Filed 10/31/14 Park Plaza II, Ltd. v. American Bankers Ins. Co. CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
PARK PLAZA II, LTD.,
Cross-complainant and Appellant, G048916
v. (Super. Ct. No. 30-2012-00587659)
AMERICAN BANKERS INSURANCE OPINION
COMPANY,
Cross-defendant and Respondent.
Appeal from an order of the Superior Court of Orange County, Gail Andrea
Andler, Judge. Reversed.
David B. Dimitruk for Cross-complainant and Appellant.
Frank J. Coughlin, Kim-Thao T. Le; Carlton Fields Jorden Burt and Frank
G. Burt for Cross-defendant and Respondent.
* * *
Cross-complainant and appellant Park Plaza II, Ltd. (Park Plaza) appeals
from the trial court’s order dismissing its cross-complaint against cross-defendant and
respondent American Bankers Insurance Company (American Bankers) based on a forum
selection provision designating Pinellas County, Florida, as the venue for “any lawsuit”
between the parties over “Blanket Bond BIC 1117” (Blanket Bond). We conclude the
trial court erred by construing the forum selection provision in isolation rather than in the
context in which it appears in the Blanket Bond.
Although the forum selection provision states it applies to “any lawsuit,”
the contracting parties placed the provision at the end of a lengthy paragraph describing
their rights to examine each other’s records and to enforce those examination rights in
court. This placement renders the forum selection provision ambiguous. As we explain
below, the clause reasonably could be interpreted as applying to any lawsuit between the
parties regardless of subject matter, but its specific placement renders it reasonably
susceptible to an interpretation applying it only to the type of lawsuit described in the
paragraph where it appears. Based on this ambiguity and American Bankers’s failure to
cite any rule of contract interpretation or other authority supporting its interpretation, we
must interpret the provision against American Bankers because they created the
ambiguity as the drafting party. We therefore conclude the forum selection provision
does not apply to Park Plaza’s cross-complaint because Park Plaza’s claims do not
concern the parties’ rights to examine each other’s records.
I
FACTS AND PROCEDURAL HISTORY
In March 2011, Kayla Tovo executed a written lease to rent an apartment in
a Park Plaza development. The lease provided, “Before taking possession of the
premises, resident shall deposit with landlord a security deposit in the amount of $300
and a Sure Deposit Bond in the amount of $218.75.” The lease also designated
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Advanced Management Company (Advanced Management) as the “owner’s management
agent.” (Capitalization omitted.)
To obtain the Sure Deposit Bond, Tovo executed the “SureDeposit
California Enrollment & Bond Acknowledgement” (Enrollment & Acknowledgement)
and provided a money order payable to “Sure Deposit” in the amount of $218.75. The
Enrollment & Acknowledgement stated, “I am enrolling on a bond that Bankers
Insurance Company . . . issued for the benefit of the apartment community named on
page two.” Page two of the Enrollment & Acknowledgement identified “Bond Number
BIC 1117” as Tovo’s bond for Park Plaza’s apartments. Under the bond, Bankers
Insurance Company promised to pay any damages for which Tovo may be liable under
her lease, including physical damage to her apartment and unpaid obligations, up to
$1,250, and Tovo promised to reimburse Bankers Insurance Company for any amount it
paid. The bond’s purpose was to reduce the amount of the security deposit Tovo had to
post at the start of her lease.
In August 2012, Tovo filed the underlying class action alleging Park Plaza
and Advanced Management illegally required her and other similarly situated tenants to
pay a nonrefundable premium to purchase a Sure Deposit Bond as part of, or in lieu of, a
security deposit for the rented apartments. When she moved out of her apartment, Tovo
alleged Park Plaza and Advanced Management charged her $82.37 for damage to the
apartment and told her the premium she paid for the Sure Deposit Bond was
nonrefundable and could not be applied to cover the damage to her apartment. Tovo
alleged this violated statutory prohibitions against landlords charging tenants a
nonrefundable security deposit (Civ. Code, § 1950.5, subds. (d) & (m)), the Consumer
Legal Remedies Act (Civ. Code, § 1770, subd. (a)(14) & (19)), and the Unfair
Competition Law (Bus. & Prof. Code, § 17200 et seq.).
In response, Park Plaza filed a cross-complaint against Tovo and American
Bankers. In a declaratory relief claim, Park Plaza alleged Bankers Insurance Company
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issued Tovo’s bond based on the Enrollment & Acknowledgement she executed, and
therefore American Bankers assumed all liabilities and obligations under the “Certificate
of Assumption and Novation” (Novation), which Park Plaza attached as an exhibit to the
cross-complaint. The Novation identified “Bond # 1117” as the obligation American
Bankers assumed and attached a copy of the Blanket Bond, dated May 30, 2008, between
Bankers Insurance Company, as the surety, and Advanced Management, as the obligee.
