Schine v. Property Solutions International
Filed 1/27/14 Schine v.
Property Solutions International CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a),
prohibits courts and parties from citing or relying on opinions not certified
for publication or ordered published, except as specified by rule
8.1115(b). This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
A. KEVIN
SCHINE,
Plaintiff and Appellant,
v.
PROPERTY
SOLUTIONS INTERNATIONAL, INC.,
Defendant and Respondent.
B240853
(Los
Angeles County
Super. Ct. No. SC115304)
APPEAL
from an order of the Superior Court of Los
Angeles County. Lisa Hart Cole,
Judge. Affirmed.
A.
Kevin Schine, in pro. per., for Plaintiff and Appellant.
Stutz
Artiano Shinoff & Holtz, Paul V. Carelli IV and Derek W. Paradis for Defendant
and Respondent.
____________________________________________
We are asked to determine whether a
forum selection clause in a contract is valid and applicable to a complaint for
fraud filed by A. Kevin Schine. We
answer both questions in the affirmative
and affirm the order of the trial court granting the motion of Property
Solutions International, Inc. (Property Solutions) to stay the action on
grounds of forum non conveniens.
A. The three
agreements
This appeal
concerns a Utah forum selection clause contained in the last of three
agreements concerning the lease and subsequent purchase by Property Solutions
from Schine of “46 domain names related to real estate leasing that ended in
vacancy.com, including apartmentvacancy.com,
officevacancy.com, homevacancy.com, lodgingvacancy.com, storevacancy.com and
condovacancy.com†(domain names). During the relevant period, Property Solutions
also purchased the domain name vacancy.com from a third party.
The
first agreement, entitled, “Purchase and Option
Agreement of *Vacancy.com,†was entered into by
Schine and Property Solutions in October 2003 (Option Agreement). Property Solutions agreed to pay Schine $6,000
for “usage rights of the domain names ‘*Vacancy.com’†for three years. Under the terms of the Option Agreement, Property
Solutions had the option to buy the 46 “*Vacancy.com†domain names owned by
Schine for $30,000. The Option Agreement
required Property Solutions to make an additional payment of $50,000 if any of the
domain names generated $10 million in annual sales. The lease was to terminate and ownership of the
domain names was to revert to Schine if Property Solutions did not exercise the
purchase option before the end of the three-year period. Eventually, the parties declared the first
agreement null and void.
The second agreement,
entitled, “Purchase Agreement of *Vacancy.com,†was entered into by Schine and Property Solutions in September 2004 (Purchase
Agreement).
for the transfer of ownership of the domain
names from Schine to Property Solutions and the termination of the Option
Agreement. Property Solutions agreed to pay
Schine an “additional $50,000 one-time payment†if the domain “Vacancy.com and/orâ€
the domain names generated $10 million in annual sales. The Purchase Agreement contained a forum
selection clause stating, in part, “It is agreed that the jurisdiction for any
action commenced by Schine to enforce the reversion rights under this agreement
in the event [Property Solutions] fails to make the payments referenced in
Paragraphs 2(a) and/or 2(b) shall be any Superior Court located in the
and 2(b) consisted of two partial payments, totaling $7,000, which constituted
the purchase price.
