In re Brock
| Decision Date | 23 September 1997 |
| Docket Number | Adversary No. 97-5019.,Bankruptcy No. 96-50961S |
| Parties | In re Timothy Joel BROCK. Timothy Joel BROCK, Plaintiff, v. FIRST FIDELITY ACCEPTANCE CORPORATION, Greenwich Capital Financial Products, Inc., Autobond Acceptance Corporation, Norwest Bank Minnesota, N.A. and American Lenders Facility, Inc., Defendants. |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Eastern District of Arkansas |
Arnold Goodman, Little Rock, AR, for Plaintiff.
William Waddell, Autobond Acceptance Corp. and First Fidelity Acceptance Corp., Lance Miller, Norwest Bank of Minnesota, N.A., Richard Ramsay, American Lenders Facility, Inc., David Powell, Greenwich Capital Financial Products, Inc., Little Rock, AR, for Defendants.
THIS CAUSE is before the Court upon the following motions filed by the parties:
1. First Fidelity Acceptance Corporation's Motion for Summary Judgment, filed on August 1, 1997, against the debtor to which the debtor responded, opposing the motion.
2. The debtor plaintiff's Motion for Summary Judgment against First Fidelity Acceptance Corporation and against Norwest Bank Minnesota, N.A., filed on August 28, 1997, to which both defendants responded.
3. The debtor plaintiff's Motion for Leave to File Out of Time, filed on August 29, 1997, in which debtor requests that he be permitted to file his response to First Fidelity Acceptance Corporation's ("First Fidelity") Motion for Summary Judgment out of time.
The complaint seeks monetary damages and a declaratory determination that the interest rate under a contract is usurious under Arkansas law. First Fidelity seeks summary judgment on the basis that Texas law applies to this action, not Arkansas law. Debtor's cross-motion for summary judgment, against both First Fidelity and Norwest Bank, seeks a declaration that the contract which is the subject of this action is governed by Arkansas law.
Rule 56, Federal Rules of Civil Procedure, provides that summary judgment shall be granted where the pleadings, depositions, answers to interrogatories, admissions or affidavits show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Burnette v. Dow Chemical Company, 849 F.2d 1269, 1273 (10th Cir.1988). Summary judgment is appropriate when a court can conclude that no reasonable juror could find for the non-moving party on the basis of the evidence presented in the motion and response. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-2512, 91 L.Ed.2d 202 (1986). As the Supreme Court has made clear, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex, 477 U.S. at 327, 106 S.Ct. at 2555.
After the movant has made a properly supported summary judgment motion, "the nonmovant has the burden of setting forth specific facts showing the existence of a genuine issue of fact for trial." Anderson, 477 U.S. at 250, 106 S.Ct. at 2511. The nonmovant may not rely on the allegations or denials in its pleadings to establish a genuine issue of fact, but must come forward with an affirmative showing of evidence. Anderson, 477 U.S. at 250, 106 S.Ct. at 2511. Of course, the trial judge must accept as true the nonmovant's evidence, must draw all legitimate inferences in the nonmovant's favor, and must not weigh the evidence on the credibility of witnesses. Windon Third Oil and Gas v. Federal Deposit Insurance Corporation, 805 F.2d 342, 346 (10th Cir.1986).
The material facts not in dispute are that, on February 16, 1996, the debtor purchased an automobile from Harrell Motors d/b/a/Pine Dodge GMC, a business located in Pine Bluff, Arkansas. Plaintiff, intending the vehicle to be used for personal use, test drove the car, negotiated the purchase price, and took delivery of the car in Arkansas. The automobile is registered in the state of Arkansas. Financing for the debtor to purchase the automobile was provided by First Fidelity, a Nevada corporation, through its Texas office, and the financing contract was later assigned to various other entities, also defendants in this adversary proceeding. Brock completed all of the documents required for the financing application in Arkansas, which documents were then transmitted to First Fidelity's office in Texas. The heading on the application for financing states in large, bold letters, "First Fidelity Acceptance Corporation." Moreover, plaintiff's affidavit states that he was aware that First Fidelity was "involved" in the financing of the car. Plaintiff also states that he did not know that First Fidelity was located in another state and implies that he did not read the contract.1 Review and approval of the financing application occurred in Texas. All payments on the contract were made by plaintiff by mailing checks from Arkansas, to either the contract servicer in California, located in Irvine, California or to First Fidelity in Texas. The financing contract states in pertinent part:
At the bottom of the contract, in an outlined box providing to plaintiff notice of entities to contact in case of questions, the following language appears:
To contact the holder of your Contract about this account call the number appearing with the Assignee\'s name in the ASSIGNMENT section on page 1. If no Assignee is listed, contact the Seller, whose number appears at the top of page 1. This Contract is subject in whole or in part to Texas law which is enforced by the Consumer Credit Commissioner, 2601 N. Lamar Blvd., Austin, Texas XXXXX-XXXX. Phone (512) 479-1285 or (800) 538-1579. Contact the commissioner relative to any inquires or complaints.
