in the Interest and Protection of R.G.P. ( 2009 )

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OPINION
No. 04-08-00244-CV
Kenneth RATTNER,
Appellant
v.
John CONTOS and the Contos Family Trust,
Appellees
From the 407th Judicial District Court, Bexar County, Texas
Trial Court No. 2007-CI-09491
Honorable Karen H. Pozza, Judge Presiding
OPINION ON APPELLANT’S MOTION FOR REHEARING
Opinion by: Phylis J. Speedlin, Justice
Sitting: Catherine Stone, Chief Justice
Phylis J. Speedlin, Justice
Steven C. Hilbig, Justice
Delivered and Filed: May 20, 2009
REVERSED AND REMANDED
In light of the recent decision of the Texas Supreme Court in Retamco Operating, Inc., v.
Republic Drilling Co., 278 S.W.3d 333 (Tex. 2009), we grant Kenneth Rattner’s motion for
rehearing. This court’s memorandum opinion and judgment dated February 11, 2009, are
withdrawn, and this opinion and judgment are substituted.
04-08-00244-CV
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 concluding that it could not properly exercise jurisdiction over Contos and
the Contos Family Trust. Because we conclude that Contos’ actions subjected him and the Trust to
the jurisdiction of Texas courts, we reverse the trial court’s judgment and remand for trial.
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, principally in the Texas real estate market. 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 Texas. 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 estate1 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.
1
… The Texas real property at issue is located in Guadalupe County, Harris County, and Bexar County.
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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’ objections to the affidavits
of Myers, Smith, and Rattner, sustained the defendants’ special appearance, and dismissed Rattner’s
suit. This appeal followed.
APPLICABLE LAW
The plaintiff bears the initial burden of pleading facts sufficient to bring a nonresident
defendant within the provisions of the long-arm statute. Republic Drilling Co., 278 S.W.3d at 337.
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 Belgium, N.V. v.
Marchand, 83 S.W.3d 789, 794 (Tex. 2002). 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
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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.
Due Process Constraints
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. Republic Drilling Co., 278 S.W.3d at
337; Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007). To meet constitutional
due process guarantees, the court must find that (1) the nonresident defendant has purposefully
availed itself of the privilege of conducting activities within the forum state, thus invoking the
benefits and protections of its laws, and (2) the court’s assertion of jurisdiction meets “traditional
notions of fair play and substantial justice.” Republic Drilling Co., 278 S.W.3d at 338.
(A) Minimum Contacts
Personal jurisdiction has been described as either general—predicated on a party’s
“continuous and systematic” contacts with the forum, or specific—that is, based on contacts arising
from the dispute at issue. PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 166 (Tex.
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2007); BMC Software, 83 S.W.3d at 795-96. Here, although his pleadings claimed both general and
specific jurisdiction, Rattner makes no substantive argument on appeal that the trial court erred in
concluding that general jurisdiction did not exist. See TEX . R. APP . P. 38.1(i) (requiring appellant’s
brief to contain “a clear and concise argument for the contentions made, with appropriate citations
to authorities and to the record”). Accordingly, we focus our analysis on specific jurisdiction and
whether Contos and the Contos Family Trust met their burden of negating specific jurisdiction.
Specific jurisdiction arises when “(1) the defendant purposefully avails itself of conducting activities
in the forum state, and (2) the cause of action arises from or is related to those contacts or activities.”
Republic Drilling Co., 278 S.W.3d at 338.
Here, assuming without deciding that the trial court correctly sustained Contos’ objections and
excluded the affidavits Rattner filed in opposition to the special appearances, the trial court had before
it Rattner’s verified petition and Contos’ affidavit in support of the special appearance. Relevant to
specific jurisdiction, Rattner’s pleadings allege that he and Contos, both California residents, entered
into an oral agreement to find, acquire, hold, manage, develop, and sell real estate principally in the
Texas real estate market. His pleadings do not allege that the agreement between these two California
residents was formed in Texas and do not detail the “significant contacts” that Contos 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. Rattner’s suit seeks a declaratory
judgment that Rattner and Contos had entered into a partnership or joint venture with regard to Texas
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properties, an accounting of partnership profits and losses, and dissolution of the partnership or joint
venture with a distribution of the assets.
Contos’ affidavit offered to negate jurisdiction does not deny Rattner’s allegations that Rattner
and Contos entered into an oral agreement to find, acquire, hold, manage, develop, and sell real estate
principally in the Texas real estate market. Contos does deny continuous or systematic business in
Texas,2 but admits 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. Contos also admits that the Contos Family Trust, which he
describes as an estate planning trust, owns property in three Texas counties: Guadalupe, Bexar, and
Harris counties.
Based on the pleadings and Contos’ affidavit, Rattner argues that the trial court erred in its
findings of fact that Contos and the Contos Family Trust did not have minimum contacts with Texas,
that the suit does not involve ownership or title to real property located in Texas, and that the exercise
of personal jurisdiction over either defendant would offend traditional notions of fair play and
substantial justice. For the reasons set forth below, we agree.
1. Purposeful Availment
For the purpose of determining if a nonresident defendant purposefully availed itself of the
privilege of conducting activities within the forum state, “only the defendant’s contacts with the forum
are relevant,” the contacts “must be purposeful rather than random, fortuitous, or attenuated,” and the
2
… Contos’ affidavit also states he is a resident of and a 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.
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defendant must “seek some benefit, advantage or profit by ‘availing’ itself of the jurisdiction.”
Republic Drilling Co., 278 S.W.3d at 338-39; Moki Mac, 221 S.W.3d at 575 (recognizing there are
three parts to a “purposeful availment” inquiry). “Additionally, the minimum-contacts analysis is
focused on the quality and nature of the defendant’s contacts, rather than their number.” Republic
Drilling Co., 278 S.W.3d at 339.
