Gold v. Salem Lutheran Home Assn.

347 P.2d 687, 53 Cal. 2d 289, 1 Cal. Rptr. 343, 1959 Cal. LEXIS 345

• Court: California Supreme Court
• Decided: December 18, 1959
• Docket: S. F. 20008
• Status: Published

Opinions

McCOMB, J.

Defendant is a nonprofit corporation which maintains a licensed home for the aged. Applicants are admitted for a trial period of two months. At the end of this period, or earlier if defendant’s board of directors consents, a contract may be executed under which defendant becomes obligated to provide a home for the applicant for the remainder of his life. For such life care contract the applicant pays a lump sum, determined by reference to life expectancy tables.

Plaintiffs are executors of the will of Nicholas Chouvaldjy. Mr. Chouvaldjy, 84 years of age, applied for admission to the home and was accepted on a trial basis. He entered August 1, 1956, at which time he paid $130 for his care for the month of August. On August 31, 1956, he paid a like amount for the month of September.

On September 10, 1956, the directors by motion duly accepted Mr. Chouvaldjy’s application for permanent residence and directed that a life care contract be granted upon payment of $8,500.

The contract was drawn by defendant and dated October 1, 1956. Mr. Chouvaldjy signed it September 25, 1956, and at the same time delivered to defendant a cashier’s cheek for $8,500. On the same afternoon or the next morning the authorized officers of defendant signed the contract, and Mr. Chouvaldjy was notified that a signed copy was available for him in the office. The contract was thus executed and in force as of September 26, 1956.

Mr. Chouvaldjy suffered a stroke on September 27, 1956, and died on September 28, 1956.

Plaintiff executors brought this action to recover the payment of $8,500. After trial before the court without a jury, judgment was entered in favor of defendant, and plaintiffs appeal.

Question: Since performance of the contract was not to commence until October 1, 1956, and Mr. Chouvaldjy died before performance was to commence, (a) was there a failure of consideration for the contract, or (b) was the doctrine of frustration applicable?

No. (a) A life care contract is not subject to rescission or cancellation, or to recovery back of the amount paid therefor, because the beneficiary dies before performance of the contract is to commence. Defendant’s promise to furnish food, lodging, and care to decedent “for the remainder of his life” constituted consideration for the agreement, and the fact that decedent died before performance of the contract was to commence did not give his estate the right to recover the amount paid under the agreement on the ground that there was a failure of consideration. (Coyne v. Pacific Mut. Life Ins. Co., 8 Cal.App.2d 104, 108 [3] [47 P.2d 1079] [hearing denied by the Supreme Court]; Rishel v. Pacific Mut. Life Ins. Co. of California, 78 F.2d 881, 883 [5, 6]; American State Bank v. National Life Ins. Co., 297 Ill.App. 137 [17 N.E.2d 256, 261 et seq.]; Dalton v. Florence Home for the Aged, 154 Neb. 735 [49 N.W.2d 595, 597 [1, 4], 599]; Curtis v. New York Life Ins. Co., 217 Mass. 47 [104 N.E. 553, 555, Ann.Cas. 1915C 945]; cf. 131 A.L.R (1941) 439.)

(b) The doctrine of frustration is not applicable to the facts in the present case, for these reasons:

(1) Frustration is no defense if it was reasonably foreseeable. The burden of proving that the risk of the frustrating event was not reasonably foreseeable rests with the party seeking to excuse performance of a contractual obligation. [3] It is settled that if parties have contracted with reference to contemplated risks, they may not invoke the doctrine of frustration to escape the obligations. (Lloyd v. Murphy, 25 Cal.2d 48, 54 [4], 55 [6] [153 P.2d 47]; Gillespie v. Ormsby, 126 Cal.App.2d 513, 526 [5] [272 P.2d 949] [hearing denied by the Supreme Court] ; Glens Falls Indem. Co. v. Perscallo, 96 Cal.App.2d 799, 802 [2] [216 P.2d 567]; McCulloch v. Liguori, 88 Cal.App.2d 366, 372 [5] [199 P.2d 25] [hearing denied by the Supreme Court].)

(2) The party who claims a frustration must show that he is harmed thereby. (Dorn v. Goetz, 85 Cal.App.2d 407, 415 [7] [193 P.2d 121].)

On the question of assumption of risk and the foreseeableness of death, the following statement in Rishel v. Pacific Mutual Life Ins. Co. of California, supra, 78 F.2d 881, 883 [5, 6], is here applicable: “. .. . contracts must be read in the light of the knowledge of all mankind, that death may come tomorrow.” (Cf Coyne v. Pacific Mut. Life Ins. Co., supra, at 108 [3].)

That death may at any unexpected time overcome a man of decedent’s age, 84 years, is by common observation readily classified as “reasonably foreseeable.” In the present case each party to the contract had clearly assumed the risk of variation of the life span from that predicted by the mortality tables. Therefore, the doctrine of frustration is not applicable here. (Cf. Coyne v. Pacific Mut. Life Ins. Co., supra, at 109.)

The judgment is affirmed.

Gibson, C. J., Traynor, J., Schauer, J., Spence J., and White, J., concurred.