Opinion
No. 04-08-00244-CV
Delivered and Filed: February 11, 2009.
Appealed from the 407th Judicial District Court, Bexar County, Texas, Trial Court No. 2007-CI-09491, Honorable Karen H. Pozza, Judge Presiding.
AFFIRMED.
Sitting: CATHERINE STONE, Chief Justice, PHYLIS J. SPEEDLIN, Justice, STEVEN C. HILBIG, Justice.
Opinion by: PHYLIS J. SPEEDLIN, Justice.
MEMORANDUM OPINION
Kenneth Rattner challenges the trial court's order granting the special appearance by nonresident defendants, John Contos and the Contos Family Trust. In two issues, Rattner contends the trial court erred by (1) sustaining evidentiary objections to Rattner's affidavit evidence, and (2) concluding that it could not properly exercise jurisdiction over Contos and the Contos Family Trust. We affirm the trial court's order.
Factual and Procedural Background
Kenneth Rattner sued John Contos and the Contos Family Trust for breach of an alleged partnership or joint venture agreement, fraud, and declaratory relief. In his pleadings, Rattner alleged that he and Contos, both California residents, entered into an oral agreement to find, acquire, hold, manage, develop, and sell real estate. Rattner asserted that he, in large part, developed a plan where Contos would trade his prior investments in Nevada real estate for similar investments in the Texas real estate market. Rattner would contribute time and effort in locating the properties and Contos would provide the financing. The two men allegedly agreed to share in the profits and losses generated by this endeavor. After several properties had been acquired, Rattner became concerned about his business arrangement with Contos. Rattner filed suit in Bexar County seeking a declaratory judgment that Rattner and Contos had entered into a partnership or joint venture with regard to Texas properties, an accounting of partnership profits and losses, and dissolution of the partnership or joint venture with a distribution of the assets. Rattner asserted that he feared and believed Contos would sell all or part of the Texas real estate to third parties and then fail to account to Rattner for Rattner's share of the profits from any such sale. Rattner also asserted fraud, breach of contract, and unjust enrichment claims.
The Texas real property at issue is located in Guadalupe County, Harris County, and Bexar County.
Contos filed a verified special appearance, both individually and on behalf of the Contos Family Trust, asserting they are not amenable to personal jurisdiction because Contos is a resident of California, the Contos Family Trust was created and is operated under the laws of California, neither defendant maintains (nor has ever maintained) offices, employees, business records, or an agent for service of process in Texas, and neither defendant has ever owned or leased buildings or facilities in Texas, advertised to residents in Texas, or recruited Texas residents for employment. In response, Rattner submitted three affidavits — the affidavit of his attorney Robert J. Myers; the affidavit of Richard D. Smith, who traveled to Texas on at least one occasion with Rattner and Contos; and Rattner's own affidavit. Contos and the Contos Family Trust objected to portions of all the affidavits filed in opposition to their special appearance on the grounds of hearsay and conclusory, vague or speculative statements. After a hearing, the trial court sustained Contos's objections to the affidavits of Myers, Smith, and Rattner, sustained the defendants's special appearance, and dismissed Rattner's suit. This appeal followed.
Applicable Law
Texas courts may exercise in personam jurisdiction over a nonresident defendant as authorized under the Texas long-arm statute provided that the exercise of such personal jurisdiction meets federal and state constitutional due process guarantees. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). Under the Texas long-arm statute, a nonresident does business in Texas by: (1) contracting by mail or otherwise with a Texas resident, with performance either in whole or in part in Texas; (2) committing a tort in whole or in part in Texas; or (3) recruiting Texas residents, directly or through an intermediary located in Texas, for employment inside or outside Texas. Tex. Civ. Prac. Rem. Code Ann. § 17.042 (Vernon 2008); see BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002) (noting the activities listed in section 17.042 are not the exclusive means of "doing business" in Texas). To meet federal due process guarantees, the nonresident defendant must have purposefully availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 166 (Tex. 2007); Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). For the purpose of establishing personal jurisdiction, "only the defendant's contacts with the forum are relevant," the contacts "must be purposeful rather than random, fortuitous, or attenuated," and the defendant must "seek some benefit, advantage or profit by `availing' itself of the jurisdiction." Moki Mac, 221 S.W.3d at 575 (recognizing there are three parts to a "purposeful availment" inquiry).
