Arkansas Appliance Distributing Co. v. Tandy Electronics, Inc., 86-274

Decision Date22 June 1987
Docket NumberNo. 86-274,86-274
Citation730 S.W.2d 899,292 Ark. 482
PartiesARKANSAS APPLIANCE DISTRIBUTING COMPANY, Robert Whitehead and Van Bunch, Appellants, v. TANDY ELECTRONICS, INC., d/b/a Tandy Computer Leasing, Appellee.
CourtArkansas Supreme Court

Meredith Wineland, Benton, for appellants.

House, Wallace & Jewell by W. Michael Reif, Little Rock, for appellee.

PURTLE, Justice.

On April 18, 1984, the appellants entered into a contract with the appellee for a computer and software equipment. The contract called for total payments of $10,138.00. Subsequently, the appellants defaulted on the contract and appellee demanded the return of the equipment. Appellee then sold the equipment to Radio Shack, a wholly owned subsidiary of the Tandy Corporation, for the amount of $3,325.95. Suit was filed in Pulaski County, Arkansas, for the deficiency.

The trial court decided that Texas law was to be applied. The court also found that the sale to Radio Shack was commercially reasonable. A deficiency judgment in the amount of $5,544.43 was entered in favor of the appellee. On appeal it is argued that the trial court erred in applying Texas law and in finding that the sale was commercially reasonable.

The contract in question was initiated in Pulaski County, Arkansas. It was accepted in Fort Worth, Texas. The contract provided that Texas law would apply. The record does not reveal where the equipment was shipped from. The monthly payments on the contract were mailed from Arkansas to Texas.

When appellee filed its complaint, it attached a copy of the original contract which stated that the laws of Texas governed the transaction. Admittedly, this copy of the contract was almost illegible. This defect was subsequently cured by appellee separately furnishing a legible copy. It was stipulated by the parties that if Texas law applied, then there would be no usury challenge; however, if Arkansas law applied, the contract would be usurious.

The first issue is whether the court properly applied Texas law. Before this issue can be considered, it must be determined whether the appellee gave notice of its intention to rely upon Texas law. Arkansas Rules of Civil Procedure, Rule 44.1(a) provides:

A party who intends to raise an issue concerning the law in a jurisdiction or governmental unit thereof outside this state shall give notice in his pleadings or other reasonable written notice.

The same issue was addressed in Yarbrough v. Prentice Lee Tractor Co., 252 Ark. 349, 479 S.W.2d 549 (1972). In Yarbrough, the appellant argued that the appellee had not given the notice required by Ark.Stat.Ann. § 27-2504 (Supp.1971), which was the predecessor statute to Rule 44.1 and which was deemed superseded by the adoption of the Arkansas Rules of Civil Procedure. The present Rule is a verbatim recitation of the former statute. In Yarbrough the complaint had set out portions of the mortgage which stated that Louisiana law would control. This Court concluded that the notice requirement had been satisfied.

Of significance in the determination of the notice issue is A.R.C.P. Rule 10(c), which states: "A copy of any written instrument or document which is an exhibit to a pleading is a part thereof for all purposes." In the present appeal, the appellee attached to the complaint a copy of the original contract executed between the parties. The contract clearly stated that Texas law would control. Even though this copy was almost illegible, the defendants' answers to interrogatories confirm that they did sign the contract. We find the facts in this appeal to be similar to those in Yarbrough and therefore conclude that the appellee properly notified the appellant that it intended to rely on Texas law.

We also conclude that the court correctly held that Texas law should apply. This Court addressed a similar conflict of laws question concerning the validity of a multistate contract in Snow v. C.I.T. Corp. of the South, Inc., 278 Ark. 554, 647 S.W.2d 465 (1983). The Uniform Commercial Code, Ark.Stat.Ann. § 85-1-105(1), affirmatively provides that the parties to a multistate transaction may choose their own law so long as it bears a reasonable relation to the transaction. Snow, supra. The parties to this case chose to apply Texas law, and the transaction bears a...

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    ...contract at issue and does not violate a fundamental public policy of the forum state. See Arkansas Appliance Distributing Co. v. Tandy Elec., Inc., 292 Ark. 482, 485-86, 730 S.W.2d 899, 900 (1987); Cooper v. Cherokee Village Dev. Co., 236 Ark. 37, 43-45, 364 S.W.2d 158, 161-62 (1963);13acc......
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