Omne Financial, Inc v. Shacks, Inc
Omne Financial, Inc v. Shacks, Inc
Opinion of the Court
This case presents us with the question whether a contractual agreement that seeks to establish the venue of potential causes of action that might accrue after the execution of the agreement is enforceable. We hold that it is not.
Pursuant to a lease, North American Interstate, Inc., was to provide defendant Shacks, Inc., with two jukeboxes and two pool tables in return for fixed monthly payments. The lease contained a provision dictating venue for any cause of action arising under the lease:
This lease shall not be effective until signed by the Lessor at our offices. This lease shall be construed to have been executed in the State of Michigan and shall be interpreted in accordance with the law and regulations of the State of Michigan. Lessee hereby agrees to jurisdiction in Michigan in the case of any action, suit or proceeding arising out of this lease and venue shall be in the district court for the 45A Judicial District (if the damages involved are in excess of $10,000 then the circuit court for the county of Oakland). Lessee hereby acknowledges that Lessee has transacted business in the State of Michigan by entering into the lease, and that the jurisdiction, choice of law and venue provisions of this lease are specifically negotiated terms of this lease. (Emphasis added.)
Plaintiff filed suit in the Oakland Circuit Court alleging that defendants breached the lease agreement and guaranty by failing to make the required payments. Defendants then filed a motion to change venue on the ground that venue was improper in Oakland County. The trial court denied defendants’ motion, and defendants now appeal by leave granted.
In Michigan, venue is controlled by statute. Plaintiff’s suit included claims for contract damages and for return of the leased property.
Except for actions provided for in sections 1605, 1611, 1615, and 1629, venue is determined as follows:
(a) The county in which a defendant resides, has a place of business, or conducts business, or in which the registered office of a defendant corporation is located, is a proper county in which to commence and try an action.
(b) If none of the defendants meet 1 or more of the criteria in subdivision (a), the county in which a plaintiff resides or has a place of business, or in which the registered office of a plaintiff corporation is located, is a proper county in which to commence and try an action.
*401 (c) An action against a fiduciary appointed by court order shall be commenced in the county in which the fiduciary was appointed.
The venue statute applicable to the recovery of tangible personal property, MCL 600.1605; MSA 27A.1605, reads:
The county in which the subject of action, or any part thereof, is situated, is a proper county in which to commence and try the following actions:
(a) the recovery of real property, or of an estate or interests therein, or for the determination in any form of such right or interest;
(b) the partition of real property;
(c) the foreclosure of all liens or mortgages on real property; and
(d) the recovery of tangible personal property.
There is no statutory provision that specifically permits parties to agree contractually to any other venue.
No Michigan cases have directly addressed the question whether parties may contractually agree to the venue of potential causes of action that might arise after execution of the contract containing the venue provision. The few cases that touch on this issue at all suggest that, where there is an existing cause of action, parties may agree to venue. See Garavaglia v Dep’t of Revenue, 338 Mich 467, 470; 61 NW2d 612 (1953); Grand Trunk W R Co v Boyd, 321 Mich 693, 699-700; 33 NW2d 120 (1948), rev’d on other grounds 338 US 263; 70 S Ct 26; 94 L Ed 55 (1949); Nat'l Equipment Rental v Miller, 73 Mich App 421,
In order to determine whether contracts regarding venue are enforceable, we must inteipret the statutes that control venue. Statutory interpretation is a question of law, which we review de novo. Long v Chelsea Community Hosp, 219 Mich App 578, 581-582; 557 NW2d 157 (1996). In inteipreting statutes we must strive to effectuate the intent of the Legislature. Id. at 582. Because the venue statutes do not directly address the question whether parties may contractually agree to venue, we must look beyond the language of the statutes. We begin by exploring the purpose of the venue requirement.
