RMP RENTALS v. Metroplex, Inc.

146 S.W.3d 861, 356 Ark. 76, 2004 Ark. LEXIS 90, 2004 WL 253511

• Court: Supreme Court of Arkansas
• Decided: February 12, 2004
• Docket: 03-569
• Status: Published

Opinions

Betty C. Dickey, Chief Justice.

This case essentially presents one issue on appeal: whether our materialmen’s lien statute, Ark. Code Ann. § 18-44-101 (a) (Repl. 2003)¹, controls over a forum-selection clause in a contract. We accepted certification from the Court of Appeals pursuant to Sup. Ct. R. 1-2(b)(1) and (4) as presenting an issue of first impression involving a substantial issue of public interest. We affirm.

Appellant RMP Rentals, LLC d/b/a RMP Developments, Inc., hereafter RMP, is a general contractor with its corporate office located in Louisiana. RMP is in the business of constructing post office buildings on property it owns, which it then leases to the United States Postal Service. The appellees are subcontractors Metroplex, Inc., and Bobby Joe Williams. Metroplex is an electrical subcontractor located in Arkansas, engaged in the business of installing electrical services, including wiring panels and fixtures. Williams is an Oklahoma subcontractor who is in the business of pouring concrete slab, curbing, and parking lots. After contracting with the Postal Service to construct a post office in Greenwood, Sebastian County, Arkansas, RMP contracted separately with the appellees to provide electrical and concrete services, respectively, to the Greenwood post office. RMP executed the contracts in Louisiana. Each contract contained identical forum-selection clauses, which read as follows:

The parties agree that the sole and exclusive forum for any civil suit arising out of obligations created by this Agreement shall be the Ninth Judicial District Court in the Parish of Rapides, State of Louisiana.

This Contract and any actions arising therefrom must be interpreted and construed solely in accordance with the laws of the state of Louisiana. (Emphasis added).

The relevant, procedural facts are as follows. In December of 2000, Metroplex filed a foreclosure complaint in the chancery court² of Sebastian County, against RMP for failure to pay on a percentage of the work completed. Based on a previously filed materialmen’s lien in Sebastian County, Metroplex sought a judgment on the lien for $17,963.86, and foreclosure of RMP’s Arkansas property. Metroplex named Williams as a separate defendant and a potential lienholder, and claimed priority over the Postal Service and equal priority with Williams. In response, RMP filed a motion to dismiss, challenging inter alia the court’s subject-matter jurisdiction, Ark. R. Civ. P. 12(1), based on the forum-selection clause in its contracts. In addition to copies of the contracts with Metroplex and Williams, RMP attached two orders of dismissal from the county’s separate circuit courts, enforcing the forum clause against Williams and another subcontractor for the same building. Williams then filed a cross-claim against RMP, asserting claims similar to those of Metroplex and seeking $18,825.06 on its lien and foreclosure. RMP filed a similar motion to dismiss Williams’s foreclosure complaint.

Following the issuance of a letter opinion, the trial court entered an order denying BMP’s motions to dismiss, and the parties proceeded to a bench trial on the appellees’ claims. Subsequently, the trial court entered judgment on behalf of the appellees in the amounts sought on their liens, subject to the superior priority of Red River Bank on its construction-money mortgage in the sum of $1,279,028.41. Further, the court awarded each of the appellees prejudgment interest, $6,000 in attorney fees, all costs, and ordered foreclosure on the property. In granting the judgment, the trial court relied on § 18-44-127(a), which provides that “the court shall ascertain by a fair trial, in the usual way, the amount of the indebtedness for which the lien is prosecuted and may render judgment therefor in any sum not exceeding the amount claimed in the demand filed with the lien, together with interest and costs.” The court found that it would be neither fair nor reasonable to require the subcontractors seeking to proceed on a materialmen’s lien under Arkansas law on property located in Arkansas to first litigate the amount of the claim in Louisiana, and then come back to an Arkansas court for execution against the land. In sum, the trial court found that in the interest of substantial justice, the matter should be heard in Sebastian County.

When a party appeals an adverse ruling on a motion brought under Ark. R. Civ. P. 12, this court treats the facts alleged in the complaint as true and views them in a light most favorable to the party who filed the complaint. Newton v. Etoch, 332 Ark. 325, 965 S.W.2d 96 (1998); Van Dyke v. Glover, 326 Ark. 736, 934 S.W.2d 204 (1996). Chancery cases are tried de novo on appeal, and the appellate court is free to affirm for a different reason. Alexander v. Twin City Bank, 322 Ark. 478, 910 S.W.2d 196 (1995). Where the facts are not in dispute and the issue is one of law, we determine whether the appellant was entitled to judgment as a matter of law. Haase v. Starnes, 323 Ark. 263, 915 S.W.2d 675 (1996).

