal v. Kaufman, 239 Or. 1, 395 P.2d 543 (Or. 1964)