Court Opinion

ID: 4030567
Source: CourtListenerOpinion
Date Created: 2016-09-01 14:23:12.901495+00
Date Added: 2024-06-11T14:35:34.335612
License: Public Domain

In The

                               Court of Appeals
                   Ninth District of Texas at Beaumont
                             _________________
                              NO. 09-16-00271-CV
                             _________________

  IN RE VARILEASE FINANCE, INC., VFI-SPV VIII, Corp., REPUBLIC
 BANK, INC., VFI-SPV IX, CORP., VFI KR SPE I, LLC, AND SOMERSET
                      CAPITAL GROUP, LTD

________________________________________________________________________

                              Original Proceeding
              284th District Court of Montgomery County, Texas
                          Trial Cause No. 15-12-12796
________________________________________________________________________

                         MEMORANDUM OPINION

      Relators Varilease Finance, Inc.; VFI-SPV VIII, Corp.; Republic Bank, Inc.;

VFI-SPV IX, Corp.; VFI KR SPE I, LLC; and Somerset Capital Group, LTD filed

a petition for writ of mandamus to compel the trial court to enforce a contractual

forum-selection clause. We stayed further proceedings in the trial court and

requested a response from the real party in interest, Energy Alloys, LLC (“Energy

Alloys”). We conditionally grant mandamus relief.

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      According to Energy Alloys, it entered into a lease transaction with

Varilease “to finance equipment and building materials essential to Energy Alloys’

operations, including, but not limited to, industrial-sized racks and pans to house

inventory, a 5-ton crane, and the foundation and building roof at Energy Alloys’

Conroe Technology Center[.]” Energy Alloys sued relators in Montgomery

County, Texas, contending that Varilease perpetrated a “fraudulent scheme . . . to

deceive Energy Alloys into executing a multi-million-dollar equipment financing

lease[.]” Energy Alloys also complained of Varilease’s alleged repudiation of the

terms actually negotiated and Varilease’s alleged “breach of the lease by

unilaterally seeking on its own and through its assignee VFI-SPV IX to convert

over $200,000.00 from Energy Alloys’ bank account.” With respect to the clause at

issue in this proceeding, Energy Alloys pleaded as follows:

      Varilease’s representations that the venue selection clause could not
      be changed, and further to the extent that selection of another forum
      for venue of disputes was not in isolation from the assurances made
      by Varilease as to the purchase price, those representations were made
      with reckless disregard for the truth, and were relied upon by Energy
      Alloys to its detriment.

      Energy Alloys sought to quiet title and asserted causes of action for

fraudulent inducement, fraud, negligent misrepresentation, promissory estoppel,

breach of contract, and breach of the implied duty of good faith and fair dealing. In

addition, Energy Alloys asserted that the agreement was unconscionable, and
                                      2
Energy Alloys sought declaratory and injunctive relief. Relators filed a motion to

dismiss the case pursuant to the forum-selection clause, but the trial court signed

an order denying the motion to dismiss. Relators then filed a petition for writ of

mandamus.

      Mandamus is appropriate when the relator demonstrates that the trial court

clearly abused its discretion and the relator has no adequate remedy by appeal. In

re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig.

proceeding). “A trial court abuses its discretion when it fails to properly interpret

or apply a forum-selection clause.” In re Lisa Laser USA, Inc., 310 S.W.3d 880,

883 (Tex. 2010) (orig. proceeding). Because an improper refusal to enforce a

contractual forum-selection clause vitiates the right to a trial in the proper forum,

mandamus relief is available to enforce a forum-selection clause. Id. “Forum-

selection clauses are generally enforceable and presumptively valid.” In re Laibe

Corp., 307 S.W.3d 314, 316 (Tex. 2010) (orig. proceeding). The burden of proof is

heavy for the party challenging enforcement of a forum-selection clause. Id.

