Desarrollo Immobiliario Y Negocios Indus. De Alta Tech. De Hermosillo, S.A. De C.V. v. Kader Holdings Co.

• Citation: 276 P.3d 1,229 Ariz. 367
• Decision Date: 16 April 2012
• Docket Number: No. 2 CA–CV 2011–0117.,2 CA–CV 2011–0117.
• Parties: DESARROLLO IMMOBILIARIO Y NEGOCIOS INDUSTRIALES DE ALTA TECNOLOGIA DE HERMOSILLO, S.A. DE C.V., successor in interest to Luis Roberto Martin Mazon Rubio, Enrique Ruben Mazon Rubio, Jorge Horacio Mazon Rubio, Jose Oscar Mazon Rubio, Hector Ruben Mazon Lizarraga, Gustavo Alberto Mazon Lizarraga, Ricardo Mazon Lizarraga, and Sergio Jesus Mazon Rubio, Plaintiff/Appellee, v. KADER HOLDINGS COMPANY LIMITED, a Bermuda company, Defendant/Appellant.
• Court: Arizona Court of Appeals

229 Ariz. 367

276 P.3d 1

DESARROLLO IMMOBILIARIO Y NEGOCIOS INDUSTRIALES DE ALTA TECNOLOGIA DE HERMOSILLO, S.A. DE C.V., successor in interest to Luis Roberto Martin Mazon Rubio, Enrique Ruben Mazon Rubio, Jorge Horacio Mazon Rubio, Jose Oscar Mazon Rubio, Hector Ruben Mazon Lizarraga, Gustavo Alberto Mazon Lizarraga, Ricardo Mazon Lizarraga, and Sergio Jesus Mazon Rubio, Plaintiff/Appellee,

v.KADER HOLDINGS COMPANY LIMITED, a Bermuda company, Defendant/Appellant.

No. 2 CA–CV 2011–0117.

Court of Appeals of Arizona,

Division 2, Department B.

April 16, 2012.

Jennings, Strouss & Salmon, P.L.C. by James O. Ehinger, Phoenix, Attorneys for Plaintiff/Appellee.

Snell & Wilmer L.L.P. by Jeffrey Willis and Andrew M. Jacobs, Tucson, and Troutman Sanders, L.L.P. by Eric A. Szweda, Hong Kong, Attorneys for Defendant/Appellant.

OPINION

GARYE L. VÁSQUEZ, Presiding Judge.

[229 Ariz. 369]¶ 1 This contract action arises out of a lease contract and guarantee between appellee Desarrollo Immobiliario y Negocios Industriales de Alta Technologia de Hermosillo, S.A. de C.V. (Desarrollo) as landlord, Siempre Novedoso de Mexico, S.A. de C.V. (Sinomex) as tenant, and appellant Kader Holdings Company, Limited (Kader) as guarantor of Sinomex's obligations under the lease. After Sinomex repeatedly failed to meet its obligations under the terms of the lease, Desarrollo filed this lawsuit against both Sinomex and Kader in Arizona. On appeal, Kader challenges the trial court's exercise of personal jurisdiction over it and the court's grant of summary judgment in favor of Desarrollo. For the reasons stated below, we affirm.

Factual Background and Procedural History

¶ 2 This case involves a fairly standard business transaction between sophisticated corporations. Kader is a Bermuda company with its principal place of business in Hong Kong. It has several subsidiaries in the toy industry, including Sinomex, originally called Kadermex, S.A. de C.V., a Mexican company formed in October 1992. Desarrollo is a Mexican real estate company that has been involved in the construction of large, industrial buildings since 1986. The parties' joint business dealings began in the early 1990s, when Kader sought to develop a toy factory in Sonora, Mexico.¹

¶ 3 On October 21, 1992, Desarrollo, Sinomex, and Kader signed a lease contract providing that Desarrollo would construct a building on property it owned and Sinomex would lease the building for an initial term of six years with five options to renew for additional terms of two years each. Under the lease, Kader agreed “to be jointly obligated with [Sinomex], in the due fulfillment of each and all of the obligations arising from” that agreement. The parties executed English and Spanish versions of the lease contract, which provided that it would be governed by the law and jurisdiction of Sonora, Mexico. Desarrollo and Kader also executed a separate guarantee that set forth Kader's obligations as guarantor in more detail. The guarantee stated the laws of Sonora, Hong Kong, or Bermuda would control.

¶ 4 Desarrollo subsequently began construction of the building and obtained a loan from Bank One, Arizona, NA (Bank One) to complete the project. In making the loan, Bank One apparently requested that the parties amend the lease contract to reflect that Arizona law and jurisdiction would apply and assign both the lease and guarantee to it as collateral for the loan. In October 1993, Desarrollo, Sinomex, and Kader signed an amendment (“lease amendment”)—in both English and Spanish—providing that Arizona “law and jurisdiction” would control.² Desarrollo executed an assignment of the guarantee to Bank One; Kader and Sinomex consented to the assignment and acknowledged that all future payments under the lease would “be made to Bank One, Arizona, NA.”

¶ 5 After taking occupancy of the building, Sinomex consistently failed to make timely rental payments. Consequently, in September 1996, Desarrollo and Sinomex entered into the first of three work-out agreements (“1996 agreement”). Under the 1996 agreement, the parties acknowledged Sinomex's default and established a payment schedule and revised terms for the past-due rent.

