Opinion
DOCKET NO. A-1571-14T1 DOCKET NO. A-2406-14T1
04-06-2016
PETROLEUM TRADERS CORPORATION, Plaintiff-Respondent, v. DAIBES OIL, L.L.C., and MUNIR DAIBES, Defendants, and FRED DAIBES, Defendant-Appellant. PETROLEUM TRADERS CORPORATION, Plaintiff-Respondent, v. DAIBES OIL, L.L.C. and MUNIR DAIBES, Defendants-Appellants, and FRED DAIBES, Defendant.
Robert P. Travers, attorney for appellant in A-1571-14. Jones and Jones, attorneys for respondent Petroleum Traders Corporation in A-1571-14 and A-2406-14 (Vincent J. Massa, III, on the brief). Law Offices of Charles Shaw, P.C., attorneys for appellants in A-2406-14 (G. William DeLaney, on the brief). Respondent Fred Daibes in A-2406-14 has not filed a brief.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Carroll. On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2212-14. Robert P. Travers, attorney for appellant in A-1571-14. Jones and Jones, attorneys for respondent Petroleum Traders Corporation in A-1571-14 and A-2406-14 (Vincent J. Massa, III, on the brief). Law Offices of Charles Shaw, P.C., attorneys for appellants in A-2406-14 (G. William DeLaney, on the brief). Respondent Fred Daibes in A-2406-14 has not filed a brief. PER CURIAM
We have consolidated these appeals for the purpose of issuing a single opinion. In A-1571-14, defendant Fred Daibes (Fred) appeals from the Law Division's November 21, 2014 orders that 1) granted summary judgment to plaintiff Petroleum Traders Corporation in the sum of $744,225.83, plus attorneys' fees and costs in the amount of $10,637.50; and 2) denied Fred's motion for summary judgment. In A-2406-14, defendants Daibes Oil, LLC (the LLC) and its managing member, Munir Daibes (Munir), appeal from the Law Division's November 21, 2014 order that granted summary judgment against them in the same amounts, and the Law Division's January 14, 2015 order that denied their motion for reconsideration.
For purposes of clarity, because defendants are related and share the same last name, we refer to them by their first names. We intend no disrespect by this informality.
I.
The dispute involves the purchase of petroleum products supplied by plaintiff to the LLC pursuant to a line of credit. The credit application agreement filed by Munir on behalf of the LLC included an express consent to litigate any dispute in Indiana as an "inducement" to have plaintiff enter into the agreement. The LLC also consented to Indiana's courts exercising personal jurisdiction over it.
Munir and Fred both executed personal guarantees (the guarantees) as security for payments due. The guarantees expressly provided that "the respective rights and duties" of the parties "shall be interpreted and determined in accordance with the laws of the State of Indiana, without regard to its laws pertaining to choice of law or conflicts of law." The guarantees further provided that any "action . . . to enforce . . . or otherwise construe" the guarantees "shall be brought in a court of competent jurisdiction in . . . Indiana."
Plaintiff's unpaid invoices for deliveries made in January 2014 exceeded $650,000, and it filed suit on March 4, 2014, seeking compensatory damages, interest due under the terms of the book account, pre- and post-judgment interest and counsel fees. By separate count in its complaint, plaintiff sought judgment on the guarantees. Attached to plaintiff's complaint were copies of the credit agreement, the guarantees and the unpaid invoices. Defendants filed answers containing general denials, and Fred specifically asserted that his guarantee was unenforceable and lacked consideration. None of the defendants asserted lack of subject matter jurisdiction as an affirmative defense.
Plaintiff's motion for summary judgment was supported by the certification of its credit specialist, Stacey K. Odom-Murray, who stated that Munir executed an application in August 2013 that was approved in September for a credit line of $400,000. Odom-Murray further certified that in November, Munir sought an increase in the credit line. Plaintiff agreed to increase the limit to $500,000, but Munir wanted a $1 million line of credit. According to Odom-Murray, she told Munir that plaintiff would consider extending a larger line of credit if secured by his and Fred's personal guarantees. On November 18, 2013, Munir and Fred executed the guarantees. One day later, plaintiff agreed to increase the credit limit to $700,000.
Odom-Murray certified that as of October 24, 2014, defendants owed plaintiff $744,225.83. Plaintiff's counsel also filed a certification of services.
