Court Opinion

ID: 2994062
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:10:06.804685+00
Date Added: 2024-06-11T15:02:41.764166
License: Public Domain

131 Nev., Advance Opinion   13
                         IN THE SUPREME COURT OF THE STATE OF NEVADA

                  AMERICA FIRST FEDERAL CREDIT                          No. 64130
                  UNION, A FEDERALLY CHARTERED
                  CREDIT UNION,
                  Appellant,
                  vs.
                  FRANCO SORO, AN INDIVIDUAL;
                                                                             FILED
                  MYRA TAIGMAN-FARRELL, AN                                   SEP 2 4 2015
                  INDIVIDUAL; ISAAC FARRELL, AN
                  INDIVIDUAL; KATHY ARRINGTON,
                  AN INDIVIDUAL; AND AUDIE
                  EMBESTRO, AN INDIVIDUAL,
                  Respondents.

                             Appeal from a district court order dismissing a deficiency
                  judgment action. Eighth Judicial District Court, Clark County; Jerry A.
                  Wiese, Judge.
                             Reversed and remanded.

                  Ballard Spahr, LLP, and Stanley W. Parry, Timothy R. Mulliner, and
                  Matthew D. Lamb, Las Vegas,
                  for Appellant.

                  Bogatz Law Group and I. Scott Bogatz and Charles M. Vlasic III, Las
                  Vegas,
                  for Respondents.

                  BEFORE THE COURT EN BANC.

                                                  OPINION
                  By the Court, HARDESTY, CA.:
                              In this opinion, we must determine whether a contract clause
                  stating that the parties "submit themselves to the jurisdiction of' another
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                state results in a mandatory forum selection clause requiring dismissal of
                the Nevada action. We hold that such a clause consenting to jurisdiction
                is permissive and therefore reverse the district court's order granting a
                motion to dismiss based on lack of subject matter jurisdiction in Nevada.
                                 FACTS AND PROCEDURAL HISTORY
                            In 2002, appellant America First Federal Credit Union (the
                credit union) loaned $2 9 million, secured by real property in Mesquite,
                Nevada, to respondents (borrowers) 1 for the purchase of a liquor/mini-
                mart. The borrowers defaulted, and the credit union held a trustee's sale,
                resulting in a deficiency on the loan balance of approximately $2.4 million.
                The Utah-based credit union sued the borrowers in Clark County to
                recover the deficiency.
                            The borrowers moved to dismiss the action under NRCP
                12(b)(1), arguing that the credit union could not sue to recover the
                deficiency in Nevada and citing several clauses in the "Commercial
                Promissory Note" and "Business Loan Agreement" to support their
                argument. An "Applicable Law" clause in the loan agreement stated that
                "[t]his Agreement (and all loan documents in connection with this
                transaction) shall be governed by and construed in accordance with the
                laws of the State of Utah." The loan agreement also contained the
                following: "Jurisdiction. The parties agree and submit themselves to the
                jurisdiction of the courts of the State of Utah with regard to the subject
                matter of this agreement." A clause in the note stated: "If there is a

                      'While eight individuals signed the note and loan agreement, the
                only borrowers in the instant action are Franco Soro, Myra Taigman-
                Farrell, Isaac Farrell, Kathy Arrington, and Audie Embestro.

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                lawsuit, Borrower(s) agrees to submit to the jurisdiction of the court in the
                county in which Lender is located."
                            The district court agreed with the borrowers and granted the
                motion to dismiss. The district court found that the note and loan
                agreement "contain language which clearly expresses the parties' intent to
                submit litigation relating to the Agreement and the Note, to the
                jurisdiction of the State of Utah. . . . [T]he language clearly enough
                identifies Utah as the forum[,] which they selected for purposes of subject
                matter jurisdiction." This appeal followed.
                                               DISCUSSION
                            On appeal, the credit union argues that the district court erred
                in enforcing the clauses in question to preclude its complaint for a
                deficiency action. 2 More specifically, the credit union argues that the
                jurisdiction clauses here were permissive, and while the complaint could
                have been brought in Utah, the clauses do not mandate that Utah was the
                exclusive forum. In response, the borrowers contend that whether a forum
                selection clause is mandatory or permissive is a matter of contract
                interpretation, and therefore, the clauses are ambiguous and must be
                construed against the credit union as the contract drafter. Whether forum
                selection clauses may be mandatory or permissive is an issue of first
                impression for this court.

                      2Additionally,    the credit union argues that Nevada's six-month
                statute of limitations for recovery of deficiency judgments applies to the
                action, not Utah's three-month statute of limitations. However, because
                the district court did not decide this issue, we do not address it here.

