Opinion
NO. 01-16-00248-CV
03-02-2017
THANH TRAN AND NANCY TRAN, Appellants v. DAVID TRAN, Appellee
On Appeal from the 400th District Court Fort Bend County, Texas
Trial Court Case No. 12-DCV-202219
MEMORANDUM OPINION
Appellants, Thanh Tran and Nancy Tran, appeal the trial court's order sustaining the special appearance of appellee, David Tran. In three issues, Thanh and Nancy contend that the trial court erred in granting David's special appearance because David (1) waived his special appearance; (2) failed to negate all potential bases for personal jurisdiction; and (3) failed to demonstrate that the exercise of jurisdiction would offend traditional notions of fair play and substantial justice. We affirm.
Background
David is a resident of the State of Washington. Thanh, David's uncle, is a Texas resident. Nancy, David's aunt, is a resident of the State of Washington. David's company, David Tran Investments, LLC, is a limited liability company organized under the laws of the State of Washington and whose principal place of business is in the State of Washington.
On November 8, 2012, Thanh and Nancy sued David alleging that he induced them to invest $350,000 in the opening of his bar and restaurant in Seattle based upon David's fraudulent representations that they would be repaid within a couple of years and receive a share of the business's profits. Thanh and Nancy asserted causes of action for fraud, fraud in the inducement, breach of fiduciary duty, breach of promise to repay, and constructive trust.
On December 7, 2012, David filed a special appearance contesting the trial court's personal jurisdiction over him. In his verified pleading, David stated that David Tran Investments, LLC, is not registered to do business in Texas; it has no registered agent, office, bank account, or telephone listing in Texas; the bar and restaurant in which Thanh invested, as well as all of its employees, managers, supervisors, vendors, suppliers, accountants, and agents, are located in the State of Washington; and all of the business decisions and day-to-day operations concerning the bar and restaurant are conducted in the State of Washington. David further stated that he has never been to Texas and that the only face-to-face discussion he had with Thanh regarding Thanh's investment took place in Seattle.
On January 28 and June 12, 2013, the parties propounded written discovery. On April 15, 2013, the trial court granted Thanh and Nancy's motion to compel. David and Thanh were deposed on November 8 and December 13, 2013, respectively, on matters relating to the special appearance. The record reflects that the only activity in the case between December 13, 2013 and November 18, 2015 was the filing by David's attorney of a notice of change of address.
On November 18, 2015, Thanh and Nancy moved for partial summary judgment and set the motion for submission on December 14, 2015. On November 20, 2015, David noticed his special appearance for hearing on December 7, 2015. David filed amended notices resetting the hearing date on his special appearance to January 11 and, later, to February 8, 2016. Thanh and Nancy filed amended notices resetting submission of their partial summary judgment motion to January 25 and, later, to February 22, 2016. On February 3, 2015, David filed a supplemental brief in support of his special appearance and, on February 8, 2015, Thanh and Nancy filed a response.
On February, 8, 2015, the trial court held a hearing on David's special appearance. On February 15, 2016, David filed a motion to continue Thanh and Nancy's motion for partial summary judgment and his response to the motion. On February 26, 2016, the trial court sustained David's special appearance and dismissed the case. This appeal followed.
Discussion
A. Waiver of Special Appearance
In their first issue, Thanh and Nancy contend that David waived his special appearance by (1) failing to timely request a hearing on the special appearance and (2) filing a motion for continuance of their partial summary judgment motion and his response to the motion.
1. Applicable Law
Unlike subject matter jurisdiction, which concerns a court's jurisdiction to hear a case and cannot be waived, personal jurisdiction concerns a court's jurisdiction over a particular party and can be waived. Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371, 379 (Tex. 2006). A party waives the absence of personal jurisdiction by making a general appearance in the case or by failing to timely object to the court's jurisdiction. Id. A party enters a general appearance when he (1) invokes the judgment of the court on any question other than the court's jurisdiction, (2) recognizes by his acts that an action is properly pending, or (3) seeks affirmative action from the court. Exito Elecs. Co. v. Trejo, 142 S.W.3d 302, 304 (Tex. 2004).
