LAIBE CORPORATION v. GENERAL PUMP WELL INC (2012)

Court of Appeals of Georgia.

LAIBE CORPORATION v. GENERAL PUMP & WELL, INC.

No. A12A1002.

Decided: October 09, 2012

Susan Warren Cox, Benjamin Joseph Colson, for Laibe Corporation. Judge WilliamE. Callaway Jr., William J. Neville Jr., for General Pump & Well, Inc.

We granted Laibe Corporation's (“Laibe”) application for interlocutory appeal to review the trial court's denial of a motion to dismiss General Pump & Well, Inc.'s (“General”) complaint for, inter alia, improper venue and lack of personal jurisdiction. For the reasons set forth infra, we vacate the trial court's denial of Laibe's motion to dismiss and remand with direction.

The record reflects that General is a Georgia corporation and Laibe is an Indiana corporation. In May 2008, General filed a complaint against Laibe concerning the March 2005 purchase of a water-well drilling unit for $438,043.00. General alleged that the drilling unit failed to operate to design specifications, repeatedly broke or malfunctioned, and was not fit for the particular purpose for which it was intended. Thus, General alleged that Laibe had breached implied warranties of merchantability and fitness for a particular purpose, and sought damages in the amount of $74,500.00.

In response, Laibe sought removal to federal district court, but the case was remanded back to the state court. Laibe subsequently filed a motion to dismiss pursuant to OCGA § 9–11–12(b)(2), (3), and (6), and admitted that it sold the water-well drilling unit to General but contended that the terms of the sale agreement barred General's complaint. Laibe included a copy of the sales contract between the parties and argued that, pursuant to the agreement's terms, (1) General failed to file suit within a specified limitations period; (2) General failed to state a claim upon which relief could be granted because the contract disclaimed the relevant warranties;¹ (3) the trial court lacked personal jurisdiction; and (4) venue in Georgia was improper because the contract contained an enforceable forum-selection clause.²

In response to the motion, General argued that the trial court could not consider the sales contract because its claims arose out of law, not from the contract, and because consideration of the contract would convert the motion to dismiss into a motion for summary judgment. General did not attach any affidavits or other evidence to its response. And before the court ruled on Laibe's motion, General amended its complaint to add claims for negligent design, manufacture, service, and repair of the drilling unit.

The trial court conducted a hearing on Laibe's motion to dismiss, during which no evidence or oral testimony was presented; and in May 2011, the trial court denied Laibe's motion on each enumerated ground. Primarily, the trial court held that the sales contract between the parties did not apply because, pursuant to our Supreme Court's decision in Bookholt v. General Motors Corp.,³ General's claims arose by creation of law and not from the contract. Further, the trial court held that even if the contract applied, the relevant provisions—i.e., disclaimer of warranties, limitations period, forum-selection clause—were “unenforceable as abhorrent to Georgia law.” The trial court issued a certificate of immediate review, and this appeal by Laibe follows.

Although Laibe argues that the trial court erred in denying its motion on each ground enumerated before that court, we vacate the trial court's order because it erred in determining that the contract was inapplicable and, if applicable, that the forum-selection clause was unenforceable. Thus, our discussion below is concerned solely with that argument, and we need not address Laibe's other enumerations of error.

1. To begin with, the trial court erred by determining that the sales contract between the parties was inapplicable to General's complaint and, consequently, to Laibe's motion to dismiss same. The trial court accepted General's argument that our Supreme Court's decision in Bookholt requires non-consideration of a contract for the sale of goods when the purchaser makes claims for breach of the implied warranties of fitness and merchantability because those warranties arise as a matter of law, not contract. We disagree with this contention.

Georgia's codification of the Uniform Commercial Code provides that, unless excluded or modified, warranties of merchantability and fitness for a particular purpose are implied in contracts for the sale of goods.⁴ And the UCC sets forth specific requirements for the exclusion or modification of warranties, including the implied warranties of merchantability and fitness for a particular purpose.⁵

In Bookholt, our Supreme Court was faced with a challenge to the constitutionality of implied warranties and considered “whether the implied warranty created by [law] ․ is contractual at all” with a determination that it was not.⁶ The Court noted that “the implied warranty adds nothing to the agreement of the parties, but simply states the legal consequences attached to a described transaction” and “is not dependent upon any contract either in fact or by implication.”⁷ Further, the Court held that an implied warranty is “an obligation that the law places upon a party as a result of some transaction entered into.”⁸ But the Court also recognized that an implied warranty can be disclaimed by agreement.⁹