The issue before the Court is whether Arkansas or Texas law governs the contract in this adversary proceeding. In determining what law to apply the court first looks to the choice-of-law rules of the forum state, in this instance, Arkansas. See Aetna Life Insurance Co. v. Great National Corporation, 818 F.2d 19, 20 (8th Cir.1987); Bridgeman v. Gateway Ford Truck Sales, 296 F.Supp. 233 (E.D.Ark.1969), amended, 311 F.Supp. 695 (E.D.Ark.1970); Nursing Home Consultants, Inc. v. Quantum Health Services, Inc., 926 F.Supp. 835 (E.D.Ark. 1996), aff'd, 112 F.3d 513 (8th Cir.1997). Although Arkansas has applied three different theories in determining what law governs a multi-state contract, where the contract itself provides the choice-of-law as a term, that law generally will apply. See Aetna Life Insurance Company v. Great National Corporation, 818 F.2d 19, 20 (8th Cir.1987)("Therefore, we proceed from the initial proposition that Texas law applies and need not analyze the loan under the two other choice-of-law theories."); American Honda Finance Corporation v. GloMc, Inc., 820 F.Supp. 1157, 1158 (E.D.Ark.1993)(Roy, J.); Cooper v. Cherokee Village Development Co., 236 Ark. 37, 364 S.W.2d 158 (1963).
However, where usurious interest rates are alleged, the Arkansas courts require further scrutiny. Aetna Life Insurance Co., 818 F.2d at 20; American Honda, 820 F.Supp. at 1158. Although the Arkansas courts will generally uphold the contractual selection of a particular state's law, and this doctrine is applied in usury cases, the parties' choice-of-law selection is applied only if the state whose law is chosen has either a "substantial connection with" or a "reasonable relationship to" the transaction at issue. Bice Construction Company v. CIT Corporation of the South, Inc., 27 B.R. 543, 546 (E.D.Ark.1982), aff'd, 700 F.2d 465 (8th Cir. 1983) (per curiam).2 The rule is balanced, too, by the Arkansas policy toward applying the law of the state that will make the contract valid, rather than void. Cooper, 364 S.W.2d at 161.
In the instant case, the sale, registration and housing of the property occurred in Arkansas. The plaintiff completed the application for the financing in Arkansas. Notification of the acceptance of the loan came from Texas, the loan funds were authorized from Texas, the decision as to whether the financing would be provided was made by First Fidelity in Texas. This factual situation is similar to several Arkansas cases in which the courts enforced contractual terms requiring the application of foreign, not Arkansas, law. For example, in American Honda, 820 F.Supp. 1157, although the documents were negotiated in Arkansas, the defendants signed them in Arkansas, and payments were to be made to a third state, California had a substantial connection with the contract because it were received by an officer in California, the contract required California law, and the payments, although processed in another state, were remitted to the California lender. Similarly, in Aetna Life Insurance Co., 818 F.2d 19, Texas had a substantial connection with the contract, because, although the purpose of the loan was to purchase equipment for use in Arkansas, the property was located in Arkansas, the security was located in Arkansas, Aetna was incorporated in Connecticut, negotiations took place in Texas, New York, Connecticut, Oklahoma and Arkansas, Aetna's principal place of...
To continue reading
Request your trial