Park Plaza sought a judicial declaration of its, American Bankers’s, and Tovo’s rights
and obligations under the Enrollment & Acknowledgement. In a separate cause of
action, Park Plaza also alleged American Bankers must indemnify Park Plaza if it is
found liable under Tovo’s complaint.
American Bankers filed a motion to dismiss the cross-complaint based on a
forum selection provision in the Blanket Bond that stated, “The venue of any lawsuit that
may be filed will be Pinellas County, Florida.” Although Park Plaza was not named in
the Blanket Bond, American Bankers argued Park Plaza was bound by the forum
selection provision because Advanced Management executed the Blanket Bond as Park
Plaza’s agent. Park Plaza opposed the motion, arguing American Bankers presented no
evidence showing Advanced Management acted as Park Plaza’s agent when it executed
the Blanket Bond, the forum selection provision did not apply to Park Plaza’s claims, and
the forum selection provision was unenforceable.
The trial court granted the motion and dismissed the cross-complaint
against American Bankers. The court found (1) Park Plaza was bound by the forum
selection provision because “[i]t appears that Advanced [Management] is acting as Park
Plaza’s agent when executing agreements relating to rents derived from the property”;
(2) the forum selection provision applied to Park Plaza’s claims because its terms apply
“to ‘any lawsuit’”; and (3) Park Plaza’s arguments on the forum selection clause’s
enforceability lacked merit. Park Plaza timely appealed from the order dismissing its
cross-complaint.
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II
DISCUSSION
A. The Forum Selection Provision Does Not Apply to Park Plaza’s Claims Against
American Bankers
The trial court concluded the forum selection clause applied to Park Plaza’s
claims against American Bankers because the provision specified the venue for “any
lawsuit that may be filed.” Park Plaza contends the trial court erred because it interpreted
the forum selection provision in isolation, rather than in the context of the entire contract.
Because the forum selection provision is located at the end of a paragraph defining the
contracting parties’ rights to examine one another’s records, Park Plaza contends it only
applies to lawsuits addressing those examination rights. Based upon fundamental rules of
contract interpretation, we agree.
Forum selection provisions are presumed valid, and the party seeking to
prevent enforcement bears the burden to show enforcement would be unreasonable under
the circumstances of the case. (Miller-Leigh LLC v. Henson (2007) 152 Cal.App.4th
1143, 1149.) A forum selection provision may apply to contractual and noncontractual
causes of action depending on the breadth of the provision’s language. (Bancomer, S. A.
v. Superior Court (1996) 44 Cal.App.4th 1450, 1461.) Which claims are covered by a
forum selection provision is a matter of contract interpretation. (Weil & Brown, Cal.
Practice Guide: Civil Procedure Before Trial (The Rutter Group 2014) ¶ 3:175,
p. 3-56.5; Bancomer, at pp. 1461-1462 [tort claim for fraudulent inducement not subject
to forum selection provision covering “‘[a]ny conflict which may arise regarding the
interpretation or fulfillment of this contract’”].)
“The basic goal of contract interpretation is to give effect to the parties’
mutual intent at the time of contracting. [Citations.] . . . [¶] . . . [¶] California
recognizes the objective theory of contracts [citation], under which ‘[i]t is the objective
intent, as evidenced by the words of the contract, rather than the subjective intent of one
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of the parties, that controls interpretation’ [citation]. The parties’ undisclosed intent or
understanding is irrelevant to contract interpretation. [Citations.]” (Founding Members
of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003)
109 Cal.App.4th 944, 955-956 (Founding Members).)
“We ascertain [the parties’] intention solely from the written contract if
possible, but also consider the circumstances under which the contract was made and the
matter to which it relates. [Citations.] We consider the contract as a whole and interpret
its language in context so as to give effect to each provision, rather than interpret
contractual language in isolation. [Citation.] We interpret words in accordance with
their ordinary and popular sense, unless the words are used in a technical sense or a
special meaning is given to them by usage. [Citation.]” (Service Employees Internat.
Union, Local 99 v. Options—A Child Care & Human Services Agency (2011)
200 Cal.App.4th 869, 879 (Service Employees Internat.).)
The context in which the words subject to interpretation appear is important
because “[t]he meaning of particular words or groups of words varies with the ‘. . . verbal
context and surrounding circumstances and purposes in view of the linguistic education
and experience of their users and their hearers or readers (not excluding judges). . . . A
word has no meaning apart from these factors; much less does it have an objective
meaning, one true meaning.’ [Citation.] Accordingly, the meaning of a writing ‘. . . can
only be found by interpretation in the light of all the circumstances that reveal the sense
in which the writer used the words. . . .’ [Citations.]” (Pacific Gas & E. Co. v. G. W.
Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 38-39 (Pacific Gas).) “[E]ven a term that
does not require context to have meaning, and on its own might appear to be completely
lacking in ambiguity, can mean something altogether different when context is known, or
in light of the circumstances under which it was uttered or written.” (In re Marriage of
Gong & Kwong (2008) 163 Cal.App.4th 510, 517 (Gong).)
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“[W]here ‘“contract language is clear and explicit and does not lead to
absurd results, we ascertain intent from the written terms and go no further.”’ [Citation.]
‘If the contract is capable of more than one reasonable interpretation, it is ambiguous
[citations], and it is the court’s task to determine the ultimate construction to be placed on
the ambiguous language by applying the standard rules of interpretation in order to give
effect to the mutual intention of the parties [citation].’ [Citation.]” (People ex rel.
Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 524-525.)
“‘In cases of uncertainty not removed by the preceding rules, the language
of a contract should be interpreted most strongly against the party who caused the
uncertainty to exist.’ (Civ. Code, § 1654.) Where the language in a contract is
ambiguous, the contract should be interpreted most strongly against the party who
prepared it. [Citations.] However, ‘this canon applies only as a tie breaker, when other
canons fail to dispel uncertainty.’ [Citation.]” (Powers v. Dickson, Carlson & Campillo
(1997) 54 Cal.App.4th 1102, 1112 (Powers); see Badie v. Bank of America (1998)
67 Cal.App.4th 779, 799 (Badie).)
“Whether contractual language is ambiguous is a question of law that we
review de novo. [Citations.] . . . The interpretation of a contract, including the
resolution of any ambiguity, is solely a judicial function unless the interpretation turns on
the credibility of extrinsic evidence. [Citations.]” (American Alternative Ins. Corp. v.
Superior Court (2006) 135 Cal.App.4th 1239, 1245; Founding Members, supra,
109 Cal.App.4th at p. 955 [“When no extrinsic evidence is introduced, or when the
competent extrinsic evidence is not in conflict, the appellate court independently
construes the contract”].)
Here, the forum selection provision states, “The venue of any lawsuit that
may be filed will be Pinellas County, Florida.” The provision appears as the final
sentence in a lengthy paragraph entitled, “Examination of Records.” (Bold,
underscoring, and some capitalization omitted.) The paragraph first describes Advanced
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Management’s right to an accounting of all transactions “pertaining to this bond as
frequently and in the form as may be agreed to by the parties.” It grants Advanced
Management the right to “initiate legal suit or other legal action to enforce this right.”
Next, the paragraph describes Advanced Management’s obligation to grant American
Bankers “access to, and the right to audit, [Advanced Management’s] books and records
. . . at all reasonable times . . . to determine any fact relating to this bond.” It grants
American Bankers the right to “initiate a suit or other legal action to enforce these
rights.” Finally, in the sentence immediately preceding the forum selection provision, the
paragraph describes the prevailing party’s right to recover attorneys fees and interest if
“any legal actions or suits become necessary for any of the parties to this bond.”1
The parties offer no extrinsic evidence regarding their intent or the
surrounding circumstances when they executed the Blanket Bond in May 2008. Instead,
they solely rely on the forum selection provision’s language and where it appears in the
Blanket Bond. Park Plaza argues the provision applies only to lawsuits brought to
1 In its entirety, the paragraph states as follows: “EXAMINATION OF
RECORDS [¶] Surety grants Obligee the right to a complete and accurate accounting of
all transactions pertaining to this bond as frequently and in the form as may be agreed to
by the parties prior to the issuance thereof, providing that factors beyond Surety’s control
do not operate to hinder such efforts. The Obligee may initiate legal suit or other legal
action to enforce this right. Obligee must give Surety access to, and the right to audit,
Obligee’s books and records, and the books and records of communities under Obligee’s
management, at all reasonable times during and after the Bond Period, to determine any
fact relating to this bond. It will also be an absolute defense for Surety to any suit or
action brought under this bond, if the Obligee refuses Surety’s access to its books and
records. Surety may initiate a suit or other legal action to enforce these rights. Surety
recognizes that Obligee’s books and records are proprietary and confidential. Surety will
not disclose the contents of same to any other party except as may be required by law or
regulatory body. In the event that any legal actions or suits become necessary for any of
the parties to this bond, the prevailing party to such suit or other legal action shall be
entitled to the recovery of reasonable costs associated with the suit or legal action,
including attorney’s fees and other associated expenses, together with interest at an
annual rate of twelve percent (12%) (ten percent (10%) in the State of California). The
venue of any lawsuit that may be filed will be Pinellas County, Florida.” (Italics added.)
