Ex parte Northern Capital Resource Corp.

• Decision Date: 24 November 1999
• Citation: 751 So.2d 12
• Parties: Ex parte NORTHERN CAPITAL RESOURCE CORPORATION. (In re Faith Academy of Mobile, Inc., and Life Church, Inc. v. Northern Capital Resource Corporation).
• Court: Alabama Supreme Court

751 So.2d 12

Ex parte NORTHERN CAPITAL RESOURCE CORPORATION.

(In re Faith Academy of Mobile, Inc., and Life Church, Inc. v. Northern Capital Resource Corporation).

1981831.

Supreme Court of Alabama.

November 24, 1999.

Matthew C. McDonald and Thomas J. Woodford of Miller, Hamilton, Snider & Odom, L.L.C., Mobile, for petitioner.

Richard E. Corrigan and James W. Tarlton III of Hamilton, Butler, Riddick, Tarlton & Sullivan, P.C., Mobile, for respondents.

HOUSTON, Justice.

Northern Capital Resource Corporation, the defendant in an action pending in the Mobile Circuit Court, petitions for a writ of mandamus directing the trial court to grant the defendant's motion to dismiss for improper venue. We grant the petition and issue the writ.

The plaintiffs, Faith Academy of Mobile, Inc., and Life Church, Inc., contacted the defendant Northern Capital through a loan broker, in an effort to obtain financing in the amount of $4.7 million. The parties entered into a written agreement on December 12, 1997, which provided that the plaintiffs would pay the defendant $35,250 as half payment of a loan-request fee, and that the defendant would, within 30 days, locate a lender willing to enter into a financing agreement with the plaintiffs.

Paragraph 11 of this agreement was a forum-selection clause, which read as follows:

"11. The parties agree that this Formal Loan Request Agreement shall be accepted or rejected at the offices of the Corporation at Springfield, Missouri, and shall be construed in accordance with and governed by the laws of the State of Missouri. The parties further agree that proper venue and jurisdiction for litigation concerning this Agreement shall be Greene County Circuit Court, State of Missouri. Any other venue or jurisdiction is specifically waived by both Borrower and Corporation."

This paragraph, as with all the individual paragraphs of the agreement, was initialed by the representative of the plaintiffs.

The defendant put the plaintiffs in contact with Silicon Valley Bank, which planned to provide the financing requested by the plaintiffs. However, Silicon Valley Bank refused to provide the financing after it learned the plaintiffs had defaulted on an earlier bond issue. The lawsuit now pending in the circuit court arose out of this refusal by Silicon Valley Bank. This petition deals with the forum-selection clause of the agreement between the plaintiffs and the defendant. The sole issue before this Court is whether the trial court abused its discretion in denying the defendant's Rule 12(b)(3), Ala. R. Civ. P., motion to dismiss for improper venue.

In recent years, this Court has adopted the majority rule that a forum-selection clause should be enforced so long as enforcing it is neither unfair nor unreasonable under the circumstances. Professional Ins. Corp. v. Sutherland, 700 So.2d 347 (Ala.1997); O'Brien Eng'g Co. v. Continental Machs., Inc., 738 So.2d 844 (Ala. 1999). A party wishing to invalidate a forum-selection clause has the burden to show:

"[E]ither (1) that enforcement of the forum selection [clause] would be unfair on the basis that the [contract was] affected by fraud, undue influence, or overweening bargaining power or (2) that enforcement would be unreasonable on the basis that the chosen ... forum would be seriously inconvenient for the trial of the action."

Professional Ins. Corp., 700 So.2d at 352.

The plaintiffs do not allege "fraud, undue influence, or overweening bargaining power," so we will focus on the issue of reasonableness. A forum-selection clause will be taken as valid and enforceable unless the chosen forum is found to be unreasonable and "seriously inconvenient." Id. at 350 and 352. We agree with the United States Supreme Court, which has held that "where it can be said with reasonable assurance that at the time they entered the contract, the parties ... contemplated the claimed inconvenience, it is difficult to see why any such claim of inconvenience should be heard to render the forum clause unenforceable." MIS Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 16, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), as quoted in Professional Ins. Corp., 700 So.2d at 353 (Maddox, J., concurring in the result).

When an agreement includes a clearly stated forum-selection clause, a party claiming that clause is unreasonable and therefore invalid will be required to make a clear showing of unreasonableness. In determining whether such a clause is unreasonable, a court should consider these five factors: (1) Are the parties business entities or businesspersons? (2) What is the subject matter of the contract? (3) Does the chosen forum have any inherent advantages? (4) Should the parties have been able to understand the...