The
third agreement, entitled, “Release Agreement between Property Solutions
International, Inc. and Kevin Schine dated May 25, 2010,â€
was entered
into by Schine and Property Solutions in May 2010 (Release Agreement). It
identified Schine as having a Beverly
Hills address and Property
Solutions as having “its primary place of business†in Utah. The Release Agreement acknowledged that Schine
had “previously sold, transferred, conveyed and assigned to Property Solutions,
all of [Schine’s] right, title and interest in and to†the domain names. In exchange for a “one-time payment, of $3,000,†the
agreement stated Schine “releases and will forever hold Property Solutions
harmless from all debt, encumbrances and obligations relating to the Domains. Further, in consideration of the receipt of
such payment, [Schine] does hereby forever release and will hold Property
Solutions harmless from any other obligations related to the Domains
. . . , including but not limited to any other monetary payment
obligations contained in any other agreement between the parties
. . . .†The $3,000
payment was made “in lieu of any afore agreed upon payments or encumbrances,
and fulfills any and all obligations by Property Solutions to [Schine]
regarding the Domains with respect to any other matter.â€
The Release Agreement
contained a forum selection clause stating, “This agreement shall be
interpreted under the laws of the State of Utah. Any litigation under this agreement shall be
resolved in the trial courts of Utah County, State of Utah. [¶] Should
any part of this Agreement be rendered or declared invalid by a court of
competent jurisdiction in the State of Utah, such invalidation
of such part or portion of this Agreement should not invalidate the remaining
portions thereof, and they shall remain in full force and effect.â€
B. The complaint
On
December 19, 2011, Schine filed a
complaint in the Superior Court of Los Angeles County against Property
Solutions (complaint), alleging that he had been fraudulently induced by
Property Solutions to enter the Release Agreement. The complaint states causes of action for
fraud and deceit; negligent misrepresentation;
breach of fiduciary duty; constructive fraud; and breach of the covenant of
good faith and fair dealing.
After reciting facts
concerning the Option and Purchase Agreements, the complaint alleges that,
under the Release Agreement, Property Solutions paid Schine $3,000 in return
for Schine’s giving up “his $50,000 contingent participation interest in
vacancy.com and the 46 domains that Schine had sold to [Property Solutions].†The complaint goes on to state that an executive
of Property Solutions induced Schine to enter into the Release Agreement by
telling him that Property Solutions had decided not to enter into the apartment
Internet listing service business and intended to sell the “vacancy.com domainâ€
name. The executive falsely offered to
“buy out†for $3,000 Property Solutions’s $50,000 contingent payment obligation
under the terms of the Purchase Agreement “to avoid any disputes with the
future domain owner.†According to the
complaint, the executive’s representations to Schine were false and Property
Solutions actually was preparing to use the domain names to enter the apartment
Internet listing business. The
executive’s misrepresentations induced Schine to “sell his interest back to [Property
Solutions] at an artificially suppressed price.†Had he known the true facts, “Schine would
have sold his $50,000 contingent interest for a higher price . . . or
Schine would have held onto his contingent interest until the $50,000
contingent payment came due.†When Schine
learned of Property Solutions’s launching of the “vacancy.com†Web site, Schine
sought to rescind the Release Agreement.
The complaint sought special damages of no less than $47,000, plus
punitive damages on most of the claims. That
amount was calculated by deducting the $3,000 paid by Property Solutions from
the $50,000 contingent payment obligation.
C. The motion to dismiss or stay
Property
Solutions filed a motion to dismiss or stay the complaint on grounds of forum
non conveniens. In his opposition,
Schine submitted a declaration stating that the Purchase Agreement had been
amended orally. The trial court
sustained Property Solutions’s objection on the ground of relevance. After argument, the trial court granted
Property Solutions’s motion to stay on grounds of forum non conveniens.
The trial court determined
that the allegations of the complaint did not pertain to the Purchase Agreement
and were based solely on the allegation that
the Release Agreement. The court noted
that “[i]n order for [Schine] to reassert any rights under the Purchase
Agreement, [Schine] must first succeed in invalidating the Release Agreement, which
is the entire purpose of this complaint.†The court further concluded that the Utah
forum selection clause in the Release Agreement was mandatory; the Utah forum
selection clause was sufficiently broad to encompass the complaint’s “fraud in
the inducement/tort claimsâ€; the complaint did not assert that the Utah forum
selection clause itself was the product of fraud or coercion; Schine had been
capable of negotiating and amending the terms of the Purchase Agreement; and
Schine failed to establish that enforcement of the Utah forum selection clause
was unreasonable, unconscionable, or in violation of California public policy.
Schine filed a timely appeal.
A. Standard of review
We
review the trial court’s ruling on a motion to stay or dismiss for forum non
conveniens for abuse of discretion. (
v. Superior Court (2001) 90
Cal.App.4th 1, 9.)
