Omne Financial, Inc v. Shacks, Inc

573 N.W.2d 641, 226 Mich. App. 397

• Court: Michigan Court of Appeals
• Decided: February 10, 1998
• Docket: Docket 190550
• Status: Published

Opinions

Wahls, J.

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.)

Defendant Lee Shacks, Jr., personally guaranteed the payments. The lease was subsequently assigned to plaintiff.

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.¹ The venue statute applicable to contract claims, MCL 600.1621; MSA 27A.1621,² reads:

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.

(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, ; 251 NW2d 611 (1977).³ These cases do not address the question whether such agreements are enforceable where they conflict with the statutes and court rules regarding venue, nor do they address the question whether such agreements could act as a waiver of a party’s right to challenge venue.

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 “the convenience of the litigants,” Grand Trunk, supra at 700 (quoting Panhandle Eastern Pipe Line Co v Federal Power Comm, 324 US 635, 636; 65 S Ct 821; 89 L Ed 1241, 1242 [1945]), and (3) “primarily a matter of convenience concerned with where the trial of an action may occur,” Kerekes v Bowlds, 179 Mich App 805, 810; 446 NW2d 357 (1989). Although the convenience of the parties is often the primary issue in venue disputes, the Michigan Supreme Court has recognized that the venue rules also address other issues:

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 tort actions, with the intent to discourage venue shopping by plaintiffs. MCL 600.1629; MSA 27A.1629; Gross, supra at 157. The Legislature has also passed specific venue provisions regarding other actions. For instance, the statute governing child custody actions requires that “if the circuit court of this state does not have prior continuing jurisdiction over a child, the action shall be submitted to the circuit court of the county where the child resides or may be found.” MCL 722.26(2); MSA 25.312(6)(2). This requirement serves to protect the best interests of children in child custody actions. Kubiak v Steen, 51 Mich App 408, 414; 215 NW2d 195 (1974). Thus, it is clear that the Legislature has used its power to establish venue to serve interests beyond the convenience of the parties.

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.⁴ Huhn v DMI, Inc, 207 Mich App 313, 319; 524 NW2d 254 (1994), remanded on other grounds 450 Mich 904 (1995). In addition, a trial court, on its own motion, may order a change of venue where the venue of a civil action is improper. MCR 2.223.⁵

In addition to statutes and court rules, we must also consider the applicable case law regarding venue. In this regard, there are at least two rules articulated in case law that are not found in the statutes or court rules. First, venue is determined at the time a suit is filed. Kerekes, supra at 808; Brown v Hillsdale Co Rd Comm, 126 Mich App 72, 76-78; 337 NW2d 318 (1983). Second, as noted above, Michigan courts have enforced agreements in which the parties stipulated a proper venue after a cause of action had arisen. Garavaglia, supra at 470; Grand Trunk, supra at 695, 700.

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).

Second, allowing parties to avoid by contract the mandate of the statutory rales relating to venue would undermine the power of the Legislature. While the waiver provisions in the venue statutes⁶ and court rules⁷ give litigants some control regarding venue after a suit has been filed, we find no evidence that the Legislature intended to abandon its own power in favor of the parties’ right to contract. To the contrary, the Legislature’s continuing exercise of its power to establish venue is inconsistent with any suggestion that it has an intent to abandon that power. As noted above, the Legislature has used the venue rales to control venue shopping by plaintiffs in tort actions and to protect the best interests of children in child custody disputes. Gross, supra at 157-159; Kubiak, supra at 414; Bert v Bert, 154 Mich App 208, 213-214; 397 NW2d 270 (1986). We do not believe that the Legislature intended to allow parties to subvert its power in this area by avoiding the effect of the statutory venue provisions by the inclusion of venue provisions in private contracts.⁸

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 otherwise permit a trial court to order a change of venue on its own motion.

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.⁹ The dissent offers no evidence that the Legislature intends to give up its venue powers. As we note above, the evidence is to the contrary. We do not believe that this Court may properly cede the Legislature’s venue powers to litigants. If the Legislature wishes to give up this power, it is perfectly capable of doing so.

For the foregoing reasons, we conclude that contractual venue provisions are not binding on Michigan courts.¹⁰ For the same reasons, we conclude that such agreements do not constitute a waiver of a party’s right to challenge venue, nor do they constitute a consent to a change of venue. There is no provision for contractual waiver or consent in the statutes or the court rules. In fact, the only ground for finding a waiver pursuant to the court rules is the failure to object in a timely manner. MCR 2.221. The court rules only permit a court to order a change of venue “for the convenience of parties and witnesses or when an impartial trial cannot be had where the action is pending,” MCR 2.222(A), or where venue is improper, MCR 2.223. We also note that enforcement of such agreements by construing them as a waiver or consent would effectively allow parties to circumvent the venue rules. As noted above, we find no evidence that the Legislature intended to allow parties to vary these rules contractually.

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 Ingham county and that neither party would raise any question as to the jurisdiction of the court.” Gar-avaglia, supra at 470. In Grand Trunk, the Court only enforced the parties’ contracts concerning venue after it had found that the contracts were “fair and reasonable,” were “made without fraud after a cause of action [had] accrued,” and “would serve the convenience of both parties.” Grand Trunk, supra at 699. We believe that Garavaglia and Grand Trunk are best understood as standing for the proposition that a trial court may consider a contract regarding venue to the extent that it is relevant to the factors that the court must consider in granting or denying a change of venue.¹¹

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 whether Oakland County is a proper venue pursuant to either MCL 600.1621; MSA 27A.1621 or MCL 600.1605; MSA 27A.1605. The court may consider the parties’ lease agreement only to the extent that it is relevant to the factors in those statutes. If venue in Oakland County is improper, the trial court shall order a change of venue to a county in which venue would have been proper. MCR 2.223(A). If the court determines that venue is proper in Oakland County, the suit may proceed there.¹²

Reversed and remanded. We do not retain jurisdiction.

Neff, P.J., concurred.

1 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).

2 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.

3 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.

4 This rule is consistent with the corresponding statute. MCL 600.1651; MSA 27A.1651.

5 MCR 2.223 provides, in part:

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.

6 MCL 600.1651; MSA 27A.1651.

7 MCR 2.221(C).

8 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.

9 Parties may not stipulate subject-matter jurisdiction. Redding v Redding, 214 Mich App 639, 643; 543 NW2d 75 (1995).

10 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.

11 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.

12 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.