Parrot-Ice Drink Products of America, Ltd. v. K & G Stores, Inc., Baljit Nanda, and Preet Puri ( 2010 )

Reversed and Remanded and Memorandum Opinion filed March 30, 2010.

In The

Fourteenth Court of Appeals

___________________

NO. 14-09-00008-CV

___________________

Parrot-Ice Drink Products of America, Ltd., Appellant

V.

K & G Stores, inc., Baljit Nanda, and Preet Puri, Appellees

On Appeal from the 11th Judicial District Court

Harris County, Texas

Trial Court Cause No. 2007-66349

MEMORANDUM OPINION

Appellant Parrot-Ice Drink Products of America Ltd. challenges the trial court’s order granting the special appearances of appellees K & G Stores, Inc., Baljit Nanda, and Preet Puri. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (Vernon 2008).  We reverse and remand.  

Background

Parrot-Ice is a Texas company that sells and leases specialty drink dispensers in the frozen beverage market.  Its principal office is located in Houston, Texas.  Parrot-Ice contracted in 1999 to lease frozen drink dispensers to K & G.  K & G is a Colorado corporation that owns 11 convenience stores in Colorado.  Nanda and Puri signed the lease agreement individually as guarantors of the lease obligations undertaken by K & G. 

K & G obtained financing for the lease agreement from First Sierra Financial.  The lease agreement lists a Houston, Texas office address for First Sierra Financial.  American Express Business Finance bought First Sierra Financial in 2001.   American Express Business Finance later sold First Sierra Financial to KeyCorp.  KeyCorp owned First Sierra Financial at the time this suit was filed.  American Express Business Finance and KeyCorp maintained Texas offices during their respective periods of ownership of First Sierra Financial.   

The lease agreement is a single document containing two consent-to-jurisdiction clauses: (1) the consent-to-jurisdiction clause in the guaranty part of the document (the “Guaranty Clause”), which applies to Nanda and Puri as individual guarantors of K & G’s obligations under the lease; and (2) the consent-to-jurisdiction clause in the lease part of the document (the “Lease Clause”), which applies to lessee K & G.[1]  The Guaranty Clause states, “Guarantor consents to the jurisdiction of any state or federal court located in California or in any other state where Lessor has an office.” The Lease Clause states, “Without limiting the Lessor to bring any action or proceeding against Lessee in the courts of other jurisdictions, Lessee irrevocably submits to the jurisdiction of any State or Federal court located in California or in an[y] state where Lessor has an office.”

Under the lease agreement, Parrot-Ice is the “supplier,” K & G is the “lessee,” First Sierra Financial is the “lessor,” and Nanda and Puri are “guarantors.”  The lease agreement also contains a choice of law clause selecting California law. 

The lease agreement had an initial term of four years.  After the initial term expired, the lease agreement automatically renewed in 90-day intervals until written notice of termination was given.  At the end of the lease agreement’s initial four-year term in 2003, Parrot-Ice became the “lessor” under the lease agreement pursuant to a separate contract between Parrot-Ice and First Sierra Financial. 

Parrot-Ice sued K & G and Nanda on October 25, 2007, alleging that they breached the lease agreement.  K & G and Nanda filed special appearances on December 20, 2007.  Parrot-Ice filed an amended original petition on July 22, 2008 adding Puri as a defendant.  Puri filed a special appearance on September 3, 2008.  After holding a hearing, the trial court granted Nanda’s, Puri’s, and K & G’s special appearances in an order signed on December 1, 2008.  The trial court did not sign findings of fact or conclusions of law.   

Standard of Review

Determining whether a trial court has personal jurisdiction over a defendant presents a question of law subject to de novo review.  BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).[2]

Trial courts sometimes must resolve fact issues before deciding personal jurisdiction.  Id.  If the trial court does not sign findings of fact and conclusions of law, all facts necessary to support the trial court’s ruling and supported by the evidence are implied in favor of the trial court’s decision.  Id. at 794-95.  When the appellate record includes the reporter’s record and the clerk’s record, parties may challenge the legal and factual sufficiency of these implied findings.  Id.  If the appellate court determines that the trial court’s findings are supported by sufficient evidence, or if the material facts are undisputed, then the appellate court decides as a matter of law whether those facts negate all bases for personal jurisdiction.  Id.