Munir and the LLC opposed the motion based upon the forum selection clause contained in the credit agreement. Fred filed a certification in opposition and in support of a cross-motion for summary judgment in his favor, stating that he owned no membership interest in the LLC, had no dealings with plaintiff and received no consideration from either the LLC or plaintiff in return for executing the guarantee.
The Law Division judge heard oral arguments on November 21, 2014. Although admitting that they first raised the issue in opposition to plaintiff's summary judgment motion, Munir and the LLC sought dismissal of plaintiff's complaint based solely on the forum selection clause. Fred, however, argued that there was no consideration extended in support of his guarantee, both because Fred had no interest in the LLC, and because plaintiff was willing to supply $500,000 in credit to Munir and the LLC without Fred's guarantee. Fred argued that any exposure he faced on the guarantee should be limited to $200,000. Fred also argued that Indiana law applied, and whether there was adequate consideration presented a factual, as opposed to a legal, issue.
Plaintiff argued that defendants had never previously sought dismissal of the complaint or raised the forum selection clause as a defense. Plaintiff further contended that Indiana law and New Jersey law were similar, and there was adequate consideration supporting Fred's guarantee because plaintiff was induced to provide products after both guarantees were executed and delivered, as reflected by its invoices in January 2014.
The judge determined that the forum selection clauses were "for the protection of" plaintiff, and, in any event, defendants should have raised the issue earlier in the litigation. The judge further noted that defendants were both residents of New Jersey, the LLC was a "New Jersey LLC" and there was "no prejudice whatsoever." Without engaging in a conflicts of law analysis, but concluding there was nothing before her demonstrating "Indiana law is different than New Jersey [law] in terms of t[hese] personal guarantee[s]," the judge quoted the language of the guarantees and concluded that Fred unconditionally guaranteed "prompt payment" of any obligation incurred by the LLC, "whether such obligation now exists or is incurred hereafter . . . ." She granted plaintiff summary judgment.
Fred filed his appeal, but Munir and the LLC moved for reconsideration. They claimed that they asserted an affirmative defense in their answer, specifically, that plaintiff's complaint was "barred by the terms of the contract," one of which was the forum selection clause. They also argued that there was minimal discovery between the parties, implying, we assume, that they should not be estopped from raising the defense now.
The judge denied the motion for reconsideration. In a brief written statement of reasons, she explained that Munir and the LLC "waived their rights to invoke the forum selection clause." Noting that the motion "fail[ed] to provide any new evidence or case law for reconsideration[,]" the judge entered a conforming order. The appeal by Munir and the LLC ensued.
II.
The standards we apply on appeal are well-known. "An appellate court reviews an order granting summary judgment in accordance with the same standard as the motion judge." Bhagat v. Bhagat, 217 N.J. 22, 38 (2014) (citing W.J.A. v. D.A., 210 N.J. 229, 237-38 (2012); Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010)). We "identify whether there are genuine issues of material fact and, if not, whether the moving party is entitled to summary judgment as a matter of law." Ibid. (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); R. 4:46-2(c)).
[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 231 (App. Div.), certif. denied, 189 N.J. 104 (2006). We owe no deference to the motion judge's conclusions in this regard and review issues of law de novo. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995)).
[Brill, supra, 142 N.J. at 540.]
A.
Before us, Munir and the LLC essentially reiterate the argument made in the Law Division. They contend that the forum selection clauses were enforceable and divested New Jersey of "subject matter jurisdiction," which can be raised at any time in the litigation. They also argue that any ambiguities in the documents are to be construed against the drafter — plaintiff — and that plaintiff would suffer no prejudice by filing suit in Indiana because defendants agreed to subject themselves to the jurisdiction of that state's courts.
The appeal raises purely legal issues to which we believe plenary review is appropriate. See Paradise Enters., Ltd. v. Sapir, 356 N.J. Super. 96, 103 n.3 (App. Div. 2002) (noting the scope of review on trial court's decision regarding forum selection clause is "an open question in New Jersey," but citing several Federal decisions holding that de novo review is appropriate), certif. denied, 175 N.J. 549 (2003). Initially, we acknowledge and agree with these defendants that "[a]s a general rule, a forum selection clause is enforceable unless it is the result of 'fraud, undue influence, or overweening bargaining power,' is 'unreasonable,' or violates a 'strong public policy.'" Ibid. (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-15, 92 S. Ct. 1907, 1913-16, 32 L. Ed. 2d 513, 520-23 (1972)). We also agree that a challenge to subject matter jurisdiction may be brought at any stage of the litigation, and, therefore, the judge erred in concluding these defendants had waived the defense of lack of subject matter jurisdiction. See, e.g., Peper v. Princeton University Bd. of Trustees, 77 N.J. 55, 66 (1978) (citing McKeeby v. Arthur, 7 N.J. 174 (1951)) ("Objection to jurisdiction of the court over the subject matter is effective whenever made."); see also R. 4:6-7 (preserving the defense to be raised at any time "by suggestion of the parties or otherwise").