Venue rules are not jurisdictional. MCL 600.1601; MSA 27A.1601. Jurisdiction deals with the power of a court to hear a class of cases or the authority of a court to bind the parties. Grebner v Oakland Co Clerk, 220 Mich App 513, 516; 560 NW2d 351 (1996); People v Eaton, 184 Mich App 649, 652-653; 459 NW2d 86 (1990), aff’d on other grounds 439 Mich 919 (1992); Dogan v Michigan Basic Property Ins Ass’n, 130 Mich App 313, 320; 343 NW2d 532 (1983). In contrast, venue rules have been described variously as (1) ensuring “that proceedings are held in the most convenient forum,” Gross v General Motors Corp, 448 Mich 147, 155; 528 NW2d 707 (1995), (2) relating to
Courts evaluate convenience primarily in terms of the interests of the parties and any relevant witnesses. However, the primary goal is to minimize the costs of litigation not only by reducing the burdens on the parties, but also by considering the strains on the system as a whole. See Piper Aircraft Co v Reyno, 454 US 235, 256-257; 102 S Ct 252; 70 L Ed 2d 419 (1981); Gulf Oil Corp v Gilbert, 330 US 501, 507-509; 67 S Ct 839; 91 L Ed 1055 (1947). [Gross, supra at 155.]
With this purpose in mind, we now turn to a review of the statutes and court rules governing venue.
The Michigan Supreme Court has recognized that the establishment of venue is within the Legislature’s power. Coleman v Gurwin, 443 Mich 59, 62; 503 NW2d 435 (1993) (citing Barnard v Hinkley, 10 Mich 458, 459 [1862]). The Legislature has passed several general venue statutes, including those at issue here, as weh as MCL 600.1611; MSA 27A.1611, regarding actions on probate bonds; MCL 600.1615; MSA 27A.1615, regarding actions against governmental units; and MCL 600.1629; MSA 27A.1629, regarding tort and products liability actions. The Legislature has recently used its power to revise the venue statute for
We note that venue is not governed solely by statute. The parties’ choice of venue and motions for change of venue are matters of practice and procedure, which are primarily treated by court rule. See Hoffman v Bos, 56 Mich App 448, 454-455; 224 NW2d 107 (1974). Where there is a conflict between a court rule and a statute, the court rule should prevail. Id. at 455. Pursuant to MCR 2.221, objections to venue are waived if not raised in a timely manner.
We decline to create a rule that allows parties to agree contractually to venue. Our decision is based on several considerations. First, we believe it would be improper to create such a rule on our own accord. The Legislature has established a rule that allows parties to consent to personal jurisdiction by contract. See MCL 600.701(3); MSA 27A.701(3), MCL 600.711(2); MSA 27A.711(2), MCL 600.745; MSA 27A.745. The Legislature has not established such a rule with regard to venue. As the Michigan Supreme Court has stated, a court “may not do on its own accord what the Legislature has seen fit not to do.” Farrington v Total Petroleum, Inc, 442 Mich 201, 210; 501 NW2d 76 (1993).
Third, enforcing contractual agreements regarding venue would conflict with our court rules. Specifically, allowing parties to agree to a venue that is improper under the applicable venue statute would conflict with MCR 2.223(A)(2), which would other
The dissent concludes that we should enforce parties’ venue agreements, relying on a freedom of contract rationale. The dissent fails to recognize that the power to establish venue lies with the Legislature, Coleman, supra at 62, not the parties. In this regard, the right of freedom of contract does not compel the recognition of a private right to fix venue any more than it compels recognition of a private right to establish subject-matter jurisdiction.
For the foregoing reasons, we conclude that contractual venue provisions are not binding on Michigan courts.
We believe that our conclusions can be harmonized with prior case law that suggests that courts will enforce agreements relating to venue that are made after a cause of action has arisen. See Garavaglia, supra at 470; Grand Trunk, supra at 695, 700. First, we note that these cases were decided before the Revised Judicature Act was passed and, therefore, dealt with a different statutory scheme. Second, it is significant that these cases did not address whether the venues that the parties agreed to were proper under the venue statutes then in effect. Third, these cases did not address the conflict between the Legislature’s power to establish venue and the parties’ right to contract. Finally, the cases did not expressly state that such contracts were always enforceable.
In Garavaglia, the defendant argued that the Ing-ham Circuit Court was without jurisdiction because the plaintiffs did not reside there. The Court did not discuss the defendant’s venue argument, but dismissed both the jurisdiction and venue issues in a single sentence: “It is sufficient to say that, prior to the institution of the suit, the parties, in conference, agreed that, for the convenience of both the department and the taxpayer, the suit should be instituted
In this case, the trial court denied defendants’ motion for a change of venue without explaining its reasoning. However, it is clear from the record below that the trial court found the venue provision in the contract enforceable. To the extent it did so, the trial court erred. On remand, the trial court must consider defendants’ motion in light of the statutes and court rules regarding venue. The trial court must decide
Reversed and remanded. We do not retain jurisdiction.
