UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 95-50438
DEAN DALTON, doing business as Dalton Enterprise;
SHIRLENE DALTON, doing business as Dalton Enterprise,
Plaintiffs-Appellants,
VERSUS
PACCAR FINANCIAL CORP.,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Texas
(A-94-CV-316)
July 9, 1996
Before REAVLEY, GARWOOD, and DeMOSS, Circuit Judges.
PER CURIAM:1
Plaintiffs Dean and Shirleen Dalton appeal an order by the
district court which grants summary judgment to Defendant Paccar
Financial Corporation on the basis that, under Georgia law, the
statute of limitations had run on the Daltons’ claims. For the
1
Pursuant to Local Rule 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
following reasons, we AFFIRM.
FACTUAL SUMMARY
Paccar Financial Corporation (“Paccar”), a company domiciled
in the State of Washington, provides third-party financing for the
sale of trucks. In 1985, Paccar repossessed three 1981 Peterbilt
Model 359 conventional truck tractors and stored them at a
Peterbilt dealership in Knoxville, Tennessee. On September 6,
1985, a Georgia branch of Paccar sold these three trucks to Dean
and Shirleen Dalton, d/b/a Dalton Enterprise, Inc. (“Daltons”), who
were residents of North Carolina. The sales were made pursuant to
contract which contains a “choice of law” clause designating
Georgia as the forum state.1 This suit involves the sale of one of
these trucks - “Truck 339.”2
The parties do not dispute that Truck 339 was inoperable at
the time of purchase, in 1985. Several years later, in 1991, the
Daltons brought Truck 339 into operable condition. On June 23,
1993, the Texas Department of Public Safety (“DPS”) stopped
Appellant Dean Dalton at a border check-point near Van Horn, Texas.
Dean Dalton presented the papers and license tags for Truck 339.
Upon inspection, the officer noticed that Dalton was driving a
1
The contract contains the following clause: “This contract
entered into in the State of Georgia and is governed by its law.”
2
Truck 339 either had, or was supposed to have had, Serial
Number 1XP9D29X5BP145339.
2
different truck, Truck 116,3 which was confirmed to be a stolen
vehicle. The DPS seized the truck. After a judicial proceeding,
a local court ordered that possession of, and title to, Truck 116
be transferred to Culberson County, Texas.
The Daltons sued Paccar in federal district court alleging
that Truck 116 -- the truck seized on June 23, 1993 -- is the
vehicle which Paccar sold to them. Paccar disagrees and argues
that the truck which it sold to the Daltons was Truck 339. The
Daltons original complaint alleged violations of the Texas
Deceptive Trade Practices Act, unconscionability, and breach of
warranty under Texas state law. The district court, sitting in
Texas, applied Texas' rule on choice of law and concluded that the
substantive law of Georgia applies. The district court allowed the
Daltons to replead under Georgia law. In their amended complaint,
the Daltons asserted Georgia state law claims including fraud,
negligence, violations of the Georgia Fair Business Practices Act
(“GFBPA”), breach of contract, and breach of implied warranty of
title. Paccar filed a motion for summary judgment asserting a
statute of limitations defense. The matter was referred to a
magistrate judge who recommended that the district court grant
summary judgment. On May 16, 1995, the district judge adopted the
magistrate judge’s report and recommendation and entered summary
judgment in favor of Paccar. The Daltons appeal from this order.
3
Truck 116 had Serial Number 1XP9D29X1BP146116. This serial
number does not appear anywhere in the sales contract.
3
JURISDICTION
Jurisdiction is based upon diversity of citizenship, pursuant
to 28 U.S.C. § 1332.
DISCUSSION
Choice of Law
The Daltons first argue that the district court erred in
applying Georgia law rather than Texas law. Specifically, they
argue that Texas law should apply to their claims because the
Georgia choice of law clause in their contract is “narrow” and only
applies to claims for breach of contract. In their amended
complaint, the Daltons pled claims for negligence, fraud, breach of
contract, “unconscionability,” “breach of warranty of title,” and
a GFBPA “laundry list” of violations including: causing actual
confusion or misunderstanding as to the sponsorship or
certification of goods; causing actual confusion or
misunderstanding as to certification or connection by another;
representing that goods have sponsorship, approval or
characteristics, which they do not have; and representing that
goods are of a particular standard, if they are of another.
Because the Daltons argue that none of these claims sound in breach
of contract, they assert that the Georgia choice of law clause in
their contract is inapplicable. Instead, the Daltons argue that
4
the Texas “significant relationship” test applies.4
0.
