OZO Capital, Inc., Biltmore Funding II, LLC, and DFI-OTH, LLC v. Vance Syphers and Chris Edens ( 2018 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-17-00131-CV
OZO CAPITAL, INC., BILTMORE APPELLANTS
FUNDING II, LLC, AND DFI-OTH,
LLC
V.
VANCE SYPHERS AND CHRIS APPELLEES
EDENS
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FROM THE 48TH DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 048-287425-16
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MEMORANDUM OPINION1
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In this appeal from the trial court’s order granting the special appearance
of nonresident appellees Vance Syphers and Chris Edens, appellants OZO
Capital, Inc., Biltmore Funding II, LLC (Biltmore II), and DFI-OTH, LLC contend
1
See Tex. R. App. P. 47.4.
that the trial court erred by determining (1) that it did not have general or specific
jurisdiction over Syphers, or specific jurisdiction over Edens, and (2) that
exercising jurisdiction over both appellees would offend traditional notions of fair
play and substantial justice. Because we conclude that the trial court did not err
by concluding that exercising jurisdiction over appellees would violate federal due
process guarantees, we affirm.
Background
In December 2013, Texas resident Mark Hyland and Florida resident Greg
Wright encouraged Texas resident Tim Fleet to purchase a pool of mortgage
loans for the sole purpose of reselling them. The three created Biltmore II, a
Texas limited liability company, to buy and sell the pool. Biltmore II’s managing
member is NTex Realty, LP, a Texas limited partnership owned by Fleet. The
other members of Biltmore II are OZO, a Florida corporation whose principal is
Wright, and DFI-OTH, a Texas limited liability company whose principal is
Hyland. Fleet funded Biltmore II with a $1.7 million contribution, but Hyland and
Wright did not contribute any funds to Biltmore II. The company is structured so
that Fleet, through NTex Realty, will receive the return of his initial $1.7 million
investment from any money paid to Biltmore II before making any distributions to
OZO or DFI-OTH.
Hyland began working on a deal to sell Biltmore II’s pool to 3 Star
Properties, along with two other note pools: one owned by TM Property
Solutions, LLC (TMPS), in which Hyland owns a fifty percent interest, and
2
another owned by Biltmore Funding, LLC, a company controlled by Wright. While
3 Star was negotiating its purchase of the three loan pools, it entered into an
agreement to sell a large group of loans from each of the three pools to SED
Holdings, LLC, a North Carolina limited liability company, for around $13.8
million. Syphers is the managing member of SED, and Edens was both a
member and the president.2
3 Star closed its sale to SED in June 2014 before closing its purchase from
Biltmore II in July 2014; 3 Star used some of SED’s initial $4 million cash
payment3 to fund its purchase of the Biltmore II, Biltmore Funding, and TMPS
pools. 3 Star paid Biltmore II $1.5 million cash4 and executed a promissory note
for the remaining $2.7 million purchase price for the Biltmore II loans. In the sale
contract with 3 Star, Biltmore II agreed that Brown & Associates, a “custodian
and doc prep vendor” located in Harris County, Texas, would keep physical
possession of the Biltmore II notes.
SED’s contract with 3 Star allowed it to perform due diligence after closing
and “put back” loans that it could not resell. After the closing of SED’s purchase
from 3 Star, Edens travelled to Texas to review the notes; SED decided that at
2
Although Edens’s discovery responses in this suit stated that he was a
member of SED, he later denied being a member in an affidavit attached to
appellees’ amended special appearance.
3
SED executed a promissory note for the rest of the purchase price.
4
3 Star paid Biltmore Funding $1.625 million and TMPS $360,000.
3
least 600 or more of the notes that it bought from 3 Star––some of them from the
Biltmore II pool––were “unsellable” and attempted to give those loans back. For
that reason, SED stopped making payments on its promissory note to 3 Star. As
a result, 3 Star never made a payment on its note to Biltmore II. Biltmore II sent 3
Star a default notice indicating that it would retain ownership of its pool unless 3
Star timely objected––it did not.
Thus began a series of lawsuits to obtain ownership of the Biltmore II pool.
First, SED sued 3 Star, its principal Jamie Johnson, Hyland, and TMPS in North
Carolina; Biltmore II was not a party to that suit. SED obtained an injunction
prohibiting Hyland from selling the notes in the Biltmore II pool. 3 Star then sued
SED in Harris County, Texas. Brown & Associates interpleaded the notes into the
Harris County suit. Finally, Biltmore II, acting through Fleet, sued 3 Star in
Tarrant County in April 2015. At some point, Fleet became aware that 3 Star had
closed its sale to SED before obtaining ownership of the Biltmore II pool. Biltmore
II and SED each attempted to obtain the notes from Brown & Associates, who
refused to release them because of the multiple title claims.