Apparently, plaintiff has recovered this property. However, because venue is determined at the time a suit is filed, venue may still be proper pursuant to the statute governing recovery of tangible personal property. See Brown v Hillsdale Co Rd Comm, 126 Mich App 72, 76-78; 337 NW2d 318 (1983).
The language we quote is that of the statute as amended by 1995 PA 161, which took effect just after the suit in this case was filed. However, the amendments were essentially grammatical and did not change the substance of the statute.
We note that the panel in Nat’l Equipment Rental discussed this issue in dicta and simply relied on Garavaglia and Grand Trunk. Nat’l Equipment Rental, supra at 425.
This rule is consistent with the corresponding statute. MCL 600.1651; MSA 27A.1651.
MCR 2.223 provides, in part:
*405 If the venue of a civil action is improper, the court
(1) shall order a change of venue on timely motion of a defendant, or
(2) may order a change of venue on its own initiative with notice to the parties and opportunity for them to be heard on the venue question.
If venue is changed because the action was brought where venue was not proper, the action may be transferred only to a county in which venue would have been proper.
MCL 600.1651; MSA 27A.1651.
MCR 2.221(C).
For example, had the parties in Bert agreed to venue before the cause of action arose, the agreement clearly would not have been enforceable. There, the child moved out of state just before a child custody action was filed. The panel in Bert properly held that venue was improper in the child’s former county of residence. The panel noted that such a finding was “necessary to safeguard the child’s interests in having the action brought in the county of the child’s residence.” Bert, supra at 214.
Parties may not stipulate subject-matter jurisdiction. Redding v Redding, 214 Mich App 639, 643; 543 NW2d 75 (1995).
We recognize that other jurisdictions have addressed similar issues with varying results. See, generally, anno: Validity of contractual provision limiting place or court in which action may be brought, 31 ALR 4th 404. However, because our holding in this case is controlled by the intent of the Michigan Legislature and by our construction of Michigan statutes and court rules, we do not find any of these cases persuasive.
The relevance of the contract will depend on the degree to which the original agreement addressed these factors and on the nature and extent of any changes in the parties’ situations between the time the contract was signed and the time the suit is filed. An example may be helpful. A hypothetical contract might state: “The parties agree that X is a mutually convenient forum, and that both parties conduct business in X.” Assuming a cause of action arose and was covered under the venue provisions of MCL 600.1621; MSA 27A.1621, such a contract would be essentially conclusive with respect to both the propriety and convenience of venue X on the day the contract was signed. Thus, in the absence of any other relevant considerations, a cause of action arising under that contract and filed on the day the contract was signed should proceed in venue X. However, the contract might be of little relevance with respect to these issues in an action filed years later, because the parties’ circumstances might have changed.
Defendants’ only objection to venue was that it was improper in Oakland County, and they requested only a change of venue pursuant to MCR 2.223. Thus, defendants have waived any challenge to venue under MCR 2.222.
Dissenting Opinion
(dissenting). I respectfully dissent. The trial court’s order denying defendants’ motion to change venue from Oakland County to Saginaw County on the basis of the parties’ agreement was proper. Neither the venue statutes nor the court rules prohibit courts from giving effect to the intent of the parties as expressed in the contract with regard to the choice of a particular venue. The preferable approach would be to enforce the forum selection clause in the contract unless a party could show that such enforcement would be unreasonable or that the provision was the product of fraud or overreaching. Such an approach embraces the modem view of forum selection clauses as set forth in the Restatement Conflict of Laws, 2d, § 80, p 244 (1988), and achieves the proper balance between the parties’
The majority reasons that because contractual forum selection clauses designating a particular venue are not expressly permitted by the Legislature, such clauses must of necessity be prohibited. This reverses the proper order of things. The rule is that citizens can contract with respect to particular things unless the Legislature determines that contracts regarding such matters are contrary to public policy. The Legislature has not forbidden persons from agreeing to a specific venue for future disputes. The majority’s approach cannot be reconciled with the fundamental principle that individuals are free to contract as they see fit in the absence of a specific statutory or constitutional prohibition.