The plaintiff bears the initial burden of pleading sufficient allegations to bring a nonresident within the provisions of the Texas long-arm statute.  Id.; Cerbone v. Farb, 225 S.W.3d 764, 766-67 (Tex. App.—Houston [14th Dist.] 2007, no pet.).  The burden then shifts to the nonresident defendant to negate all bases of personal jurisdiction asserted by the plaintiff.  Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007); Cerbone, 225 S.W.3d at 767.

The court will not resolve merits-based questions on appeal regarding a special appearance.  Pulmosan Safety Equip. Corp. v. Lamb, 273 S.W.3d 829, 839 (Tex. App.—Houston [14th Dist.] 2008, pet. denied).

Analysis

            Parrot-Ice asserts that personal jurisdiction is established with respect to Nanda, Puri, and K & G because (1) all three defendants consented to jurisdiction in Texas pursuant to the Guaranty Clause and the Lease Clause; and, alternatively, (2) the minimum contacts standard is satisfied. 

Parrot-Ice asserts that personal jurisdiction over Nanda and Puri is established based on the Guaranty Clause, and that personal jurisdiction over K & G is established based on the Lease Clause.  A consent-to-jurisdiction clause is one of several ways a litigant may consent to personal jurisdiction in a forum.  See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14 (1985); In re Wilmer Cutler Pickering Hale & Dorr, LLP, No. 05-08-01395-CV, 2008 WL 5413097, at *4 (Tex. App.—Dallas, Dec. 31, 2008, orig. proceeding [mand. denied]).  If a litigant signs a contract containing a consent-to-jurisdiction clause, then that litigant either has consented to personal jurisdiction or waived the requirements for personal jurisdiction in the forum or forums within the scope of the clause.  Burger King Corp, 471 U.S. at 473 n. 14; Tri-State Bldg. Specialties, Inc. v. NCI Bldg. Sys., L.P., 184 S.W.3d 242, 248 (Tex. App.—Houston [1st Dist .] 2005, no pet.); In re Wilmer Cutler Pickering Hale & Door, LLP, 2008 WL 5413097, at *4.   

Nanda, Puri, and K & G argue that they did not consent to personal jurisdiction in Texas under the consent-to-jurisdiction clauses.  They first contend that the clauses should be construed as consenting to jurisdiction in California and any other state in which the lessor had an office “on the day that Plaintiff’s Original Petition was filed.”  Nanda, Puri, and K & G assert that First Sierra Financial did not have an office in Texas on the day Parrot-Ice filed its original petition; thus, under their construction, they did not consent to personal jurisdiction in Texas.  Alternatively, Nanda, Puri, and K & G argue that these clauses are ambiguous because they are susceptible to multiple reasonable interpretations. 

Parrot-Ice argues that the clauses are written in present tense; therefore, they should be construed as consenting to personal jurisdiction in California and any other state in which First Sierra Financial had an office “at the time the parties reached their agreement.”  The lease agreement lists a Houston, Texas office for First Sierra Financial.  Thus, under Parrot-Ice’s construction, Nanda, Puri, and K & G consented to jurisdiction in Texas when they signed the agreement containing the forum selection clauses because First Sierra Financial had an office in Texas at that time.

A.        The Guaranty Clause

Nanda and Puri consented to jurisdiction “in any . . . state where Lessor has an office.”  The lease’s guaranty section defines “Lessor” as “First Sierra Financial, Inc., its successors and assigns.” 

It is undisputed that First Sierra Financial was purchased by American Express Business Finance in 2001, and that American Express Business Finance later sold First Sierra Financial to KeyCorp.  It is undisputed that Parrot-Ice became the “Lessor” under the lease agreement when the initial four-year lease term expired in 2003 pursuant to a separate agreement between Parrot-Ice and First Sierra Financial.  It also is undisputed that First Sierra Financial, American Express Business Finance, KeyCorp, and Parrot-Ice all maintained offices in Texas while they were the “Lessor” under the Guaranty Clause.  Under these circumstances, every possible “Lessor” had an office in Texas regardless of whether the operative time frame is the time of signing (as Parrot-Ice contends) or the time of filing suit (as Nanda and Puri contend).  Therefore, Nanda and Puri consented to personal jurisdiction in Texas pursuant to the Guaranty Clause under either interpretation.  

B.        The Lease Clause

K & G agreed that it “irrevocably submits to the jurisdiction of any State or Federal court located in California or in an[y] state where Lessor has an office.”  Unlike the Guaranty Clause, the term “Lessor” as used in the Lease Clause is not defined to include First Sierra Financial’s successors and assigns.  Therefore, the time-of-signing versus time-of-filing dispute cannot be resolved as to K & G by looking at office locations of First Sierra Financial’s successors. 