Rule 120a of the Texas Rules of Civil Procedure recognizes a procedure for a "special appearance"—a means by which a party may make a limited appearance in the case for the purpose of challenging personal jurisdiction without making a general appearance that will waive the challenge. See TEX. R. CIV. P. 120a; Trenz v. Peter Paul Petroleum Co., 388 S.W.3d 796, 800 (Tex. App.—Houston [1st Dist.] 2012, no pet.). A party availing himself of rule 120a's special appearance procedure must strictly comply with the rule's terms because failure to do so results in waiver. See TEX. R. CIV. P. 120a(1) ("Every appearance, prior to judgment, not in compliance with this rule is a general appearance."); First Oil PLC v. ATP Oil & Gas Corp., 264 S.W.3d 767, 776 (Tex. App.—Houston [1st Dist.] 2008, pet. denied). Rule 120a dictates the order in which pleadings may be filed with respect to the filing of a special appearance. Trenz, 388 S.W.3d at 800. The due-order-of-pleading requirement provides that a special appearance be "filed prior to motion to transfer venue or any other plea, pleading or motion . . . ." TEX. R. CIV. P. 120a(1). Rule 120a also dictates the order in which motions may be heard with respect to a special appearance. Trenz, 388 S.W.3d at 800. The due-order-of-hearing requirement provides that "[a]ny motion to challenge the jurisdiction provided for herein shall be heard and determined before a motion to transfer venue or any other plea or pleading may be heard." TEX. R. CIV. P. 120a(2).
The rule further provides that "a motion to transfer venue and any other plea, pleading, or motion may be contained in the same instrument or filed subsequent thereto without waiver of such special appearance . . . ." TEX. R. CIV. P. 120a(1).
2. Analysis
Relying on Bruneio v. Bruneio, 890 S.W.2d 150, 154 (Tex. App.—Corpus Christi 1994, no writ), Thanh and Nancy argue that David waived his special appearance "by not timely requesting a hearing and pressing for a ruling on his special appearance." The record reflects that David filed his special appearance on December 7, 2012 and requested a hearing on November 20, 2015.
Rule 120a contains due-order-of-pleading and due-order-of-hearing requirements but imposes no temporal deadline by which a party contesting jurisdiction must have a hearing on a motion for special appearance. See TEX. R. CIV. P. 120a. Further, Thanh and Nancy's reliance on Bruneio is misplaced. There, the trial court concluded that the specially appearing defendant had waived his challenge to the trial court's personal jurisdiction over him because none of his pleadings specifically requested a hearing, nor was there any indication that he had sought a hearing on his challenge to the court's jurisdiction during the nine-month period between the time he specially appeared and the case went to trial. See Bruneio, 890 S.W.2d at 154. Here, David noticed his special appearance for hearing, and the trial court held a hearing on February 8, 2015, before any other matter. Rule 120a's due-order-of-hearing requirement is satisfied.
Thanh and Nancy also argue that David waived his special appearance by filing a motion for continuance of their partial summary judgment motion and his response to the motion. The record reflects that David filed his special appearance prior to filing his answer, participated in jurisdictional discovery only, and moved for a hearing on his special appearance. See Trenz, 388 S.W.3d at 804 (noting rule 120a "expressly contemplates jurisdictional discovery before a special appearance hearing") (citing TEX .R. CIV. P. 120a(3)). David made no other request of the court prior to the hearing on his special appearance. Moreover, David's motion for continuance and summary judgment response were filed after the court heard David's special appearance and expressly subject to the pending ruling on David's special appearance. See TEX. R. CIV. P. 120(1) (stating that other pleadings and motions may "be filed subsequent [to a special appearance] without waiver of such special appearance"). David complied with rule 120a's due-order-of-pleading hearing requirement. Because David did not waive his special appearance, we overrule Thanh and Nancy's first issue.
B. Personal Jurisdiction
In their second and third issues, Thanh and Nancy contend that the trial court erred in granting David's special appearance because David failed to negate all potential bases for personal jurisdiction and demonstrate that the exercise of jurisdiction would offend traditional notions of fair play and substantial justice.
1. Standard of Review
We review de novo a trial court's decision to grant or deny a special appearance. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). A plaintiff must plead allegations that bring a nonresident defendant within the provisions of the Texas long-arm statute. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex. 2002). A nonresident defendant challenging the court's exercise of personal jurisdiction through a special appearance carries the burden of negating those allegations. Id.; Curocom Energy LLC v. Young-Sub Shim, 416 S.W.3d 893, 896 (Tex. App.—Houston [1st Dist.] 2013, no pet.).
