Desarrollo Immobiliario Y Negocios Industriales De Alta Tecnologia De Hermosillo, S.A. De C v. v. Kader Holdings Co.
276 P.3d 1
Ariz. Ct. App.2012Background
- Kader Holdings, a Bermuda/Hong Kong-based guarantor, entered a lease with Desarrollo and Sinomex for a factory building, with Kader guaranteeing Sinomex's lease obligations.
- In 1993, an amendment shifted governing law and jurisdiction to Arizona, and a loan to Desarrollo was secured by Bank One, Arizona, with the lease and guarantee assigned as collateral.
- Sinomex repeatedly defaulted on rent; multiple workout agreements (1996, 1999, 2002) attempted to address arrears, while preserving the lease and guarantee.
- In 2003 Desarrollo sued Sinomex and Kader in Arizona for breach of contract; Sinomex defaulted; Kader sought dismissal for lack of personal jurisdiction, but the court denied.
- The trial court later awarded Desarrollo over $3.5 million in damages against Kader and Sinomex; on appeal, Kader challenged personal jurisdiction and the enforceability of modifications to the guarantee.
- The appellate court affirmed, holding Arizona had jurisdiction via the forum selection clause, and that the guarantee extended to extensions of the lease, and that the workout agreements did not extinguish the guarantee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the forum selection clause bind Kader as guarantor? | Desarrollo argues Kader consented to Arizona forum via lease amendment forum clause. | Kader contends the clause does not apply to the guarantee and is unreasonable. | Yes; the clause applies to Kader as guarantor. |
| Is the forum selection clause enforceable against Kader as reasonable? | Enforcement is fair and not unfairly prohibitive to Kader's day in court. | Enforcement would deprive Kader of its day in court and Arizona has no nexus. | Enforceable; clause is reasonable. |
| Did the workout agreements extinguish the guarantee? | Guaranty covers all extensions; workout did not extinguish. | Extensions/modifications to lease could discharge the guarantee under ordinary rules. | Workout did not extinguish the guarantee; extensions are within the guarantee. |
| Did simultaneous exercise of lease renewal options bind Kader under the guarantee? | Options to renew are extensions guaranteed by Kader. | Options might require sequencing; Kader did not guarantee simultaneous exercise. | Simultaneous exercise valid; Kader guaranteed all extensions. |
Key Cases Cited
- Morgan Bank (Del.) v. Wilson, 164 Ariz. 535 (App.1990) (consent-based personal jurisdiction via forum clause)
- United Cal. Bank v. Prudential Ins. Co. of Am., 140 Ariz. 238 (App.1983) (contractual choice of law and jurisdiction concepts)
- Phx. Arbor Plaza, Ltd. v. Dauderman, 163 Ariz. 27 (App.1989) (guarantor not bound by underlying contract's forum clause when not signatory to that contract)
- Sociéte Jean Nicolas Et Fils v. Mousseux, 123 Ariz. 59 (App.1979) (forum selection clauses upholdable when fairly bargained)
- Bennett v. Appaloosa Horse Club, 201 Ariz. 372 (App.2001) (reasonableness of forum selection clause; heavy burden on challenger)
- Rand v. Porsche Fin. Servs., 216 Ariz. 424 (App.2007) (contract interpretation; language viewed in context; drafter held to ambiguous terms)