SED intervened in Biltmore II’s Tarrant County suit. In an attempt to
salvage the value of the Biltmore II pool, Edens and Fleet discussed selling the
Biltmore II notes. Eventually, they agreed to a settlement. Under the settlement
agreement, which Syphers approved and signed from North Carolina, SED and
Biltmore II “agree[d] to work together and cooperate with each other in the
[Tarrant County suit] . . . to achieve an outcome whereby a [j]udgment is
4
rendered . . . declaring [Biltmore II] the owner of the [pool] with clear and
negotiable title . . ., free and clear of any claims by or through 3 Star.” Biltmore II
further agreed that if it obtained such a judgment, it would, with Fleet and SED,
“jointly pursue possession of the [pool]” and upon taking possession, liquidate the
pool. SED would receive sixty percent of the liquidated proceeds and Biltmore II
forty percent.
At the Tarrant County trial, SED and Biltmore II set forth the settlement
agreement terms on the record. Fleet and Edens testified. 3 Star did not offer any
evidence or sponsor any witnesses, and its counsel admitted that 3 Star had
defaulted on its payments to Biltmore II because SED had defaulted on its
payments to 3 Star. The trial court signed a judgment declaring Biltmore II the
sole owner of the Biltmore II pool, free of 3 Star’s and its assignees’ claims.
During the fallout from the sale to 3 Star, Fleet’s relationship with Hyland
and Wright soured to the point that they could no longer work together. Through
attorneys, Hyland attempted to buy out NTex Realty’s membership interest in
Biltmore II. As part of these negotiations, Hyland’s counsel attempted to obtain
Fleet’s verification that Biltmore II had not “disposed of, assigned, released,
transferred, or otherwise conveyed” the mortgages in the pool, but Fleet’s
counsel refused to answer. After Hyland and Wright found out about the
settlement agreement with SED, they purported to authorize Biltmore II, along
5
with OZO and DFI-OTH, to sue Fleet, NTex Realty, appellees, and James Dever5
for breach of fiduciary duty, fraud, breach of contract, and tortious interference
with a contract. Hyland verified appellants’ original and amended petitions. OZO
and DFI-OTH also called a members’ meeting of Biltmore II, at which they voted
to expel NTex Realty as managing member.
Appellants alleged in their pleadings that the settlement agreement
Biltmore II entered into with SED is a void Mary Carter agreement,6 characterized
it as a “side deal” to transfer Biltmore II’s assets to SED, and contended that its
purpose was to benefit Fleet to their detriment because Biltmore II’s company
agreement allows him to “get his money out first.”
Appellants sought (1) damages, (2) a temporary restraining order and
temporary injunction preventing the conveyance of the Biltmore II pool to any
third parties, (3) a temporary injunction ordering that the pool be sold “at a price
agreeable to all parties,” that the parties mutually agree to hire a broker to effect
the sale, and that the sale proceeds be deposited into an escrow account
pending the suit’s resolution, (4) a court order to wind up and terminate Biltmore
II, (5) a declaratory judgment that the Tarrant County judgment in the 3 Star
litigation “finally, fully, and forever adjudicated any interest SED . . . had or may
5
Dever is also a member of SED. Appellants eventually nonsuited their
claims against Dever.
6
See Elbaor v. Smith, 845 S.W.2d 240, 247 (Tex. 1992) (“A Mary Carter
agreement exists when the settling defendant retains a financial stake in the
plaintiff’s recovery and remains a party at the trial of the case.”).
6
have had in the Biltmore II Pool––none,” and (6) a declaratory judgment that
Biltmore II’s settlement agreement with SED is void, illegal, and unenforceable,
that SED’s claims to the pool are barred by res judicata, and that their vote to
expel NTex Realty as a member of Biltmore II comported with the Biltmore II
company agreement and Texas law.
Regarding jurisdiction over appellees, appellants alleged in their original
petition that although appellees both resided in North Carolina,7 they did
business in Texas and the suit arose from that business. In their second
amended petition––the live pleading at the time of the special appearance ruling–
–appellants alleged only that appellees conduct business in Texas, have
systematic and continuous contacts with Texas sufficient to establish general
jurisdiction, have committed torts in Texas in their individual capacities, and their
Texas contacts gave rise to or relate to appellants’ claims in this suit. Appellants
did not plead any alter ego-based theories of jurisdiction.
Appellees filed a joint special appearance in which they argued (1) that
appellants failed to plead jurisdictional facts sufficient to subject them to Texas’s
jurisdiction, (2) that they are not Texas residents, (3) that they “have no business
presence in Texas, own no property in Texas, have no offices in Texas, have no
bank accounts in Texas, and have no employees or agents in Texas,” (4) that
they have not maintained sufficient contacts with Texas or purposefully availed
7
Edens is actually a Tennessee resident.
7
themselves of the benefits and protections of Texas laws, and (5) that exercising
jurisdiction over them would offend traditional notions of fair play and substantial
justice. Appellees also attached an affidavit from Syphers averring the same.
