Alto Eldorado Partnership v. Amrep

• Citation: 2005 NMCA 131,124 P.3d 585
• Decision Date: 28 September 2005
• Docket Number: No. 23,515.,23,515.
• Parties: ALTO ELDORADO PARTNERSHIP, Joseph Miller, Alma Miller, Chris Miller, Matt Miller, Rancho Verano, L.L.C., Summit Partnership 2, and Santa Fe Partners I, Plaintiffs-Appellees, v. AMREP Corporation, an Oklahoma corporation, Defendant-Appellant.
• Court: Supreme Court of New Mexico

124 P.3d 585

2005 NMCA 131

ALTO ELDORADO PARTNERSHIP, Joseph Miller, Alma Miller, Chris Miller, Matt Miller, Rancho Verano, L.L.C., Summit Partnership 2, and Santa Fe Partners I, Plaintiffs-Appellees, v. AMREP Corporation, an Oklahoma corporation, Defendant-Appellant.

No. 23,515.

Court of Appeals of New Mexico.

September 28, 2005.

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Law Offices of Brad L. Hays, L.L.C., Brad L. Hays, Rio Rancho, NM, Roth, VanAmberg, Rogers, Ortiz, Fairbank & Yepa, L.L.P., Ronald J. VanAmberg, Santa Fe, NM, for Appellees.

Lastrapes, Spangler & Pacheco, P.A., Matthew M. Spangler, Rio Rancho, NM, for Appellant.

OPINION

KENNEDY, Judge.

{1} We certified this case to our Supreme Court under NMSA 1978, § 34-5-14(C) (1972), as we believed that our differing views of jurisdiction required resolution. Following oral argument above, our Supreme Court quashed certification as improvidently granted and returned the case to this Court. But see id. ("Any certification by the court of appeals under this subsection is a final determination of appellate jurisdiction."). We now enter our respective opinions as they were set forth in the order of certification.

{2} Defendant Amrep Corporation (Amrep) brings this interlocutory appeal from the district court's denial of Amrep's motion to dismiss for lack of personal jurisdiction. We must decide whether the district court has personal jurisdiction over Amrep. This inquiry presents the primary issue of whether alter ego is a viable theory for obtaining personal jurisdiction over a foreign corporation in New Mexico, and if not, whether the district court could properly assert jurisdiction over Amrep. We hold that under these facts, an alter ego theory that uses substantive corporate law is not the test that New Mexico uses for personal jurisdiction. Instead, the test is one of constitutional perimeters. As Plaintiffs made a sufficient showing to satisfy the due process requirement of minimum contacts for jurisdiction over Amrep, we affirm.

PROCEDURAL HISTORY

{3} On September 18, 1997, Plaintiffs filed a complaint against Eldorado Utilities, Inc. (EUI) for breach of contract, negligent misrepresentation, innocent misrepresentation, negligence, injunctive relief, and violation of the Unfair Trade Practices Act. Plaintiffs later dismissed their Unfair Trade Practices Act claim against EUI.

{4} EUI is a New Mexico incorporated public utility that has the "right and obligation" to provide water to its franchise area. Plaintiffs were landowners and developers in the EUI franchise area in Santa Fe County. Plaintiffs claimed that EUI committed itself to serve as a water utility for their real estate developments in its franchise area. According to Plaintiffs, Santa Fe County later determined that EUI was unable to do so, and prohibited any further developers from relying on EUI for their water. Santa Fe County subsequently imposed a moratorium on subdivision within EUI's service area. Plaintiffs urged EUI to fight this decision; EUI would not. When Plaintiffs brought this matter before the Public Utility Commission (PUC), which is now the Public Regulation Commission, EUI refused to join in the proceedings, and was involuntarily joined by the PUC Hearing Officer. PUC staff recommended finding that EUI could not service Plaintiffs' proposed developments. Plaintiffs further alleged that Santa Fe County imposed another ordinance in 1997 due to EUI's inability to provide adequate water, which was extended in 1998 and 1999. In 1999, EUI informed its customers that it was at "Water Alert Stage 2," and unable to "produce water under existing conditions at a sufficient rate to meet [the] consumption" of its customers. Essentially, Plaintiffs' complaint alleged that EUI promised them something it could not provide: water. Now, Plaintiffs complain, they own land that they cannot develop as they had planned. Plaintiffs also asserted that EUI did not fight the ordinances because Amrep's land development subsidiaries, including Eldorado at Santa Fe and Amrep Southwest, compete with Plaintiffs. EUI's failure would help Amrep by hurting those competing with its land-development subsidiaries. As one of its own officers stated, Amrep is in the land business, not the utility business.