Choice-of-forum clauses in contracts have generally been held binding, unless it can be shown that the enforcement of the clause would be unreasonable and unfair. Nelms v. Morgan Portable Bldg. Corp., 305 Ark. 284, 808 S.W.2d 314 (1991); SD Leasing, Inc. v. Al Spain & Assoc., Inc., 277 Ark. 178, 640 S.W.2d 451 (1982). Nonetheless, the determination of subject-matter jurisdiction is paramount. Parties may by agreement consent to personal jurisdiction in a given court, but subject-matter jurisdiction cannot be conferred merely by agreement of the parties.. See Hardy Construction Co., Inc. v. Arkansas State Highway & Transportation Dept., 324 Ark. 496, 922 S.W.2d 705 (1996) (chancery court had jurisdiction to enforce contracts pursuant to the Uniform Arbitration Act). While a forum-selection clause implies consent as to personal jurisdiction, SD Leasing, Inc., supra; St. Paul Fire & Marine Ins. Co. v. Courtney Enter., Inc., 270 F.3d 621 (8th Cir. 2001), it cannot confer subject-matter jurisdiction over in rem proceedings. Publix v. Cheesbro Roofing, Inc., 502 So.2d 484 (Fla. 5th Dist. Ct. App. 1987).

Here, RMP argues extensively that under International Shoe Co. v. Washington, 326 U.S. 310 (1945), its forum-selection clause meets the requirements for minimum contacts. But that is not the issue here, nor do we disagree with RMP’s argument. It is correct that under the clause, the Louisiana court may have subject-matter jurisdiction to award the appellees an in personam judgment equal to the amount of their liens, but that is not what the trial court determined and that is not what we decide here. Only an Arkansas court has subject-matter jurisdiction to enforce the liens and to order foreclosure on real property located within its borders. Specifically, “[t]he chancery court of the county where the property is situated and on which a lien created under § 18-44-101 et seq. is attached shall have exclusive jurisdiction to enforce the lien.” § 16-13-304(c) (Repl. 1999, repealed 2003).

An in rem action is one in which the court is required to act directly on property or on title to property. Id. In Publix SuperMarkets, Inc., supra, the Florida court was faced with a similar issue. There, a roofing subcontractor had entered a contract containing a clause establishing a specific county as the forum for “any action” brought under the contract. Subsequently, the subcontractor filed to enforce its mechanic’s lien and to foreclose in the county where the land was located. In affirming the denial of the land owner’s motion to transfer to the county specified in the contract, the Florida court held that pursuant to statute, an agreement that has the effect of placing venue in a county, other than the one in which the land to be foreclosed is located, is ineffective because such an action requires in rem court jurisdiction, and only a court with geographic jurisdiction over the county where the land is located has in rem jurisdiction. In so holding, the court noted that foreclosure of land based on a mechanic’s lien is analogous to foreclosure of a mortgage on land by seeking to judicially convert a lien interest against title to land, into a legal title to land. The result, the court found, is that the court is required to act directly on the title to the property. Id. We agree. Under our statutes, a judicial proceeding on a materialmen’s lien as to land is an in rem proceeding.

RMP characterizes the cause of action against it as one for breach of contract and for damages “arising out of obligations created” by the contract. However, a review of the appellees’ complaints shows that the appellees filed a “foreclosure complaint.”³ While the claim had its genesis in the contract with RMP, the appellees, as materialmen, had a statutory right to seek in rem relief: that is judgment on their liens previously filed pursuant to Arkansas law, and foreclosure on RMP’s real property located in Arkansas. Section 18-44-101 (a) gives the appellees an absolute right to file such a lien. RMP argues that by limiting the jurisdiction to a particular “venue” (Louisiana), the forum clause does not eliminate the appellees’ right to redress, but that it merely establishes the forum where redress can be sought. But RMP ignores the fact that the property is not located in Louisiana. Nor does RMP claim that the appellees have a right under Louisiana law to file a materialmen’s lien in that forum, nor a right under Louisiana law to seek enforcement of their liens that are filed in Arkansas. Cf. Three Sisters Petroleum, Inc. v. Langley, 348 Ark. 167, 72 S.W.3d 95 (2002) (Louisiana court had both subject and personal jurisdiction to determine whether a contract existed to purchase leases on oil wells located in Arkansas, and if so, to grant specific performance). In sum, as to the appellees’ liens, the choice-of-law provision in RMP’s contract is meaningless.

