76 Hawai'i 323, Shaw v. North American Title Co.

• Citation: 876 P.2d 1291,76 Hawaii 323
• Decision Date: 07 July 1994
• Docket Number: No. 17161,17161
• Parties: 76 Hawai'i 323 Stephen M. SHAW, Plaintiff-Appellant, v. NORTH AMERICAN TITLE CO., and Does 1-50, Defendants-Appellees.
• Court: Supreme Court of Hawai'i

Page 1291

876 P.2d 1291

76 Hawai'i 323

Stephen M. SHAW, Plaintiff-Appellant, v. NORTH AMERICAN TITLE CO., and Does 1-50, Defendants-Appellees.

No. 17161.

Supreme Court of Hawai'i.

July 7, 1994.

As Amended July 12, 1994.

Stephen M. Shaw, pro se.

Andrew S. Winer (Steven H. Aden, with him on the brief, of Jervis & Werner), Kailua, for defendant-appellee North American Title Co.

Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ.

MOON, Chief Justice.

Plaintiff-appellant Stephen M. Shaw appeals from the First Circuit Court's dismissal of his complaint for lack of personal jurisdiction. Because we find that Shaw's complaint, together with the affidavits presented on the motion to dismiss, create a prima facie showing of personal jurisdiction, we vacate the circuit court's dismissal and remand for further proceedings.

I. FACTUAL BACKGROUND

This case arises from an escrow transaction for the refinancing of Shaw's property located in La Jolla, California. Defendant-appellee North American Title Company (NATCO) was retained by San Clemente Savings Bank to provide escrow services and title insurance. Shaw is a Hawai'i resident; NATCO is a California corporation and is not registered to do business in Hawai'i nor does it service Hawai'i properties.

Upon closing of the refinancing, NATCO had issued several checks on its Union Bank account, which included Shaw's escrow account. Although the checks were made payable to Shaw's creditors, NATCO, pursuant to Shaw's instructions, mailed the checks directly to Shaw in Hawai'i.

Meanwhile, Shaw was in the midst of negotiating with his creditors in an effort to improve his credit rating. Shaw had contested items on his credit reports and was negotiating lump sum payments to creditors in exchange for deletion of negative entries from credit bureau files. Shaw alleges that he had planned to use the proceeds from the California refinancing in dealing with his creditors. Shaw claims that he specifically advised NATCO that positive credit entries on his Hawai'i credit report were necessary because of an upcoming refinancing transaction related to a property on Kaua'i. Shaw also claims that he repeatedly explained to NATCO his reasons for requesting that the checks be sent to him rather than directly to his creditors.

Two months after the checks were issued to Shaw, NATCO transferred its Union Bank account to Imperial Bank in San Francisco without notifying Shaw. As a result, the checks in Shaw's possession apparently became worthless. Shaw kept the checks for approximately a year before forwarding one of them to a bank in Ohio to settle his account. That check was dishonored. Once being notified of the invalid check, NATCO reissued new checks on its Imperial Bank account and sent them directly to Shaw's creditors, apparently countermanding Shaw's instructions. As a result, Shaw alleges that he suffered damages to his credit rating because his ability to negotiate payment with his creditors in exchange for deletion of negative entries in his credit reports was foreclosed. Shaw also complains that NATCO refused to perform a satisfactory accounting, including providing him with a list of those creditors NATCO paid directly and identifying all checks and amounts paid from Shaw's escrow account.

Shaw filed his first amended complaint on February 25, 1993, asserting eleven causes of action against NATCO and various Doe defendants. As to NATCO, he alleged: (1) fraud or deceit based on suppression or concealment of facts; (2) negligent misrepresentation; (3) breach of fiduciary duty; (4) malicious breach of agreement and breach of implied covenant of good faith and fair dealing; (5) intentional interference with economic advantage; (6) negligent and intentional infliction of emotional distress; and (7) negligent supervision or hiring of employees. He sought general, special, and punitive damages and an accounting.

On March 31, 1993, NATCO filed a motion to dismiss for lack of personal jurisdiction, pursuant to Rule 12(b)(2) of the Hawai'i Rules of Civil Procedure (HRCP). The circuit court granted the motion on May 11, 1993, and Shaw timely appealed.

II. DISCUSSION

The question presented here is whether, under the facts alleged by Shaw, Hawai'i's courts may assert personal jurisdiction over NATCO, a nonresident defendant. A trial court's determination to exercise personal jurisdiction is a question of law reviewable de novo when the underlying facts are undisputed. Bourassa v. Desrochers, 938 F.2d 1056, 1057 (9th Cir.1991).

