Houghland Farms, Inc. v. Johnson

Decision Date27 December 1990
Docket NumberNo. 18406,18406
Citation803 P.2d 978,119 Idaho 72
PartiesHOUGHLAND FARMS, INC., Plaintiff-Respondent, v. Phillip JOHNSON, d/b/a Anchor Financial Services, Defendant-Appellant. Idaho Falls, September 1990 Term
CourtIdaho Supreme Court

Johnson, Olson & Bacon, Pocatello, for defendant-appellant. Scott L. Burnham argued, Pocatello.

Whittier, McDougall, Souza, Murray & Clark, Chartered, Pocatello, for plaintiff-respondent. R. Max Whittier argued, Pocatello.

JOHNSON, Justice.

This is a breach of contract case that also raises issues concerning personal jurisdiction under our long-arm statute, I.C. § 5-514(a) (1990), and under the due process clause of the fourteenth amendment to the United States Constitution. We conclude that the trial court should have granted a motion to dismiss for lack of personal jurisdiction. In doing so, we find it necessary to overrule Beco Corp. v. Roberts & Sons Constr. Co., 114 Idaho 704, 760 P.2d 1120 (1988), to the extent that it conflicts with Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).

I.

THE BACKGROUND AND PRIOR PROCEEDINGS.

Phillip W. Johnson was a loan broker who resided in Salt Lake City, Utah and did business as Anchor Financial Services. Houghland Farms, Inc. (HFI) was an Idaho corporation. HFI owned an ice manufacturing plant in Arizona known as Diamond Mine Ice. HFI also operated farms in Idaho. Porter Houghland (Houghland) was the president of HFI and resided in Arizona.

In October 1987, Johnson wrote a letter from Utah to Houghland in Arizona, stating that Johnson had several lenders in Colorado who would be interested in refinancing $1,500,000.00 which HFI owed for the purchase of Diamond Mine Ice. In November 1987, Johnson visited Arizona to inspect the assets of Diamond Mine Ice. These assets were the proposed collateral for the refinancing. Shortly thereafter, Johnson called representatives of HFI in Idaho by telephone to arrange a visit to farms of HFI in Idaho. In December 1987, Johnson visited one of HFI's farms in Idaho and then sent a letter to representatives of HFI in Idaho. The letter concluded: "I look forward to formally submitting your loan request as soon as I receive the October 31, 1987 year end financial statement." Johnson also contacted various Idaho banks to procure statistical information regarding HFI.

In December 1987, Johnson sent a loan proposal to Houghland in Arizona. This proposal provided for a loan of $1,200,000.00 to HFI from a Colorado lender, with Houghland and his wife as guarantors. The collateral for the loan was a first mortgage on the assets of Diamond Mine Ice in Arizona. HFI had purchased these assets for $1,750,000.00. The loan was to be limited to sixty-nine percent of the value of the collateral. The proposal stated that the lender might require an appraisal of the collateral prior to funding. Johnson was to receive a one and one-half percent broker's fee at the time of closing, from which he was to pay a fee to Financial Management Group of Boise, Idaho. HFI was to pay Johnson $9,000.00 from the broker's fee at the time of HFI's acceptance of the proposal. The proposal stated: "This fee is refundable if the lender does not approve and fund the loan. If the lender approves the loan under the terms above and the transaction does not close through no fault of lender, the fee shall be considered earned." Houghland signed the loan proposal on behalf of HFI and sent Johnson a check for $9,000.00 drawn on HFI's account in an Idaho bank.

An appraisal determined the value of the assets of Diamond Mine Ice to be only $750,000.00. Consequently, the lender was not willing to loan the proposed $1,200,000.00. Houghland and Johnson then agreed that attempts should be made to see if there was a possibility of "bifurcating the loans." Johnson arranged a loan of $525,000.00 from the lender, but HFI obtained financing elsewhere.

Houghland then requested the return of the $9,000.00 advance that HFI had paid toward the broker's fee. Johnson sent HFI a check for $9,000.00 drawn on a Utah bank but stopped payment on the check before HFI cashed it. Johnson then refused to return the $9,000.00 to HFI.

HFI filed this action in Idaho seeking the return of the $9,000.00, plus interest, attorney fees, costs, and additional damages under the Idaho law regulating loan brokers, I.C. § 26-2504 (1990). Johnson was apparently served in Utah and moved to dismiss the action for lack of personal jurisdiction. The parties supported and opposed the motion with affidavits. Although the trial court offered the parties the opportunity to have an evidentiary hearing, neither party requested one, and the motion was considered solely on the basis of the affidavits.

