Capital Title of Texas, LLC v. Mark Shank and Douglas Shank ( 2022 )

NUMBER 13-21-00062-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
CAPITAL TITLE OF TEXAS, LLC, Appellant,
v.
MARK SHANK AND DOUGLAS SHANK, Appellees.
On appeal from the 398th District Court
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Benavides and Longoria
Memorandum Opinion by Justice Benavides
In this interlocutory appeal from the granting of special appearances, appellant
Capital Title of Texas, LLC (Capital Title) contends that the trial court has specific personal
jurisdiction over appellees Mark and Douglas Shank. We reverse and remand.
I. BACKGROUND
Carolyn Shank and Robert Eugene Shank (Robert Sr.) married in 1977. Robert Sr.
had four children from a previous marriage—David, Mark, Douglas, and Robert Jr. In
2010, Carolyn and Robert Sr., residents of Kansas, purchased a second home in City of
Alamo, Texas. Robert Sr. died in 2018, and although he left a will devising his interest in
the property to Carolyn, she elected not to probate the will.
In 2019, Carolyn entered a contract to sell the property to two Texas residents. Per
the contract, Carolyn furnished the sellers with a title policy issued by Capital Title, which
also served as the escrow agent. Carolyn executed an affidavit of heirship identifying
David, Mark, Douglas, and Robert Jr. as Robert Sr.’s only children. All four children are
residents of other states. In the affidavit, Carolyn also represented that “there has been
no administration of [Robert Sr.’s] estate nor is any administration expected or
necessary.”
Under Texas intestacy laws, Robert Sr.’s undivided 50% interest in the property
passed upon his death to his four children in equal shares of 12.5%. See TEX. EST. CODE
ANN. § 201.003(c); see also id. § 256.001 (providing generally that “a will is not effective
to prove title to, or the right to possession of, any property disposed of by the will until the
will is admitted to probate”). Accordingly, Capital Title contacted the four brothers,
informing them about the impending sale, their respective interests in the proceeds, and
the need for them to execute the general warranty deed to effectuate the sale. Each
brother executed the general warranty deed and returned it to Capital Title for recording.
The four brothers were also provided copies of the affidavit of heirship and Robert
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Sr.’s unprobated will. David and Robert Jr. instructed Capital Title to distribute their shares
to Carolyn, meaning Carolyn would receive 75% of the sale proceeds and Douglas and
Mark would each receive 12.5%. For reasons that are in dispute, Capital Title instead
distributed 50% of the sale proceeds to Carolyn, while Douglas and Mark each received
25%.
Capital Title subsequently informed Douglas and Mark that they had received their
brothers’ shares in error and requested that they either return the shares to Capital Title
or pay them directly to their brothers. After Douglas and Mark denied that request,
Carolyn, David, and Robert Jr. sued Capital Title, alleging the company breached its
fiduciary duty to them as the escrow agent and violated various provisions of the Texas
Deceptive Trade Practices-Consumer Protection Act.1
Capital Title filed a general denial and a third-party petition against Douglas and
Mark for unjust enrichment, alleging that the trial court had specific personal jurisdiction
over the brothers. Specifically, Capital Title alleged that the brothers “engaged in conduct
in and/or directed toward Hidalgo County, Texas, having direct contact with business
conducted in Hidalgo County and with persons doing business in Hidalgo County in
connection with the real estate transaction at issue, and including receipt . . . of proceeds
from the transaction.”
Mark, a resident of Kansas, and Douglas, a resident of Louisiana, filed a combined
special appearance. In support of their special appearance, each brother filed an affidavit.
In his affidavit, Mark stated:
1 Carolyn died during the pendency of the suit, and the executrix of her estate was substituted in
her place.
3
My father passed away in April of 2018. In May of 2019, I received email
correspondence from [Capital Title] along with a Warranty Deed and
Federal Express air bill requesting my signature and return of the Warranty
Deed, and informing me that the property owned by my father in Alamo,
Texas was being sold and I would be receiving a certain amount of money
from the proceeds of the sale. I simply signed the Warranty Deed and
returned it as requested. I did not have anything to do with the sale of the
property nor did I initiate any contact regarding this transaction.
Douglas made identical allegations in his affidavit but also acknowledged that he “called
Capital Title once or twice inquiring what this matter was about.”