However, contrary to defendants' argument, the fact that the parties have agreed to an enforceable forum selection clause does not divest a different forum of subject matter jurisdiction. As the Court has made clear, "[t]he holding in The Bremen represents the prevailing view on the enforceability of forum-selection clauses, and is consistent with the position adopted by the Restatement (Second) of Conflict of Laws § 80 (1969)." Kubis & Perszyk Assocs., Inc. v. Sun Microsystems, Inc., 146 N.J. 176, 188 (1996). As the Restatement explains, while a fair and reasonable forum selection agreement will routinely be given effect, "[t]he parties' agreement as to the place of the action cannot oust a state of judicial jurisdiction." Restatement (Second) of Conflict of Laws § 80.
In this regard, defendants misread our decision in Hoffman v. Supplements Togo Management, LLC, 419 N.J. Super. 596 (App. Div. 2011). There, we reversed the trial court's dismissal of the New Jersey plaintiff's complaint based upon a forum selection contained within a disclaimer on the defendant's website. Id. at 598. Discussing the effect of forum selection provisions generally, we stated that "[a] court lacks subject matter jurisdiction over a case if it is brought in an ineligible forum." Id. at 606 (citing Peper, supra, 77 N.J. at 65). We noted that "[i]n particular, a plaintiff cannot file suit in a court if he or she has entered into an enforceable agreement to bring such claims in another forum." Ibid. (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94, 111 S. Ct. 1522, 1527, 113 L. Ed. 2d 622, 632 (1991)).
Defendants twist this dicta to argue that the forum selection provisions in this case divested New Jersey's courts of subject matter jurisdiction. That simply is not true.
First of all, New Jersey clearly was not an "ineligible" forum. Munir and the LLC were residents of New Jersey, conducted their business in New Jersey and the shipments of petroleum products at issue were shipped to the LLC's address in New Jersey. Moreover, unlike the plaintiff in Hoffman, who may have agreed to bring any action in another state and then started the action in New Jersey, plaintiff here was the beneficiary of the forum selection provisions at issue. It is undisputed that defendants failed to assert any reason why litigating the case in New Jersey — their home forum — was unfair, prejudicial or an unreasonable forum for the litigation. They have raised no such argument before us.
Plaintiff correctly points out that none of the cases cited by these defendants support the proposition that one party may prevent the other party, who drafted the forum selection clause for its own benefit, from waiving the provisions if 1) the forum selected is the home forum of the party seeking enforcement and 2) that forum has subject matter jurisdiction over the dispute. We affirm the orders under review in A-2406-14.
B.
Without asserting that New Jersey or Indiana law necessarily controls, Fred contends that the judge erred in not conducting a choice of law analysis and deciding the issue, because differences do exist between the substantive law of the two states regarding Fred's guarantee. He also argues, as he did before the motion judge, that there were material factual disputes that should have forestalled judgment in plaintiff's favor.
As to the latter argument, Fred claims there were disputed facts as to "whether sufficient consideration existed for [his] guarantee." The contention lacks sufficient merit to warrant extensive discussion in a written opinion. R. 2:11-3(e)(1)(E). It suffices to say that Fred never disputed the statement of material undisputed facts or the assertions contained in Odom-Murray's certification filed in support of plaintiff's motion. He simply claimed a lack of knowledge. See R. 4:46-5 (requiring that in response to a summary judgment motion, "an adverse party may not rest upon the mere allegations or denials of the pleading, but must respond by affidavits . . . setting forth specific facts showing there is a genuine issue for trial"). The undisputed facts showed that plaintiff demanded Fred's guarantee before extending an additional amount of credit to the LLC, the invoices reflected shipments made after the guarantees were executed and the amount of the invoices due, in and of themselves, exceeded the amount of credit originally extended to the LLC.