Restatement § 6 states: (1) A court, subject to constitutional
restrictions, will follow a statutory directive of its own state on
choice of law. (2) When there is no such directive, the factors
relevant to the choice of the applicable rule of law include:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the
relative interests of those states in the determination of the
particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be
applied.
Restatement § 145 states: (1) The rights and liabilities of
the parties with respect to an issue in tort are determined by the
4
Texas has adopted the significant relationship test as set
forth in §§ 6 and 145 of the Restatement (Second) of Conflict of
Laws (the "Restatement")
5
local law of the state which, with respect to that issue, has the
most significant relationship to the occurrence and the parties
under the principles stated in § 6. (2) Contacts to be taken into
account in applying the principles of § 6 to determine the law
applicable to an issue include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicile, residence, nationality, place of
incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the
parties is centered. These contacts are to be evaluated according
to their relative importance with respect to the particular issue.
Id. at 577, n.9.5
. Air Disaster at Ramstein Air Force Base, Germany v. Lockheed, 81
F.3d 570, 576 (5th Cir. 1996).
Restatement § 6 states: (1) A court, subject to constitutional
restrictions, will follow a statutory directive of its own state on
choice of law. (2) When there is no such directive, the factors
relevant to the choice of the applicable rule of law include:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the
relative interests of those states in the determination
of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of
law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to
6
Paccar disagrees and argues that, “however phrased,” the
“embroidering” of the Daltons’ claims, does not change their
nature: “the Daltons [sic] complaints are rooted in the sales
contract.” As such, Paccar argues that they should be governed by
be applied.
Restatement § 145 states: (1) The rights and liabilities of
the parties with respect to an issue in tort are determined by the
local law of the state which, with respect to that issue, has the
most significant relationship to the occurrence and the parties
under the principles stated in § 6. (2) Contacts to be taken into
account in applying the principles of § 6 to determine the law
applicable to an issue include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicile, residence, nationality, place of
incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the
parties is centered. These contacts are to be evaluated
according to their relative importance with respect to
the particular issue.
Id. at 577, n.9.
In applying § 6 to this case, we must first identify the state
contacts that should be considered. Gutierrez v. Collins, 583
S.W.2d 312, 319 (Tex. 1979). Once these contacts are established,
the question of which state's law will apply is one of law. Id.
The number of contacts with a particular state is not
determinative. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 421
(Tex. 1984). Some contacts are more important than others because
they implicate state policies underlying the particular substantive
issue. Id. Consequently, selection of the applicable law depends
upon the qualitative nature of the particular contacts. Id.
Under the significant relationship test, the Daltons argue
that Texas has the most significant relationship with the
substantive causes of action pled. In support, the Daltons argue
that appellee is authorized to do business in Texas, and that the
seizure of the truck, the investigation, and the state court
hearing, all occurred in Texas. For these reasons, the Daltons
argue that Texas law should apply.
7
the contracted choice of law clause, which dictates that Georgia
law shall apply. In the alternative, Paccar argues that Georgia
has a more significant relationship to the Daltons’ claims. In
support, Paccar primarily argues that payment was made in Georgia,
“and there is no conduct or behavior of Paccar alleged to have
occurred in Texas.”
The choice of law rules in our Circuit are well-established.
“In a diversity action, a federal court must apply the choice of
law rules of the state in which it sits.” Klaxon Co. v. Stentor
Elec. Manufacturing Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021,
85 L.Ed. 1477 (1941). “According to Texas law, in all choice-of-
law cases, except those contract cases in which the parties have
agreed to a valid choice-of-law clause, the law of the state with
the most significant relationship to the particular substantive
issue will be applied to resolve that issue.” De Aguilar v. Boeing
Co., 47 F.3d 1404, 1413 (5th Cir.), cert denied, 116 S. Ct. 180,
(1995) (internal citations omitted); see also, Air Disaster at
Ramstein Air Force Base, Germany v. Lockheed, 81 F.3d 570, 576 (5th
Cir. 1996).
To the extent that the parties have contracted to settle their
differences under the laws of a particular forum, we do not apply
the significant relationship test. “A forum selection provision in
a written contract is prima facie valid and enforceable unless the
opposing party shows that enforcement would be unreasonable. This
8
rule also applies to form contracts containing a choice of forum
provision.” Kevlin Services, Inc. v. Lexington State Bank, 46
F.3d 13, 15 (5th Cir. 1995). To be enforceable, the law chosen by
the parties must have a “reasonable relationship with the parties
and the chosen state, and the law of the chosen state must not be
contrary to a fundamental policy of the state....” Caton v. Leach
Corp., 896 F.2d 939, 943 (5th Cir. 1990). The parties' choice of
law clause should address the entirety of the parties' relation-
ship. Id. If the choice of law clause does not address the
general rights and liabilities of the parties, we must return to
Texas choice of law rules to determine which law applies. Id. We
review a district court's choice of law determination de novo. Air
Disaster at Ramstein Air Force Base, Germany v. Lockheed, 81 F.3d
570, 576 (5th Cir. 1996).