¶ 6 Despite the 1996 agreement, Sinomex's financial difficulties continued. In February 1997, Desarrollo sued Sinomex and Kader for breach of contract under the lease and guarantee. On May 8, 1998, however, Desarrollo and Sinomex executed a settlement agreement pursuant to which Sinomex paid Desarrollo $685,000 in satisfaction of the deficiencies, Sinomex and Kader were released from liability for all obligations due on or before April 1, 1998, and the lawsuit was dismissed. That same day, Desarrollo and Sinomex also executed an addendum to the lease (“1998 addendum”). Under the 1998 addendum, Sinomex exercised three of its options to renew simultaneously, extending the lease term for an additional six years. Sinomex nevertheless still struggled to make full and timely rental payments. Therefore, in October 1999 and April 2002, Desarrollo and Sinomex entered into two additional work-out agreements (“1999 agreement” and “2002 agreement”) in a further attempt to address the payment of rental arrearages.

¶ 7 In February 2003, Desarrollo ultimately brought this action in Santa Cruz County, against Sinomex and Kader, alleging breach of contract under the lease and guarantee. Sinomex unexpectedly vacated the building in September 2003 and did not file a response to Desarrollo's complaint. In January 2004, Kader moved to dismiss the lawsuit, arguing the Arizona trial court lacked personal jurisdiction. A year later, the court denied the motion, finding the forum selection clause in the lease amendment was binding on Kader.

¶ 8 In March 2005, Kader filed a cross-claim against Sinomex and a counterclaim against Desarrollo. In May 2005, Desarrollo filed a motion for partial summary judgment on the issue of Kader's liability for the lease payments as guarantor. Kader filed a cross-motion for summary judgment on the same issue. Desarrollo filed a separate motion to dismiss Kader's counterclaim, and the trial court granted that motion in December 2005. The court also granted Desarrollo's motion for partial summary judgment in August 2007 and denied Kader's two motions for reconsideration of that decision.

¶ 9 In April 2010, the matter proceeded to a bench trial solely on the issue of damages. The trial court issued its under-advisement ruling on March 4, 2011, awarding Desarrollo more than $3.5 million in damages, plus interest and taxes, against Kader and Sinomex.³ Final judgment was entered on June 11, 2011. This appeal followed.

Discussion

Jurisdiction

¶ 10 Kader argues the trial court lacked personal jurisdiction over it because the forum selection clause contained in the lease amendment did not apply to Kader as guarantor and, even if it did, the clause was unreasonable and therefore unenforceable.⁴We review the court's exercise of personal jurisdiction de novo. Ariz. Tile, L.L.C. v. Berger, 223 Ariz. 491, ¶ 8, 224 P.3d 988, 990 (App.2010). To avoid dismissal of the lawsuit for lack of personal jurisdiction, Desarrollo needed only to make a prima facie showing that jurisdiction was proper. Bohreer v. Erie Ins. Exch., 216 Ariz. 208, ¶ 7, 165 P.3d 186, 189 (App.2007). It could not rely solely on the allegations in the complaint; rather, it had to establish a factual basis supporting personal jurisdiction. In re Consol. Zicam Prod. Liab. Cases, 212 Ariz. 85, ¶ 8, 127 P.3d 903, 907–08 (App.2006). Once such a showing was made, Kader had the burden of rebuttal. Id.

¶ 11 “There are three types of activities by a defendant which may allow a court to assert personal jurisdiction over that defendant: (1) consent; (2) presence in the forum; (3) causing effects in the forum.” Morgan Bank (Del.) v. Wilson, 164 Ariz. 535, 537, 794 P.2d 959, 961 (App.1990). In this case, the trial court concluded Kader was subject to Arizona's jurisdiction on the basis of the forum selection clause in the lease amendment. And, indeed, a defendant may consent to a particular court's exercise of personal jurisdiction through a variety of legal arrangements, including a forum selection clause in a contract. Id. Kader contends, however, “[t]he trial court erred by finding the forum selection clause in the lease amendment applied to Kader as guarantor.” We review the court's interpretation of the contract de novo. See Rand v. Porsche Fin. Servs., 216 Ariz. 424, ¶ 37, 167 P.3d 111, 121 (App.2007).

¶ 12 To determine whether the forum selection clause in the lease amendment applied to Kader, we review the relevant documents—the lease contract, the lease amendment, and the guarantee—to ascertain the parties' intent. See Long John Silver's, Inc. v. DIWA III, Inc., 650 F.Supp.2d 612, 626 (E.D.Ky.2009); see also Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152, 854 P.2d 1134, 1138 (1993). In doing so, we first “look to the plain meaning of the words as viewed in the context of the contract as a whole.” United Cal. Bank v. Prudential Ins. Co. of Am., 140 Ariz. 238, 259, 681 P.2d 390, 411 (App.1983). Only if the language of the contract is ambiguous do we then look to the surrounding circumstances for aid in determining the parties' intent. Id. at 265, 681 P.2d at 417.

¶ 13 Based on the plain language of the documents in this case, we conclude the parties intended the forum selection clause of the lease amendment to apply to Kader. First, under the guarantee, Kader promised “the prompt, full and complete payment and performance ... of all of the conditions, covenants, obligations, liabilities and agreements of [Sinomex] as set forth in the contract or any extension thereof.” Kader expressly guaranteed more than Sinomex's rental payments; it adopted as its own every condition and extension of the lease contract, including the forum selection clause of the lease amendment. As another court has explained: “This emphatic expression...