The defendant can negate jurisdiction on either a factual or legal basis. Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 659 (Tex. 2010). Factually, the defendant can present evidence that negates one or more of the requirements, controverting the plaintiff's contrary allegations. Id. Legally, the defendant can show that the plaintiff's alleged jurisdictional facts, even if true, do not meet the personal jurisdiction requirements: the defendant's contacts with Texas fall short of purposeful availment; for specific jurisdiction, that the claims do not arise from the contacts; or that traditional notions of fair play and substantial justice are offended by the exercise of jurisdiction. See id. When, as here, a trial court does not issue findings of fact and conclusion of law in support of a special appearance ruling, then "all facts necessary to support the judgment and supported by the evidence are implied." BMC Software, 83 S.W.3d at 795.
2. Applicable Law
Texas courts may assert personal jurisdiction over a nonresident defendant if: (1) the Texas long-arm statute authorizes the exercise of jurisdiction; and (2) the exercise of jurisdiction is consistent with federal and state due process standards. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). The Texas long-arm statute allows Texas courts to exercise personal jurisdiction "as far as the federal constitutional requirements of due process will permit." BMC Software, 83 S.W.3d at 795. Federal due process requires that the nonresident defendant have purposefully established minimum contacts with the forum state, such that the defendant reasonably could anticipate being sued there. Curocom Energy LLC, 416 S.W.3d at 896. The exercise of personal jurisdiction must also comport with traditional notions of fair play and substantial justice. Id.
A nonresident's contacts can give rise to either general or specific personal jurisdiction. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013). Here, Thanh and Nancy assert that David's contacts with Texas vest the court with specific jurisdiction. Specific jurisdiction arises when the defendant purposefully avails itself of conducting activities in the forum state, and the cause of action arises from or is related to those contacts or activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 2185 (1985); Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009). In a specific jurisdiction analysis, "we focus . . . on the 'relationship among the defendant, the forum [,] and the litigation.'" Moki Mac, 221 S.W.3d at 575-76 (citing Guardian Royal Exch. Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991)). The plaintiff must show a substantial connection between the defendant's contacts with the forum state and the operative facts of the litigation. Moki Mac, 221 S.W.3d at 585.
The "purposeful availment" inquiry has three parts. See Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). First, only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person. Id. at 785. Second, the contacts relied upon must be purposeful rather than random, fortuitous, or attenuated. Id.; see also Burger King, 471 U.S. at 475 n.18, 105 S. Ct. at 2184. Third, the "defendant must seek some benefit, advantage or profit by 'availing' itself of the jurisdiction." Michiana, 168 S.W.3d at 785.
3. Analysis
Thanh and Nancy contend that David is subject to specific jurisdiction in Texas by virtue of the following contacts: (1) making representations through phone calls in Texas; (2) receiving money originating in Texas and directing money be deposited into his account in Texas; and (3) mailing checks representing shares of profits to Texas. David argues that the facts are disputed but that, even if true, they do not constitute contact with the state sufficient to confer personal jurisdiction over him.
With regard to the allegation that David made representations through phone calls to Texas, Thanh testified in his deposition that David called him "at least . . . three, four times" to request that Thanh invest money in David's business. Thanh and Nancy argue that, in cases involving intentional fraud, the defendant's initiation of a single telephone call is enough to establish personal jurisdiction if the content of the call gave rise to the fraud claim. But the Texas Supreme Court expressly rejected this "directed tort" rationale for "purposeful availment" in Michiana. See 168 S.W.3d at 788-91 ("[D]irect[ing] a tort" at Texas is insufficient alone to establish jurisdiction because such a concept would improperly shift a court's focus to the relationship among the "plaintiff, the forum . . . and the litigation" rather than "the defendant, the forum and the litigation."). David's calls to Thanh in Texas do not satisfy the minimum contacts requirement for Texas jurisdiction. See Ashdon, Inc. v. Gary Brown & Assocs., Inc., No. 01-06-01186-CV, 2008 WL 2209203, at *10 (Tex. App.—Houston [1st Dist.] May 29, 2008, no pet.) (mem. op.) (holding that defendant lacked sufficient minimum contacts to establish personal jurisdiction despite contracting with Texas plaintiff over many years and communicating by phone, email, fax, or mail, traveling to Texas, and being paid by checks drawn on Texas account); Alenia Spazio, S.p.A. v. Reid, 130 S.W.3d 201, 213 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (contracting with Texas entity and numerous telephone and facsimile communications with people in Texas relating to alleged contract do not establish minimum contacts).
Thanh and Nancy allege that David received money that originated in Texas. Specifically, Thanh testified that, at David's direction, he deposited money in David's bank account in Texas. However, only the defendant's contacts with the forum are relevant, not the unilateral activity of another party or a third person. See Michiana, 168 S.W.3d at 785. Thanh's act of depositing money in a bank account in Texas does not constitute a jurisdictional contact by David.