First Sierra Financial had a Texas office at the time of signing; on this record, it did not have a Texas office at the time suit was filed.  The lease agreement lists a Texas office address for First Sierra Financial.  K & G attached an affidavit from its counsel stating in part as follows:

I have done an internet search on First Sierra Financial, Inc., and found a variety of documents on the internet that indicate the company existed in the late 1990’s in Houston.  I was unable to find anything indicating the company still exists or has any office in Texas.  I looked in the Houston phone book but was unable to find any listing for First Sierra Financial, Inc.  

There also is evidence in the record that American Express Business Finance bought First Sierra Financial in 2001, and that American Express Business Finance later sold First Sierra Financial to KeyCorp.  

We analyze the Lease Clause under the general rules for contract interpretation.   See Wilmer Cutler Pickering Hale & Dorr, 2008 WL 5413097, at *4.  We construe a contract according to its plain language.  See CNOOC Se. Asia Ltd v. Paladin Res. (Sunda) Ltd, 222 S.W.3d 889, 895 (Tex. App.—Dallas 2007, pet. denied).  Whether a contract is ambiguous is a question of law.  J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).  We determine whether a contract is ambiguous by analyzing the contract as a whole, in light of the circumstances present when the parties entered into the contract.  Universal Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003).  A contract is ambiguous when it is susceptible to more than one reasonable interpretation.  Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005).  If a contract is worded so that it can be given a certain or definite legal meaning, it is unambiguous.  Id.  The parties’ mere disagreement about a contract’s meaning does not render it ambiguous.  Hewlett-Packard Co. v. Benchmark Elecs., Inc., 142 S.W.3d 554, 561 (Tex. App.—Houston [14th Dist.] 2004, pet. denied).  The court may conclude that a contract is ambiguous in the absence of such pleading by any party.  Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993). 

We conclude that the lease forum selection clause is not ambiguous because it can be given a definite legal meaning.  The clause states that “Lessee . . . submits to the jurisdiction . . . in California or in an[y] state where Lessor has an office.” (emphasis added).  The clause is written in present tense, establishing that the relevant time period is the point in time at which the contract was signed.  Further, the clause references “where Lessor has an office;” it does not reference successors and assigns.  (emphasis added). Therefore, the only reasonable interpretation is that the lessee “submits” to jurisdiction “in California and in an[y] state where Lessor has an office” at the time of signing the contract.  See Chambers County v. TSP Dev., Ltd., 63 S.W.3d 835, 839 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (Phrase “Seller sells and agrees to convey” is present tense “suggesting the document itself brings about the sale,” whereas phrase “Seller agrees to sell and Buyer agrees to buy” is prospective “suggesting that the actual sale may take place in the future but is not being effectuated by the present contract itself.”).

K & G argues that the clause reasonably can be interpreted to mean that it submitted to jurisdiction “in California or in an[y] state where Lessor has an office” at the time suit is filed.  K & G’s interpretation is not supported by the plain language of the clause. K & G’s interpretation is unreasonable because it requires reading language into the clause indicating that the “lessor” must have an office “at the time suit is filed.”  There is no such language in the Lease Clause or in the lease agreement.[3] We conclude that the only reasonable interpretation of the Lease Clause is that the time of signing is the operative timeframe.  See CMS Partners, Ltd. v. Plumrose USA, Inc., 101 S.W.3d 730, 733 (Tex. App.—Texarkana 2003, no pet.) (unambiguous meaning of clause was that “county and state of the defendant” were determined according to parties’ status at time the contract was signed).

Having determined that the Lease Clause is unambiguous, we must next determine whether K & G consented to jurisdiction in Texas under the clause.  The lease agreement designates First Sierra Financial as the “Lessor,” and lists a Texas address for First Sierra Financial.  Therefore, K & G consented to jurisdiction in Texas under the Lease Clause.

C.        Enforceability of the Consent-to-Jurisdiction Clauses

Nanda, Puri, and K & G did not argue in the trial court that the consent-to-jurisdiction clauses are unenforceable or present evidence in support of such an argument.  In their second appellate brief, Nanda, Puri, and K & G assert that the consent-to-jurisdiction clauses cannot be enforced.[4] However, they cite no cases in support of this proposition.  The only argument they make in support of this assertion is that interpreting the Lease Clause to apply as of the time suit is filed, which they contend is the correct construction, would lead to absurd results and be unfair.  They make no argument that the Lease Clause is unenforceable under the construction adopted by this court above. 