Capital Title responded that the brothers’ involvement in the transaction was more
than incidental because they: (1) participated in email and phone correspondence with
Capital Title regarding the sale of the property and the distribution of the proceeds; (2)
executed a general warranty deed and a document titled “Seller Proceeds Instructions”
and returned these documents to Capital Title in Texas; (3) received proceeds from the
sale drawn on a Texas bank account; and (4) incurred taxes in Texas from the sale of the
property. Capital Title filed an affidavit from a corporate representative that states, in part:
5. In 2019, Carolyn Shank entered into a contract to sell the [p]roperty
and sought a title insurance policy from Capital Title as part of the
sale[.] Capital Title also served as the escrow agent. At this time
Carolyn Shank signed an Affidavit of Heirship swearing that there
was no administration of the estate and none was necessary.
6. Because there had not been an administration, Capital Title
discussed with each of the four children, Robert [Jr.], David (through
Robert [Jr.]), Mark and Douglas Shank[,] about distribution of the
proceeds from the sale of the [p]roperty.
7. Capital Title was instructed by Robert Shank [Jr.] that he and David
Shank did not want payment from the sale of the [p]roperty and that
their proceeds should go to Carolyn Shank. In turn, Carolyn Shank
signed a distribution statement causing that portion of the proceeds
to be disbursed evenly to Mark and Douglas Shank.
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8. Moreover, Mark and Douglas Shank entered into Proceeds
Distribution Agreements with Capital Title instructing Capital Title in
Texas, how to disburse their proceeds from the sale of the [p]roperty.
However, Robert Shank [Jr.] and David Shank never entered into
any such agreements.
9. Capital Title is no longer holding any proceeds from this sales
transaction. Those funds were released pursuant to the distribution
statement signed by Carolyn Shank at the time of closing, and the
Proceeds Distribution Agreements provided to Capital Title at the
time of closing from Mark and Douglas Shank. Capital Title acted in
reliance upon and complied with the instructions it received under
the Proceeds Distribution Agreements it was provided by Mark and
Douglas Shank.
Capital Title also provided various supporting documents, including copies of the sales
contract between Carolyn and the buyers, the affidavit of heirship executed by Carolyn,
Robert Sr.’s unprobated will, the general warranty deed, the settlement statement
executed by Carolyn, the “Seller Proceeds Instructions” completed and signed by
Douglas and Mark, 1099-S forms 2 signed by Douglas and Mark, bank statements
showing the distributions from Capital Title to Douglas and Mark, and email
correspondence between Capital Title and Robert Jr., Douglas, and Mark.
After holding a hearing, the trial court granted the special appearances, issuing no
findings of fact or conclusions of law. This interlocutory appeal ensued. See TEX. CIV.
PRAC. & REM. CODE ANN. § 51.014(a)(7).
II. STANDARD OF REVIEW & APPLICABLE LAW
A. Standard of Review
“A court must have both subject matter jurisdiction over a case and personal
2 A 1099-S form is used “to report the sale or exchange of real estate” to the Internal Revenue
Service. About Form 1099-S, Proceeds from Real Estate Transactions, INTERNAL REVENUE SERV.,
https://www.irs.gov/forms-pubs/about-form-1099-s (Mar. 12, 2021).
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jurisdiction over the parties to issue a binding judgment.” Luciano v.
SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 7–8 (Tex. 2021); Spir Star AG v. Kimich,
310 S.W.3d 868, 871 (Tex. 2010). Personal jurisdiction involves a court’s ability to bind a
particular party to that judgment. Luciano, 625 S.W.3d at 8; CSR Ltd. v. Link, 925 S.W.2d
591, 594 (Tex. 1996). A special appearance allows a nonresident to appear in a Texas
court for the limited purpose of challenging the court’s exercise of personal jurisdiction.
See TEX. R. CIV. P. 120a(1).
Whether a trial court may exercise personal jurisdiction over a nonresident
defendant is a question of law we review de novo. Searcy v. Parex Res., Inc., 496 S.W.3d
58, 66 (Tex. 2016) (citing Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801,
805–06 (Tex. 2002)). In resolving this legal question, the trial court may be required to
decide questions of fact. Luciano, 625 S.W.3d at 8; Am. Type Culture Collection, 83
S.W.3d at 806. “When, as here, the trial court does not issue findings of fact and
conclusions of law with its judgment, we presume all factual disputes were resolved in
favor of the trial court’s decision unless they are challenged on appeal.” Luciano, 625
S.W.3d at 8; see Old Republic Nat’l Title Ins. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018)
(citing BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)).
B. Personal Jurisdiction
Under Texas’s long-arm statute, Texas courts may exercise personal jurisdiction
over a nonresident defendant that “does business” in Texas. See TEX. CIV. PRAC. & REM.