Personal jurisdiction has been described as either specific — that is, based on contacts arising from the dispute at issue, or general — predicated on a party's "continuous and systematic" contacts with the forum. PHC-Minden, 235 S.W.3d at 166; BMC Software, 83 S.W.3d at 795-96. Specific jurisdiction exists if the nonresident defendant's alleged liability arises from or is related to activity conducted within the forum. Moki Mac, 221 S.W.3d at 576. To support an exercise of specific jurisdiction over a nonresident, the defendant's contacts must be "purposefully directed at" the forum state and have a "substantial connection" with the operative facts of the litigation. Id. at 577-79, 585.
By contrast, general jurisdiction has been described as "dispute-blind," and is exercised "without regard to the nature of the claim presented." PHC-Minden, 235 S.W.3d at 168. To establish general jurisdiction, the defendant's contacts with the forum must be "continuous and systematic" so that the forum may exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. BMC Software, 83 S.W.3d at 796. Accordingly, general jurisdiction requires a "more demanding minimum contacts analysis" with a "substantially higher" threshold. PHC-Minden, 235 S.W.3d at 168.
Evidentiary Objections
As an initial matter, Rattner argues the trial court improperly sustained Contos's "numerous unfounded and legally insufficient objections" to two of the affidavits filed by Rattner in opposition to Contos's special appearance. Specifically, Rattner complains the court erred in sustaining objections to Rattner's own affidavit and the affidavit of Richard Smith. We review evidentiary rulings under an abuse of discretion standard. City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex. 1995).
As to his own affidavit, Rattner contends his affidavit established ten relevant facts that were true and correct from his personal knowledge, including that he and Contos entered into an agreement, or joint venture, to purchase and develop or re-sell Texas real estate. Contos objected to substantial portions of Rattner's affidavit on numerous grounds, including that the affidavit consisted largely of vague and conclusory statements that did not meet the requirements of Rule 120a(3) of the Texas Rules of Civil Procedure. Tex. R. Civ. P. 120a(3) (affidavit shall be made on personal knowledge and shall set forth specific facts as would be admissible in evidence). We agree. Rattner's affidavit begins with the statement, "Mr. Contos and I entered into an agreement or joint venture whereby, among other things, Mr. Contos was to provide capital and financing for seeking out and obtaining properties in Texas for either re-sale or development." Thereafter, no further factual details are provided, such as when or where this agreement was reached, what role Rattner played in the agreement, or what were the terms of the agreement. See Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex.App.-San Antonio 1999, pet. denied) (binding contract requires offer, acceptance, meeting of the minds, consent to terms, and intent to be mutually binding). "[A]n affidavit is insufficient unless the allegations contained therein are direct and unequivocal and perjury can be assigned upon it." Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984). Further, Rattner's affidavit proffers legal conclusions such as that Contos and the Trust "had significant contacts with Texas" and "regular and systematic contacts with Texas" without setting forth the underlying factual basis for such claims. Legal conclusions are not competent affidavit evidence. Anderson v. Snider, 808 S.W.2d 54, 55 (Tex. 1991). Finally, Rattner's affidavit contains inadmissible hearsay statements such as, " I am told that Mr. Contos has incurred over $60,000 in legal fees with this firm (although I have also been told that he has not paid the firm for its invoices)." (emphasis added). See Tex. R. Evid. 801(d).
Turning to the affidavit of Richard Smith, Contos objected to this affidavit on the ground that it contained multiple vague and conclusory statements, including statements by Smith generally referencing meetings, telephone contacts, and trips by Contos without setting forth any identifying facts such as the date, time, or place. See Brownlee, 665 S.W.2d at 112. Such conclusory statements do not meet the strict requirements of Rule 120a(3). Tex. R. Civ. P. 120a(3). Contos further objected to affidavit testimony that was not based on Smith's personal knowledge, such as Smith's statement, " I believe that, on at least one of those conference calls, Mr. Contos was participating from Texas." (emphasis added). See Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (affidavit that recites that the affiant "estimates" or "believes" certain facts to be true does not meet requirement that "facts" disclosed are true).
Based on the numerous defects in both Rattner's and Smith's affidavits, the trial court did not abuse its discretion by sustaining Contos's objections and excluding both affidavits in their entirety. See Tex. Reciprocal Ins. Ass'n v. Stadler, 140 Tex. 96, 166 S.W.2d 121, 125 (1942) ("where evidence is offered as a whole, some of which is inadmissible, it is not error for the trial court to exclude the whole upon proper objection"). Furthermore, it is not the duty of the court, or of the party objecting to affidavit testimony, to separate admissible from inadmissible testimony. Case Corp. v. Hi-Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 783 (Tex.App.-Dallas 2005, pet. denied) (citing Perry v. Tex. Mun. Power Agency, 667 S.W.2d 259, 265 (Tex.App.-Houston [1st Dist.] 1984, writ ref'd n.r.e.)); Humble Sand Gravel, Inc. v. Gomez, 48 S.W.3d 487, 506 (Tex.App.-Texarkana 2001, rev'd on other grounds, 146 S.W.3d 170 (Tex. 2004)). Here, Rattner never re-offered those portions of the affidavits that might have been admissible. Accordingly, in the absence of an offer to separate the admissible from the inadmissible portions of the affidavits, Rattner may not complain that the trial court excluded the entire affidavits. Case Corp., 184 S.W.3d at 783; Brown v. Gonzales, 653 S.W.2d 854, 864 (Tex.App.-San Antonio 1983, no writ). Rattner's evidentiary issue is overruled.