After the parties engaged in jurisdictional discovery, appellants moved to
strike Syphers’s affidavit claiming that his entire affidavit was not credible
because he had falsely answered some discovery requests. Appellants attached
evidence purporting to show that contrary to Syphers’s statements in his affidavit,
he had some Texas business connections, Texas business partners, and
dealings with Texas companies sufficient to establish general jurisdiction. In
response, appellees filed five additional exhibits including an amended affidavit
from Syphers. Appellants again objected, arguing that Syphers was continuing to
make false statements under oath and that his new affidavit suffered from the
same defects as the original.
After a nonevidentiary hearing, the trial court overruled appellants’
objections to appellees’ special appearance evidence and granted appellees’
special appearance. Although appellants timely requested findings of fact and
conclusions of law, the trial court declined to file any. Appellants filed this
accelerated interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann.
§ 51.014(a)(7) (West Supp. 2017).
Law on Personal Jurisdiction
A Texas court may assert personal jurisdiction over a nonresident
defendant only if the requirements of the Texas long-arm statute and of due
8
process under the Fourteenth Amendment are satisfied. U.S. Const. amend. XIV,
§ 1; Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041–.045 (West 2015); Bristol-
Myers Squibb Co. v. Super. Ct. of Cal., 137 S. Ct. 1773, 1779 (2017); TV Azteca
v. Ruiz, 490 S.W.3d 29, 36 (Tex. 2016), cert. denied, 137 S. Ct. 2290 (2017).
The Texas long-arm statute permits Texas courts to exercise jurisdiction over a
nonresident defendant who “does business” in Texas, which includes committing
a tort in whole or in part in the state. Tex. Civ. Prac. & Rem. Code Ann. § 17.042;
TV Azteca, 490 S.W.3d at 36. Due process is satisfied when (1) the defendant
has established minimum contacts with the forum state and (2) the exercise of
jurisdiction comports with traditional notions of fair play and substantial justice.
BNSF Ry. v. Tyrrell, 137 S. Ct. 1549, 1558 (2017); TV Azteca, 490 S.W.3d at 36.
In determining whether federal due process requirements have been met, we rely
on precedent from the United States Supreme Court and other federal courts, as
well as our own state’s decisions. BMC Software Belgium, N.V. v. Marchand, 83
S.W.3d 789, 795 (Tex. 2002); TravelJungle v. Am. Airlines, Inc., 212 S.W.3d 841,
845–46 (Tex. App.––Fort Worth 2006, no pet.).
The United States Supreme Court has distinguished two types of
jurisdiction, depending on the types of contacts: general (all-purpose) jurisdiction
and specific (case-linked) jurisdiction. BNSF Ry., 137 S. Ct. at 1558. A trial court
may assert general jurisdiction over a nonresident defendant when that
defendant’s contacts with the forum are so continuous and systematic that they
render the defendant “at home” in the forum state. Daimler AG v. Bauman, 134
9
S. Ct. 746, 754 (2014); TV Azteca, 490 SW.3d at 37. The paradigm forum for
exercising general jurisdiction over an individual is the person’s domicile; for a
corporation, it is an equivalent place in which the company is fairly regarded as at
home, such as its domicile, place of incorporation, or principal place of business.
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924, 131 S. Ct.
2846, 2853–54 (2011). Only a limited set of affiliations with a forum will render a
defendant amenable to general jurisdiction in a state. Bristol-Myers Squibb, 137
S. Ct. at 1780.
In contrast, a trial court may exercise specific jurisdiction over a defendant
only if the suit arises out of or relates to the defendant’s forum contacts. Id. In
other words, specific jurisdiction depends on the existence of activity or an
occurrence that takes place in the forum state and is therefore subject to its
regulation. Goodyear, 564 U.S. at 919, 131 S. Ct. at 2851.
Parties’ Burdens in Trial Court and Appellate Standard of Review
Whether a trial court has personal jurisdiction over a defendant is a
question of law, which we review de novo based on all of the evidence. Searcy v.
Parex Res., Inc., 496 S.W.3d 58, 66 (Tex. 2016). At trial, the plaintiff bears the
initial burden to plead sufficient allegations that would permit the trial court to
exercise personal jurisdiction over a defendant. Id. Once the plaintiff has done
so, the defendant bears the burden to negate all potential bases for personal
jurisdiction pleaded by the plaintiff. Id. The defendant can negate jurisdiction on a
factual basis by presenting evidence that he has no contacts with Texas,
10
effectively disproving the plaintiff’s allegations; the plaintiff risks dismissal of its
suit if it does not present the trial court with evidence affirming its jurisdictional
allegations and establishing personal jurisdiction over the defendant. Kelly v.
Gen. Interior Constr., Inc., 301 S.W.3d 653, 659 (Tex. 2010). The defendant can
also negate jurisdiction on a legal basis by showing that even if the plaintiff’s
alleged jurisdictional facts are true, (1) those facts are not sufficient to establish
jurisdiction, (2) the defendant’s Texas contacts fall short of purposeful availment,
(3) the claims do not arise from the defendant’s Texas contacts, or (4) exercising
jurisdiction over the defendant would offend traditional notions of fair play and
substantial justice. Id.