CODE ANN. § 17.042; PHC-Minden, L.P., v. Kimberly-Clark Corp., 235 S.W.3d 163, 166
(Tex. 2007). A nonresident “does business” in Texas if, among other things, it contracts
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with a Texas resident and either party performs the contract in whole or in part in Texas
or the nonresident commits a tort in whole or in part in Texas. TEX. CIV. PRAC. & REM.
CODE ANN. § 17.042(1), (2).
However, because the exercise of personal jurisdiction over a nonresident
implicates due process concerns, the Texas long-arm statute reaches only “as far as the
federal constitutional requirements of due process will permit.” PHC-Minden, 235 S.W.3d
at 166 (quoting U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977)); see
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 918 (2011) (“A state
court’s assertion of jurisdiction exposes defendants to the State’s coercive power, and is
therefore subject to review for compatibility with the Fourteenth Amendment’s Due
Process Clause.” (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))).
Accordingly, in addition to its own decisions, the Supreme Court of Texas relies on
personal jurisdiction precedent from the United States Supreme Court and other federal
courts. PHC-Minden, 235 S.W.3d at 166.
The exercise of personal jurisdiction satisfies due process if (1) the nonresident
defendant established minimum contacts with the forum state and (2) the exercise of
jurisdiction comports with traditional notions of fair play and substantial justice. Id. (citing
Int’l Shoe, 326 U.S. at 316). When a nonresident defendant purposefully avails itself of
the privileges and benefits of conducting business in a foreign jurisdiction, its contacts are
sufficient to confer the forum with personal jurisdiction over the defendant. Moncrief Oil
Int’l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013) (citing Retamco Operating,
Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338 (Tex. 2009)). Only the defendant’s
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purposeful contacts are relevant to the inquiry; unilateral activity of another party or third
person, as well as random, isolated, or fortuitous contacts by the defendant, are
insufficient to prove the defendant purposefully availed itself of the forum. Cornerstone
Healthcare Grp. Holding, Inc. v. Nautic Mgmt. VI, L.P., 493 S.W.3d 65, 70 (Tex. 2016)
(citing Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005)).
Once minimum contacts have been established, the exercise of jurisdiction will
typically comport with traditional notions of fair play and substantial justice. Spir Star, 310
S.W.3d at 878 (citing Guardian Royal Exch. Assurance, Ltd. v. English China Clays,
P.L.C., 815 S.W.2d 223, 231 (Tex. 1991)). To establish the contrary, the defendant must
present “a compelling case that the presence of some consideration would render
jurisdiction unreasonable.” Id. at 879 (quoting Guardian Royal, 815 S.W.2d at 231). Those
considerations include: (1) the burden on the defendant; (2) the forum state’s interest in
adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective
relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution
of controversies; and (5) the shared interest of the several states in furthering
fundamental substantive social policies. Id. at 878 (citing Guardian Royal, 815 S.W.2d at
231).
A defendant’s contacts with the forum can give rise to either general or specific
jurisdiction. Cornerstone Healthcare, 493 S.W.3d at 71. The central inquiry under specific
jurisdiction is the relationship between the defendant, the forum state, and the plaintiff’s
claim. Id. (citing Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 575–76 (Tex.
2007)). General jurisdiction, on the other hand, does not require a nexus between the
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defendant’s in-state contacts and the plaintiff’s claim; instead, the focus is solely on the
defendant’s contacts with the forum. Helicopteros Nacionales de Colom., S.A. v. Hall, 466
U.S. 408, 414 (1984) (citing Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952));
PHC-Minden, 235 S.W.3d at 168.
Specific jurisdiction, which is alleged here, is appropriate when the plaintiff’s claim
arises from or relates to the defendant’s contacts with the forum state. Cornerstone
Healthcare, 493 S.W.3d at 71 (citing Spir Star, 310 S.W.3d at 873). To satisfy this
requirement, “there must be a substantial connection between those contacts and the
operative facts of the litigation.” Old Republic, 549 S.W.3d at 560 (citing Moki Mac, 221
S.W.3d at 585).
The plaintiff bears the initial burden of alleging facts that establish the trial court’s
jurisdiction. Searcy, 496 S.W.3d at 66 (citing Retamco Operating, 278 S.W.3d at 337).
