Am. First Fed. Credit Union v. Soro , 2015 NV 73 ( 2015 )

131 Nev., Advance Opinion 13
IN THE SUPREME COURT OF THE STATE OF NEVADA
AMERICA FIRST FEDERAL CREDIT No. 64130
UNION, A FEDERALLY CHARTERED
CREDIT UNION,
Appellant,
vs.
FRANCO SORO, AN INDIVIDUAL;
FILED
MYRA TAIGMAN-FARRELL, AN SEP 2 4 2015
INDIVIDUAL; ISAAC FARRELL, AN
INDIVIDUAL; KATHY ARRINGTON,
AN INDIVIDUAL; AND AUDIE
EMBESTRO, AN INDIVIDUAL,
Respondents.
Appeal from a district court order dismissing a deficiency
judgment action. Eighth Judicial District Court, Clark County; Jerry A.
Wiese, Judge.
Reversed and remanded.
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.
OPINION
By the Court, HARDESTY, CA.:
In this opinion, we must determine whether a contract clause
stating that the parties "submit themselves to the jurisdiction of' another
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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.
FACTS AND PROCEDURAL HISTORY
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: "Jurisdiction. The parties agree and submit themselves to the
jurisdiction of the courts of the State of Utah with regard to the subject
matter of this agreement." A clause in the note stated: "If there is a
'While eight individuals signed the note and loan agreement, the
only borrowers in the instant action are Franco Soro, Myra Taigman-
Farrell, Isaac Farrell, Kathy Arrington, and Audie Embestro.
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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 "contain language which clearly expresses the parties' intent to
submit litigation relating to the Agreement and the Note, to the
jurisdiction of the State of Utah. . . . [T]he language clearly enough
identifies Utah as the forum[,] which they selected for purposes of subject
matter jurisdiction." This appeal followed.
DISCUSSION
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.
2Additionally, the credit union argues that Nevada's six-month
statute of limitations for recovery of deficiency judgments applies to the
action, not Utah's three-month statute of limitations. However, because
the district court did not decide this issue, we do not address it here.
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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.,
127 Nev., Adv. Op. 38, 254 P.3d 641, 647-48 (2011). The objective of
interpreting contracts "is to discern the intent of the contracting parties.
Traditional rules of contract interpretation are employed to accomplish
that result." Davis v. Beling, 128 Nev., Adv. Op. 28, 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 "[ably 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.
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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) (distinguishing between
exclusive and nonexclusive forum selection
clauses). 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)
(recognizing that a mandatory jurisdiction clause requires "a particular
forum be the exclusive jurisdiction for litigation," while permissive
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jurisdiction is merely a consent to jurisdiction in a venue (internal
quotation marks omitted)); Polk Cnty. Recreational Ass'n v. Susquehanna
Patriot Commercial Leasing Co., 734 N.W.2d 750, 758-59 (Neb. 2007)
(distinguishing a mandatory forum selection clause based on the words
"shall be brought only in" a particular jurisdiction from a permissive
forum selection clause where parties only "consent and submit to the
jurisdiction" of other courts); Caperton v. A.T. Massey Coal Co., 690 S.E.2d
322, 338-39 (W. Va. 2009) ("[T]o be enforced as mandatory, a forum-
selection clause must do more than simply mention or list a jurisdiction; in
addition, it must either specify venue in mandatory language, or contain
other language demonstrating the parties' intent to make jurisdiction
exclusive."). 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 I Biophile Labs., Inc. v. Ludlow Composites Corp., 722 N.W.2d
633, 640-41 (Wis. Ct. App. 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
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will generally not be enforced unless there is some
further language indicating the parties' intent to
make venue exclusive.
Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th
Cir. 1992); see Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318,
321 (10th Cir. 1997) (describing the "mandatory/permissive dichotomy"
and concluding that the clause, "jurisdiction shall be in the StateS of
Colorado, and venue shall lie in the County of El Paso, Colorado," was
mandatory (internal quotation marks omitted)); John Bout an & Son,
Wines & Spirits, S.A. v. Attiki Imps. & Distribs. Inc., 22 F.3d 51, 52-53 (2d
Cir. 1994) (holding the forum selection clause, "[a]ny dispute arising
between the parties hereunder shall come within the jurisdiction of the
competent Greek Courts, specifically of the Thessaloniki Courts," as
permissive (internal quotation marks omitted)); Hunt Wesson Foods, Inc.
v. Supreme Oil Co., 817 F.2d 75, 76-78 (9th Cir. 1987) (holding the forum
selection clause, "Whe courts of California, County of Orange, shall have
jurisdiction over the parties in any action at law relating to the subject
matter or the interpretation of this contract," as permissive, and noting
that to be considered mandatory, a forum selection clause must clearly
require that a particular court is the only one that has jurisdiction
(internal quotation marks omitted)); Keaty v. Freeport Indon., Inc., 503
F.2d 955, 956-57 (5th Cir. 1974) (holding the forum selection clause, "[t]his
agreement shall be construed and enforceable according to the law of the
State of New York and the parties submit to the jurisdiction of the courts
of New York," as permissive (internal quotation marks omitted)).
We agree with the distinctions made by other state and
federal courts regarding mandatory and permissive forum selection
clauses described above. Here, there are two jurisdictional clauses at
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issue. First, the loan agreement contains a clause entitled "Jurisdiction,"
which provides that "Nhe parties agree and submit themselves to the
jurisdiction of the courts of the State of Utah with regard to the subject
matter of this agreement." We conclude that this language is permissive
as there is no language within the clause containing words of exclusivity.
Absent such language, we deem the clause permissive.
Second, 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." This language is also permissive as there is
no language within the clause containing words of exclusivity. See Golden
Palm Hospitality, Inc. v. Stearns Bank Nat'l Ass'n, 874 So. 2d 1231, 1233-
37 (Fla. Dist. Ct. App. 2004) (concluding that the language, "WI' there is a
lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of STEARNS County, the State of Minnesota" as
permissive, and thus permitted, but did not require, that the action be
brought in Minnesota (internal quotation marks omitted)). Thus, the case
may be heard in another appropriate venue besides the courts in Utah.
Without articulating why, the borrowers argue that the forum
selection clauses are ambiguous and therefore must be construed against
the credit union. We conclude that this argument is without merit as the
clauses are clear and unambiguous and this court need not interpret the
contract any differently from the contract's plain meaning. See, e.g., Hunt
Wesson Foods, 817 F.2d at 77 ("A primary rule of interpretation is that
``[t] he common or normal meaning of language will be given to the words of
a contract unless circumstances show that in a particular case a special
meaning should be attached to it." (quoting 4 Samuel Williston & Walter
H. E. Jaeger, A Treatise on the Law of Contracts § 618 (3d ed. 1961)). The
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clauses provide no words of exclusivity and to interpret the clauses as
mandatory forum selection clauses would read language into the contract
that is not there.
CONCLUSION
In this case, none of the clauses contain exclusive language.
Accordingly, all clauses are permissive forum selection clauses, and the
district court erred when it found Utah was the sole forum for any
controversy and dismissed the case for lack of subject matter jurisdiction.
We therefore reverse the district court's order dismissing the case and
remand this matter to the district court for further proceedings
, C.J.
Hardesty
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Thut-e Ai3
Douglas
Parraguirre
J.
Saitta
Gibbons
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