When the trial court resolves fact questions in making a jurisdictional
determination, we may review its findings––express or implied––for both legal
and factual sufficiency. BMC Software, 83 S.W.3d at 794–95 (holding that when
trial court does not make express fact findings, appellate court may review
implied findings for sufficiency when appellate record includes both reporter’s
and clerk’s records); Norstrud v. Cicur, No. 02-14-00364-CV, 2015 WL 4878716,
at *2 (Tex. App.––Fort Worth Aug. 13, 2015, no pet.) (mem. op.); cf. Ad Villarai,
LLC v. Chan Il Pak, 519 S.W.3d 132, 136 (Tex. 2017) (summarizing “the law
governing findings of fact” and noting that when trial court does not respond to a
timely request for fact findings, appellate court “must presume the trial court
made all the [fact] findings necessary to support the judgment” but that this
presumption is rebutted if implied findings are not supported by evidence).
11
In their first issue, appellants urge us to review only the trial court’s
undisputed implied fact findings for legal and factual sufficiency and to review
any implied fact findings dependent on a witness’s credibility de novo, affording
no deference to the trial court’s implied resolution of those facts. According to
appellants, the well-established sufficiency standard of review is not applicable to
disputed facts when the trial court did not hold an evidentiary hearing on a
special appearance. But appellants have not directed this court to any disputed
facts that the trial court must have resolved in appellees’ favor; instead, the
parties dispute the legal significance of the jurisdictional facts developed in the
trial court. Thus, we need not carve out an exception to the standard of review
established by the supreme court in BMC for this appeal.8 See Villagomez v.
8
Appellants rely on Otis Elevator Co. v. Parmelee, a death-penalty
sanctions appeal which concerned whether the trial court’s order complied with
the TransAmerican requirement that the record show the trial court considered
the availability of lesser sanctions or that lesser sanctions would not be sufficient
to curb the abuse. 850 S.W.2d 179, 181 (Tex. 1993); TransAm. Nat. Gas Corp. v.
Powell, 811 S.W.2d 913, 917–18 (Tex. 1991). The supreme court held that the
court of appeals erred by holding that because the reporter did not make a record
of the sanctions hearing, “the trial court must be presumed to have made all
findings necessary to support its judgment.” 850 S.W.2d at 181. In doing so, the
supreme court distinguished the sanctions scenario from cases presuming
findings in support of a judgment after trial. Id. Although appellants acknowledge
that Otis Elevator was not a special appearance case, they contend that its
holding is on point because it was a death-penalty sanctions case and “special
appearance is, in some instances, the ultimate death penalty.” But neither the
supreme court nor this court has ever applied the TransAmerican factors to a
special appearance ruling; thus, Otis Elevator is inapposite.
Appellants also contend that “any suggestion that this Court is deference–
bound to implied findings under the circumstances presented flies in the face of
well over a century of Texas jurisprudence on proper evidentiary review.”
12
Rockwood Specialties, Inc., 210 S.W.3d 720, 726–28 (Tex. App.––Corpus Christi
2006, pet. denied) (questioning BMC standard of review for implied findings in
special appearance appeals but nevertheless applying legal sufficiency standard
to facts); see also Norstrud, 2015 WL 4878716, at *4 (declining to follow
Villagomez to the extent it held that a trial court’s adoption of parties’ proposed
findings verbatim is entitled to less deference than other trial court findings and
following BMC standard requiring appellant to challenge the sufficiency of the
evidence supporting any appealed finding).
Appellants’ Pleadings Shifted Burden to Appellees;
Both Parties Responded With Evidence
Appellants’ pleadings alleging that both appellees conduct business in
Texas and committed torts individually in Texas were sufficient to shift the burden
to appellees to negate the pleaded bases of jurisdiction. See Searcy, 496 S.W.3d
at 66; Griffith Techs., Inc. v. Packers Plus Energy Servs. (USA), Inc., No. 01-17-
00097-CV, 2017 WL 6759200, at *3 (Tex. App.—Houston [1st Dist.] Dec. 28,
2017, no pet.) (mem. op.); Lombardo v. Bhattacharyya, 437 S.W.3d 658, 679
(Tex. App.––Dallas 2014, pet. denied); Huynh v. Nguyen, 180 S.W.3d 608, 619
(Tex. App.––Houston [14th Dist.] 2005, no pet.). But cf. Kelly, 301 S.W.3d at
Because the trial court need not have resolved any disputed fact issue in making
its rulings in this case, we acknowledge––as did the supreme court in Moncrief
Oil Int’l v. OAO Gazprom, 414 S.W.3d 142, 150 n.4 (Tex. 2013)––that we need
not resolve this particular argument. See Tex. R. App P. 47.1.
13
659–60 (holding that plaintiff failed to plead facts sufficient to shift burden to
defendants because it did not allege defendants committed torts “in Texas”).