Pursuant to HRCP 12(b)(2) (1990), "the following defenses may at the option of the pleader be made by motion ... (2) lack of jurisdiction over the person[.]" Where personal jurisdiction is at issue, "[w]e look to the allegations [of the complaint] to determine jurisdiction[.]" Kailieha v. Hayes, 56 Haw. 306 n. 1, 536 P.2d 568 n. 1 (1975). However, the manner in which the court should view and weigh the allegations in the complaint is not clearly addressed in Kailieha or any other Hawai'i case. Therefore, we look to federal sources for guidance. Because HRCP 12(b)(2) is identical to Rule 12(b)(2) of the Federal Rules of Civil Procedure (FRCP), the interpretation of this rule by federal courts is highly persuasive. Harada v. Burns, 50 Haw. 528, 532, 445 P.2d 376, 380 (1968); Schubert v. Saluni, 9 Haw.App. 591, 597-99, 855 P.2d 858, 862 (1993). In determining personal jurisdiction, "the [trial] court has discretion to proceed either upon written submissions or through a full evidentiary hearing." ¹ 2A J. Moore, J. Lucas & G. Grotheer, Moore's Federal Practice p 12.07[2.-2] at 12-69-70 (2d ed. 1993) [hereinafter Moore's].

If the district court chooses not to conduct a full-blown evidentiary hearing on a pretrial motion to dismiss for lack of personal jurisdiction, plaintiff need make only a prima facie showing of jurisdiction through its own affidavits and supporting materials, even though plaintiff eventually must establish jurisdiction by a preponderance of the evidence either at a pretrial evidentiary hearing or at trial and, before the hearing is held, a prima facie showing suffices notwithstanding any controverting presentation by the moving party to defeat the motion.

Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981) (citations omitted). Here, because the circuit court proceeded to review the motion to dismiss upon written submissions, "all of [Shaw's] allegations are presumed true and all factual disputes are decided in [his] favor." Id.; ² see also Shasta Beverages, 691 F.Supp. at 1277 ("the court looks to the uncontroverted allegations of the complaint, affidavit and depositions").

In order to defeat NATCO's motion to dismiss for lack of personal jurisdiction, Shaw need make only a prima facie showing that: (1) NATCO's activities in Hawai'i fall into a category specified by Hawai'i's long-arm statute, Hawai'i Revised Statutes (HRS) § 634-35; and (2) the application of HRS § 634-35 comports with due process. Cowan v. First Ins. Co. of Hawai'i, 61 Haw. 644, 649, 608 P.2d 394, 399 (1980); Cf. Moore's, supra, p 4.41-1 at 4-335-36; Pure, Ltd. v. Shasta Beverages, Inc., 691 F.Supp. 1274, 1277-79 (D.Haw.1988).

A. Hawai'i's Long-Arm Statute, HRS § 634-35

In order to validly exercise personal jurisdiction over NATCO, we must first determine whether NATCO's activities fall into a category specified by Hawai'i's long-arm statute, which provides in relevant part:

(a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person ... to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of the acts:

(1) The transaction of any business within this State;

(2) The commission of a tortious act within this State;

....

(c) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over the defendant is based upon this section.

HRS § 634-35 (emphasis added).

1. Was NATCO "transacting business" in Hawai'i pursuant to HRS § 634-35(a)(1)?

Whether a nonresident transacted business "demands an examination of all of the defendant['s] activities within the forum related to the present cause of action." Cowan, 61 Haw. at 652, 608 P.2d at 400. The dispute in Cowan arose out of a brokerage contract to list plaintiff's sailboat. The defendant broker asserted that, because the contract became binding in California, no business was transacted in Hawai'i. This court disagreed. We recognized that physical presence in the forum state is not necessary for a finding of "transacting business." Id. at 651, 608 P.2d at 400. In analyzing the defendant's activities in Hawai'i, we noted that the defendant: (1) entered into two listing contracts with Hawai'i residents involving a sailboat located in Hawai'i; (2) mailed documents to Hawai'i (signed by plaintiff in Hawai'i); and (3) solicited customers in Hawai'i by regular advertising in national magazines. Thus, we concluded that the defendant had "transacted business" in Hawai'i. Id. at 654, 608 P.2d at 401.

NATCO maintains that it did not transact business in Hawai'i. In distinguishing Cowan, NATCO emphasizes that there is no contract in evidence between Shaw and NATCO. As previously stated, NATCO was retained by San Clemente Savings Bank to provide title insurance and perform escrow services for the transaction on Shaw's California property. Shaw was not a party to the agreement between NATCO and the bank. NATCO also maintains that its contacts with Hawai'i were administrative in nature, limited to mailing checks to Shaw and related communications (e.g., correspondence, telephone calls, and facsimile transmissions) with Shaw or his wife. NATCO asserts that these incidental contacts cannot reasonably be construed as "transacting business" in Hawai'i. NATCO emphasizes that: (1...