Having carefully considered the Supreme Court's opinion, we do not share the trial court and General's overly broad reading of Bookholt, because the language in that decision makes abundantly clear that the underlying contractual transaction is what triggers the legal obligations of implied warranties.¹⁰ Indeed, our Supreme Court has more recently explained that “the implied warranties of the UCC arise out of a contract for the sale of goods.”¹¹ Thus, it would be patently absurd to conclude that the written contract, of which those warranties are a “legal consequence,” is irrelevant or inapplicable to a motion to dismiss a claim for breach of those warranties—especially when the written agreement is alleged to disclaim the same.¹²

Furthermore, as to General's argument that consideration of the written agreement would have converted the motion to dismiss into a motion for summary judgment, although this might have been true as to Laibe's 12(b)(6) arguments for failure to state a claim upon which relief can be granted,¹³ the consideration of matters outside the pleadings on a 12(b)(2) or 12(b)(3) motion to dismiss for lack of personal jurisdiction or improper venue does not convert the motion to one for summary judgment.¹⁴ Thus, the trial court erred in holding that it could not consider the sales contract when deciding whether to grant Laibe's motion to dismiss.

2. Having determined that the sales contract was relevant and should have been considered by the trial court in assessing Laibe's arguments regarding the forum-selection clause, we must now consider whether the trial court was correct that, even if considered, that provision was unenforceable.¹⁵

Georgia has adopted the Supreme Court of the United States's ruling that forum-selection clauses are “prima facie valid and should be enforced unless the opposing party shows that enforcement would be unreasonable under the circumstances.”¹⁶ Indeed, to invalidate a forum-selection clause, the party opposing the provision “must show that trial in the chosen forum will be so inconvenient that he will, for all practical purposes, be deprived of his day in court.”¹⁷ And, suffice it to say, a freely negotiated agreement “should be upheld absent a compelling reason such as fraud, undue influence, or overweening bargaining power.”¹⁸

In the case sub judice, the contract between the parties includes a paragraph that contains, inter alia, the following language in all-caps:

You agree that the court of the State of Indiana for Marion County or any federal district court having the jurisdiction in that county shall have exclusive jurisdiction for the determination of all disputes arising under this contract.

The trial court held that because this forum-selection clause was inapplicable—a decision which was erroneous for the reasons set forth in Division 1, supra—Laibe failed to carry its burden of proof.¹⁹ Additionally, citing to the Supreme Court of the United States's decision in Carnival Cruise Lines, Inc. v. Shute,²⁰ the trial court held in a footnote that because the language in the paragraph containing the forum-selection clause “cannot be fairly interpreted to extend the rights therein to both parties equally, it is fundamentally unfair and amounts to a bad-faith tactic intended to discourage pursuit of legitimate claims by [General].”

The trial court, presumably, was concerned with language that indicates that “[n]othing stated in this Contract is intended to prevent us [Laibe] from commencing any action in any court having proper jurisdiction.” But we do not view the above-quoted language as being fundamentally unfair or evincing bad faith on Laibe's part.²¹ Indeed, in the very case relied upon by the trial court, our federal Supreme Court held that any suggestion of bad-faith was belied by the fact that the selected venue was the principal place of the cruise line's business, there was no evidence that accession to the clause was obtained by fraud or overreaching, and the plaintiff conceded to having notice of the provision.²²

Similarly here, there is a decided lack of evidence in the record to support any assertion that the forum-selection provision is unreasonable or that it resulted from fraud, overweening bargaining power, or undue influence. On appeal, General more or less argues that the language on the face of the contract evinces overreaching by Laibe. But as explained supra, General did not attach any affidavits or other evidence to its response to Laibe's motion to dismiss, and the trial court did not hear oral testimony or receive other evidence at the hearing on the motion.²³

General presented no evidence that pursuing legal remedies in Indiana would be so inconvenient that the company would, “for all practical purposes, be deprived of [its] day in court.”²⁴ Additionally, the relevant contract was entered into between two corporations, and the five-page contract—only two of which contain terms and conditions—includes a separate signature from General's owner, acknowledging “receipt of an exact copy of this contract and ․ that you have read the warranty on the reverse side,” followed by a notation that “additional terms and conditions are detailed on the reverse side.” Thus, there is no evidence of fraud, overweening bargaining power, or undue influence because General failed to present any competing evidence to show that the forum-selection clause should not be enforced.²⁵ Therefore, the trial court erred in denying dismissal of the complaint for lack of personal jurisdiction and improper venue.²⁶

Accordingly, for all the foregoing reasons, we vacate the trial court's order denying Laibe's motion to dismiss and remand for the entry of an order dismissing General's complaint.

Judgment vacated and case remanded with direction.

DILLARD, Judge.

ELLINGTON, C.J., and PHIPPS, P.J., concur in judgment only.