B. The trial
court did not abuse its discretion in granting Property Solutions’s motion to stay the action
conveniens
1.
Schine’s claim arises under the Release Agreement, not the Purchase
Agreement
Schine
contends that the Los Angeles forum selection clause in the Purchase Agreement applies and that
the Utah forum selection clause in the Release Agreement does not. In so doing, he disputes that his claim
arises “under†the Release Agreement.
We
examine the gravamen of Schine’s claim to determine which agreement it arises
under. Schine’s complaint is that he was
induced by fraud to give up his contingent right to be paid $50,000. He received that right under the Purchase
Agreement. He has no complaint that he
was fraudulently induced to enter the Purchase Agreement whereby he obtained
the right he now asserts.
Quite
to the contrary, he lost his
contingent right to the $50,000 as a result of signing the Release
Agreement. Basic logic results in the
conclusion that his claims arise under the Release Agreement, whereby that
right was lost.
Schine’s
own words illustrate that his claim arose under the Release Agreement. In his complaint, Shine described his fraud
claim by stating: “In reliance on
[Property Solutions’s] representations, [Schine] was induced to and did sell to
[Property Solutions] his $50,000 contingent participation without sufficient
consideration and under undue influence, based upon the misrepresentations, omissions
and concealments of [Property Solutions].
Had [Schine] known the actual facts, [he] would not have accepted [Property
Solutions’s] Buyout at $3,000. Shine
would have sold his $50,000 contingent interest for a higher price if Schine
had known the true facts, or Schine would have held onto his contingent
interest until the $50,000 contingent payment became due.â€
When
Schine later attempted to boil his claim down to its essence, he stated: “‘In simple form, my main claim is that the
fraud and deceit of [Property Solutions] caused me to sell my contingent
interest for a lower price . . . .’â€
Schine’s
damage calculation underscores that his claim arises under the Release
Agreement, not the Purchase Agreement.
His damage claim is $50,000 minus the $3,000 he received in exchange for
giving up the contingent right to the $50,000, adjusted for other considerations. That right was lost as a result of entering
the Release Agreement.
In
addition, by its own terms, the Los
Angeles forum selection clause
in the Purchase Agreement is inapplicable to the claims Schine now
asserts. That forum selection clause
limited its scope to an action whereby Properly Solutions failed to pay the
$7,000 purchase price. There is no
confusion here that Property Solutions failed to pay the $7,000.
Schine
argues that because the alleged fraud occurred while the Purchase Agreement was
in effect and was discovered after the Release Agreement was executed, the
Purchase Agreement and its Los Angeles
forum clause governs the action.
Schine’s argument does not advance his cause, but supports our
conclusion that the gravamen of the complaint was the alleged fraudulent
inducement of Schine to enter into the Release Agreement, based on alleged fraudulent
conduct that he claims occurred before he executed the Release Agreement.
Shine
also contends that, because the complaint did not seek rescission of the
Release Agreement, he was not suing under the Release Agreement and, therefore,
the Utah forum selection clause does not apply. This argument is unsound because the gravamen
of the complaint was that Schine was fraudulently induced to enter the Release
Agreement. In light of that, the forum
selection clause in the Release Agreement would have applied whether or not
Schine chose to pursue a cause of action for rescission.
Schine
also takes great pains to make it clear that his claim is based on fraud, not
breach of the Purchase Agreement or any other contract. This eliminates the possibility that Schine
is pursuing a breach of contract claim under the Purchase Agreement.
The Release Agreement’s forum selection clause applies because it is not
ambiguous, unreasonable, unconscionable, or otherwise unenforceable
The
Release Agreement’s forum selection clause provides that “[a]ny litigation
under this agreement shall be resolved in the trial courts of . . . Utah.†The word “under†in forum selection clauses is
read expansively to include a wide variety of claims, including various types
of fraud, various types of negligent misrepresentation, restraint of trade,
unfair trade practices, and breach of contract.