Specific Jurisdiction
Turning now to the issue of personal jurisdiction, Rattner contends the evidence is legally and factually insufficient to support the trial court's conclusion that specific jurisdiction does not lie against Contos and the Trust. Rattner argues that Contos failed to meet his burden of negating jurisdiction because the "uncontroverted facts" show Contos and Rattner had an agreement to share profits and losses from their venture to acquire, develop, and re-sell Texas properties, and further show that, in fact, Contos traveled to Texas with Rattner and others to purchase Texas property using the Family Trust.
In the briefing before this court, Rattner makes no substantive argument that the trial court erred in concluding that Contos and the Contos Family Trust are not subject to the general jurisdiction of Texas courts. A party asserting error on appeal must put forth some specific argument and analysis showing that the record and the law support his contentions. See Tex. R. App. P. 38.1(h) (requiring appellant's brief to contain "a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record").
The plaintiff bears the initial burden of pleading facts sufficient to bring a nonresident defendant within the provisions of the long-arm statute. Moki Mac, 221 S.W.3d at 574. Upon filing a special appearance, the nonresident defendant then assumes the burden to negate all the bases of personal jurisdiction alleged by the plaintiff. Id. Whether a court has personal jurisdiction over a nonresident defendant is a question of law; however, the trial court frequently must resolve questions of fact before deciding the jurisdictional question. BMC Software, 83 S.W.3d at 794. On appeal, we review the trial court's findings of fact for legal and factual sufficiency. Id. at 794-95. In conducting a legal sufficiency analysis, we review the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We credit favorable evidence if a reasonable fact finder could, and disregard contrary evidence unless a reasonable fact finder could not. Id. at 827. If there is more than a scintilla of evidence to support the finding, the legal sufficiency challenge fails. BMC Software, 83 S.W.3d at 795. In reviewing for factual sufficiency, we examine all evidence in the record and reverse only if the finding is so against the great weight and preponderance of the evidence as to be manifestly wrong or unjust. Carone v. Retamco Operating, Inc., 138 S.W.3d 1, 7 (Tex.App.-San Antonio 2004, pet. denied). We review the trial court's conclusions of law drawn from the findings of fact de novo. BMC Software, 83 S.W.3d at 794.
Here, because the trial court properly sustained Contos's objections and excluded the affidavits Rattner filed in opposition to the special appearances, the only evidence the trial court had before it at the time of its decision was Rattner's verified petition and Contos's affidavit in support of the defendants' special appearances. Although Rattner's petition claims he and Contos entered into an agreement, his pleadings do not allege that the agreement between these two California residents was formed in Texas. Further, Rattner's pleadings do not detail the "significant contacts" that Contos allegedly had with Texas. To the contrary, Rattner's pleadings affirmatively state that in exchange for Contos providing financing, Rattner, not Contos, would identify investment opportunities — principally in the Texas real estate market. Additionally, Rattner's pleadings set forth no specific allegations against the Contos Family Trust, except to state that the Trust owns Texas real estate. In contrast, Contos's affidavit in support of the special appearances states that he is a resident and licensed attorney in the State of California; that the Contos Family Trust was created in California and is domiciled in California; and that Contos individually does not now own, and has never owned, any real property in Texas. Neither the Contos Family Trust nor Contos individually has offices or employees in Texas, owns or leases property in Texas, advertises in Texas, recruits Texas residents as employees, or has appointed an agent for service of process in Texas. The Contos Family Trust, which has been in existence for at least twenty years, does own property in three Texas counties: Guadalupe, Bexar, and Harris counties. Contos denied continuous or systematic business in Texas, but did admit that he traveled in and out of Texas for the purpose of identifying and purchasing property on behalf of the Contos Family Trust beginning during the Fall of 2006 and continuing for an approximately nine-month period. Although Rattner argues his lawsuit is related to, and arises out of, the defendants' contacts with Texas because the "essential terms of the agreement" were made by the parties in Texas and Texas property was purchased pursuant to that agreement, the evidence in the record simply does not support his assertion. As previously noted, although Rattner's petition claims he entered into an agreement with Contos, neither his pleadings nor his excluded affidavit affirmatively state that this