Appellees attached Syphers’s affidavit to their special appearance, in
which he averred the following:
• He is a resident of Wake County, North Carolina, and Edens is a
resident of Memphis, Tennessee;
• He is a member and manager of SED, a North Carolina limited
liability company, and Edens is a member;
• As an individual, he had nothing to do with SED’s purchase of loans
from 3 Star and was not involved in the 3 Star Tarrant County litigation
other than––in his capacity as manager of SED––authorizing SED to
intervene;
• Neither he nor Edens has a business presence in Texas, owns
property in Texas, or has offices, bank accounts, employees, or agents in
Texas; and
• He would be significantly burdened by having to travel to Fort Worth
to defend this suit.
Appellees also attached a copy of the settlement agreement in the 3 Star
litigation. Syphers signed the signature block for SED; the title “Managing
Member” was listed underneath his signature.
In response to the special appearance, appellants attached Syphers’s
answers in discovery, in which he represented that in the previous ten years,
14
neither he nor any entity under his control, ownership, or management had
owned an interest in any Texas company and that he had no documents that
would show any such interest. He also stated that he owned his membership
interest in SED through Hickory Knob, LLC. To show that Syphers was being
untruthful about having no Texas connections, appellants attached the 2008
Texas certificate of formation of Capital Preservation Group, LLC (CPG), listing
Syphers and Dale K. Edwards as managers and H. David Wright as the initial
registered agent. The form listed Syphers’s address as Durham, North Carolina.
Appellants also attached CPG’s 2012 franchise tax public information report,
signed by Adelene Piper as a member and listing the other officers, directors, or
members as Verus Consulting Group, LP, Fourth Line, LLC, and Hickory Knob,
LLC of Durham, North Carolina. Appellants urged that Syphers’s 2008 interest as
a manager of CPG was sufficient to establish general jurisdiction over him.
Regarding specific jurisdiction over both appellees, appellants attached
Edens’s answers to interrogatories9 in which he stated that
• in his capacity as President of SED, he traveled to Texas in July
2014 and January 2015 to visit Brown & Associates,
9
Much of appellants’ responsive evidence relates to the merits of their tort
claims, e.g., when Syphers and Edens first became aware of Fleet and when the
three began working together to sell the Biltmore II pool. We do not detail that
evidence in this opinion because we do not address the merits of the tort claims
in reviewing the special appearance; rather, we instead analyze the quality and
nature of appellees’ proven contacts in light of appellants’ pleaded tort claims.
See Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 790–92 (Tex.
2005).
15
• SED began working with Biltmore II in June 2015 “as an allied party
to the dispute with 3 Star,” the parties worked together in defending the
case and made joint filings with the court, the parties sat at counsel table
together and provided a joint presentation to the court, and although he
attended the trial as President of SED, he “did not assist, work with, or
cooperate with [Biltmore II’s] prosecution of its claims against 3 Star . . . in
[his] individual capacity,”
• he discussed the settlement agreement with Fleet by phone in May
and June 2016, and he exchanged emails with Fleet about the settlement
agreement, but only as an officer of SED,
• after discussing the settlement agreement with SED’s membership,
Syphers approved the agreement and executed it on SED’s behalf in
Raleigh, North Carolina,
• as President of SED, Edens did not think the terms of the settlement
agreement were “optimal,” but the agreement “was an effort to maximize
the value of the assets” after SED had concluded that receiving sixty
percent of the assets was better than potentially receiving 100 percent
“after a long and costly litigation,” and
• SED understood that at the time of settlement, the pool was already
in Biltmore II’s name; the settlement agreement contemplated that keeping
the assets in Biltmore II’s name would make it easier to sell the pool and
16
would help remove any cloud to title; and selling the pool pursuant to a
court order or final judgment would maximize the pool’s value.
In addition to Edens’s discovery answers, appellants relied on the
following:
• A reporter’s record from the trial in the Tarrant County 3 Star
litigation, in which SED and Biltmore II jointly offered evidence, informed
the trial court that they had settled their differences, and set forth on the
record the terms of the settlement agreement; and
• A July 2015 email from Edens to Fleet and Syphers, among others,
indicating that Edens was seeking as high a price as possible for the pool
to mitigate SED’s damages, that he intended to sell the pool as soon as
possible “to minimize my investors[’] losses,” and that he was “working
closely” with Fleet.
Responding to appellants’ evidence, appellees filed a supplemental special
appearance in which they argued that all of Biltmore II’s claims against them in
their individual capacities arise out of their involvement with SED as either
officers or members. Syphers’s affidavit was attached as well as an affidavit from
Edens, in which he averred that as an individual, he had nothing to do with SED’s
purchase of the pool from 3 Star or the Tarrant County 3 Star litigation; he is a
resident of Memphis, Tennessee; and he has no business presence in Texas,
owns no property in Texas, and has no offices, bank accounts, employees, or
agents in Texas.
17
Appellees also attached Hyland’s deposition, in which he admitted that the
only basis of the claim against Edens was that he “understood . . . Edens
personally made the deal with . . . Fleet in Fort Worth” and “personally discussed
with . . . Fleet this side backdoor agreement that was signed,” but Hyland did not
“remember where [that understanding] came from.” Hyland also said that
appellants sued Syphers individually “[b]ecause . . . he makes all the decisions
for SED.” Hyland admitted that Biltmore II’s claims against appellees are based
on the fact that “SED negotiated an agreement . . . with . . . Fleet.”
