Summary
In Mungas v. Rishikof, No. 01-16-00809-CV, 2017 WL 1488137, at *1 (Tex. App.-Houston [1st Dist.] Apr. 25, 2017, no pet.), a California resident solicited a resident of Texas for a $75,000 loan in order to secure funds to continue operating his business in California.
Summary of this case from Sevenly Outfitters, LLC v. Monkedia, LLCOpinion
NO. 01-16-00809-CV
04-25-2017
GREG MUNGAS, Appellant v. BRIAN RISHIKOF, Appellee
On Appeal from the County Civil Court at Law No. 1 Harris County, Texas
Trial Court Case No. 1075659
MEMORANDUM OPINION
This is an interlocutory appeal from an order overruling a special appearance made by a nonresident defendant in a suit on a promissory note. A resident of California, Greg Mungas, solicited a resident of Texas, Brian Rishikof, for a loan. Rishikof loaned Mungas the money, which Mungas agreed to repay according to the terms of a promissory note. Mungas defaulted on the note, and Rishikof sued Mungas in Texas state court. Mungas filed a special appearance, which the trial court denied, ruling that Mungas was subject to specific jurisdiction. On appeal, Mungas contends that his Texas contacts are insufficient to establish personal jurisdiction over him. We affirm.
See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(7).
Background
This dispute arises out of the default on a promissory note by the maker of the note, Greg Mungas, a resident of California. The bearer of the note is Brian Rishikof, a resident of Texas. Rishikof and Mungas know each other from prior business dealings. They both own companies that have worked together on government-funded aerospace research.
In early 2012, Mungas solicited Rishikof for a loan of $75,000. According to Mungas, he solicited the loan from Rishikof because he needed funds to continue operating his business in California. Rishikof agreed to loan Mungas the money, and the two prepared a promissory note. The principal amount, $75,000, was printed on the top left corner of the note, and "Houston, Texas" was printed on the top right. The first paragraph stated:
For value received, the undersigned ("Maker") promises to pay to Brian Rishikof ("Payee"), of [street address], Houston, TX 77059, the principal sum of seventy-five thousand dollars ($75,000.00), together
with interest at the rate hereinafter provided for on the unpaid balance of this note from time to time outstanding until paid in full.The note provided that "principal and interest shall be due and payable in full on April 30, 2012." Although the note made clear that the principal and interest were payable to Rishikof, it did not provide any instructions on exactly where Mungas was supposed to repay him. Nor did the note contain provisions specifying the governing law or the parties' choice of forum.
After Mungas and Rishikof drafted the note, Rishikof asked Mungas to send him a signed copy and to provide him with wiring instructions so he could wire Mungas the proceeds from his personal bank account. Mungas signed the promissory note and provided Rishikof with the instructions. Rishikof wired the proceeds from his bank account in Texas to Mungas's bank account in California.
Mungas never made any payments, and Rishikof eventually filed this lawsuit to collect on the note. In response to Rishikof's petition, Mungas filed a special appearance.
Mungas supported his special appearance with a sworn declaration. In the declaration, Mungas stated that, at all times relevant to the lawsuit, he was a resident of California. His home and business were in California. He paid state and local taxes in California. He was registered to vote in California. When the lawsuit was filed, he was temporarily residing in Arizona, but he expected to return to California in the near future.
According to Mungas's sworn declaration, Mungas had never resided or worked in Texas, was not registered to vote in Texas, did not own property in Texas, did not have employees or agents in Texas, and did not earn income from Texas. Mungas stated that the promissory note was for loan proceeds that were related to business operations in California. He stated that he did not sign the promissory note in Texas, did not receive the money in Texas, and did not deposit the money into a Texas bank account.
The trial court overruled Mungas's special appearance, finding that Mungas was subject to specific jurisdiction because the promissory note was executed in Texas. Mungas appeals.
Special Appearance
In three issues, Mungas contends that his Texas contacts were insufficient to justify either specific or general jurisdiction.
A. Applicable law and standard of review
"A nonresident defendant is subject to personal jurisdiction in Texas if (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction does not violate the due process guarantees of the federal and state constitutions." TMX Fin. Holdings, Inc. v. Wellshire Fin. Servs., LLC, No. 01-16-00044-CV, 2016 WL 5920776, at *3 (Tex. App.—Houston [1st Dist.] Oct. 11, 2016, no pet. h.). "The Texas long-arm statute allows the exercise of personal jurisdiction to 'reach as far as the federal constitutional requirements of due process will allow.'" Id. (quoting Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 657 (Tex. 2010)).
"The exercise of personal jurisdiction is consistent with due process 'when the nonresident defendant has established minimum contacts with the forum state, and the exercise of jurisdiction comports with traditional notions of fair play and substantial justice.'" Id. A nonresident defendant establishes minimum contacts with the forum state when it purposefully avails itself of the privilege of conducting activities within the state. Id. A nonresident defendant's minimum contacts can create either general or specific jurisdiction. TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016).