The burden then shifts to the defendant to negate all bases for personal jurisdiction that
exist in the plaintiff’s pleading. Id. (citing Retamco Operating, 278 S.W.3d at 337). If the
defendant disproves the plaintiff’s jurisdictional allegations, then the plaintiff should
present evidence in support of the petition’s allegations. Kelly v. Gen. Interior Constr.,
Inc., 301 S.W.3d 653, 659 (Tex. 2010). In a specific jurisdiction analysis, “we must
analyze the defendant’s contacts ‘on a claim-by-claim basis’ to determine whether each
claim arises out of or is related to the defendant’s minimum contacts.” TV Azteca v. Ruiz,
490 S.W.3d 29, 37 (Tex. 2016) (quoting Moncrief Oil, 414 S.W.3d at 150).
III. ANALYSIS
The sole issue before us is whether Douglas and Mark’s contacts with Texas are
9
sufficient to confer the trial court with specific jurisdiction over them as to Capital Title’s
unjust enrichment claim. Although the parties highlight the facts that support their
respective positions, the facts themselves are not in dispute.
A. Purposeful Availment
Douglas and Mark contend that they did not purposefully avail themselves of the
privilege of conducting activities in Texas because Carolyn initiated the sale, and they
“merely responded and complied with requests initiated by [Capital Title] to effectuate the
sale of the [p]roperty owned by [their] stepmother and father prior to his death.” At first
blush, their argument has some appeal.
Robert Sr. and Carolyn’s decision to purchase real property in Texas created a
continuing relationship for them with the state. See Retamco Operating, 278 S.W.3d at
340 (“Republic, by purchasing Texas real property, has purposefully availed itself of the
privilege of conducting activities in Texas.”). But we cannot attribute their unilateral
decision to Douglas and Mark. See Cornerstone Healthcare, 493 S.W.3d at 70.
Likewise, Carolyn elected not to probate Robert Sr.’s will, effectively forgoing her
right to inherit his interest in the property and keep all the proceeds from the sale. See id.
Stated differently, Douglas and Mark only acquired an interest in the property because
Carolyn decided not to probate the will. See TEX. EST. CODE ANN. § 201.003(c). The fact
that they passively acquired an interest in the property could be described as fortuitous.
See Johnson v. Kindred, 285 S.W.3d 895, 902 (Tex. App.—Dallas 2009, no pet.) (holding
trust beneficiary did not purposefully avail himself because trustee unilaterally selected
Texas property for purchase and beneficiary was merely a “passive investor”).
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Finally, Carolyn alone initiated the sale and engaged Capital Title to issue a title
policy and serve as the escrow agent. See Cornerstone Healthcare, 493 S.W.3d at 70.
Indeed, it was Capital Title that informed the four brothers about the impending sale and
their respective interests in the proceeds if the sale went through. Up to this point, we
agree that Douglas and Mark did not purposefully avail themselves of the privileges of
doing business in Texas.
But regardless of how they initially became involved with the transaction, by
signing the deed and accepting the proceeds, the brothers made a purposeful decision
to avail themselves of Texas law and profit from their ownership interests in Texas real
property. Although Robert Sr. was a resident of Kansas at the time of his death, Texas
law controlled the descent and distribution of his interest in the property. See Nw. Nat’l
Cas. Co. v. Doucette, 817 S.W.2d 396, 399 (Tex. App.—Fort Worth 1991, writ denied)
(“[Q]uestions of descent and distribution are controlled by the state where the realty of
the estate is located.” (citing Martinez v. Gutierrez, 66 S.W.2d 678, 683 (Tex. [Comm’n
Op.] 1933))). Thus, Douglas and Mark benefitted under Texas’s intestacy laws, and their
interests in the property vested immediately upon their father’s death approximately a
year prior to the sale. See TEX. EST. CODE ANN. §§ 101.001(b), 201.003(c).
The record reflects, through a series of emails, that Douglas and Mark were
deliberate in their decision to join the transaction, waiting approximately a month after the
closing date to execute the general warranty deed. Before signing the deed, the brothers
asked Capital Title to send them the settlement statement and their father’s will. Douglas
then requested to review “current documents that demonstrate owners of record for this
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property.” In a subsequent email from Capital Title to the brothers, the escrow officer
asked them to confirm whether they were “ready to move forward with signing the
documentation” because the buyers were growing impatient. In response, Douglas asked
Capital Title to confirm how the proceeds would be distributed. Capital Title replied that
Carolyn would receive half and Douglas and Mark would split the other half because
“Robert [Jr.] and David did not request payment.” Capital Title reiterated that “the buyers
are anxious to finalize this transaction.”
“Jurisdiction is premised on notions of implied consent—that by invoking the
benefits and protections of a forum’s laws, a nonresident consents to suit there.”
Michiana, 168 S.W.3d at 785 (citing World–Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 297 (1980)). But “a nonresident may purposefully avoid a particular jurisdiction
by structuring its transactions so as neither to profit from the forum’s laws nor be subject
to its jurisdiction.” Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985)).
