PS 01405.013 Guam

A. PS 01-204 Oral Loan Agreements in Guam - Yvonne P~ (SSN ~)

DATE: August 22, 2001

1. SYLLABUS

This opinion concerns oral loan agreements. For purposes of SSI eligibility, proceeds of oral loans do not count as income if the borrower must repay the loan and it is an enforceable contract under State law. On several occasions a resident of Guam lent cash to a relative who now resides in California. Because the loan agreements were made in Guam, Guam law is controlling. Under Guam's law (which follows California's statute of frauds), these loans are enforceable contracts because the statute of frauds does not apply. The statute of frauds does not apply because the lender fully performed his part of the loan agreements by lending the money to the borrower.

2. OPINION

ISSUE

The issue you presented is whether oral loans made to Claimant Yvonne P~ (hereinafter "Claimant") by Claimant's father-in-law are enforceable contracts under applicable state law.

SUMMARY

The oral loans create a debt that is enforceable under the applicable state law.

SUMMARY OF EVIDENCE

From February through July 1999, Claimant's father-in-law (hereinafter "the lender") executed a series of loans in the total amount of $5300.00 to Claimant and her husband. An alleged oral agreement provided that Claimant was to begin repayment in July 2000, at the rate of $25.00 to $75.00 per month. The lender resides in Guam. Claimant may have resided in Guam when one of the loan agreements was made. Claimant now resides in California.

ANALYSIS

1. Choice of Law

For purposes of SSI eligibility, the proceeds of the oral loans do not count as income to Claimant if she must repay the loans and they are enforceable contracts under relevant state law. Social Security Ruling 92-8p.

The law of the state with the most significant relationship to the contract determines the enforceability of an oral contract, unless the parties have made an effective choice of law. 1 Witkin, Summary of California Law (9th ed. 1987), Contracts § 55, pp. 90-91. In this matter, the lender resides in Guam. Moreover, at least one of the loan agreements was made in Guam. Based on these facts, a court is likely to find that Guam has the most significant relationship to the contracts and that Guam law should apply.

The Government of Guam has adopted the statute of fraud provisions of the California Civil Code. See Gogo v. Ada, (1955) 128 F.Supp. 92, 94 (D. Guam A.D.); G.C.A. T. 18, § 86106(1); Cal.Civ.Code § 1624(1). We were unable to locate any Guam case law relating to the facts of this matter. However, the decisions of the California courts provide guidance as to the construction to be given to the statute of fraud provisions in the Guam Code. Roberto v. Aguon, 519 F.2d 754, 755 (9th Cir. 1975); Gogo v. Ada, 128 F.Supp. at 94.

2. California Statute of Frauds

Under the statute of frauds, an oral contract is unenforceable if, by its terms, it is impossible that it will be performed within a year from the date it is made. Plumlee v. Poag, (1984) 150 Cal.App.3d 541, 549; G.C.A. T. 18, § 86106(1); Cal.Civ.Code § 1624(1). The statute of frauds does not bar enforcement of contracts that are unlikely to be performed within one year, or those in which the period of performance is indefinite. Blaustein v. Burton (1970) 9 Cal.App.3d 161, 185; see also 1 Witkin, Summary of California Law (9th ed. 1987), Contracts § 284, p. 275.

3. P~ Contract

Where, as in this matter, a contract has been fully performed by one party (the loans have been fully dispersed) and nothing remains to be done except the payment of money by the other party, the statute of frauds is inapplicable. Blaustein v. Burton, 9 Cal.App.3d at 185; see also In re William Duncan & Son, 165 F.Supp. 159, 161-162 (N.D. Cal. 1958); 1 Witkin, Summary of California Law (9th ed. 1987), Contracts § 289, p. 278. The purpose of the exception is to prevent unjust enrichment by one party to a contract when the other party already has fully performed his obligation under the contract. In re William Duncan & Son, 165 F.Supp. 159, 162.

CONCLUSION

The statute of frauds is inapplicable to the oral loans made to Claimant because the lender fully performed his promises of loaning Claimant $ 5300.00. The oral loans are enforceable under California law, which provides guidance as to the construction to be given to the Guam statute of frauds. The loans should not be counted as income to Claimant for purposes of SSI eligibility.


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PS 01405.013 - Guam - 06/27/2002
Batch run: 01/27/2009
Rev:06/27/2002