General jurisdiction is party-focused. A trial court has general jurisdiction over a nonresident defendant when the defendant's contacts with the forum state are so continuous and systematic that the defendant is essentially at home in the state. Id. When a nonresident defendant is subject to general jurisdiction, the trial court may exercise jurisdiction over the defendant even if the plaintiff's cause of action does not arise from or relate to the defendant's contacts with the forum. Id.
"This test requires substantial activities within the forum . . . ." Id. "For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home." Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924, 131 S. Ct. 2846, 2853-54 (2011)).
Specific jurisdiction is transaction-focused. A trial court has specific jurisdiction over a nonresident defendant when (1) the defendant's contacts with the forum state were purposeful and (2) the cause of action arises from or relates to those contacts. Kelly, 301 S.W.3d at 658. When a nonresident defendant is subject to specific jurisdiction, the trial court may exercise jurisdiction over the defendant even if the defendant's forum contacts are isolated or sporadic. TV Azteca, 490 S.W.3d at 37.
Under the first prong of specific jurisdiction, the nonresident defendant must purposefully avail himself of the privilege of conducting activities in the forum state. Touradji v. Beach Capital P'ship, L.P., 316 S.W.3d 15, 24 (Tex. App.—Houston [1st Dist.] 2010, no pet.). In determining whether a nonresident defendant has purposefully availed himself of the privileges of conducting activities in Texas, we consider the defendant's own actions without considering the unilateral activity of any other party and ask (1) whether the defendant's actions were purposeful rather than random, isolated, or fortuitous, and (2) whether the defendant sought some benefit, advantage, or profit by availing himself of the jurisdiction. Proppant Sols., LLC v. Delgado, 471 S.W.3d 529, 537 (Tex. App.—Houston [1st Dist.] 2015, no pet.).
Under the second prong of specific jurisdiction, there must be a "substantial connection" between the defendant's forum contacts and the operative facts of the litigation. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex. 2007). In determining whether there is a substantial connection, we consider the relationship between the defendant, the forum, and the litigation. Kelly, 301 S.W.3d at 658; Proppant Sols., 471 S.W.3d at 537.
A single contact can create specific jurisdiction, "as long as it creates a substantial connection with the forum state." Lensing v. Card, 417 S.W.3d 152, 156 (Tex. App.—Dallas 2013, no pet.). For example, soliciting a Texas resident for a loan or business may give rise to specific jurisdiction. See Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005) ("[A] nonresident that directs marketing efforts to Texas in the hope of soliciting sales is subject to suit here in disputes arising from that business."); Silbaugh v. Ramirez, 126 S.W.3d 88, 95-96 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (holding that nonresident defendant was subject to specific jurisdiction in suit against her for breach of contract when defendant solicited business from plaintiff knowing plaintiff was Texas resident); Ark of Safety Christian Church, Inc. v. Church Loans & Invs. Trust, No. 07-05-0273-CV, 2006 WL 334280, at *3-4 (Tex. App.—Amarillo Feb. 14, 2006, no pet.) (mem. op.) (holding that nonresident borrower was subject to specific jurisdiction in action for breach of loan agreement when evidence showed that nonresident purposefully contacted Texas lender to obtain loan). However, specific jurisdiction normally "is not justified by the single fact that a nonresident contracts with a Texas resident." J.D. Fields & Co. v. W.H. Streit, Inc., 21 S.W.3d 599, 604 (Tex. App.—Houston [1st Dist.] 2000, no pet.). "Nor is it justified by the single fact that a contract is payable in Texas." Id.
Whether a trial court can exercise personal jurisdiction over a nonresident defendant is a question of law, which we review de novo. TMX Fin. Holdings, 2016 WL 5920776, at *3. When the trial court does not issue findings of fact or conclusions of law, we imply all facts that are necessary to support the ruling and supported by the evidence. Id.
In a special appearance, the plaintiff and the defendant bear shifting burdens of proof. Kelly, 301 S.W.3d at 658; TMX Fin. Holdings, 2016 WL 5920776, at *3. The plaintiff bears the initial burden of pleading sufficient facts to bring a nonresident defendant within the reach of the Texas long-arm statute. Kelly, 301 S.W.3d at 658; TMX Fin. Holdings, 2016 WL 5920776, at *3. If the plaintiff meets its initial burden, the burden then shifts to the defendant to negate all bases of personal jurisdiction alleged by the plaintiff. Kelly, 301 S.W.3d at 658; TMX Fin. Holdings, 2016 WL 5920776, at *3.
"If the plaintiff fails to plead facts bringing the defendant within the reach of the long-arm statute, the defendant need only prove that it does not reside in Texas to negate jurisdiction." TMX Fin. Holdings, Inc. v. Wellshire Fin. Servs., LLC, No. 01-16-00044-CV, 2016 WL 5920776, at *4 (Tex. App.—Houston [1st Dist.] Oct. 11, 2016, no pet. h.).