Here, if the brothers wanted to avoid jurisdiction in Texas with respect to this transaction,
then they could have simply refused to sign the deed. And if they wanted to sever all ties
to Texas with respect to the property, then they could have executed a quitclaim deed in
favor of Carolyn or their brothers. See Enerlex, Inc. v. Amerada Hess, Inc., 302 S.W.3d
351, 354 (Tex. App.—Eastland 2009, no pet.) (“A quitclaim deed conveys the grantor’s
right in that property, if any.” (citing Geodyne Energy Income Prod. P’ship I–E v. Newton
Corp., 161 S.W.3d 482, 486 n.12 (Tex. 2005))).
Instead, they elected to sign the general warranty deed and convey their interests
to the buyers in exchange for a portion of the sales proceeds. In doing so, they established
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an ongoing relationship between themselves, the buyers, and Texas. See Stumhoffer v.
Perales, 459 S.W.3d 158, 165 (Tex. App.—Houston [1st Dist.] 2015, pet. denied)
(explaining that “a general warranty deed expressly binds the grantor to defend against
title defects created by himself and all prior titleholders”). This decision was made solely
by the brothers; it cannot be attributed to anyone else. See Cornerstone Healthcare, 493
S.W.3d at 70. Accordingly, we conclude that by choosing to participate in the transaction,
Douglas and Mark purposefully availed themselves of the privileges and benefits of
conducting activities in Texas.
B. Substantial Connection
The brothers argue that their potential liability “does not arise from or relate to any
of [their] contacts with Texas” because Capital Title was relying on the settlement
statement executed by Carolyn—as opposed to any representations made by them—
when it distributed the proceeds. Although they couch their argument in the correct
language, Douglas and Mark ask us to engage in a merits-based analysis that focuses
on whether their conduct proximately caused the other parties’ injuries. The Supreme
Court of Texas has specifically eschewed this approach to the relatedness inquiry. See
Moki Mac, 221 S.W.3d at 583 (rejecting a proximate cause test as exceeding the
guarantees of due process and noting that such an analysis would “require a court to
delve into the merits to determine whether a jurisdictional fact is actually a legal cause of
the injury”).
Rather, in adopting “a middle ground,” the supreme court requires only “a
substantial connection between [the nonresident’s] contacts and the operative facts of the
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litigation.” Id. at 585 (citing Guardian Royal, 815 S.W.2d at 229–33; Rush v. Savchuk,
444 U.S. 320, 329 (1980)). Here, Capital Title has alleged that if it distributed the proceeds
from the sale in error, then Douglas and Mark were unjustly enriched, and judgment
should lie against them for the overpayment. As corresponding parts of the same
transaction, there was a substantial connection between Douglas and Mark executing the
deed and then accepting the proceeds as consideration for the conveyance. See id. It
was error for the trial court to conclude otherwise.
C. Traditional Notions of Fair Play
Other than making a conclusory statement that exercising jurisdiction over them
“would violate traditional notions of fair play and substantial justice,” Douglas and Mark
did not argue or offer evidence in the trial court to show how defending a suit in Texas
would be particularly burdensome to them. See Spir Star, 310 S.W.3d at 878 (citing
Guardian Royal, 815 S.W.2d at 231). To the contrary, Douglas resides in a neighboring
state, and Mark acknowledged in his affidavit that he has traveled to Texas in the past to
visit his father at the property. See Moncrief Oil, 414 S.W.3d at 155 (acknowledging that
defending a suit in another state is inherently burdensome to all nonresidents but that
“[d]istance alone cannot ordinarily defeat jurisdiction”); Guardian Royal, 815 S.W.2d at
231 (noting that “modern transportation and communication have made it much less
burdensome” for nonresidents to defend themselves in another jurisdiction). Moreover,
because Carolyn, David, and Robert Jr.’s claims against Capital Title will be heard in
Texas, it would be more efficient to litigate all the claims as to all the parties in one court,
as opposed to three courts, each in a separate state. See Moncrief Oil, 414 S.W.3d at
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155; Spir Star, 310 S.W.3d at 879.
Because Douglas and Mark failed to meet their burden to present “a compelling
case that the presence of some consideration would render jurisdiction unreasonable,”
we conclude that the exercise of jurisdiction will comport with traditional notions of fair
play and substantial justice. See Spir Star, 310 S.W.3d at 879 (quoting Guardian Royal,
815 S.W.2d at 231). Accordingly, the trial court erred when it granted Douglas and Mark’s
special appearance. We sustain Capital Title’s issue.
IV. CONCLUSION
We reverse the trial court’s judgment and remand the case for further proceedings.
GINA M. BENAVIDES
Justice
Delivered and filed on the
17th day of February, 2022.
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