Opinion ID: 1885799
Heading Depth: 1
Heading Rank: 1

Heading: which law governs

Text: Plaintiffs submit that the trial court erred in ruling that Tennessee substantive law is applicable. We disagree. The trial court was correct in ruling that Tennessee substantive law (the Tennessee version of the Uniform Commercial Code) applies, although we conclude that the basis for its reasoning is erroneous. In analyzing a problem arising under the UCC, we must look initially to the UCC itself, for, as provided in § 1-103, UCC, appearing as § 7-1-103, Ala.Code 1975, and as § 47-1-103, Tenn.Code Ann.:  Unless displaced by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions. (Emphasis added.) See Toomey Equipment Co. v. Commercial Credit Equipment Corp., 386 So.2d 1155, 1159 (Ala.Civ.App.1980). Thus, we must first consult the UCC to see if there are relevant provisions suggesting the appropriate forum for trial of this cause. Here, the UCC covers the question of which state's law will govern. Under the UCC, parties to a security agreement are permitted to stipulate as to the governing law on matters not involving the rights of third parties, provided the law has a reasonable relation to the transaction. Coogan, Secured Transactions Under the Uniform Commercial Code, § 3A.06[1], at 212.9 (1985). Section 1-105(1), UCC, provides: (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this title applies to transactions bearing an appropriate relation to this state. In each of the security agreements relevant to this action, wherein certain property belonging to plaintiffs was pledged as security for loans made by the Bank, the parties agreed that the Tennessee Uniform Commercial Code would be the applicable law. [1] We find that Tennessee law has a reasonable relation to the transaction, because the bank from which loans were made is located in Tennessee.