{5} EUI is a wholly owned subsidiary of Amrep. On March 29, 2000, Plaintiffs filed an amended complaint naming Amrep as a defendant. The amended complaint also named Amrep Southwest, another wholly owned Amrep subsidiary, and Eldorado at Santa Fe, a subsidiary of Amrep Southwest. Both are incorporated in New Mexico. A diagram of Amrep's corporate structure would look like:

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{6} Amrep, an Oklahoma corporation, was served with the amended complaint in Oklahoma, and does not contest this service. However, on May 11, 2000, Amrep's counsel, who also serves as EUI's counsel, entered a special appearance to challenge the district court's jurisdiction. Amrep then filed a motion to dismiss for lack of personal jurisdiction. The district court ordered discovery on the jurisdictional issue, and on June 13, 2002, Plaintiffs filed their response to Amrep's motion. On August 30, 2002, Amrep filed its reply with an affidavit from Gary Sullivan, EUI's treasurer. Amrep's motion to dismiss was denied by the district court on September 23, 2002, and Amrep appealed. For the reasons set forth below, we affirm.

FACTS

{7} Most of the facts in this case are undisputed. Amrep is a holding company publicly traded on the New York Stock Exchange. Amrep essentially has two ventures: cable television and real estate. The real estate branch of Amrep owns the New Mexico Amrep subsidiaries listed above. In 1973, EUI, not its parent Amrep, applied to run a water utility in New Mexico. Minutes from a special meeting of EUI's board in 1973 stated that EUI "was formed for the purpose of providing water utility service at El Dorado at Santa Fe." EUI was created to facilitate the real estate interests or ventures of Amrep. According to EUI's president, who also serves as vice president for Amrep, when Amrep's land subsidiaries no longer need EUI, Amrep will sell it. Specifically, Amrep is in the land business, not the utility business.

{8} PUC required that Amrep subsidize any of EUI's operating shortfalls. The 1973 PUC order noted that "[a]s the revenues from the utility operation will be insufficient to maintain the utility in a `no-loss' position for several years, the payments made by AMREP are the additional revenues needed to maintain the utility in a `no-loss' financial position." PUC ordered that "AMREP . . . shall annually pay . . . the amount required to maintain [EUI] in a `no-loss' financial position until such a time as [EUI] becomes a self sustaining utility." The final order approving this subsidization agreement found jurisdiction over the parties, but does not state who those parties were. In 1993, EUI asked PUC to end this requirement, since the subsidization requirement interfered with Amrep's desire to sell EUI. The subsidization requirement ended in 1994. In its 1994 order, PUC stated that it had jurisdiction over EUI and "all the parties to [the] case," and that EUI had become self-sustaining. However, from 1994 until 1999, Amrep gave EUI millions of dollars in what it called "capital contributions." EUI's employee supervisor, James William McLean, stated that EUI never had any money. If EUI needed money, such as to drill a well, it looked to Amrep to pay for it.

{9} By 2001, EUI had an income of $1,300,000. In 2002, its assets alone were worth $8,500,000. EUI had 2700 customers, some employees, and contracts in its own name. Amrep referred to EUI as a subsidiary, and not as a department or division. EUI filed its own separate financial statement with PUC as part of that Commission's requirements.

{10} Amrep officers were also officers for its New Mexico subsidiaries. James Wall served as the senior vice president for Amrep and the president of Amrep's New Mexican subsidiaries, including EUI. He considered himself an employee of Amrep and of Amrep Southwest; he was the primary link between the two. He was also the common link between Amrep Southwest and EUI. Below, counsel argued over whether EUI's board ever elected Wall as their chief executive officer. Defense counsel, however, only pointed to EUI board minutes appointing Wall as president of EUI. When asked about his relationship with EUI, Wall stated that he served as the "CEO for all the real estate for AMREP," and that the only position he held with Amrep itself was as its senior vice president. However, he did not have a contract with EUI nor a job description with this subsidiary. Wall's salary and raises were set by Amrep, but Amrep Southwest actually paid him. Wall reported directly to an executive committee that served as the CEO of Amrep, and considered it his "boss." Amrep and its various subsidiaries, including EUI, had a common payroll system, and consolidated their annual reports and financial statements.

{11} When Wall reported the Santa Fe County moratorium to Amrep, he was directed to "[f]ix it." When asked why EUI did not fight this moratorium, Wall said that "[w]e have a lot of other things that came before the county [and] [w]e didn't feel it was in our best interest at that time to challenge [the county] legally." These issues included a road system for its subdivision and zoning. Being in the land business, and not the utility business, Amrep apparently chose to make the interests of its land development subsidiaries superior to the issues facing EUI.

{12} EUI's officers also included Gary Sullivan, Mohan Vachani as vice president, and Wendy Mitchell as secretary. Vachani was the Corporate Finance Officer for Amrep, plus an officer and director of its subsidiaries, serving as vice president for Eldorado at Santa Fe. Sullivan was the comptroller of...