Keeh an Tenn. Inv., LLC v. Praetorium Secured Fund I, L.P.

• Decision Date: 27 December 2016
• Docket Number: No. 15CA010800.,15CA010800.
• Citation: 71 N.E.3d 325,2016 Ohio 8390
• Parties: KEEH AN TENNESSEE INVESTMENT, LLC, et al., Appellants v. PRAETORIUM SECURED FUND I, L.P., et al., Appellees.
• Court: Ohio Court of Appeals

71 N.E.3d 325

2016 Ohio 8390

KEEH AN TENNESSEE INVESTMENT, LLC, et al., Appellants

v.PRAETORIUM SECURED FUND I, L.P., et al., Appellees.

No. 15CA010800.

Court of Appeals of Ohio, Ninth District, Lorain County.

Dec. 27, 2016.

Robert R. Kracht, Attorney at Law, Cleveland, for appellants.

Richard W. Cline, Attorney at Law, Cleveland, for appellees.

CANNON, Judge.

{¶ 1} Appellants—David Keehan; Donald J. Keehan Jr.; Donald J. Keehan Sr.; Keehan Tennessee Investment, LLC; Durham Ridge Investments, LLC; Westlake Briar, LLC; 951 Realty Ltd.; and Keehan Trust Funding, LLC—appeal from the judgment of the Lorain County Court of Common Pleas granting the motion to transfer filed by Appellees Praetorium Secured Fund I, L.P. ("Praetorium"); Development Finance, L.P. ("Development Finance"); and George V. Cresson. For the reasons that follow, we affirm the judgment of the trial court.

I.

{¶ 2} This case stems from the alleged breach of certain loan commitments related to a multi-million dollar development project in Tennessee ("the Project"). The following factual allegations are taken from plaintiffs' amended complaint and attached exhibits.

{¶ 3} Defendant Guardian Capital Advisors, Inc. ("Guardian") entered into a loan commitment with Keehan Tennessee Investment, LLC ("KTI") and its principals (David Keehan, Donald Keehan Jr., and Donald Keehan Sr.) to provide a $24.5 million loan ("Senior Loan"). According to the complaint, Defendant Kenneth A. Miller is the "principal, manager and/or managing partner" of Guardian. The Senior Loan was to be used to buy out equity interest holders of the Project and to pay off an existing lender that had called its loan. Guardian obtained personal cognovit guarantees from David and Donald Sr. as additional security on the Senior Loan.

{¶ 4} KTI negotiated several short forbearance periods with the existing lender, but Guardian failed to fund the Senior Loan within that time period as promised in the loan commitment. In exchange for a $1.2 million extension fee, the existing lender granted KTI another forbearance period on the existing loan. The extension fee was to be paid in two installments: the first by KTI, and the second by Guardian. David paid the first installment of $500,000 from the proceeds of a personal loan. Guardian failed to pay the second installment of $700,000.

{¶ 5} KTI had also entered into a separate loan commitment with Development Finance regarding a $3.5 million line of credit for construction of the Project ("Construction Loan"). According to the complaint, Defendant George V. Cresson held himself out to be the manager of Development Finance.

{¶ 6} Following Guardian's failure to pay the second installment of the extension fee on the existing loan, Development Finance (through Mr. Cresson) agreed to provide an additional $700,000 to KTI in order to satisfy the remainder of the extension fee ("Bridge Loan"). Plaintiffs assert that Mr. Cresson executed the Bridge Loan agreement on behalf of Development Finance, an entity owned and controlled by Mr. Cresson, but that "at the eleventh hour and on the date of execution, Cresson unilaterally changed the identity of the lender from [Development Finance] to [Praetorium], another entity owned and controlled by Cresson."¹ To provide additional security for the Bridge Loan, Praetorium obtained a cognovit promissory note and personal cognovit guarantees from Donald Sr. and David. Cognovit guarantees were also executed in favor of Praetorium by Plaintiffs Durham Ridge Investments, LLC ("Durham Ridge"); Westlake Briar, LLC ("Westlake Briar"); 951 Realty Ltd. ("951 Realty"); and Keehan Trust Funding, LLC ("Keehan Trust").

{¶ 7} Plaintiffs allege that Guardian, Praetorium, and Mr. Cresson "demanded substantial fees and imposed onerous collateral requirements" for the Bridge Loan. Durham Ridge, Westlake Briar, and 951 Realty granted mortgages to Praetorium on certain Ohio commercial properties as collateral, and Praetorium paid off the existing mortgages with proceeds from the Bridge Loan. Keehan Trust also pledged certain equity interests in a publicly-traded company as collateral, pursuant to a security agreement with Praetorium. These requirements increased the principal amount of the Bridge Loan from $700,000 to $2.95 million.

{¶ 8} It is alleged that Guardian and Praetorium subsequently failed to provide the Senior Loan and the Construction Loan, respectively, by the agreed-upon date. As a result, the Project's existing lender filed a notice of foreclosure against KTI. In order to cancel the ensuing foreclosure sale, plaintiffs obtained a loan for over $17.5 million from an alternative source. Plaintiffs allege that KTI lost its majority ownership interest in the Project as a material condition of the alternative loan.