A defendant can negate jurisdiction on either a factual or a legal basis. TMX Fin. Holdings, 2016 WL 5920776, at *4. "Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations." Kelly, 301 S.W.3d at 658. "Legally, the defendant can show that even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish jurisdiction . . . ." Id. "In determining whether a defendant has negated all bases, we examine all the evidence in the record." Fleischer v. Coffey, 270 S.W.3d 334, 337 (Tex. App.—Dallas 2008, no pet.).
If the defendant meets its burden of negating all alleged bases of personal jurisdiction, the burden then shifts backs to the plaintiff, who bears the ultimate burden of proving as a matter of law that the trial court has personal jurisdiction over the defendant. TMX Fin. Holdings, 2016 WL 5920776, at *4.
B. Mungas is subject to specific jurisdiction
Mungas contends that the trial court erred in overruling his special appearance. In two issues, Mungas argues that he is not subject to specific jurisdiction in Texas because the loan proceeds were used to fund his business in California, the promissory note did not include a forum-selection clause, and his contacts with Texas were merely "incidental" and therefore insufficient to give rise to specific jurisdiction. Rishikof responds that by soliciting him for the loan and then defaulting on the note, Mungas subjected himself to specific jurisdiction in Texas.
We agree with Rishikof. Mungas's conduct satisfies both prongs of the test for specific jurisdiction. See Kelly, 301 S.W.3d at 658.
First, Mungas purposefully availed himself of the privilege of conducting activities in Texas by soliciting Rishikof for the loan. Touradji, 316 S.W.3d at 24. Mungas's solicitation of Rishikof was Mungas's own action. Proppant Sols., 471 S.W.3d at 537. Mungas was the one who reached out to Rishikof and not the other way around. Mungas's solicitation of Rishikof, a Texas resident, was purposeful rather than random, isolated, or fortuitous. Id. The two had an ongoing business relationship, increasing Mungas's chances of securing a loan from Rishikof as opposed to a bank or some other financial institution. And Mungas's solicitation of Rishikof obviously sought some benefit, advantage, or profit—money to operate his business. Id.
Second, there is a "substantial connection" between Mungas's Texas contacts and the operative facts of the litigation. Moki Mac, 221 S.W.3d at 585. Mungas solicited a loan from a resident of Texas, received the loan proceeds from a bank account in Texas, and then defaulted on the note by failing to make payments to the Texas resident, causing the Texas resident harm. Rishikof's cause of action arises from or relates to Mungas's Texas contacts. Kelly, 301 S.W.3d at 658.
Mungas contends that these contacts cannot by themselves create specific jurisdiction over him because they merely show that he contracted with a Texas resident. We disagree. The contacts do not merely show that he contracted with a Texas resident; instead, they show that he contracted with a Texas resident as a result of his solicitation of the Texas resident. It is undisputed that Mungas solicited Rishikof for the loan. And it is undisputed that Mungas knew Rishikof was a Texas resident. When a nonresident knowingly solicits a resident of Texas for a loan, the nonresident purposefully avails himself of the privileges of conducting activities in Texas. See, e.g., Silbaugh, 126 S.W.3d at 95-96 (holding that nonresident defendant was subject to specific jurisdiction in suit against her for breach of contract when defendant solicited business from plaintiff knowing plaintiff was Texas resident); J.D. Fields, 21 S.W.3d at 604-05 (holding that nonresident guarantor was subject to specific jurisdiction in action for breach of contract when "guarantor called plaintiff's Houston office with an offer to personally guarantee the defendant company's indebtedness in order to induce plaintiff to contract with defendant company"); Ark of Safety Christian Church, 2006 WL 334280, at *3-4 (holding that nonresident borrower was subject to specific jurisdiction in action for breach of loan agreement when evidence showed that nonresident purposefully contacted Texas lender to obtain loan).
Mungas argues that his solicitation of Rishikof is not relevant because Rishikof is not suing him for fraudulent inducement or some other claim arising directly from the solicitation itself. Again, we disagree. When, as here, a nonresident defendant solicits a Texas resident to make him a loan, mails the signed note to the Texas resident-lender, receives the loan proceeds from a Texas financial institution, and then breaches that agreement, there is a "substantial connection" between the defendant's Texas contacts and the litigation's operative facts. See, e.g., Silbaugh, 126 S.W.3d at 95-96; J.D. Fields, 21 S.W.3d at 604-05.
We hold that Mungas has failed to meet his burden of negating all bases of personal jurisdiction and that the trial court therefore did not err in overruling Mungas's special appearance. Accordingly, we overrule Mungas's first and second issues.
Because we hold that Mungas is subject to specific jurisdiction, we need not reach his third issue or otherwise determine whether he is subject to general jurisdiction.
Conclusion
We affirm the trial court's order.
Harvey Brown
Justice Panel consists of Chief Justice Radack and Justices Brown and Lloyd.