      The portion of the agreement that pertains to this proceeding reads as

follows:

      LESSEE AGREES TO SUBMIT TO THE JURISDICTION OF THE
      STATE AND/OR FEDERAL COURTS IN THE STATE OF
      MICHIGAN IN ALL MATTERS RELATING TO THE LEASE,
      THE EQUIPMENT, AND THE CONDUCT OF THE
                              3
      RELATIONSHIP BETWEEN LESSOR AND LESSEE. THE
      PARTIES HERETO AGREE THAT IN THE EVENT OF AN
      ALLEGED BREACH OF THIS MASTER AGREEMENT OR ANY
      DOCUMENTS RELATING THERETO BY EITHER PARTY, OR
      ANY CONTROVERSIES ARISE BETWEEN THE PARTIES
      RELATING TO THIS MASTER AGREEMENT OR ANY
      DOCUMENTS RELATING THERETO, SUCH CONTROVERSIES
      SHALL BE TRIED BY A JUDGE ALONE BEFORE THE
      FEDERAL OR STATE COURTS IN OAKLAND COUNTY,
      MICHIGAN. THE PARTIES, HAVING HAD THE OPPORTUNITY
      TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR
      OWN     CHOOSING,    HEREBY     KNOWINGLY     AND
      VOLUNTARILY CONSENT TO MICHIGAN JURISDICTION AS
      SET FORTH HEREIN AND WAIVE THEIR RIGHTS TO A TRIAL
      BY JURY IN ANY MATTER RELATING TO THIS MASTER
      AGREEMENT OR ANY DOCUMENTS RELATED THERETO.

Relators argue that the above language constitutes a mandatory forum-selection

clause that encompasses the claims made by Energy Alloys. Energy Alloys

maintains that the provision is permissive rather than mandatory, and the clause

simply indicates that Energy Alloys agreed that “Michigan was one place that

forum and venue could lie, and that the Parties agreed to a bench trial.”

      The Texas Supreme Court has adopted the federal courts’ analysis of forum-

selection clauses. Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777,

793 (Tex. 2005). A mandatory forum-selection clause requires that all litigation be

conducted in a specified forum. UNC Lear Servs., Inc. v. Kingdom of Saudi

Arabia, 581 F.3d 210, 219 (5th Cir. 2009). For a forum-selection clause to be

considered mandatory, the clause “must go beyond establishing that a particular
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forum will have jurisdiction and must clearly demonstrate the parties’ intent to

make that jurisdiction exclusive.” City of New Orleans v. Mun. Admin. Servs., Inc.,

376 F.3d 501, 504 (5th Cir. 2004). Enforcement of forum-selection clauses is

mandatory unless the opposing party “‘clearly show[s] that enforcement would be

unreasonable and unjust, or that the clause was invalid for such reasons as fraud or

overreaching.’” In re Automated Collection Techs., Inc., 156 S.W.3d 557, 559

(Tex. 2004) (orig. proceeding) (quoting In re AIU Ins. Co., 148 S.W.3d 109, 112

(Tex. 2004). A permissive forum-selection clause, which is sometimes described as

a “‘consent to jurisdiction’” clause, authorizes venue in a designated forum but

does not prohibit litigation elsewhere. LeBlanc v. C.R. England, Inc., 961 F.

Supp.2d 819, 828 (N.D. Tex. 2013). “[F]raud may invalidate a forum-selection

clause, but only if the inclusion of that clause, as opposed to the signing of the

entire contract, was the product of fraud.” In re GreatAmerica Leasing Corp., 294
S.W.3d 912, 916 (Tex. App.—Corpus Christi 2009, orig. proceeding).

      As we do in all contract cases, we construe the forum-selection clause

according to its plain language. See Phoenix Network Techs. (Europe) Ltd. v. Neon

Sys., Inc., 177 S.W.3d 605, 615 (Tex. App.—Houston [1st Dist.] 2005, no pet.). In

construing a contract, we must consider the instrument as a whole rather than give

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controlling effect to a single provision. J.M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 229 (Tex. 2003).