Appellants responded with their own supplemental filing. They attached
documents showing that someone named Dale K. Edwards, one of the initial
members of CPG, was also a member of Agilis Benefit Services, LLC (ABS),
which was formed under Delaware law but in 2001 sought to register a Texas
office in Flower Mound; David Wright––also a member––was listed as the initial
registered agent. ABS filed Texas franchise tax report forms from 2008-2013 and
in 2015. Additional documents showed that ABS was a general partner of Agilis
Benefit Services of Texas, L.P. (ABST), a Texas limited partnership formed in
2001, and that Wright was also its registered agent. In 2008, ABST changed its
name to Verus Consulting Group, L.P.
Appellants also attached copies of complaints in two different suits against
Syphers: one in Mississippi naming Syphers, Syphers Wealth Management, and
ABST as defendants and another in North Carolina naming ABS and Syphers,
among others, as defendants. The plaintiffs in these suits alleged that Syphers––
18
as an agent for either Fidelity & Guaranty Life Insurance Company or Aviva Life
Insurance Company, formerly known as AmerUS Life Insurance Company––sold
them life insurance policies for investment purposes and induced them to add a
company owned by either ABST or ABS as a co-owner of the policy. The policy
owner would then pay an inflated premium through a complicated series of
transactions involving an ABS- or ABST-related company, which company then
retained the inflated part of the premium. In the Mississippi suit, the plaintiff
alleged that ABS developed this life insurance scheme, and Syphers and his
company Syphers Wealth Management marketed it nationwide.10
Finally, appellants presented evidence of (1) a Policy Delivery Receipt
signed by the policy owner on June 11, 2003 and also signed by Syphers as
“Agent” confirming receipt of an AmerUS policy, (2) an insurance policy issued by
Fidelity listing Syphers as agent, and (3) the underlying Fidelity life insurance
application, which contained a fax header stating “Agilis Benefit Service,” listed
the owner as an “LLC TBD,” and was signed by Syphers as agent. Handwriting
on the October 24, 2006 application indicates that Syphers was splitting his
commission in part with Piper, who had signed CPG’s 2012 Texas franchise tax
report as a member and ABS’s 2008, 2011, and 2012 Texas franchise tax
10
Appellants also attached a copy of a search warrant and underlying
affidavit for ABS’s U.S. Virgin Islands office and related federal criminal complaint
filings, including a search warrant for safety deposit boxes or lock boxes under
Edwards’s, David Wright’s, or Piper’s control. Syphers is not mentioned in any of
those documents.
19
reports in various different capacities. Piper also signed a 2015 Texas franchise
tax report for ABST as COO.
No General Jurisdiction Over Syphers
Appellants argue in part of their second issue that the trial court erred by
determining that it could not exercise general jurisdiction over Syphers.
Specifically, they contend that his following contacts with Texas are sufficient to
establish general jurisdiction:
• his status as a manager of CPG in 2008;
• his “agreement” with Texas entity ABS beginning as early as 2003 and his
“agreement” with Texas entity ABST as early as 2006; and
• his 2006 agreement to split commissions with Piper.
First, the record does not show that Syphers had an agreement with either
Agilis entity. The evidence that appellants claim shows an agreement between
Syphers and the Agilis entities shows only that Syphers was listed as an agent
on an insurance policy issued by Fidelity and signed a policy delivery receipt for
AmerUS as an agent. Nothing in the record shows that either of these insurance
companies were actually Agilis entities or that either was an alter ego of an Agilis
entity. To the extent that the pleadings in the Mississippi and North Carolina suits
against Syphers and the Agilis entities alleged those insurance companies and
Syphers were affiliated with the Agilis entities, those pleadings show nothing
more than allegations of such a relationship; they are not proof. See Laidlaw
Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex. 1995)
20
(“Generally, pleadings are not competent evidence, even if sworn or verified.”).
Moreover, even if Syphers had a contractual relationship with either Agilis entity,
those agreements alone would not be sufficient to establish general jurisdiction
over Syphers in Texas. See, e.g., Yfantis v. Balloun, 115 S.W.3d 175, 181 (Tex.
App.––Fort Worth 2003, no pet.). The same reasoning applies to his agreement
to split commissions with Piper.11 Id.
