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Can a Lender Prohibit a Borrower From Objecting to the County Where the Lawsuit Is Filed.

New York based lenders want the freedom of filing a lawsuit in whichever county in New York State they choose. One county may be much faster than another at entering judgments. One county may be friendlier to the lender’s legal arguments than another. The lender wants the freedom of hiring the cheapest lawyer in any county in New York State. To keep this freedom of choice, lenders put in their contract a provision that the borrower cannot object to the lender’s choice of county, or “venue.” However, such a contract provision does not necessarily work.

Under the statute, NY CPLR §503(a), a lawsuit must be brought in the county where one of the parties resided: “Except where otherwise prescribed by law, the place of trial shall be in the county in which one of the parties resided when it was commenced; or, if none of the parties then resided in the state, in any county designated by the plaintiff.”

The lender only resides in the one county stated in its certificate of organization or doing business filed with the New York Department of State. Carlton Group, Ltd. v Property Mkts. Group, Inc., 134 A.D.3d 1018, 1020, Second Dept. [2015]:

“[T]he sole residence of a foreign corporation or a foreign limited liability company for venue purposes is the county where its principal office is located as designated in its application for authority to conduct business filed with the New York State Department of State, regardless of where it transacts business or maintains its actual principal office or facility [citations].”

NY CPLR §501 permits the mandatory venue selection in §503 to be avoided: “Contractual provisions fixing venue. Subject to the provisions of subdivision two of section 510, written agreement fixing place of trial, made before an action is commenced, shall be enforced upon a motion for change of place of trial.”

A contract provision that only prohibits the borrower from challenging venue does not fix a place, or county, of trial. It just leaves the choice totally open. This has been recognized by the courts (decision quoted below).

Since CPLR §501 authorizes a contract provision fixing venue to override §503, it must be concluded that without §501 the contract provision could not override CPLR §503. Otherwise, CPLR §501 would be wholly unnecessary and superfluous. "A construction rendering statutory language superfluous is to be avoided" (Matter of Branford House v Michetti, 81 NY2d 681, 688 [1993].

CPLR §501 allowing venue to be designated in an otherwise improper county by an agreement “fixing place of trial”, an agreement that attempts to dictate a choice of venue without “fixing place of trial” could not be construed to have been permitted by the Legislature. Where the Legislature has prescribed a certain method to override a statute, there cannot be used a different method to override the statute. People v. Fox, 17 Misc. 3d 281, 287 [2007]:

“'The failure of the Legislature to include a matter within a particular statute is an indication that its exclusion was intended' " (quoting Pajak v Pajak, 56 NY2d 394, 397 [1982])]; McKinney's Cons Laws of NY, Book 1, Statutes § 74; see also McKinney's Cons Laws of NY, Book 1, Statutes § 240 ["The maxim expressio unius est exclusio alterius is applied in the construction of . . . statutes, so that where a law expressly describes a particular act, thing or person to which it shall apply, an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded"]; McKinney's Cons Laws of NY, Book 1, Statutes § 94, at 194 ["the language of an enactment should be given its plain meaning, or its everyday commonplace interpretation; and the court should neither limit nor extend plain language. Words will not be expanded so as to enlarge their meaning to something which the Legislature could easily have expressed but did not"].)

Rochester Christian Church, Inc. v. New York Public Service Com., 81 A.D.2d 204, 206, Third Dept. [1981]: “this court may not enlarge upon the legislative design”.

97 NY Jur 2d Statutes, §112, “The legal expression `expression unius est exclusion alterius,’ means that the mention of one thing implies the exclusion of another. According to this maxim, if a law expressly applies to a particular act, then there is an irrefutable inference that what is omitted was intended to be excluded.”

Therefore, the Legislature having expressly authorized a particular contractual provision governing a motion to change venue, it is deemed to have intended to exclude an even broader provision, to wit, a provision barring all objections to venue.

A contract provision fixing the county in which the action is brought is completely different from one prohibiting the borrower from objecting to an improper choice. Forum selection, that is the right to force an out of state defendant to be sued in New York State, is a much more valuable right than venue selection, which merely chooses the county in New York where the lawsuit is brought. However, a contractual forum selection clause that does not actually fix a designated forum will not be enforced. Sterling Nat'l Bank v. Borger, Jones & Keeley-Cain, 2005 N.Y. Misc. LEXIS 3376, 233 N.Y.L.J. 81, N.Y. Civ. Ct. (Scarpulla, J.):

“The Agreement at issue in this action contains a floating forum selection clause, i.e., the clause provides that the lessee agrees to be sued not only in any state where Norvergence has a principle office, but also in any state where any future, as yet unidentified assignee of the agreement has a principal office. In addition, the floating forum selection clause provides that Norvergence, or its assignee, in their sole discretion, may chosen to sue in either federal or state court. In IFC Credit Corp., Assignee of Norvergence, Inc. v. Aliano Brothers General Contractors, Inc. and in IFC Credit Corp., Assignee of Norvergence, Inc. v. Eastcom, Inc., the courts refused to enforce this exact floating forum selection clause, because it is lack of specificity regarding any particular jurisdiction does not permit the lessee to know where an assignee might file suit. IFC Credit Corp., Assignee of Norvergence, Inc. v. Aliano Brothers General Contractors, 2005 U.S. Dist. LEXIS 22961, 2005 WL 643288, *4 (N.D.I. 2005); Inc. IFC Credit Corp., Assignee of Norvergence, Inc. v. Eastcom, Inc., 2005 U.S. Dist. LEXIS 279, 2005 WL 43159, *1 (N.D.I. 2005). The Aliano Brothers court found: "Defendants have no way of knowing at the time the lease was [sic] executed, what state in the union they would be required to litigate. As such, defendants cannot be found to have cons[ented to jurisdiction in Illinois." IFC Credit Corp., Assignee of Norvergence, Inc. v. Aliano Brothers General Contractors, Inc., 2005 WL 643288, *4 (N.D.I. 2005). The court noted that public policy that a forum selection clause be "clear and specific." See IFC Credit Corp., 2005 WL 643288 at *4.

Judge Scarpulla (now Commercial Division Justice), by emphasizing Brooke Group v. JCH Syndicate, 87 N.Y.2d 530, 534 [1996] (“Forum selection clauses are enforced because they provide certainty and predictability”) noted that a clause that does not actually fix a forum fails to provide any certainty or predictability and thereby fails to fulfill the basis for enforcing a forum selection clause. She therefore drew the clear distinction between a contract provision that actually selects, or fixes, the forum, from one that does not.

To allow a clause prohibiting defendant from objecting to venue to permit an improper venue would enlarge the permissible clause specifically enacted by the Legislature in CPLR §501. Specific language in a statute cannot be enlarged. Cf., Walter v. Walter, 217 N.Y. 439, 443 [1916]: “When relatives, the next friend and the incompetent after restoration to sanity are enumerated therein as those authorized to maintain the action, an application of the familiar maxim "expressio unius est exclusio alterius" excludes the committee. The general words of section 2340 do not enlarge the specific provisions of sections 1747 and 1748.”


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