Northland Capital Fin. Servs., LLC v. Robinson

976 N.W.2d 252

NORTHLAND CAPITAL FINANCIAL SERVICES, LLC, Plaintiff and Appellee,

v.Robert Stephen ROBINSON, Defendant and Appellant.

#29573

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS OCTOBER 4, 2021

OPINION FILED June 8, 2022

PAUL J. GILLETTE of Gillette Law Office, P.C., Redfield, South Dakota, Attorneys for defendant and appellant.

PAUL H. LINDE of Schaffer Law Office, Prof. LLC, Sioux Falls, South Dakota, Attorneys for plaintiff and appellee.

JENSEN, Chief Justice

[¶1.] Northland Capital Financial Services, LLC (Northland) and Robert Robinson entered into a lease financing agreement for Robinson's purchase of grain bin monitoring equipment. The lease agreement included a forum selection clause requiring any suit filed by either party to be filed in Stearns County, Minnesota. After Robinson stopped making lease payments, Northland filed suit against Robinson in Spink County, South Dakota, where he resided. Northland filed a motion for summary judgment. In granting Northland's motion, the circuit court treated Robinson's objection to the suit filed in Spink County as a question of venue and determined that Robinson failed to make a timely objection in Spink County. Robinson appeals, arguing that the forum selection clause required Northland to file the action in Stearns County, Minnesota, and that the circuit court erred in finding he had waived objection to enforcement of the forum selection clause. We reverse and remand with directions for the circuit court to dismiss the action in Spink County.

Facts and Procedural History

[¶2.] Robinson purchased grain bin monitoring equipment for his farm in Spink County from American Edge Grain, Inc. on May 8, 2017. The purchase was financed through an Equipment Master Lease Agreement (Lease) between Northland and Robinson. Northland's place of business is located in Stearns County, Minnesota.

[¶3.] Paragraph 21 of the Lease contained a forum selection clause that provided:

Consent to Minnesota Law, Jurisdiction and Venue: It is agreed between the parties that this Lease has been negotiated within Stearns County, Minnesota, and finally executed within Stearns County, Minnesota, and accordingly, the Lease and all related documentation shall be governed by, and construed in accordance with, the laws of the State of Minnesota (without regard to principles of conflicts of laws) and any suit by either of the parties pursuant to this Lease shall be maintained in and the venue for any such litigation shall be in Stearns County District Court, Stearns County, Minnesota.

[¶4.] Following the purchase, Robinson reported problems with the equipment. He claimed the problems were not addressed and stopped making Lease payments to Northland. Northland filed suit against Robinson in Spink County to collect the balance due under the Lease. Northland served a summons and complaint on Robinson on March 12, 2020. On April 10, 2020, Robinson, acting pro se, mailed a letter to Northland's counsel stating:

According to the lease agreement that I read, paragraph number 21, says the lawsuit should take place in Stearns County, Minnesota. It says all related documents shall be governed by, and construed in accordance with the laws of the State of Minnesota. From what I read the lawsuit shall be cancelled in Spink County, South Dakota and moved to Stearns County, Minnesota.

[¶5.] Northland's counsel responded to Robinson that the forum selection clause was included in the Lease for Northland's benefit and that it was choosing to waive the clause. Robinson did not serve and file a formal answer or a motion to dismiss.

[¶6.] Northland later filed a motion for summary judgment and attached Robinson's letter to the filing. Robinson hired counsel and resisted the motion arguing that he intended to pursue claims against Northland and other parties in Minnesota for the defective equipment, and that the forum selection clause required Northland to file the action in Stearns County, Minnesota. Robinson did not file a counterclaim against Northland or move to file a third-party complaint in Spink County.

[¶7.] Following a hearing on the motion for summary judgment, the circuit court issued a letter ruling, denying Northland's motion for summary judgment. The circuit court expressed concerns about the forum selection clause and characterized the issue as whether Spink County was the proper venue for the action. The court stated its belief that Northland was otherwise entitled to summary judgment but requested the parties to submit briefing on whether Robinson had waived the right to enforce the forum selection clause by failing to timely raise the issue under the venue statute, SDCL 15-5-10.