Fred also argues the judge failed to resolve the factual dispute about whether Indiana or New Jersey law applied. This is not a factual dispute, but, rather, it presents a purely legal question to which we apply de novo review. --------
We turn to Fred's other contention on appeal. We agree that a choice of law analysis was required.
Guarantees are contracts, to which many of the usual tenets of contract formation and interpretation apply. See, e.g., Ctr. 48 Ltd. P'ship v. May Dept. Stores Co., 355 N.J. Super. 390, 405-06 (App. Div. 2002). The Court has clearly stated that "'[o]rdinarily, when parties to a contract have agreed to be governed by the laws of a particular state, New Jersey courts will uphold the contractual choice if it does not violate New Jersey's public policy.'" N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 568 (1999) (quoting Instructional Sys., Inc. v. Computer Curriculum Corp., 130 N.J. 324, 341 (1992)). Despite the parties' choice, New Jersey law will govern if
"(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, orHere, the chosen state, Indiana, has a substantial relationship to plaintiff and the transaction secured by the guarantees, and Fred does not contend otherwise. Nor does Fred contend, and we cannot say, that New Jersey's interests are "materially greater" than Indiana's, or that application of Indiana law is "contrary to a fundamental policy" of New Jersey. Ibid. We conclude that Indiana law applies.
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which . . . would be the state of the applicable law in the absence of an effective choice of law by the parties."
[Id. at 568-69 (quoting Instructional Sys., supra, 130 N.J. at 342).]
Fred contends that under Indiana law, his guarantee was not supported by adequate consideration, because he executed and delivered it after the original credit application made by the LLC was accepted, and plaintiff had already approved a $400,000 line of credit. We disagree.
Both parties cite Jackson v. Luellen Farms, Inc., 877 N.E.2d 848 (Ind. Ct. App. 2007), as instructive. There, the court explained that under Indiana law,
"[i]t is not necessary for a guarantor to derive any benefit from the principal contract or the guarantee for consideration to exist. If the guarantee is made at the time of the principal contract sufficient consideration exists." On the other hand, when a guaranty is executed subsequent to the original contract, in order for the same consideration used to support the original contract to serve as consideration for the guaranty, one of five conditions must exist:
(1) The guaranty was executed pursuant to an understanding had before and was an inducement to the execution of the principal contract; or
(2) The guaranty was delivered before any obligation or liability was incurred under the principal contract; or
(3) The guaranty was made pursuant to a contract provision; or
(4) The principal contract does not become operative until the execution of a guaranty; or
(5) The guaranty expressly refers to a previous agreement between the principal debtor and creditor which is executory in its character and embraces prospective dealings between the parties.
[Id. at 858-59 (emphasis added) (first quoting Vanek v. Ind. Nat'l Bank, 540 N.E.2d 81, 84 (Ind. Ct. App. 1989), aff'd, 551 N.E.2d 1134 (1990) (emphasis
added); and then quoting Merchants Nat'l Bank & Trust Co. of Indianapolis v. Lewark, 503 N.E.2d 415, 417 (Ind. Ct. App. 1987)).]
In this case, the undisputed facts were that after the guarantees were executed and delivered, pursuant to a previously-approved, but limited in amount, line of credit, plaintiff delivered petroleum products worth more than $655,000 to the LLC. Fred persistently contends that $400,000 of these deliveries made in January 2014 were pursuant to the originally-approved credit application, but they were only made after the guarantees were executed and delivered. In other words, there was additional consideration extended based upon Fred's and Munir's guarantees, i.e., additional deliveries in increased amounts. There is no proof to the contrary. See also Restatement of (Third) Suretyship & Guaranty, § 9(2)(d) (1996) (noting that a secondary obligation does not fail for lack of consideration if "the secondary obligor should reasonably expect its promise to induce action . . . of a substantial character on the part of the obligee . . . and the promise does induce such action").
Even if we were wrong about this assessment, one of the exceptions cited by Indiana's courts clearly applies. The guarantee expressly referred to the existing line of credit, because it provided security for "any extensions of credit . . . [plaintiff] has made, or may hereafter make" to the LLC. The credit application agreement was in the nature of an executory revolving line of credit and "embrace[d] prospective dealings between the parties." Jackson, supra, 877 N.E.2d at 859. As a result, under the fifth Jackson factor, Fred's guarantee did not fail for lack of consideration.
We affirm the order under review in A-1571-14. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION