Federated Capital Corp. v. Libby

• Decision Date: 06 September 2016
• Docket Number: No(s). 20140208, 20140249,(s). 20140208, 20140249
• Parties: Federated Capital Corp. dba Federated Financial Corp. of America, Appellant, v. Conor Libby dba Critterbox, Appellee, Federated Capital Corp., Appellant, v. Elena Chapa dba Delena Management, Inc., Appellee.
• Court: Utah Supreme Court

384 P.3d 221

2016 UT 41

Federated Capital Corp. dba Federated Financial Corp. of America, Appellant,

v.Conor Libby dba Critterbox, Appellee,Federated Capital Corp., Appellant,

v.Elena Chapa dba Delena Management, Inc., Appellee.

No(s). 20140208, 20140249

Supreme Court of Utah.

Filed September 6, 2016

Michael D. Zimmerman, Linda M. Jones, Beth E. Kennedy, Salt Lake City, for appellant

Lester A. Perry, James N. Taylor, Salt Lake City, for appellees

Chief Justice Durrantauthored the opinion of the Court, in which Justice Durham, and Justice Pearcejoined.

On Direct Appeal

Chief Justice Durrant, opinion of the Court:

Introduction

¶ 1 In 2005, Appellees signed credit card agreements with Federated Capital Corporation's predecessor-in-interest, Advanta Bank Corporation. The agreements included a forum selection clause and choice of law provision, ensuring that Utah procedural and substantive law would govern any dispute under the contract. The agreements required Appellees to render payment to the address specified on their periodic billing statements. Each billing statement identified an address in Philadelphia, Pennsylvania, as the place of payment. In 2006, Appellees defaulted. And in 2012, Federated brought suit against Appellees in separate proceedings. The district court in each proceeding granted summary judgment, concluding that Utah's borrowing statute adopted Pennsylvania's four-year statute of limitations, which barred Federated's causes of action. Federated appealed the district court's decision in each case, and we consolidated the two appeals. Each appeal presents the same issue: whether an enforceable forum selection clause precludes the application of Utah's borrowing statute.

Background

¶ 2 In 2005, Connor Libby,¹ a California resident, and Elena Chapa,² a Texas resident (collectively, Appellees), signed identical credit card agreements (collectively, the Agreement) with Federated Capital Corporation of America's predecessor-in-interest, Advanta Bank Corporation, a Utah corporation with its principal place of business in Pennsylvania.³ The Agreement contains a paragraph titled "CONTROLLING LAW AND JURISDICTION." That paragraph includes a choice of law provision that adopts Utah substantive law to govern the Agreement. The paragraph also includes a forum selection clause that requires the parties to bring suit only "IN THE STATE AND FEDERAL COURTS IN UTAH."⁴

¶ 3 The Agreement allowed Appellees to purchase goods and services, receive cash advances, and write checks. In return, Appellees were required to make monthly payments on all debts "at the location and in the manner specified on [their] periodic billing statement[s]." The Agreement also noted that "[p]ayments tendered to and accepted by us or our agent at a location other than the address stated on your periodic billing statement are not effective until received by us at the address specified ." Each monthly billing statement required Appellees to send their payments to an address in Philadelphia, Pennsylvania, though, in fact, Appellees sent each payment by electronic fund transfer to Advanta's Utah address.

¶ 4 In 2006, Appellees defaulted on their payments. Ms. Chapa made no payments after August 2, 2006, and owed $21,104.11. Mr. Libby made no payments after October 31, 2006, and owed $22,747.30. In 2007, Advanta assigned its interest in Appellees' accounts to Federated, a Michigan corporation licensed in Utah. Nearly six years later, Federated filed separate claims in separate proceedings against Ms. Chapa and Mr. Libby on August 2, 2012, and October 4, 2012, respectively.

¶ 5 Appellees individually moved for summary judgment, both arguing that Utah's borrowing statute required the court to apply Pennsylvania's four-year statute of limitations governing contract disputes, thereby barring Federated's claims. The district court agreed and granted summary judgment in favor of Appellees. Thereafter, Federated moved for a new trial in each case, and the district court denied both motions, awarding Appellees attorney fees under the reciprocal attorney fees statute.⁵ This sum included additional fees resulting from Federated's motion for a new trial in each case.