In the instant case, we first must ask whether the Georgia
choice of law clause, which is found in the parties’ sales
contract, applies to some, or all, of the Daltons’ claims. The
answer to this question depends upon how the Daltons’ claims are
characterized: if characterized as sounding in contract, then the
unambiguous choice of Georgia forum provision should prevail and
the finding of the district court should be affirmed. To the
extent that some or all of the Daltons’ claims do not sound in
contract, then the significant relationship test applies.
There were at least two complaints filed in this case. The
9
controlling complaint is “Plaintiffs’ Second Amended Original
Complaint” (“second amended complaint”). The Daltons characterize
the claims pled in their second amended complaint as asserting
causes of action for, “common law fraud, negligence, breach of
implied warranty of title, breach of contract and violations of the
Georgia Fair Business Practices Act.” After a de novo review of
the record, we agree with the district court and hold that the
Daltons’ claims, however characterized, are derived from, and
rooted-in, the sales contract.
Next, we look to see if the law of Georgia is reasonably
related to the parties and the causes of action at issue. Under
the facts of this case, we hold that it is: Paccar’s branch office
was located in Georgia and the Daltons have offered no evidence
showing that the enforcement of Georgia law would be unreasonable,
or that such enforcement would be contrary to a fundamental policy
of the state of Georgia. For these reasons, we hold that the
Georgia choice of law provision governs.
Alternatively, even if we did hold that the Georgia choice of
law provision is inapplicable, we would still hold that the
significant relationship test compels the application of Georgia
law. As stated earlier, Texas has adopted the significant
relationship test as set forth in §§ 6 and 145 of the Restatement
(Second) of Conflict of Laws. Air Disaster at Ramstein Air Force
Base, Germany v. Lockheed, 81 F.3d 570, 576 (5th Cir. 1996).
10
Considering all of the factors discussed in §§ 6 and 145, we hold
that the “justified expectations” of the parties, Restatement §
6(2)(d), as well as “the place where the relationship ... is
centered”, Restatement § 145(2)(d), point strongly to Georgia as
having the most significant relationship with the dispute at issue.
Statute of Limitations
Adopting the recommendation of the magistrate judge, the
district court held that the statute of limitations precludes the
Daltons’ claims and it granted summary judgment in favor of Paccar,
on this basis.6 Because the order of the district court does not
substantively address the issues raised in Paccar’s motion for
summary judgment, it is necessary to review the district court’s
order vis-a-vis the analysis in the report and recommendation of
the magistrate judge, upon which the district court relied.
The Daltons purchased the three truck tractors in 1985. In
1993, the Texas DPS stopped Mr. Dalton at a border check-point and
6
The limitation periods for Plaintiffs’ causes of action are
as follows: Claims based upon the Georgia Fair Business Practices
Act can not be brought “more than two years after the person
bringing the action knew or should have known of the occurrence of
the alleged violation.” O.C.G.A. § 10-1-401(a)(1). Claims for
breach of contract and breach of implied warranty must be brought
within four years. O.C.G.A. § 11-2-725(1),(2). Claims for
negligence must be brought within four years. O.C.G.A. § 9-3-31.
Claims for fraud must be brought within four years. Hahne v. Wyly,
406 S.E.2d 94, 96 (Ga. Ct. App. 1991).
11
seized the subject vehicle because it was reported stolen. The
Daltons filed their lawsuit against Paccar in 1994, approximately
nine years after the purchase of their trucks.
The Daltons argue that Paccar committed actual fraud, thus
tolling the statute of limitations which would otherwise preclude
the Daltons’ claims. Specifically, the Daltons allege that the
Defendant intentionally failed to check the identification numbers
on the vehicles prior to sale, and that such failure constituted
actual fraud. The Daltons argue that they did not discover the
alleged actual fraud until 1993, when the vehicle was seized.
Because the four year statute of limitations for actual fraud does
not begin to run until the date that the alleged fraud or deception
is discovered, the Daltons argue that their complaint was timely
filed. The Daltons argue that their causes of action for breach of
contract, warranty, and negligence, are subject to the statutory
fraudulent tolling exception under Georgia law.