The trial court denied the motion to dismiss on the grounds that Johnson had purposefully directed his activities at residents of Idaho and that the litigation resulted from alleged injuries that arose out of or related to those activities, thus meeting the fair warning requirement to provide Johnson with due process of law.

HFI then moved for summary judgment on its claims against Johnson. The trial court granted summary judgment to HFI for $9,000.00, plus costs, attorney fees, and interest. In doing so, the trial court rejected Johnson's contention that there were genuine issues of material fact concerning whether the parties had orally modified the loan proposal to provide Johnson a $525,000.00 loan, rather than the $1,200,000.00 contemplated in the loan proposal. The trial court also concluded that the Idaho law regulating loan brokers did not apply, because the written agreement for a broker's commission was formed outside of Idaho.

Johnson appealed, challenging the denial of the motion to dismiss, the grant of summary judgment, and the award of attorney fees to HFI.

II.

APPLYING BECO CORP. V. ROBERTS & SONS, THE TRIAL COURT PROPERLY DENIED THE MOTION TO DISMISS.

Johnson asserts that the trial court should have granted the motion to dismiss on the grounds that Johnson's contacts with Idaho were too brief and insignificant to fall within the Idaho long-arm statute or to meet constitutional due process requirements. We first consider the propriety of the denial of the motion to dismiss by applying our decision in Beco Corp. v. Roberts & Sons. Viewing the affidavits presented here in the light most favorable to HFI, construing the facts asserted in the affidavits liberally in favor of HFI, and applying Beco, there was not a sufficient basis to dismiss the action for lack of personal jurisdiction.

We note in passing that although the record does not contain either a return of service or an allegation indicating that Johnson was served outside of the state of Idaho, neither party has addressed this question. By implication, we are asked to assume that Johnson was served outside this state. If Johnson had been served in Idaho, the courts of this state would have had personal jurisdiction over Johnson. Burnham v. Superior Court of California, 495 U.S. 604, ----, 110 S.Ct. 2105, 2115, 109 L.Ed.2d 631, 645 (1990) (jurisdiction based on physical presence alone constitutes due process). Because this issue was not presented to the trial court, we do not rule on it here.

Before embarking on an analysis of the trial court's denial of the motion to dismiss, we restate the standard by which we review the trial court's decision. In Intermountain Business Forms, Inc. v. Shepard Business Forms Co., 96 Idaho 538, 531 P.2d 1183 (1975), this Court set forth the "evidentiary presumptions" that "should apply to appellate review of the factual questions presented by the conflicting affidavits in a motion to dismiss for lack of personal jurisdiction." Id. at 540, 531 P.2d at 1185. In Intermountain Business Forms, this Court applied the same standard for appellate review as the standard used in reviewing an involuntary dismissal at the close of plaintiff's proof in a jury case, and the standard used in reviewing an order granting summary judgment:

On appellate review of involuntary dismissal at the close of plaintiff's proof in a jury case, this court has held that the evidence introduced must be viewed "in the light most favorable to the plaintiffs, and the plaintiffs are entitled to all reasonable inferences which can be drawn from facts established by their case in chief. Blackburn v. Boise School Bus Co., 95 Idaho 323, 325, 508 P.2d 553, 555 (1973).

* * * On appeal from an order granting summary judgment, this court must construe the evidence presented to the district court liberally in favor of the party opposing the order and accord [that party] 'the benefit of all inferences which might be reasonably drawn.' " Straley v. Idaho Nuclear Corp., 94 Idaho 917, 918, 500 P.2d 218, 220 (1972). Accord, Fairchild v. Olsen, 96 Idaho 338, 528 P.2d 900 (1974).

These same presumptions should apply to appellate review of the factual questions presented by the conflicting affidavits in a motion to dismiss for lack of personal jurisdiction.

Id.

In order to apply this standard of review to the denial of the motion to dismiss, we must first identify the legal basis for the assertion of personal jurisdiction over Johnson in this action. Our long-arm statute provides:

5-514. Acts subjecting persons to jurisdiction of courts of state.--Any person, firm, company, association or corporation, 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 said person, firm, company, association or corporation, and if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of said acts:

(a) The transaction of any business within this state which is hereby defined as the doing of any act for the purpose of realizing pecuniary benefit or accomplishing or attempting to accomplish, transact or enhance the...

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