            We need not address which legal standard should be applied to determine the enforceability of consent-to-jurisdiction clauses, as opposed to mandatory forum selection clauses.  At a minimum, the standard would be as favorable to enforceability as the standard for mandatory forum selection clauses.  See In re Int’l Profit Assocs., Inc., 274 S.W.3d 672, 675 (Tex. 2009) (mandatory forum selection clauses are presumptively enforceable and must be enforced by the trial court unless the party opposing enforcement clearly shows that (1) the clause is invalid for reasons of fraud or overreaching, (2) enforcement would be unreasonable or unjust, (3) enforcement would contravene a strong public policy of the forum where the suit was brought, or (4) the selected forum would be seriously inconvenient for trial).  Nanda, Puri, and K & G made no showing to rebut the presumption of enforceability under this standard, and therefore, the trial court could not have granted the special appearance based on a determination that the Guaranty Clause and the Lease Clause were unenforceable. 

Conclusion

            The trial court erred in granting Nanda’s, Puri’s, and K & G’s special appearances. We reverse the trial court’s December 1, 2008 order granting the special appearances of Nanda, Puri, and K & G and remand this case for further proceedings in accordance with this opinion.

                                                                        /s/        William J. Boyce

                                                                                    Justice

Panel consists of Justices Frost, Boyce, and Sullivan.

---

[1] The parties refer to these clauses as “forum selection clauses.”  They are more accurately described as “consent-to-jurisdiction” clauses.  In contrast to a forum selection clause, in which the parties agree to litigate in a particular forum, a “consent-to-jurisdiction” clause indicates that the parties consent or submit to the jurisdiction of a particular forum.  In re Wilmer Cutler Pickering Hale & Dorr, LLP, No. 05-08-01395-CV, 2008 WL 5413097, at *4 (Tex. App.—Dallas, Dec. 31, 2008, orig. proceeding [mand.denied]).   A “consent-to-jurisdiction” clause is permissive rather than mandatory.  Id.   

[2] In their brief, Nanda, Puri, and K & G address whether the choice of law clause selecting California law is reasonable; they suggest that, if the choice of California law is enforceable, then this court must follow California precedent in determining whether the exercise of personal jurisdiction satisfies the requirements of federal due process.  Presuming without deciding that this argument otherwise would be correct, it fails because no party has asserted or established that California precedent differs from Texas precedent regarding any issue in this case. Therefore, this court presumes that California precedent is the same as Texas precedent. See Excess Underwriters at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 53 (Tex. 2008).

[3] The authorities K & G relies on to support its time-of-filing argument are distinguishable. K & G first cites Mollan v. Torrance, 22 U.S. 537, 539 (1824), and Conolly v. Taylor, 27 U.S. 556, 565 (1829).  These cases address subject matter jurisdiction rather than personal jurisdiction.  See Mollan, 22 U.S. at 539; Conolly, 27 U.S. at 565.  Specifically, they address the point in time at which a court determines citizenship for purposes of diversity jurisdiction in federal court.  See Mollan, 22 U.S. at 539; Conolly, 27 U.S. at 565.  The other cases K & G cites also address subject matter jurisdiction rather than personal jurisdiction.  See Ex parte Birmingham, 244 S.W.2d 977, 980 (Tex. 1952); Brannon v. Pac. Employers Ins. Co., 224 S.W.2d 466, 469 (Tex. 1949); Isbell v. Kenyon-Warner Dredging Co., 113 Tex. 528, 261 S.W. 762, 763 (1924); Long v. Fox, 625 S.W.2d 376, 378 (Tex. Civ. App.—San Antonio 1981, writ ref’d n.r.e.).  The cases cited by K & G do not address the construction of a consent-to-jurisdiction clause.

[4] In their first appellate brief, they did not assert that these clauses are unenforceable; however, they assert that the trial court may have declined to enforce these clauses under the legal standard stated in Greenwood v. Tillamook Country Smoker, Inc., 857 S.W.2d 654, 657 (Tex. App.—Houston [1st Dist.] 1993, no writ).  This argument lacks merit because this legal standard has been abrogated by the Texas Supreme Court.  See In re AIU Ins. Co., 148 S.W.3d 109, 111–13 (Tex. 2004) (adopting legal standard from M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9 (1972), for determining enforceability of mandatory forum selection clauses); Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 611–14 & ns. 4, 5, 7 (Tex. App.—Houston [1st Dist.] 2005, no pet.) (concluding that Greenwood case is no longer good law as to legal standard for mandatory forum selection clauses).