RMP argues that the forum clause is reasonable and fair because the appellees could litigate on the contract in Louisiana and then seek to enforce their liens in Arkansas. First, this ignores our holding that the Sebastian County court had sole jurisdiction over the res of the appellees’ complaint. Second, the argument ignores the fact that the appellees have fifteen months from the time the lien is filed to institute an action on the lien as required by § 18-44-119. As the appellees point out, even if they could register a foreign judgment obtained in Louisiana and then execute on it in Arkansas, it is highly probable that, in the interim, the land could be transferred to a third party or further encumbered, thereby defeating the immediacy of their lien. Additionally, RMP’s argument disregards our well-established policy that piecemeal litigation is to be avoided. Fisher v. Chavers, 351 Ark. 318, 92 S.W.3d 30 (2002). Finally, under the cleanup doctrine, the chancery court had subject-matter jurisdiction over the entire action. Burns v. First Nat'l. Bank, 336 Ark. 406, 985 S.W.2d 747 (1999); Riggin v. Dierdorff, 302 Ark. 517, 790 S.W.2d 897 (1990).

The dissent cites A.C.E. Elevator Co., Inc. v. V.J.B. Construction Corp., 192 Misc.2d 258, 746 N.Y.S.2d 361 (N.Y. Sup. Ct. 2002), in support of its position that the forum clause should be enforced. But that case is distinguishable because the language in the New York statute provided that the place of trial in actions affecting title, possession, use, or enjoyment of real property “shall” be in the county where the property is located. Notwithstanding the “seemingly mandatory nature” of this statute, the New York court relied instead on another statute providing that a written agreement fixing the place of trial “shall be enforced upon a motion for change of place of trial.” There, the New York court found that the parties’ agreement to venue “trumped” the statute placing venue in the county where the land was located. In our case, § 16-13-304(c) was clear that the court of the county where the property is situated “shall have exclusive jurisdiction to enforce the lien.” RMP cites to no other statute that would allow jurisdiction outside of Sebastian County. Further, unlike the present case, in none of the cases cited by the dissent was the issue of subject-matter jurisdiction raised.

RMP makes much of the fact that two circuit courts in Sebastian County had previously dismissed Williams’s and another subcontractor’s complaints, enforcing the forum-selection clause. But a review of those orders shows that the cause of action there was for breach of contract. There, the subcontractors sought only damages based on the terms of the contract. No in rem action or remedy was sought.⁴

As noted above, the trial court specifically found that it was neither fair nor reasonable to require the appellees seeking to proceed on materialmen’s liens under Arkansas law against real estate located in Arkansas to first litigate the amount of their claim in Louisiana, and then to come back to court in Arkansas for execution against the land. A contractual choice of forum should be held unenforceable if enforcement would contravene a strong public policy of forum, whether declared by statute or by judicial decision. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). For the reasons cited above, we agree with the trial court’s results, and reaffirm this court’s precedent that parties to a contract may agree as to personal jurisdiction if fair and reasonable, but that they cannot agree as to subject-matter jurisdiction. As a matter of law, we hold that the mechanics’ and materialmen’s lien provisions of §§ 18-44-101 — 135, as to real property located within Arkansas, control over a forum-selection clause.

In so holding, we emphasize that we are not in any way overruling Nelms v. Morgan Portable Bldg. Corp., 305 Ark. 284, 808 S.W.2d 314 (1991) and SD Leasing, Inc. v. Al Spain & Assoc., Inc., 277 Ark. 178, 640 S.W.2d 451 (1982). Where the court has subject-matter jurisdiction, forum-selection clauses are enforceable if enforcement would be fair and reasonable.

Affirmed.

Corbin and Hannah, JJ., dissent.

1 Every contractor, subcontractor, or material supplier ... who supplies labor, services, material, fixtures, engines, boilers, or machinery in the construction or repair of an improvement to real estate ... by virtue of a contract with the owner, proprietor, contractor, or subcontractor, or agent thereof, upon complying with the provisions of this subchapter, shall have, to secure payment, a lien upon the improvement and on up to (1) acre of land upon which the improvement is situated, or to the extent of any number of acres of land upon which work has been done or improvements erected or repaired. § 18-44-101(a).

2 This cause of action was filed prior to the effective date of Amendment 80, which merged courts of equity and law.

3 RMP concedes in its brief that seeking a materialmen’s lien and breach of contract are two separate causes of action.

4 RMP also makes much of the fact that the appellees did not attach copies of the contracts to their foreclosure complaints.The appellees complied with § 18-44-117 by filing an account of the demand due or owing ....” See also § 18-44-122. In sum, as to the lien and foreclosure, attachment of a contract was unnecessary to the appellees’ filings.