PENNSYLVANIA HOUSE v. Juneau's Pennsylvania House

791 F. Supp. 160

PENNSYLVANIA HOUSE, INC., Plaintiff, v. JUNEAU'S PENNSYLVANIA HOUSE, INC., et al., Defendants.

Civ. A. No. 1:90cv620.

United States District Court, E.D. Texas, Beaumont Division.

April 17, 1992.

Michael W. Schultz, Robert J. Kruckemeyer, Chamberlain, Hrdlicka, White, Williams & Martin, Houston, Tex., for plaintiff.

Carl A. Parker, Rife Scott Kimler, Port Arthur, Tex., for defendant.

MEMORANDUM OPINION

COBB, District Judge.

Pennsylvania House, Inc. moves for rehearing on its motion for partial summary judgment.

Juneau's Pennsylvania House, Inc. was a dealer in Pennsylvania House furniture. At the time the dealership was created, Riley Juneau, Creola Juneau, and Robert Juneau personally guaranteed the dealership's debts to Pennsylvania House in an indemnity agreement drafted by Pennsylvania House. The dealership incurred significant debt with Pennsylvania House secured by inventory merchandise. The dealership later defaulted, and Pennsylvania House conducted a private sale of the collateral pursuant to a Consent to Private Sale of Collateral. The proceeds from the sale were insufficient to extinguish the debts. Pennsylvania House now sues the dealership and the Juneaus for the deficiency.

The Juneaus asserted that the disposition was commercially unreasonable under § 9-504(1)(c) of the Uniform Commercial Code. Pennsylvania House moved for summary judgment on the grounds that the Juneaus waived the defense of commercial unreasonableness in the Consent to Private Sale. By order dated December 19, 1991, this court denied summary judgment because the right to a commercially reasonable sale of collateral is not waivable under Pennsylvania law. 782 F.Supp. 1195.

Pennsylvania House now moves for rehearing on three grounds: (1) that this court improperly applied Pennsylvania law to this dispute instead of Texas law, (2) that the Consent to Private Sale does not improperly waive the defense of commercial reasonableness, but rather articulates standards by which commercial reasonableness is to be measured, and (3) that benefit to the Juneaus from the Consent should estop the Juneaus from challenging the commercial reasonableness of the sale.

CHOICE OF LAW

Pennsylvania House first raises the issue whether an action to enforce a guaranty agreement is governed by the choice of law provisions of that agreement or the law of the forum. The Texas rule is that the manifest intent of the parties to be bound by the law of another state will be respected. Austin Bldg. Co. v. National Union Fire Ins. Co., 432 S.W.2d 697, 701 (Tex.1968). Section 11 of the Security Agreement and § 11 of the Accessory Security Agreement state:

This agreement shall be construed under and in accordance with the Pennsylvania Uniform Commercial Code and other applicable laws of the Commonwealth of Pennsylvania....

The Indemnity Agreement states, "This Agreement shall be construed under and in accordance with the laws of the Commonwealth of Pennsylvania...." These agreements express the intention of the parties that disputes arising from these agreements should be determined under Pennsylvania law.

Pennsylvania House relies on Resource Savings Ass'n v. Neary, 782 S.W.2d 897 (Tex.App.1989), for the proposition that transactions to enforce legal remedies against guarantors as opposed to against collateral are governed by the law of the forum. Plaintiff's reliance is misplaced. The court in Resource Savings construed a choice of law provision which provided for application of Texas law to all aspects of the transaction except for the enforcement of rights and remedies against certain real property in Georgia which were to be governed by Georgia law. Because a legal remedy was not being pursued against the Georgia property, the exception did not apply, and Texas law governed the dispute under the terms of the choice of law provision. The Resource Savings court did not face the situation where, as here, the plaintiffs sought to avoid the effect of a choice of law provision, drafted by the plaintiffs, which designated that all disputes arising from the transaction should be governed by another state's law.

Further, Pennsylvania House argues that this case does not call for construction of the agreements; rather, it is an action to enforce legal remedies created by the agreements. Such a distinction is mere semantics. This court refuses to recognize the artificial distinction between construction of the agreement and enforcing legal remedies under the agreement. To do so would defeat the entire purpose of the choice of law provisions in the agreements.

COMMERCIAL REASONABLENESS

Second, Pennsylvania House argues that the...