Thus, we are left with a single contact: Syphers’s 2008 status as a
manager of a Texas limited liability company, CPG. Without evidence of any
other contacts sufficient to show that Syphers was essentially “at home” in
Texas, this single contact does not suffice to establish general jurisdiction over
him. See Booth v. Kontomitras, 485 S.W.3d 461, 480 (Tex. App.––Beaumont
2016, no pet.); Furie Petroleum Co. v. Ben Barnes Grp., L.P., No. 03-14-00181-
CV, 2015 WL 6459606, at *8 (Tex. App.––Austin Oct. 23, 2015, no pet.) (mem.
op.); Martinez v. de Anda, No. 13-09-00277-CV, 2010 WL 2543892, at * 1, *17
(Tex. App.––Corpus Christi June 24, 2010, no pet.) (mem. op.); Yfantis, 115
S.W.3d at 181–82; Smith v. Cattier, No. 05-99-01643, 2000 WL 893243, at *3
(Tex. App.––Dallas July 6, 2000, no pet.) (not designated for publication); Al-
Turki v. Taher, 958 S.W.2d 258, 263 (Tex. App.––Eastland 1997, pet. denied);
see also Mower v. Nibley, 2016 UT App 174, ¶ 20–32, 382 P.3d 614, 620–23
11
Likewise, even assuming Edwards, David Wright, and Piper are Texas
residents, the mere fact that Syphers had business contacts with them would not
subject him to general jurisdiction in Texas. See, e.g., Daimler AG v. Bauman,
134 S. Ct. 746, 757–58 & n.11, 760 (2014).
21
(citing authority for proposition that individual can have only one domicile for any
particular purpose and concluding that, even if applying Daimler’s analysis of
contacts that would render a corporate defendant “at home,” plaintiff did not show
sufficient contacts to allow court to exercise general jurisdiction over individual);
cf. Daimler AG, 134 S. Ct. at 760–62 (holding that California court could not
exercise jurisdiction over German company based on its subsidiary’s assumed
“at home” California contacts).
Appellants argue that Syphers should not be rewarded for being untruthful
about his Texas contacts in discovery. But even if we discount his assertion that
he has no contacts with Texas, the negation of that statement cannot create
contacts sufficient to allow the trial court to exercise general jurisdiction over him.
Accordingly, we hold that the trial court did not err by concluding as a matter of
law that Syphers’s contacts with Texas are not sufficient to subject him to general
jurisdiction. We overrule the part of appellants’ second issue that argues
otherwise.
No Specific Jurisdiction Over Syphers and Edens
In the second part of their second issue and in their third issue, 12
appellants claim that the trial court erred by determining that it did not have
specific jurisdiction over appellees because they committed torts in Texas:
Syphers by approving and signing the settlement agreement and Edens by
Appellants’ fourth issue does not raise a reversible ground but instead
12
argues which law this court should apply.
22
negotiating it and testifying in Tarrant County in the 3 Star litigation. Appellees
contend that appellants have not shown that they committed any torts as
individuals.
Even if all of an officer’s or member’s actions are performed in his
corporate capacity, the officer or member may be subjected to personal
jurisdiction and held liable in his individual capacity for those actions if they were
tortious. Deaton v. Moreno, No. 02-16-00188-CV, 2017 WL 4683940, at *5 (Tex.
App.––Fort Worth Oct. 19, 2017, pet. denied) (mem. op.); Niehaus v. Cedar
Bridge, Inc., 208 S.W.3d 575, 581 (Tex. App.—Austin 2006, no pet.); SITQ E.U.,
Inc. v. Reata Rest., Inc., 111 S.W.3d 638, 651 (Tex. App.––Fort Worth 2003, pet.
denied). But that officer’s tortious activity will be sufficient to establish specific
jurisdiction only if that conduct creates a substantial connection with the forum
state. Walden v. Fiore, 134 S. Ct. 1115, 1121–22 (2014); TV Azteca, 490 S.W.3d
at 52–53; Moncrief Oil Int’l v. OAO Gazprom, 414 S.W.3d 142, 156 (Tex. 2013).
The relationship must arise from the purposeful contacts the individual created
with the state rather than with a state resident. Walden, 134 S. Ct. at 1122; see
Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 788–89 (Tex.
2005). Mere injury to a forum resident is not a sufficient connection to the forum
state. Walden, 134 S. Ct. at 1125 (citing Calder v. Jones, 465 U.S. 783, 104 S.
Ct. 1482 (1984)).
The evidence shows that appellees’ only purposeful contacts with Texas
are (1) that while in North Carolina, Syphers authorized SED’s intervention in the
23
3 Star litigation and approved and executed SED’s settlement with Biltmore II
and (2) that Edens negotiated the settlement agreement with Fleet while
physically outside the state of Texas and testified in furtherance of the settlement
agreement in a Tarrant County court.
SED originally attempted to secure title to the Biltmore II notes by filing suit
in North Carolina. Neither appellees nor SED chose the forum of the Biltmore II
litigation with 3 Star; Biltmore II chose the forum and SED intervened. See
Seguros Afirme, S.A. de C.V. v. Elamex, S.A. de C.V., No. 05-16-01465-CV,
2017 WL 3599693, at *7 (Tex. App.––Dallas Aug. 22, 2017, no pet.) (mem. op.)
(noting that Mexican insurer did not initiate its interactions with the insured and
was instead solicited by a third party, who represented to insurer that insured
was a Mexican company with locations in both Mexico and the United States).