¶ 6 Federated now appeals the district court's grant of summary judgment, arguing that the Agreement's forum selection clause makes the borrowing statute inapplicable to its claims. The cases were consolidated for appeal, and we retained the cases on appeal to consider the effect of the Agreement's forum selection clause on Utah's borrowing statute.⁶

Standard of Review

¶ 7 Federated appeals the district court's grant of summary judgment. Summary judgment is appropriate when the evidence "shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law."⁷ "Because a summary judgment challenge presents only legal issues, we review the grant of summary judgment for correctness."⁸ In addition, this court reviews for correctness "questions of statutory interpretation"⁹ and "[t]he district court's application of a statute of limitations."¹⁰ Here, there are two legal questions before this court: (1) whether a forum selection clause that fails to explicitly identify any of Utah's statutes of limitations implicitly requires application of Utah's statute of limitations for written contracts, thereby excluding application of the borrowing statute; and (2) whether Utah's borrowing statute operates to apply a foreign jurisdiction's statute of limitations when the parties could not have brought suit in that jurisdiction because of an enforceable forum selection clause. Jurisdiction over this matter is proper pursuant to Utah Code section 78A–3–102(3)(j).

Analysis

¶ 8 Federated raises essentially two arguments on appeal. First, it claims that the district court erred when it relied on the borrowing statute to apply Pennsylvania's four-year statute of limitations because the Agreement's forum selection clause required the court to apply Utah procedural law only, including Utah's six-year statute of limitations for written contracts. Second, it asserts that the borrowing statute applies only where a cause of action that arises in another jurisdiction is "not actionable by reason of the lapse of time," and is thus inapplicable here since it was the forum selection clause that rendered Federated's claims not actionable in Pennsylvania. The first argument focuses on whether the forum selection clause wholly excludes the borrowing statute, whereas the second argument focuses on whether the statute, by its plain language, even applies to this dispute. We reject both arguments.

¶ 9 Utah's borrowing statute requires a court to apply the limitation period of a foreign jurisdiction when a party's "cause of action arises in [that] jurisdiction" and is "not actionable" there "by reason of the lapse of time."¹¹ Federated's first argument fails because the Agreement requires that it be governed by all of Utah's laws, both procedural and substantive. Because those laws include the borrowing statute, the forum selection clause does not preclude the borrowing statute from applying to Federated's claims.

¶ 10 Federated's second argument also fails. As a preliminary matter, Federated did not challenge on appeal the district court's conclusion that its breach of contract causes of action arose in Pennsylvania. We therefore accept, for purposes of this appeal, the district court's decision on this point. Further, contrary to Federated's contention, the borrowing statute merely requires that a cause of action be "not actionable" in a foreign jurisdiction "by reason of the lapse of time," even if it is "not actionable" by some other independent reason.¹² That condition is met here. Thus, we uphold the district court's decision to apply the borrowing statute to adopt Pennsylvania's four-year statute of limitations and bar Federated's claims against Appellees. In addition, we also award Appellees attorney fees as the prevailing party under Utah's reciprocal fee statute. We address each of these arguments and issues in order.

I. The Agreement Selects All of Utah's Substantive and Procedural Laws, Which Include the Borrowing Statute

¶ 11 Federated argues that when the parties signed the forum selection clause, they agreed to be bound by Utah procedural law, and "they necessarily agree[d]" that Utah's six-year statute of limitations for written contracts¹³ would govern any dispute between them. Accordingly, Federated avers that "the district court disregarded the forum selection clause and applied Utah's borrowing statute to look to the statute of limitations of a foreign jurisdiction,"¹⁴ even though the forum selection clause "renders the procedural laws of any other state inapplicable." As a result, Federated claims that the district court "denied [Federated] the benefit of its bargain."

¶ 12 This argument misconstrues the importance of the forum selection clause in the context of the broader Agreement and the relationship between the Agreement and the borrowing statute. The Agreement contained both a forum selection clause and a choice of law provision. Between these two contractual provisions, the Agreement ensured that the entirety of Utah law would govern a dispute between the parties. Because the borrowing statute is a Utah law, the Agreement requires that the statute apply when "[a] cause of action ... ar[ose] in [a foreign] jurisdiction."¹⁵ Consequently, the forum selection clause does not prevent the borrowing statute from applying in this case to adopt Pennsylvania's four-year statute of limitations.

¶ 13 Because a forum selection clause controls where its signatories may bring suit,¹⁶ it binds them to the procedural laws of the selected forum.¹⁷ After all, "[m]atters of procedure in a contract action are ... governed by the law of the forum."¹⁸ A choice of law provision, in contrast, selects the substantive law that will govern a contract dispute. In this case, the Agreement...