(See Cal-State Business Products
& Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1671, 1673, fn. 6
(Cal-State).)
We
are not persuaded by Schine’s argument that a forum selection clause must
contain the words “governed by†instead of “under.†Schine cites Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459 (
contention. Nedlloyd does not hold that an agreement must contain the magic
words “governed by†to designate a choice of law or, by analogy, a forum. It merely holds that “a valid choice-of-law
clause, which provides that a specified body of law ‘governs’ the ‘agreement’
between the parties encompasses all causes of action arising from or related to
that agreement, regardless of how they are characterized.†(Nedlloyd,
is inadequate. Indeed, that word is
commonly used in valid forum selection clauses.
(E.g., Cal-State,
fn. 6.)
Because
Schine’s claim arises under the Release Agreement, the Utah forum
selection clause applies unless it is ambiguous, unreasonable, unconscionable
or otherwise unenforceable.
a. The
clause is not ambiguous
Schine
claims the Utah forum selection clause is ambiguous. His principal argument appears be that,
because there is a Los Angeles forum selection clause in the Purchase Agreement and a Utah forum
selection clause in the Release Agreement, there is an ambiguity that requires
the two agreements to be construed together and the forum issue decided only
after extrinsic evidence is admitted.
We
see no ambiguity resulting from a change in the location of the selected forum
here. The contracts were entered almost
six years apart and concerned different transactions and subject matter. The first conveyed the right to the domains
to Property Solutions and imposed on it the contingent obligation to pay
$50,000. The second released Property
Solutions from the obligation to pay $50,000.
The transactions were polar opposites of one another in that the first
imposed an obligation the second took away.
One would not necessarily expect that one contract would explain the
other when they had such contrary objectives and were not made at the same time
or under the same circumstances.
Each
agreement was supported by different consideration. One element of the consideration for the
second transaction may well have been to give Property Solutions the additional
benefit of being sued in its own state in an action such as this one.
Shine
also argues that the word “under†in the Release Agreement is applicable only
to claims for breach of contract or specific performance. We cannot find a logical basis in the
contract language or elsewhere in the record for this contention. Indeed, Cal-State
held that a forum selection clause using the term “under this agreementâ€
applied to fraud and negligent misrepresentation claims, not just contract
claims. (Cal-State, supra, 12
Cal.App.4th at p. 1677.) Schine’s
interpretation contradicts the plain language of the forum selection clause,
which simply is not amenable to Schine’s reading of it.
Nor
can we find a logical basis for Shine’s similar contention that his claims were
to be litigated in Los Angeles while Property Solutions’s claims were to be litigated in Utah. Again, Schine’s argument contradicts the
plain language of the forum selection clauses in both agreements.
Schine
also argues that there was a modification of the Purchase Agreement that should
have been considered. Again, it is the
Release Agreement, not the Purchase Agreement entered six years earlier, under
which Schine’s claim arises. The trial
court did not abuse its discretion in sustaining the objection to evidence of
the alleged modification on the ground of relevance. (See Evid. Code, § 352; McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 295–296
[trial court has broad authority as to relevancy issues; appellate court reviews
orders as to relevance for abuse of discretion].)
Schine
argues that we must follow the lead of the court in Cal-State in examining the language of several of a series of
agreements. However, those agreements
were relevant in that case. The Purchase
Agreement is not relevant here. Also,
the forum selection clauses were identical in the relevant contracts there. (Cal-State,
supra, 12 Cal.App.4th at p. 1677.) Here they are not only different, but the Utah forum
selection clause is far broader than the Los Angeles clause
that concerns only the payment of the $7,000 purchase price. Schine’s reliance on Cal-State is misplaced.
The
trial court did not abuse its discretion in rejecting Schine’s argument that
alleged that ambiguities in the agreements required it to read the Purchase
Agreement and Release Agreement together and to accept extrinsic evidence to
contradict the clear terms of the Release Agreement.
b. The
clause is not inconvenient, unconscionable, unreasonable, or otherwise
unenforceable
Schine
argues that the Utah forum selection clause is inconvenient, unconscionable,
unreasonable and otherwise unenforceable.