The majority contends that such agreements would abrogate a court’s authority with regard to venue under the court rules; however, that is not the case. The relevant question in a contract case is whether, under the circumstances, a court should exercise its authority with regard to venue to give effect to the legitimate expectations of the parties as manifested in their voluntary agreement regarding the particular court in which certain actions must be brought. See MCR 2.222(A) and 2.223(A)(2); The Bremen v Zapata Off-Shore Co, 407 US 1, 9, 12; 92 S Ct 1907; 32 L Ed 2d 513 (1972); Restatement, supra. There are compelling reasons why a freely negotiated agreement with respect to venue should be given full effect.
As the majority notes, “the primary goal [of statutes and court rules establishing venue] is to minimize the costs of litigation not only by reducing the burdens on the parties, but also by considering the strains on the system as a whole.” Gross v General Motors Corp, 448 Mich 147, 155; 528 NW2d 707 (1995). Yet, the majority’s decision moves the law in just the opposite
As the majority correctly recognizes, statutes and court rules relating to venue are procedural in nature and are primarily concerned with the convenience of the litigants. MCR 2.222(A); Gross, supra at 155; Kerekes v Bowlds, 179 Mich App 805, 810; 446 NW2d 357 (1989); 77 Am Jur 2d, Venue, § 47, pp 654-655. “[V]enue is simply the location of trial, and its determination should only concern the selection of a fair and convenient location where the merits of a dispute can be adjudicated.” Gross, supra at 156. There is
Federal courts, employing the modem view of forum selection clauses, have not distinguished between contractual provisions designating a particular court and those specifying a particular jurisdiction. See The Bremen, supra (upholding a forum selection clause stating that disputes were to be resolved in the High Court of Justice in London, England), Carnival Cruise Lines, Inc v Shute, 499 US 585, 591-593; 111 S Ct 1522; 113 L Ed 2d 622 (1991) (applying the holding in The Bremen to uphold a forum selection clause stating that disputes were to
Moreover, there is no principled excuse for distinguishing between those agreements that are reached after a cause of action arises and those that are negotiated in advance pursuant to a contract. In Garavag-lia v Dep’t of Revenue, 338 Mich 467, 470; 61 NW2d
In every case in which Michigan courts have considered the question, the broader federal view has been adopted. In Grand Trunk W R Co v Boyd, 321 Mich 693, 699-700; 33 NW2d 120 (1948), rev’d 338 US 263; 70 S Ct 26; 94 L Ed 55 (1949), our Supreme Court adopted the modem view with regard to forum selection clauses. However, consistent with the reasoning above, the decision was reversed by the United States Supreme Court because the Federal Employers Liability Act, 45 USC 56, expressly forbade such agreements as applied to claims under the act. 388 US 265-266. Similarly, this Court adopted the reasoning of Nat’l Equipment Rental, Inc v Szukhent, 375 US 311; 84 S Ct 411; 11 L Ed 2d 354 (1964), in Nat’l Equipment Rental, Inc v Miller, 73 Mich App 421, 426; 251 NW2d 611 (1977). The fact that the federal approach was followed in both these cases and in Garavaglia, supra, inescapably leads to the conclusion that the modem view of forum selection clauses should form the basis for today’s decision.
In my opinion, the trial court acted within its authority when it found that venue was proper in
See, e.g., Dep’t of Navy v Federal Labor Relations Authority, 295 US App DC 239, 248; 962 F2d 48 (1992) [cited with approval in Port Huron Ed Ass’n v Port Huron Area School Dist, 452 Mich 309, 319; 550 NW2d 228 (1996)]:
Because of the fundamental policy of freedom of contract, the parties are generally free to agree to whatever specific rules they like, and in most circumstances it is beyond the competence of the Authority, the National Labor Relations Board or the courts to interfere with the parties’ choice.
Such limitations are justified in view of the fact that parties in such cases generally do not have either the opportunity or the capacity to negotiate and agree in advance to the most convenient venue.
It should be noted in advance that the analysis would be different in a situation where the parties to the contract were not on an equal bargaining basis or the terms were not subject to negotiation, such as in a contract of adhesion.
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