{¶ 9} Plaintiffs filed a breach of contract action against Guardian and Praetorium, in the Lorain County Court of Common Pleas, alleging breach of the loan commitments. Defendants jointly removed the case to the United States District Court for the Northern District of Ohio, Eastern Division, on the basis of complete diversity. Plaintiffs then filed an amended complaint, which added claims for economic duress, fraud, and equitable subordination and also added Development Finance, Mr. Cresson, and Mr. Miller as new party defendants.²

{¶ 10} Guardian/Mr. Miller and Development Finance/Mr. Cresson each filed motions to transfer the case to the United States District Court for the District of Nevada in Reno, Nevada. These motions were granted on the basis of forum selection clauses in the loan commitment letters from Guardian and Development Finance, which provided for exclusive jurisdiction in Reno, Nevada. The Federal District Court of Nevada thereafter determined complete diversity was lacking, as a result of an improperly pled complaint, and remanded the case back to the Lorain County Court of Common Pleas.

{¶ 11} Appellees (Praetorium, Development Finance, and Mr. Cresson) then filed a joint motion to transfer the case to a Reno, Nevada state court, pursuant to Civ.R. 3(D), again based on the forum selection clauses. Plaintiffs filed a brief in opposition; Guardian and Mr. Miller did not object. The trial court granted appellees' motion and stayed the case pending transfer. Plaintiffs were ordered to refile the case in a Reno, Nevada state court within 60 days or the trial court would enter an order of dismissal without prejudice. It is from this order that plaintiffs (appellants herein) now appeal, raising four assignments of error.

II.

{¶ 12} An order enforcing a forum selection clause and granting a 60–day stay pursuant to Civ.R. 3(D) is a final, appealable order. Overhead, Inc. v. Standen Contracting, 6th Dist. Lucas No. L–01–1397, 2002 WL 398342, *–2 (Mar. 11, 2002), citing Vintage Travel Servs., Inc. v. White Heron Travel of Cincinnati, Inc., 2d Dist. Montgomery No. 16433, 1998 WL 257862 (May 22, 1998). " ‘The practical effect of this judgment is to preclude plaintiffs, residents of Ohio, from pursuing a legal remedy in the courts of Ohio; consequently, a substantial right of the appellants is adversely affected.’ " Id., quoting Clark v. Consol. Foods Corp., 5th Dist. Stark No. CA 4906, 1978 WL 217574 (Dec. 13, 1978).

III.Second Assignment of Error

The trial court erred as a matter of law by failing to submit the forum selection clauses to the trier of fact to determine the intent of the parties.

{¶ 13} Appellants argue the forum selection clauses are ambiguous and thus should have been submitted to the trier of fact to determine the parties' intent.

{¶ 14} "Terms in a contract are ambiguous if their meanings cannot be determined from reading the entire contract, or if they are reasonably susceptible to multiple interpretations." Foley v. Empire Die Casting Co., 9th Dist. Summit No. 24558, 2009-Ohio-5539, 2009 WL 3366269, ¶ 12. " ‘The decision as to whether a contract is ambiguous and thus requires extrinsic evidence to ascertain its meaning is one of law.’ " Id., quoting Ohio Historical Soc. v. Gen. Maintenance & Eng. Co., 65 Ohio App.3d 139, 146, 583 N.E.2d 340 (10th Dist.1989). Questions of law are reviewed by an appellate court de novo. Butler v. Joshi, 9th Dist. No. 00CA0058, 2001 WL 489962, *4–5 (May 9, 2001).

{¶ 15} All of appellants' allegations arise out of the relationship created by the loan commitments KTI entered into with Guardian and Development Finance. The term sheets attached to the Senior Loan and Construction Loan commitment letters contain identical forum selection clauses: "Governing Law and Jurisdiction. * * * The parties acknowledge and consent to the exclusive jurisdiction of any competent court in Reno, Nevada." Additionally, the Construction Loan commitment letter, itself, contains the following language: "Exclusive Jurisdiction. The parties acknowledge and consent to the exclusive jurisdiction of any competent court in Reno, Nevada."

{¶ 16} Appellants first assert the forum selection clauses are ambiguous because they do not expressly prohibit the filing of suit elsewhere than Reno, Nevada. The clause clearly provides, however, that Reno, Nevada has exclusive jurisdiction. " ‘Exclusive jurisdiction’ is defined as ‘[a] court's power to adjudicate an action or class of actions to the exclusion of all other courts [.]’ " EI UK Holdings, Inc. v. Cinergy UK, Inc., 9th Dist. Summit No. 22326, 2005-Ohio-1271, 2005 WL 662921, ¶ 18, quoting Black's Law Dictionary 856 (7th Ed.1999) (emphasis added). Providing for exclusive jurisdiction is thus, very simply, the positive linguistic equivalent to prohibiting the filing of suit elsewhere. This argument is not well taken.

{¶ 17} Appellants next assert the term "jurisdiction" could possibly refer to subject matter jurisdiction, as opposed to personal jurisdiction. Appellants argue, under that scenario, that the clause would be without effect because parties cannot confer subject matter jurisdiction upon a court by agreement.

{¶ 18} It is, of course, true that ...