Thanh and Nancy also allege that David mailed checks representing a share of the business profits to Thanh. In his deposition, Thanh testified that David paid him some money by mailing checks to him in Texas. Sending payments to Texas does not establish minimum contacts sufficient to confer personal jurisdiction. See KC Smash 01, LLC v. Gerdes, Hendrichson, Ltd., 384 S.W.3d 389, 393-94 (Tex. App.—Dallas 2012, no pet.) (concluding nonresident's contacts with plaintiff in Texas through telephone and email communications and sending of payments to plaintiff did not constitute contact demonstrating purposeful availment); Shell Compañia Argentina De Petroleo, S.A. v. Reef Exploration, Inc., 84 S.W.3d 830, 839 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (noting payments sent to forum state are not determinative of whether specific jurisdiction exists); see also Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327, 344 (5th Cir. 2004) ("[T]his Court has repeatedly held that the combination of mailing payments to the forum state, engaging in communications related to the execution and performance of the contract, and the existence of a contract between the nonresident defendant and a resident of the forum are insufficient to establish the minimum contacts necessary to support the exercise of specific personal jurisdiction over the nonresident defendant").
Further, the contacts relied upon by Thanh and Nancy do not qualify as the type of "purposeful contacts" required to convey specific jurisdiction. Moki Mac, 221 S.W.3d at 575 (stating that second part of "purposeful availment" inquiry requires that contacts relied upon be "purposeful rather than random, fortuitous, or attenuated"). It is apparent that David's contact with Thanh was based on the fact that Thanh is his uncle and had nothing to do with the State of Texas. David's calls and mailing of checks to Thanh in Texas was not an attempt to do business in Texas but rather an attempt to do business with his uncle. David's receipt of funds into his Texas bank account does not qualify as a "purposeful" contact because it was Thanh's action, not David's. See Michiana, 168 S.W.3d at 785.
At the hearing on David's special appearance, Thanh's counsel characterized the case as follows: "It's basically just a straight-up family matter, where someone calls you and asks you to borrow money. That's basically what it was. He called them, he asked to borrow money. They gave him the money."
Finally, David did not seek some benefit, advantage, or profit by availing himself of the jurisdiction. See id. (noting that third part of purposeful availment inquiry requires that defendant "seek some benefit, advantage or profit by 'availing' itself of the jurisdiction"). The Texas Supreme Court has held that "a defendant may purposefully avoid a particular forum by structuring its transactions in such a way as to neither profit from the forum's laws nor subject itself to jurisdiction there." Moki Mac, 221 S.W.3d at 575 (citing Burger King, 471 U.S. at 472, 105 S. Ct. at 2174). Here, the investment agreement executed by Thanh and David Tran Investments, L.L.C., contains the following language:
8.3 Governing Law: This Agreement shall be construed, interpreted, and applied, and the rights of the parties hereunder shall be determined in accordance with the laws of the State of Washington applicable to
contracts negotiated, signed and performed entirely in Washington, and the parties agree that the Courts of King County shall have exclusive jurisdiction over any claims arising hereunder. This Section 8.3 shall survive the expiration or termination of this agreement.
The agreement was signed by Thanh and David. A review of the agreement reflects that Thanh deleted several provisions before signing. See Michiana, 168 S.W.3d at 792-93 ("[I]nsertion of a clause designating a foreign forum suggests that no local availment was intended."). David's "availing" was for the purpose of securing the necessary funds to open his business in Seattle, not for realizing a profit or obtaining a benefit or advantage in Texas. See KC Smash, 384 S.W.3d at 394 (concluding third part of purposeful availment inquiry was not satisfied where defendant's "availing" was for purpose of building its restaurants in Kansas, not for reaping profit or obtaining benefit or advantage in Texas).
We conclude that the trial court did not err in sustaining David's special appearance. Accordingly, we overrule Thanh and Nancy's second and third issues.
In light of our conclusion that David lacked sufficient minimum contacts with Texas to support a finding of specific jurisdiction, we need not consider whether the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. See F oley v. Trinity Indus. Leasing Co., 314 S.W.3d 593, 602 (Tex. App.—Dallas 2010, no pet.) (noting that only if minimum contacts are established does court consider second prong of constitutional due process analysis).
Conclusion
We affirm the trial court's order sustaining David's special appearance.
Russell Lloyd
Justice Panel consists of Justices Keyes, Higley, and Lloyd.