In its motion for summary judgment, Paccar argues that it is
entitled to summary judgment because the statute of limitations had
expired for the Daltons’ claims. Paccar argues that, even if it
did sell Plaintiffs the wrong vehicle, the Plaintiffs either knew,
or should have known, within the statutory periods, that the
vehicle which they received was not vehicle 339. Paccar further
argues that the Daltons adduced no summary judgment evidence
showing that Paccar acted knowingly or with reckless disregard, or
that Paccar acted with an intent to deceive. Paccar argues that,
12
because the Daltons failed to offer any evidence of scienter, the
Daltons failed to show fraud and were not entitled to Georgia’s
fraud-based statutory tolling exception.
Under Georgia law, a cause of action generally accrues on the
date when the claim can be successfully maintained. Limoli v.
First Ga. Bank, 250 S.E.2d 155 (Ga. Ct. App. 1978). However, this
limitations period may be tolled “if the defendant committed an act
of actual fraud that had the effect of concealing from the
plaintiff the existence of the cause of action despite her exercise
of reasonable diligence.” Id.
Actual fraud involves moral turpitude, Shipman
v. Horizon Corp., 245 Ga. 808, 267 S.E.2d 244
(1980), and requires an intentional deception
by false representation or by concealment of a
fact. Lodge v. Popham, 156 Ga. App. 825, 275
S.E.2d 669 (1980). When actual fraud is the
gravamen of the underlying action, no
independent fraud is required for tolling of
the statute of limitation, and the limitation
period is tolled until the plaintiff discovers
or in the exercise of reasonable diligence
should have discovered the fraud.
Id. at 96. The Plaintiffs have the burden of proving facts that
would toll the statute of limitations. Edmonds v. Bates, 342
S.E.2d 476 (Ga. Ct. App. 1986).
In its report and recommendation, the magistrate judge said
that the “critical question is whether the Plaintiffs have
adequately alleged or established, for purposes of summary
judgment, that the Defendant engaged in an activity in a manner
that would allow the Court to toll the statute of limitations....”
13
The magistrate judge recognized that the element of fraud would
toll the statute of limitations, and he stated that “the Plaintiffs
must present sufficient summary judgment evidence to establish that
the Defendant acted with the intent to defraud the Plaintiffs.”
After conducting a summary judgment hearing, the magistrate
judge found that: there “is no allegation or evidence that a
confidential or fiduciary relationship existed between the
parties”; there “is no evidence that the Defendant committed any
act that had the effect of concealing from the Plaintiffs the
existence of the cause of action”; “neither Plaintiff testified
that the Defendant made any oral misrepresentations to them at the
time of sale”; Plaintiffs submitted no evidence “that the Defendant
knew that the vehicle was stolen”; “there is no summary judgment
evidence that the Defendant altered any documents or took any
action, such as altering or concealing the VIN numbers on the
truck”; and the Plaintiffs made no effort to “trace the legal
genealogy of the vehicle.” Based upon these findings, the
magistrate judge found that the Daltons had not met their burden of
adducing evidence to show that Paccar had committed actual fraud.
Accordingly, the magistrate judge found that there was no legal
basis upon which the statute of limitations could be tolled.
Having found that the statute of limitations had expired, the
magistrate judge recommended that Paccar’s motion for summary
judgment be granted, and the district court adopted the magistrate
judge’s recommendation.
14
In order to defeat the summary judgment, the Daltons must
offer evidence sufficient to create a genuine issue of material
fact that Paccar committed an act of actual fraud which had the
effect of concealing from the Daltons the existence of their causes
of action, despite an exercise of reasonable diligence by the
Daltons.
Upon a de novo review of the record, we hold that the Daltons
have failed to offer any evidence showing that Paccar knowingly or
intentionally concealed information from the Plaintiffs. Further-
more, there is no evidence showing that Paccar defrauded the
Daltons, or that the Daltons, for their part, exercised reasonable
diligence. To the extent that the Daltons argue that Paccar
recklessly or negligently failed to inspect the vehicle
identification prior to sale, the Daltons offer no authority
imposing such a burden, nor any evidence showing that Paccar failed
to conduct such inspection. Having failed to show actual fraud on
the part of Paccar, the Daltons are not entitled to a tolling of
the statute of limitations on their claims. Accordingly, their
causes of action accrued in 1985 and expired no later than 1989.
Therefore, Georgia’s statutes of limitations bar the Daltons’
claims. The district court’s order granting summary judgment in
favor of Paccar is affirmed.
CONCLUSION
15
For the foregoing reasons, the order of the district court is
AFFIRMED.
16