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                Standard of review
                            This court reviews a district court's decision regarding subject
                matter jurisdiction de novo. Ogawa v. Ogawa, 125 Nev. 660, 667, 221 P.3d
699, 704 (2009). Additionally, "[c]ontract interpretation is a question of
                law and, as long as no facts are in dispute, this court reviews contract
                issues de novo, looking to the language of the agreement and the
                surrounding circumstances." Redrock Valley Ranch, LLC v. Washoe Cnty.,
                127 Nev., Adv. Op. 38, 254 P.3d 641, 647-48 (2011). The objective of
                interpreting contracts "is to discern the intent of the contracting parties.
                Traditional rules of contract interpretation are employed to accomplish
                that result." Davis v. Beling, 128 Nev., Adv. Op. 28, 278 P.3d 501, 515
                (2012) (citation and internal quotation marks omitted). This court
                initially determines whether the "language of the contract is clear and
                unambiguous; if it is, the contract will be enforced as written."    Id. An
                ambiguous contract is susceptible to more than one reasonable
                interpretation, and "[ably ambiguity, moreover, should be construed
                against the drafter." Anvui, LLC v. G.L. Dragon, LLC,    123 Nev. 212, 215-
                16, 163 P.3d 405, 407 (2007).
                The district court erred when it dismissed the case based on the forum
                selection clauses
                            The credit union argues that the clauses do not contain any
                mandatory language and, therefore, all of the forum selection clauses are
                merely permissive. We agree.
                            We have not yet distinguished between mandatory and
                permissive forum selection clauses. In Tuxedo International, Inc. v.
                Rosenberg, 127 Nev. 11, 251 P.3d 690 (2011), we reversed a district court's
                grant of a motion to dismiss based on the defendants' argument that any
                litigation must be brought in Peru. Id. at 14, 24-25, 251 P.3d at 692, 699.
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                  There, we remanded the case to the district court to determine which of
                  three separate forum selection clauses potentially controlled the dispute.
                  Id. at 26, 251 P.3d at 699-700. In analyzing the clauses, we noted that one
                  of the clauses contained both a consent to jurisdiction in Peru and a
                  Peruvian choice-of-law provision. Id. at 22-23, 251 P.3d at 697. We then
                  stated:
                              It can be argued, however, that there is no
                              requirement contained in this clause that Peru is
                              the exclusive forum for jurisdiction over any
                              dispute between the parties. See, e.g., Hunt
                              Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d
75, 76-77 (9th Cir. 1987) (distinguishing between
                              exclusive and nonexclusive forum selection
                              clauses). If it is determined that the parties did
                              not intend for the clause to act as an exclusive
                              forum selection clause, then arguably, there is no
                              contractual bar to [plaintiff] bringing its tort
                              claims in the Nevada district court.
                  Id. at 23-24, 251 P.3d at 698 (second emphasis added). We also noted that
                  another clause "resemble [d] a traditional exclusive forum selection
                  clause," containing language that "any action. . . must be brought in a
                  court in the Country of Peru." Id. at 24, 251 P.3d at 698. Thus, Tuxedo
                  International   observed the distinctions between mandatory and
                  permissive forum selection clauses, but the facts of the case did not
                  provide an opportunity for us to affirmatively adopt a rule. See id. at 26
                  n.5, 251 P.3d at 700 n.5.
                              Other state courts have distinguished between mandatory and
                  permissive forum selection clauses.   See, e.g., Garcia Granados Quinones
                  v. Swiss Bank Corp. (Overseas), S.A.,     509 So. 2d 273, 274 (Fla. 1987)
                  (recognizing that a mandatory jurisdiction clause requires "a particular
                  forum be the exclusive jurisdiction for litigation," while permissive