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enforce the obligation of each party to submit its records for examination because the
provision appears at the end of a lengthy paragraph dedicated to that topic. American
Bankers argues the forum selection provision applies to any lawsuit between the parties
because the provision does not expressly limit its application to any particular type of
lawsuit, and elsewhere in the Examination of Records paragraph when the parties
intended to limit a provision to a lawsuit relating to the examination of records they
included language expressly stating so. For example, in authorizing lawsuits to enforce
their examination rights, the parties stated they could “initiate legal suit or other legal
action to enforce these rights.” (Original italics.)
The forum selection provision is ambiguous because it is reasonably
susceptible to the different interpretations of both parties. The absence of any language
expressly limiting the forum selection provision to a particular type of lawsuit supports
an interpretation applying the provision’s “any lawsuit” phrase to any lawsuit between
the contracting parties. We must construe the forum selection provision in context,
however. (Service Employees Internat., supra, 200 Cal.App.4th at p. 879; see Pacific
Gas, supra, 69 Cal.2d at pp. 38-39; Gong, supra, 163 Cal.App.4th at p. 517.) By placing
the forum selection provision at the end of a lengthy paragraph describing the parties’
rights to examine one another’s records, we conclude the parties intended the provision to
apply only to lawsuits involving the parties’ examination of records. Indeed, we construe
the “any lawsuit” phase to mean any lawsuit described earlier in that same paragraph, and
the only lawsuits described there are lawsuits to enforce the parties’ rights to examine
records. American Bankers failed to provide any extrinsic evidence showing the parties
expressed any other intent when they entered into the Blanket Bond.
When contracting parties intend a forum selection provision, an arbitration
provision, a choice-of-law provision, or any other dispute resolution provision to govern
all their disputes regardless of subject matter, they typically include the provision in a
paragraph or section of their contract that addresses only how, where, or under what rules
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they will resolve their disputes. Alternatively, the parties may employ language that
clearly states they intend the provision to apply to all disputes relating to their contract or
disputes arising out of their contractual relationship. Here, the parties failed to use
language showing they intended the phrase “any lawsuit” to mean any lawsuit between
them, as opposed to any lawsuit relating to their right to examine records.
American Bankers fails to cite any rule of contract interpretation or other
authority supporting its contention the forum selection provision must be construed to
apply to any lawsuit between the parties despite its location at the end of a lengthy
paragraph discussing lawsuits to enforce the parties’ right to examine one another’s
records. In the absence of any other rule of contract interpretation that resolves the
ambiguity created by the forum selection clause’s location in the Blanket Bond, we must
resolve the ambiguity by interpreting the provision against American Bankers because it
was the party who prepared the Blanket Bond and therefore is responsible for the
uncertainty. (Civ. Code, § 1654; Badie, supra, 67 Cal.App.4th at p. 799; Powers, supra,
54 Cal.App.4th at p. 1112.)
American Bankers contends the interpretation we adopt requires us to
rewrite the forum selection provision to state, “The venue of any lawsuit [concerning
books, records or an accounting] that may be filed will be Pinellas County, Florida.”
(Original italics.) We disagree. As explained above, we conclude the context of the
forum selection provision makes it reasonably susceptible to this interpretation without
rewriting the provision.
Park Plaza’s cross-complaint against American Bankers does not relate to
the parties’ rights to examine one another’s records, but rather seeks a declaration of
rights under the Enrollment & Acknowledgement Tovo executed to enroll under the
Blanket Bond and whether it is entitled to indemnity in the event Park Plaza is found
liable to Tovo on any of her claims. Accordingly, the forum selection provision does not
apply and the trial court erred in concluding otherwise.
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Our conclusion the forum selection provision does not apply to Park
Plaza’s cross-complaint eliminates the need to address the parties’ contentions regarding
whether Advanced Management acted as Park Plaza’s agent when it signed the Blanket
Bond in 2008, whether it is reasonable to enforce the forum selection provision in this
case, the scope of Tovo’s claims, and the merits of Park Plaza’s claims. Accordingly, we
express no opinion on these topics. 2
III
DISPOSITION
The order is reversed. Park Plaza shall recover its costs on appeal.
ARONSON, J.
WE CONCUR:
O’LEARY, P. J.
IKOLA, J.
2 Park Plaza asked us to judicially notice the following documents to show
that American Bankers is now a party to the underlying action: (1) Tovo’s second
amended complaint naming American Bankers as a defendant; (2) American Bankers’
demurrer to that pleading; and (3) the trial court’s ruling on that demurrer. We deny Park
Plaza’s request because it asks us to judicially notice facts occurring after the trial court’s
ruling on the motion to dismiss (In re B.D. (2008) 159 Cal.App.4th 1218, 1239), and the
documents are irrelevant to the contract interpretation issue on which we decide this
appeal (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on
other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276).
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