[¶8.] Thereafter, Robinson filed a motion to dismiss the action based upon the forum selection clause and both parties submitted briefs addressing the issues raised by the circuit court. The circuit court did not take any action on the motion to dismiss and determined that Robinson waived the right to enforce the forum selection clause by not filing a motion to change venue or a motion to dismiss. The court entered summary judgment against Robinson for the principal balance due under the Lease, plus prejudgment interest and attorney fees incurred by Northland as permitted by the Lease.

[¶9.] Robinson appeals the circuit court's entry of summary judgment, arguing that the circuit court erred by applying the South Dakota venue statutes to find waiver by Robinson and in failing to enforce the forum selection clause in the Lease. Northland argues that the circuit court correctly determined that Robinson failed to timely object to venue. Alternatively, Northland argues that the circuit court's summary judgment order should be affirmed because Northland was legally entitled to waive enforcement of the forum selection clause, which was intended to unilaterally benefit Northland, and sue Robinson in his county of residence.

Analysis and Decision

[¶10.] An order of summary judgment is reviewed de novo by this Court. Wyman v. Bruckner , 2018 S.D. 17, ¶ 9, 908 N.W.2d 170, 174. In considering a motion for summary judgment, "[w]e decide whether genuine issues of material fact exist and whether the law was correctly applied." State v. BP plc , 2020 S.D. 47, ¶ 18, 948 N.W.2d 45, 52 (citation omitted).

1. Whether the circuit court erred in determining that Robinson waived his objection to Northland's filing of the action in Spink County.

[¶11.] Robinson initially argues that the circuit court erred in concluding that he waived enforcement of the forum selection clause. In finding waiver by Robinson, the circuit court relied upon SDCL 15-5-10, which provides that an action may be tried in an improper county "unless the defendant, before the time for answering expires, demands in writing that the trial be had in the proper county[.]" See Kolb v. Monroe , 1998 S.D. 64, ¶ 11, 581 N.W.2d 149, 151 (finding a party waived objection to venue under SDCL 15-5-10 when it did not file a motion to change venue until after the expiration of the time for filing an answer). Robinson argues that the contractual forum selection clause, not the venue statutes, controls the choice of forum for this action. Therefore, in his view, SDCL 15-5-10 does not bar his right to contest the filing of the suit in Spink County. He relies on OT Industries, Inc. v. OT-tehdas Oy Santasalo-Sohlberg Ab , 346 N.W.2d 162, 168 (Minn. Ct. App. 1984) to support his position that "[a] contractual forum selection clause is not governed by the rules relating to venue and jurisdiction, but rather by the rules of contractual defenses."

a. Choice of law

[¶12.] Before addressing the merits, we must initially consider the law applicable to these issues. In addition to the forum selection clause, the Lease includes a choice of law provision that provides "the Lease and all related documentation shall be governed by, and construed in accordance with, the laws of the State of Minnesota (without regard to principles of conflicts of laws)[.]" While the parties cite both South Dakota and Minnesota law in addressing the issues on appeal, neither party has specifically addressed which state's law should be applied to the questions of waiver and enforceability of the forum selection clause at issue.

[¶13.] In considering contractual choice of law provisions, we have applied the conflict of law principles from the Restatement and have stated that generally "[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied." Dunes Hosp., L.L.C. v. Country Kitchen Int'l, Inc. , 2001 S.D. 36, ¶ 11, 623 N.W.2d 484, 488 (alteration in original) (quoting Restatement (Second) Conflict of Laws § 187 (Am. L. Inst. 1971) ). However, the law of the forum is generally applied when the issues presented involve matters of procedure. For instance, the Restatement (Second) Conflict of Laws, § 122 (Am. L. Inst. 1971) provides that "[a] court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case." Minnesota also recognizes that "general choice of law provisions, as expressed in contracts, incorporate only substantive law, and do not displace the procedural law of the forum state." Fredin v. Sharp , 176 F.R.D. 304, 308 (D. Minn. 1997). As the Minnesota Supreme Court has explained, "[t]his court has for many years followed the almost universal rule that matters of procedure and remedies were governed by the law of the forum state." Davis v. Furlong , 328 N.W.2d 150, 153 (Minn. 1983).

[¶14.] The question of whether waiver and enforceability of a forum selection clause are matters of procedural or substantive law has not been addressed by this Court. However, in O'Neill Farms, Inc. v. Reinert , this Court, without discussion, applied the forum state's law (South Dakota) to questions of enforceability of a forum selection clause in a lease, despite a...