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                   jurisdiction is merely a consent to jurisdiction in a venue (internal
                   quotation marks omitted)); Polk Cnty. Recreational Ass'n v. Susquehanna
                   Patriot Commercial Leasing Co., 734 N.W.2d 750, 758-59 (Neb. 2007)
                   (distinguishing a mandatory forum selection clause based on the words
                   "shall be brought only in" a particular jurisdiction from a permissive
                   forum selection clause where parties only "consent and submit to the
                   jurisdiction" of other courts); Caperton v. A.T. Massey Coal Co., 690 S.E.2d
322, 338-39 (W. Va. 2009) ("[T]o be enforced as mandatory, a forum-
                   selection clause must do more than simply mention or list a jurisdiction; in
                   addition, it must either specify venue in mandatory language, or contain
                   other language demonstrating the parties' intent to make jurisdiction
                   exclusive."). For example, the Wisconsin Court of Appeals stated:
                               Clauses in which a party agrees to submit to
                               jurisdiction are not necessarily mandatory. Such
                               language means that the party agrees to be
                               subject to that forum's jurisdiction if sued there. It
                               does not prevent the party from bringing suit in
                               another forum. The language of a mandatory
                               clause shows more than that jurisdiction is
                               appropriate in a designated forum; it
                               unequivocally mandates exclusive jurisdiction.
                               Absent specific language of exclusion, an
                               agreement conferring jurisdiction in one forum
                               will not be interpreted as excluding jurisdiction
                               elsewhere.
                   Converting I Biophile Labs., Inc. v. Ludlow Composites Corp., 722 N.W.2d
633, 640-41 (Wis. Ct. App. 2006) (citations and internal quotation marks
                   omitted).
                               Similarly, federal circuit courts generally agree that
                               where venue is specified [in a forum selection
                               clause] with mandatory or obligatory language,
                               the clause will be enforced; where only jurisdiction
                               is specified [in a forum selection clause], the clause
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                             will generally not be enforced unless there is some
                             further language indicating the parties' intent to
                             make venue exclusive.
                 Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th
                 Cir. 1992); see Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318,
                 321 (10th Cir. 1997) (describing the "mandatory/permissive dichotomy"
                 and concluding that the clause, "jurisdiction shall be in the StateS of
                 Colorado, and venue shall lie in the County of El Paso, Colorado," was
                 mandatory (internal quotation marks omitted)); John Bout an & Son,
                 Wines & Spirits, S.A. v. Attiki Imps. & Distribs. Inc.,   22 F.3d 51, 52-53 (2d
                 Cir. 1994) (holding the forum selection clause, "[a]ny dispute arising
                 between the parties hereunder shall come within the jurisdiction of the
                 competent Greek Courts, specifically of the Thessaloniki Courts," as
                 permissive (internal quotation marks omitted)); Hunt Wesson Foods, Inc.
                 v. Supreme Oil Co., 817 F.2d 75, 76-78 (9th Cir. 1987) (holding the forum
                 selection clause, "Whe courts of California, County of Orange, shall have
                 jurisdiction over the parties in any action at law relating to the subject
                 matter or the interpretation of this contract," as permissive, and noting
                 that to be considered mandatory, a forum selection clause must clearly
                 require that a particular court is the only one that has jurisdiction
                 (internal quotation marks omitted)); Keaty v. Freeport Indon., Inc., 503
F.2d 955, 956-57 (5th Cir. 1974) (holding the forum selection clause, "[t]his
                 agreement shall be construed and enforceable according to the law of the
                 State of New York and the parties submit to the jurisdiction of the courts
                 of New York," as permissive (internal quotation marks omitted)).
                              We agree with the distinctions made by other state and
                 federal courts regarding mandatory and permissive forum selection
                 clauses described above. Here, there are two jurisdictional clauses at

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                issue. First, the loan agreement contains a clause entitled "Jurisdiction,"
                which provides that "Nhe parties agree and submit themselves to the
                jurisdiction of the courts of the State of Utah with regard to the subject
                matter of this agreement." We conclude that this language is permissive
                as there is no language within the clause containing words of exclusivity.
                Absent such language, we deem the clause permissive.
                            Second, a clause in the note stated: "If there is a lawsuit,
                Borrower(s) agrees to submit to the jurisdiction of the court in the county
                in which Lender is located." This language is also permissive as there is
                no language within the clause containing words of exclusivity. See Golden
                Palm Hospitality, Inc. v. Stearns Bank Nat'l Ass'n, 874 So. 2d 1231, 1233-
                37 (Fla. Dist. Ct. App. 2004) (concluding that the language, "WI' there is a
                lawsuit, Borrower agrees upon Lender's request to submit to the
                jurisdiction of the courts of STEARNS County, the State of Minnesota" as
                permissive, and thus permitted, but did not require, that the action be
                brought in Minnesota (internal quotation marks omitted)). Thus, the case
                may be heard in another appropriate venue besides the courts in Utah.
                            Without articulating why, the borrowers argue that the forum
                selection clauses are ambiguous and therefore must be construed against
                the credit union. We conclude that this argument is without merit as the
                clauses are clear and unambiguous and this court need not interpret the
                contract any differently from the contract's plain meaning. See, e.g., Hunt
                Wesson Foods, 817 F.2d at 77 ("A primary rule of interpretation is that
                `[t] he common or normal meaning of language will be given to the words of
                a contract unless circumstances show that in a particular case a special
                meaning should be attached to it." (quoting 4 Samuel Williston & Walter
                H. E. Jaeger, A Treatise on the Law of Contracts § 618 (3d ed. 1961)). The

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                   clauses provide no words of exclusivity and to interpret the clauses as
                   mandatory forum selection clauses would read language into the contract
                   that is not there.
                                                  CONCLUSION
                                 In this case, none of the clauses contain exclusive language.
                   Accordingly, all clauses are permissive forum selection clauses, and the
                   district court erred when it found Utah was the sole forum for any
                   controversy and dismissed the case for lack of subject matter jurisdiction.
                   We therefore reverse the district court's order dismissing the case and
                   remand this matter to the district court for further proceedings

                                                                   , C.J.
                                            Hardesty

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                   Gibbons

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