Based on the undisputed evidence before the trial court, we conclude that Contos’ contacts with
Texas meet the purposeful-availment standard. Contos admitted that he willingly traveled in and out
of Texas over a nine-month period in order to find and purchase Texas real property on behalf of his
Family Trust. Based on Contos’ multiple contacts with Texas, three separate pieces of real property
were ultimately purchased in Guadalupe, Harris, and Bexar Counties, Texas. Contos’ contacts with
Texas were purposeful, not random, fortuitous, or attenuated, and specifically sought a “benefit,
advantage or profit” in Texas. Id. Additionally, by taking ownership of Texas real property, the
Contos Family Trust created a continuing relationship with Texas that affords the Contos Family Trust
benefits and protections under Texas law. Id. (“real property will always be in Texas, which leaves
no doubt of the continuing relationship that this ownership creates”). Accordingly, we conclude that
the undisputed evidence establishes that both Contos and the Contos Family Trust purposefully availed
themselves of the privilege of conducting activities in Texas.
2. Arises From or Related to
Having found that Contos’ contacts with Texas meet the purposeful-availment standard, we
next must determine whether “the defendant’s liability arises from or is related to the forum contacts.”
Id. at 340 (quoting Moki Mac, 221 S.W.3d at 579) (“[P]urposeful availment alone will not support an
exercise of specific jurisdiction . . . unless the defendant’s liability arises from or relates to the forum
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contacts.”). Here, Rattner’s pleadings allege that he and Contos entered into an agreement to share
in the profits and losses associated with the purchase and sale or development of Texas real property,
an allegation never denied by Contos. Rattner’s suit then sets forth four causes of action: (1) “a
judicial declaration of the existence of the partnership or joint venture between himself and Contos
with regard to the Texas real estate projects;” (2) “fraud in a real estate transaction;” (3) breach of
contract “to identify, acquire, hold, develop, manage and/or dispose of certain real property interests
in Texas for a profit;” and (4) unjust enrichment based on “Contos’ representations that he would share
in the profits of the Texas real estate ventures.” Each of Rattner’s four causes of action reference the
real property located in Texas—real property admittedly purchased by Contos in the name of the
Contos Family Trust.
Contos argues that the trial court correctly found that the current litigation does not involve
ownership or title to Texas property. Contos maintains this is a suit for money damages between two
California residents over a claimed business relationship that was formed in California. Relying on
Potkovick v. Regional Ventures, Inc. 904 S.W.2d 846 (Tex. App.—Eastland 1995, no writ), Contos
argues Texas property must be the focal point of the litigation to exercise specific jurisdiction over the
property owner. Id. at 847 (“We conclude that mere ownership of the real property alone is
insufficient to bestow in personam jurisdiction: the ownership of the real property must be the subject
of the underlying suit.”). Because the property at issue here, instead of being at the focal point of the
litigation, is, at most, a claimed asset of the business venture, Contos argues specific jurisdiction fails.
We disagree. Contos is alleged to have entered into a business relationship to share in the profits and
losses associated with finding, developing, and selling Texas real estate. As a result of this alleged
relationship, Texas property was purchased and is now owned by the Contos Family Trust. Contos’
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alleged liability, if any, stems from or is substantially connected to his purchase of the property and
how that property has been held, managed, developed, and/or sold since its purchase. Accordingly,
the property is not only a claimed asset, but is also the very subject matter of the claimed business
relationship. Contos’ contacts with Texas are sufficient to demonstrate that this alleged tort occurred
at least, in part, in Texas. See Republic Drilling Co., 278 S.W.3d at 341.
(B) Traditional Notions of Fair Play and Substantial Justice
Finally, having found that Contos and the Contos Family Trust have minimum contacts with
Texas sufficient to support specific jurisdiction, we next determine whether an assertion of jurisdiction
over these nonresidents comports with “traditional notions of fair play and substantial justice.” Id.
We consider: (1) “the burden on the defendant;” (2) the interests of the forum state 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.” Guardian
Royal Exchange Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991). “In
this inquiry, it is incumbent upon the defendant to present ‘a compelling case that the presence of some
consideration would render jurisdiction unreasonable.’” Id. at 231 (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 477 (1985)).
Contos contends the trial court correctly found that exercise of jurisdiction over the nonresident
defendants would violate traditional notions of fair play and substantial justice. Contos argues that
California courts have more interest in resolving this dispute because it is between two California
businessmen over a partnership allegedly created under California law. Although we agree California
may have some interest in this litigation, other factors weigh in favor of Rattner and the forum state.
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Rattner chose to resolve this controversy in Texas because the property at issue is located here.
Additionally, as noted by the court in Republic Drilling, Co., “Texas has an interest in resolving
controversies involving real property within its borders . . . Moreover, California has much less of an
interest in resolving Texas real property disputes than does Texas.” Republic Drilling Co., 278 S.W.3d
at 341-42. Accordingly, although we agree Contos and the Contos Family Trust are burdened by
litigation outside their home state of California, weighing all factors, we cannot say that jurisdiction
in Texas violates traditional notions of fair play and substantial justice.
CONCLUSION In summary, we conclude that Contos and the Contos Family Trust have established
minimum contacts with Texas to support specific jurisdiction and that the exercise of jurisdiction over
these nonresidents does not offend traditional notions of fair play and substantial justice. Accordingly,
we reverse the trial court’s judgment and remand to the trial court for further proceedings consistent
with this opinion.
Phylis J. Speedlin, Justice
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