Am. First Fed. Credit Union v. Soro
Citation | 131 Nev. Adv. Op. 73,359 P.3d 105 |
Decision Date | 24 September 2015 |
Docket Number | No. 64130.,64130. |
Parties | AMERICA FIRST FEDERAL CREDIT UNION, A Federally Chartered Credit Union, Appellant, v. Franco SORO, an Individual; Myra Taigman–Farrell, an Individual; Isaac Farrell, an Individual; Kathy Arrington, an Individual; and Audie Embestro, an Individual, Respondents. |
Court | Nevada Supreme Court |
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.
In this opinion, we must determine whether a contract clause stating that the parties “submit themselves to the jurisdiction of” another 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.
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: 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.”
The district court agreed with the borrowers and granted the motion to dismiss. The district court found that the note and loan agreement This appeal followed.
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.
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., –––Nev. ––––, ––––, 254 P.3d 641, 647–48 (2011). The objective of interpreting contracts Davis v. Beling, ––– Nev. ––––, ––––, 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 “[a]ny 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. 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) ( ). 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) ( ); Polk Cnty. Recreational Ass'n v. Susquehanna Patriot Commercial Leasing Co., 273 Neb. 1026, 734 N.W.2d 750, 758–59 (2007) ( ); Caperton v. A.T. Massey Coal Co., 225 W.Va. 128, 690 S.E.2d 322, 338–39 (2009) (). 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/Biophile Labs., Inc. v. Ludlow Composites Corp., 296 Wis.2d 273, 722 N.W.2d 633, 640–41 (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 will generally not be enforced unless there is some further...
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