But cf. Furie Petroleum, 2015 WL 6459606, at *7–8 (citing caselaw holding that
participating in litigation as a plaintiff constitutes purposeful availment of a forum
that can subject a party to specific jurisdiction as a defendant in a different suit in
the same forum that arises from the same transaction or operative facts). Neither
appellee intervened as an individual in Biltmore II’s suit. Cf. J. McIntyre Mach.,
Ltd. v. Nicastro, 564 U.S. 873, 882, 131 S. Ct. 2780, 2788 (2011) (“The principal
inquiry in cases of this sort is whether the defendant’s activities manifest an
intention to submit to the power of a sovereign.” (emphasis added)).
Likewise, a nonresident nonparty’s agreement to be bound by a settlement
in pending Texas litigation or the nonparty’s actions in furtherance of such a
24
settlement do not necessarily establish a purposeful, substantial connection to
Texas, even if the nonparty is affiliated with a party to the litigation. See Mt.
McKinley Ins. v. Grupo Mex., S.A.B. de C.V., No. 13-12-00347-CV, 2013 WL
1683641, at *3–4, *7 (Tex. App.––Corpus Christi Apr. 18, 2013, no pet.) (mem.
op.); Cerbone v. Farb, 225 S.W.3d 764, 766, 771–72 (Tex. App.––Houston [14th
Dist.] 2007, no pet.). Neither appellee here is a party to the settlement
agreement, nor is there any evidence to what extent either of them would obtain
a personal benefit from the settlement as individuals.13 See Michiana, 168
S.W.3d at 785; Cerbone, 225 S.W.3d at 771. But cf. Nev. Nat’l Advert., Inc. v.
Silverleaf Resorts, Inc., No. 05-16-00694-CV, 2017 WL 655949, at *10–11 (Tex.
App.––Dallas Feb. 17, 2017, no pet.) (mem. op.) (affirming denial of individual’s
special appearance when evidence showed that he is the sole owner of
defendant corporation over whom trial court had specific jurisdiction and that he
is the “beneficiary of its profits”).
Although appellants claim that appellees both committed a tort “in Texas,”
there is no evidence in the record that appellees committed a tort while physically
present in Texas. Appellants do not claim that Edens’s testimony in the 3 Star
litigation was tortious. Instead, the gist of appellants’ complaint against appellees
is that the effect of the profit-sharing provision of the settlement would ultimately
13
Although the record shows that Syphers owns his interest in SED
through his company Hickory Knob, there is no evidence in the record about
SED’s structure or how it makes distributions to its members.
25
injure two Texas companies––Biltmore II and DFI-OTH––as well as a Florida
company––OZO, upon the sale of the Biltmore II pool. Accordingly, appellants
likewise have not shown that appellees directed any alleged individual actions at
Texas rather than merely at a Texas resident. See Walden, 134 S. Ct. at 1125;
TV Azteca, 490 S.W.3d at 43; Booth, 485 S.W.3d at 486–87.
Based on this record, we hold that appellees’ individual involvement in
Biltmore II’s suit against 3 Star does not show an intent to direct a tort at Texas;
instead, their suit-related contacts were tangential to their attempt to recoup as
much of SED’s losses from the failed 3 Star purchase as possible, to the alleged
detriment of at least two Texas residents. See Searcy, 496 S.W.3d at 73–75;
Vinmar Overseas Sing. PTE Ltd. v. PTT Int’l Trading PTE, Ltd., No. 14-16-
00934-CV, 2017 WL 4797842, at *7–8 (Tex. App.––Houston [14th Dist.] Oct. 24,
2017, pet. denied); Niehaus, 208 S.W.3d at 581–84; see also Elbaor, 845
S.W.2d at 247–50 (describing effect of Mary Carter agreement on trial process
and nonsettling defendant). But cf. TV Azteca, 490 S.W.3d at 52 (noting that in
addition to directing alleged defamatory material at Texas resident and knowing
brunt of injury would be felt in Texas, individual also promoted show on which
statements were made while physically in Texas and knew show would have a
substantial audience in Texas); Hoskins v. Ricco Family Partners, Ltd., Nos. 02-
15-00249-CV, 02-15-00253-CV, 2016 WL 2772164, at *7 (Tex. App.––Fort Worth
May 12, 2016, no pet.) (mem. op.) (holding that individuals’ alleged fraudulent
backdating of documents to be filed in Texas property’s chain of title were
26
directed at Texas in light of Texas’s interest in maintaining stability and certainty
of real property title). Accordingly, we conclude that the trial court did not err by
determining that it did not have specific jurisdiction over appellees sufficient to
comport with federal due process guarantees. We overrule appellants’ second
and third issues. We therefore need not address appellants’ fifth issue
complaining that the trial court erred by determining that exercising jurisdiction
over appellants would offend traditional notions of fair play and substantial
justice. See Tex. R. App. P. 47.1.
Conclusion
Having overruled appellants’ dispositive issues, we affirm the trial court’s
order granting appellees’ special appearance.
/s/ Wade Birdwell
WADE BIRDWELL
JUSTICE
PANEL: WALKER, MEIER, and BIRDWELL, JJ.
DELIVERED: March 29, 2018
27