      If the written instrument is so worded that it can be given a certain or
      definite legal meaning or interpretation, then it is not ambiguous and
      the court will construe the contract as a matter of law. A contract,
      however, is ambiguous when its meaning is uncertain and doubtful or
      it is reasonably susceptible to more than one meaning. Whether a
      contract is ambiguous is a question of law for the court to decide by
      looking at the contract as a whole in light of the circumstances present
      when the contract was entered.

Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983) (citations omitted). When an

instrument is ambiguous, courts construe the instrument against the drafter;

however, that maxim only applies when, after the rules of interpretation have been

applied, the agreement remains ambiguous. Houston Pipe Line Co. v. Dwyer, 374
S.W.2d 662, 665 (Tex. 1964); Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d
154, 157 (Tex. 1951).

      As discussed above, the clause at issue stated, in pertinent part, that “THE

PARTIES     HERETO       AGREE      THAT     IN   THE     EVENT      .   .   .   ANY

CONTROVERSIES ARISE BETWEEN THE PARTIES RELATING TO THIS

MASTER AGREEMENT OR ANY DOCUMENTS RELATING THERETO,

SUCH CONTROVERSIES SHALL BE TRIED BY A JUDGE ALONE BEFORE

THE FEDERAL OR STATE COURTS IN OAKLAND COUNTY, MICHIGAN.”

(emphasis added) When “shall” is used in contracts, it is generally mandatory and
                                       6
operates to impose a duty. Lesikar v. Moon, 237 S.W.3d 361, 367 (Tex. App.—

Houston [14th Dist.] 2007, pet. denied). Construing the plain language of this

provision, as well as taking into account the generally mandatory nature of the

word “shall,” viewing the agreement as a whole, we conclude that the parties

intended for the forum-selection clause to be mandatory, and the provision is not

ambiguous after the rules of construction are applied. See Smith v. Kenda Capital,

LLC, 451 S.W.3d 453, 455, 457 (Tex. App.—Houston [14th Dist.] 2014, no pet.)

(holding that a clause which stated that “‘[t]he venue for any dispute . . . shall be

any state or federal court of competent jurisdiction in Harris County, Texas’”

constituted a mandatory forum-selection clause); In re GreatAmerica Leasing

Corp., 294 S.W.3d at 913, 916-17 (holding that the following constituted a

mandatory forum-selection clause: “ANY CLAIM . . . WILL BE ADJUDICATED

IN A STATE OR FEDERAL COURT LOCATED IN CEDAR RAPIDS, IOWA.

YOU HEREBY CONSENT TO PERSONAL JURISDICTION AND VENUE IN

SUCH COURT[.]”); see also In Re Automated Collection Techs., Inc., 156 S.W.3d

at 558-60; Dwyer, 374 S.W.2d at 665; Daniel, 243 S.W.2d at 157. Lastly, we

conclude that the fraud allegations asserted by Energy Alloys in its second

amended petition are directed toward the entire agreement rather than the inclusion

of the clause itself. See In re GreatAmerica Leasing Corp., 294 S.W.3d at 916.

                                         7
Energy Alloys did not meet its burden of demonstrating that the forum-selection

clause was invalid. See In re Laibe Corp., 307 S.W.3d at 316. For all of these

reasons, the trial court abused its discretion by denying relators’ motion to dismiss

the case pursuant to the forum-selection clause. We conditionally grant the petition

for writ of mandamus and order the trial court to vacate its order denying relators’

motion to dismiss and to sign an order granting relators’ motion to dismiss. The

writ will issue only if the trial court fails to do so.

       PETITION CONDITIONALLY GRANTED.

                                                          PER CURIAM

Submitted on August 12, 2016
Opinion Delivered September 1, 2016

Before McKeithen, C.J., Kreger and Johnson, JJ.

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