Shine
is correct that the trial court has discretion to refuse to enforce a forum
selection clause that is unreasonable or unconscionable. “[F]orum selection clauses are valid and may be given
effect, in the court’s discretion and in the
absence of a showing that enforcement of such a clause would be unreasonable.†(Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17
Cal.3d 491, 496.) Similarly, if a clause in a contract is unconscionable, the court
may refuse to enforce it. (Civ. Code, § 1670.5,
subd. (a).)
Forum
selection clauses are not offensive to California public
policy. Indeed, California’s
policy favoring access to California courts by resident plaintiffs is satisfied in those cases where the
plaintiff has freely and voluntarily negotiated away his or her right to a California
forum. (Smith, Valentino & Smith, Inc. v. Superior Court,
(i)
Inconvenience
The
first step in determining whether to enforce a forum selection clause is to
decide if it is mandatory or permissive.
“A mandatory clause ordinarily is ‘given effect without any analysis of
convenience; the only question is whether enforcement of the clause would be
unreasonable.’†(Animal Film, LLC v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th
466, 471.) This rule seems to recognize
the principle that one who bargains to litigate in a particular distant forum
cannot later be heard to complain that the forum bargained for is inconvenient.
The
language of the Utah forum selection clause is clearly mandatory, as it uses the word
“shall,†indicating exclusive jurisdiction in the courts of Utah County, Utah: “Any litigation under this agreement shall be
resolved in the trial courts of Utah County, State
of Utah.†This is the type of
language that has been recognized as mandatory.
(Animal Film, LLC v. D.E.J.
Productions, Inc., supra, 193 Cal.App.4th at pp. 471–472.)
Because
the clause is mandatory, the trial court was not required to consider
inconvenience to Schine in determining whether to enforce the forum selection
clause. This would have eliminated most
of Schine’s arguments based upon unreasonableness, unfairness and
unconscionability, as these arguments are based principally on Schine’s claim
that he has limited financial resources that would make it too expensive for
him to travel to Utah to pursue his claim.
Even
if inconvenience were considered, Schine has made no persuasive argument that
he should be released from the agreement that he signed to litigate only in Utah because it is
inconvenient or too expensive for him to do so.
“California courts routinely enforce forum selection clauses even where the
chosen forum is far from the plaintiff’s residence.†(Net2Phone,
Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 588–589 [forum selection
clause with “take it or leave it†proposition, and not vigorously “bargained
for,†enforceable].)
(ii)
Unconscionability
Nor has
Schine persuaded us that the forum selection clause is unconscionable.
An
agreement is not unconscionable substantively or procedurally due to mere
inconvenience. To be found
unconscionable, the agreement must contain overly harsh terms or deprive the
objecting party of meaningful choice, as evidenced by oppression or
surprise. (Carboni v. Arrospide (1991) 2 Cal.App.4th 76, 83, 85.) We see no overly harsh terms or lack of
meaningful choice here.
Indeed,
it is not overly harsh for Schine to be required to litigate in Utah, since Utah is one of two
logical forums. As noted, Schine is a Los Angeles county
resident and Property Solutions is a Utah resident. Where two parties are residents of different
states, it is inevitable that one will be required by a forum selection clause
that designates a single forum to litigate in another state. Virtually any person who agrees to litigate
in a forum outside their home state will suffer the additional expense and
inconvenience necessitated by securing counsel in another state and possibly
traveling there to trial and otherwise.
Schine’s arguments about the expense of litigating outside the home
state could be made by any party signing a mandatory forum selection clause
agreeing to litigate elsewhere. If Schine’s
argument that such a clause is unconscionable were accepted, most forum
selection clauses would be invalidated.
In
addition, if it were unconscionable to force Schine to litigate in Utah, Property
Solutions could make a similar unconscionability argument, and the parties
might find themselves without any forum.