agreement was formed in Texas or would be governed under Texas law. Instead, based on the pleadings and evidence before it, the trial court had legally sufficient evidence to conclude that both individual parties were California residents, and that Contos did not maintain offices or lease facilities in Texas, did not hold title to property in Texas, did not advertise to or recruit residents of Texas as employees, and did not have minimum contacts with Texas for purposes of establishing specific or general jurisdiction. Similarly, the trial court had legally sufficient evidence to make similar findings and conclusions of law as to the Contos Family Trust. Reviewing the evidence for factual sufficiency, at most there is evidence establishing that Contos is a nonresident who traveled in and out of Texas over a nine-month period for the purpose of purchasing property on behalf of his Family Trust, and that the Contos Family Trust is a California trust that holds title to several pieces of Texas real property. However, such fact findings, without more, are insufficient for the exercise of specific jurisdiction over either Contos, see Moki Mac, 221 S.W.3d at 579 (purposeful contacts alone are insufficient to establish specific jurisdiction unless the defendant's liability arises from or relates to the forum contacts) and see also Kulko v. Superior Court of California, 436 U.S. 84, 93 (1978) (basing California jurisdiction on 3-day and 1-day stopovers in that state "would make a mockery of" due process limitations on assertion of personal jurisdiction), or the Contos Family Trust. See Shaffer v. Heitner, 433 U.S. 186, 209-13 (1977) (mere ownership of property in a forum state, absent more, is insufficient for the exercise of in personam jurisdiction over a nonresident defendant).
In support of his position that specific jurisdiction in Texas is proper, Rattner cites to Capital Pacific, L.L.C. v. Humble Garden, L.L.C., No. 01-05-00469-CV, 2005 WL 2989576 (Tex.App.-Houston [1st Dist.] Nov. 3, 2005, no pet.) (mem. op.). In that case, Capital Pacific, an Oregon real estate brokerage firm, served as the exclusive broker for the sale of commercial property located in Texas. Id. at *1. Employees of Capital Pacific marketed the property, prepared a due diligence report for potential purchasers, and traveled to Texas to meet with the Texas sellers. Id. Ultimately, the property was purchased by non-Texas residents. Id. When Capital Pacific was later sued by the buyers of the property for fraud, it challenged personal jurisdiction, claiming that all conference calls, marketing, and other activities connected with the property were conducted outside Texas. Id. at *3. Our sister court of appeals disagreed, concluding that Capital Pacific had established minimum contacts with Texas to support specific jurisdiction and noting that the real estate at issue was located in Texas, Capital's employees visited the property in Texas, Capital prepared the due diligence report relied upon by the purchasers, and Capital received commissions from the sale of the Texas property from a Texas title company. Id. at *4-5. The court concluded that Capital's liability, if any, was all " related to an activity — selling the property — within [Texas]." Id. at *4 (emphasis in original). "[I]t is not simply because the Garden Ridge property is physically in Texas that specific jurisdiction lies, but that the location of the property forms the heart of the underlying lawsuit here." Id. at *5.
We find Capital Pacific readily distinguishable from the instant case. As noted by the Houston Court of Appeals in Capital Pacific, the Texas property at issue in that suit was the central focus of the litigation. See id. Here, based on Rattner's own pleadings, the gravamen of his suit is a declaratory judgment action that seeks to confirm the existence of a partnership or joint venture, and seeks an accounting of partnership profits and losses, dissolution of the partnership or joint venture, and distribution of the assets. In other words, it is a suit for money damages between two California residents over a claimed business relationship that was formed in California. The property at issue, instead of being at the heart of the litigation, is, at most, a claimed asset of the business venture. Contrary to what occurred in Capital Pacific, Contos's liability, if any, stems from a breach of an agreement with Rattner, and is not based on contacts with or actions taken within Texas. Contra id. Because the alleged liability against the nonresident defendants in this suit neither arises from, nor is related to, activity conducted within Texas, specific jurisdiction cannot be established. See Moki Mac, 221 S.W.3d at 576.
Conclusion
In summary, we conclude there is legally and factually sufficient evidence to support the trial court's findings that contacts by the nonresident defendants with Texas are not sufficient to establish personal jurisdiction. Accordingly, we affirm the trial court's judgment granting the special appearances and dismissing the lawsuit against Contos and the Contos Family Trust for want of jurisdiction.