Jurisdiction--forum selection clause--sureties--Virginia law
The trial court properly denied defendants' notice of defenses to entry of a foreign
judgment arising from an equipment lease where the document signed by defendants was titled
“Guaranty,” but the content reveals that defendants were directly responsible to plaintiff as soon
as the principal debtor defaulted and, as sureties, were bound to the agreement entered into by the
principal debtor and the forum selection clause it contained. Defendants failed to establish that
the forum selection clause was unfair, unreasonable, or affected by fraud or unequal bargaining
power.
Cansler, Lockhart, Campbell, Evans, Bryant & Garlitz, P.A., by
Thomas D. Garlitz, for plaintiff-appellee.
Daniel J. Clifton for defendants-appellants.
WALKER, Judge.
Plaintiff, a Virginia corporation, entered into an equipment
lease agreement (agreement) with Caffe' Milan, Inc., a North
Carolina corporation. Defendant John G. Plumides, II signed the
agreement on 24 October 1994. The agreement provides:
This Lease shall be interpreted and construed
according to the laws of the Commonwealth of
Virginia. This Lease is being consummated in
Hanover County, Virginia. Lessee agrees that
any action brought in law or equity arising
from this lease in any fashion may be
commenced and maintained in any of the
following courts: the General District Court
or Circuit Court for either Hanover County,
Virginia, or the City of Richmond, Virginia or
the United States District Court for the
Eastern District of Virginia.
On that same day, defendants John G. Plumides, II and John G.Plumides signed a guaranty of the agreement on behalf of Caffe'
Milan, Inc. Mary L. Plumides also signed a guaranty on behalf of
Caffe' Milan, Inc. on 7 November 1994.
On or about 30 July 1997, plaintiff brought an action in
Hanover County, Virginia, against defendants Plumides, alleging
that Caffe' Milan, Inc. is “in default for nonpayment of the
foregoing monthly payments.” After serving defendants with a
motion for default judgment, plaintiff obtained a judgment on 19
November 1997 against defendants, jointly and severally, in the
amount of $45,916.87, plus late charges of $2,246.27, a purchase
residual of $7,019.31, attorney fees of $11,036.39, and interest
thereon at the rate of 9% per annum from the date of judgment.
On 17 February 1998, plaintiff filed a notice of registration
of foreign judgment and supporting affidavit with the Mecklenburg
County Superior Court. On 1 June 1998, defendants filed a notice
of defenses to entry of foreign judgment pursuant to N.C. Gen.
Stat. § 1C-1705, in which they alleged that the Virginia Court
lacked personal jurisdiction over them. Plaintiff then filed a
motion for entry of foreign judgment on 18 November 1998, alleging
that “[p]ursuant to N.C. Gen. Stat. § 1C-1805, the State of
Virginia has proper jurisdiction over the Defendants, as is
evidenced by Paragraph 19 of the Equipment Lease Agreement executed
by the Defendants.” After a hearing, the trial court denied
defendants' notice of defenses to entry of foreign judgment andallowed plaintiff's motion for entry of foreign judgment, giving
the foreign judgment from Virginia full faith and credit. “Since the validity and effect of a judgment of anoth
er state
must be determined by reference to the laws of the state wherein
the judgement was rendered,” it is necessary for us to examine the
laws of Virginia. See Marketing Systems v. Realty Co., 277 N.C.
230, 234, 176 S.E.2d 775, 777 (1970).
Defendants contend that the trial court erred in denying their
notice of defenses to entry of foreign judgment since the Virginia
courts did not have personal jurisdiction over them. Defendants
argue that they are not bound by the forum selection clause in the
agreement since plaintiff's contract was with Caffe' Milan, Inc.
and defendant John G. Plumides, II signed the agreement only in his
official capacity as president of the corporation. Defendants
further argue that by signing the guaranty, they did not agree to
submit to the jurisdiction of the Virginia courts since it did not
contain a forum selection clause. However, plaintiff contends that
defendants, by unconditionally guaranteeing performance of the
agreement, became sureties under Virginia law, subject to the forum
selection clause in the agreement.
“A contract of suretyship is distinguishable from a guaranty
in that it generally binds the surety to the instrument of his
principal.” Klockner-Pentaplast of America, Inc. v. Roth Display
Corp., 860 F.Supp. 1119, 1121 (W.D. Va. 1994). The Virginia
Supreme Court has recognized:
Whether the contract is that of suretyship or
guaranty does not depend upon the use of
particular or technical words, such as
'security,' 'surety,' 'guaranty' or
'guarantee.' The nature of the obligation,
whether primary or secondary, is thedetermining element. If the obligation is
direct and primary, the contract will be that
of suretyship, and not of guaranty, although
the word 'guaranty' or 'guarantee' is
employed.
The B.F. Goodrich Rubber Company, Inc. v. Fisch, 141 Va. 261, 267,
127 S.E.2d 187, 188 (1925). “The guarantor contracts to pay, if,
by the use of due diligence, the debt cannot be made out of the
principal debtor, while the surety undertakes directly for the
payment, and so is responsible at once if the principal debtor
makes default.” The Phoenix Insurance Company v. Lester Brothers,
Inc., 203 Va. 802, 807, 127 S.E.2d 432, 436 (1962), citing Piedmont
Guano & Mfg. Co. v. Morris, 86 Va. 941, 11 S.E. 883 (1890). “[I]n
other words, guaranty is an undertaking that the debtor shall pay;
suretyship, that the debt shall be paid.” Id.
The guaranty signed by defendants in the case at bar provides:
For valuable consideration, the receipt of
which is hereby acknowledged, the Undersigned
jointly and severally unconditionally
guarantee to you the full and prompt
performance by the Lessee: Caffe' Milan, Inc.
....
The guaranty also states that “all sums owing to you by Obligor
shall be deemed to have become immediately due and payable if” the
Obligor defaults or files a petition for bankruptcy and that the
“Undersigned shall reimburse you, on demand, for all expenses
incurred by you in the enforcement or attempted enforcement of any
of your rights hereunder....” Further, the guaranty provides that
“[n]otice of your acceptance hereof, of default and non-payment by
Obligor..., of presentment, protest and demand, and of all other
matters of which Undersigned otherwise might be entitled, iswaived.” “Legal rights and obligation hereunder shall be
determined in accordance with the law of the Commonwealth of
Virginia.”
Although the document signed by defendants is titled
“Guaranty,” the content of the document reveals that defendants
were directly responsible to plaintiff as soon as the principal
debtor, Caffe' Milan, Inc. defaulted on its obligations under the
agreement. As sureties, defendants were bound to the agreement
entered into by plaintiff and Caffe' Milan, Inc. and the forum
selection clause it contained. See Klockner-Pentaplast of America,
Inc., 860 F.Supp. 1119, 1121 (W.D. Va. 1994). Since defendants
have failed to establish that the forum selection clause is unfair,
unreasonable, or affected by fraud or unequal bargaining power,
this provision of the agreement is valid and should be enforced.
See Paul Business Systems, Inc. v. Canon U.S.A., Inc., 240 Va. 337,
397 S.E.2d 804 (1990). Thus, the trial court properly denied
defendants' notice of defenses to entry of foreign judgment and
allowed plaintiff's motion for entry of foreign judgment, giving
the foreign judgment from Virginia full faith and credit.
Affirmed.
Judges MCGEE and HUNTER concur.
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