(iii) Unreasonableness
The party
challenging the forum selection clause on the ground of
unreasonableness must show that the forum selected would be unavailable or
unable to accomplish substantial justice; that is, the choice of forum must
have some rational basis in light of the facts underlying the transaction. (Cal-State,
supra, 12 Cal.App.4th at p. 1679.) Schine has not shown that the Utah forum is
unavailable or unable to render substantial justice. Moreover, the forum selection clause has a
rational basis because Property Solutions has its principal place of business
in Utah. Therefore, Schine has not
fulfilled the legal prerequisites for a showing of unreasonableness.
In addition, the
same rationale discussed above as to why the forum selection clause is not
unconscionable applies equally to show it is not unreasonable.
Schine also
attacks the reasonableness of the forum selection clause by urging that Property
Solutions was a fiduciary to him and he “is not a sophisticated businessperson,
and was not represented by counsel.†Schine
has not provided any evidence that the Release Agreement was other than arm’s
length or that he lacked sophistication.
An arm’s length contractual relationship does not give rise to any
fiduciary duty to the other party. (
Cal.App.4th 25, 30–31 [arm’s length contractual relationship is not, by itself,
sufficient to create a fiduciary relationship where one would not otherwise
exist].) Property Solutions did not have
a fiduciary duty to Schine.
Considering all
of the evidence, we have no reason to hold that the trial court abused its
discretion when it rejected Schine’s arguments that he should not be held to
the forum selection clause because he was unsophisticated and unrepresented,
stating that Schine negotiated and amended the agreements, including the forum
selection clause at issue, and “was fully capable of amending and negotiating
with [Property Solutions] regarding contractual terms.â€
Another
reason why Schine finds it unreasonable for him to have to litigate in Utah is that he
did not “anticipate that there would be a fraud claim, or that he would be
forced to litigate in Utah.†Such private, unexpressed interpretations
may not be considered in interpreting a contract, even if it is ambiguous. (Founding
Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc.
(2003) 109 Cal.App.4th 944, 956 [“The parties’ undisclosed intent or
understanding is irrelevant to contract interpretation.â€].)
Schine
also seems to argue that it is unreasonable to force him to litigate in Utah because he
was fraudulently induced to sign the agreement.
As the trial court observed, Schine does not contend that he was
fraudulently induced to enter the Utah forum
selection clause. Nor would the record
support such a contention. If we were
entitled to address any issue of fraud, it would be fraud in the inducement of
the Utah forum selection clause.
Schine’s argument addresses the agreement as a whole, not the forum
selection clause. What Schine is really
asking is to have California courts determine the issue of fraud at the forum non conveniens
stage, usurping the role assigned to the Utah courts by the
signed Release Agreement. This we cannot
do.
Similarly,
Schine contends that the Release Agreement was “simply a purchase by [Property
Solutions] of an asset that Schine ownedâ€; the Release Agreement was not a true
release; the Release Agreement was not integrated; and the Release Agreement
did not replace the Purchase Agreement. The
narrow issue on appeal is whether the Utah
forum selection clause applies. Whether
the Release Agreement was integrated, the construction and interpretation of
the Release Agreement, and whether Schine was fraudulently induced into signing
the Release Agreement are issues for the Utah
court, not for us, to decide.
Thus, the forum selection clause of the Release Agreement and not
the forum selection clause of the Purchase Agreement applies. We conclude that the
trial court did not abuse its discretion in granting Property Solutions’s
motion to stay the action on grounds of forum non
conveniens.
DISPOSITION
The order granting Property
Solutions International, Inc.’s motion to stay the action on grounds of forum
non conveniens is affirmed.
NOT
TO BE PUBLISHED.
MILLER,
J.
We concur:
CHANEY,
Acting P. J.
JOHNSON,
J.
name="_ftn1" title="">[1] Schine’s motion for judicial notice filed on January 6,
2014, is
denied.
Superior Court, assigned by the Chief Justice pursuant to article VI, section 6
of the California Constitution.
