Interfirst Bank Clifton v. Fernandez, 87-1321

• Decision Date: 11 May 1988
• Docket Number: No. 87-1321,87-1321
• Citation: 844 F.2d 279
• Parties: 6 UCC Rep.Serv.2d 302 INTERFIRST BANK CLIFTON, Plaintiff-Appellee, v. Julian E. FERNANDEZ, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 279

844 F.2d 279

6 UCC Rep.Serv.2d 302

INTERFIRST BANK CLIFTON, Plaintiff-Appellee, v. Julian E. FERNANDEZ, Defendant-Appellant.

No. 87-1321.

United States Court of Appeals, Fifth Circuit.

May 11, 1988.

Steve Moody, Naman, Howell, Smith & Lee, P.C., Waco, Tex., Rudy J. Cerone, B. Franklin Martin, III, New Orleans, La., for defendant-appellant.

George Philip Robertson, Steve Robertson, Clifton, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before RUBIN, WILLIAMS and DAVIS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

This appeal arises from a deficiency judgment rendered in federal district court in Texas, against appellant Julian E. Fernandez, a Louisiana resident, who claims his contacts with the State of Texas are insufficient to support personal jurisdiction. Fernandez also claims that the district court erred in applying the Texas law of deficiency judgments instead of the Louisiana law. Finally, he claims that even under Texas law, the deficiency judgment was erroneous because it was based upon an unreasonable commercial sale under Tex.Bus. & Com.Code Ann. Sec. 9.504(c) (Vernon Supp.1988). We affirm the decision of the district court, finding that it properly exercised personal jurisdiction, and correctly chose and applied Texas law.

I. Facts

Fernandez is a Louisiana businessman and owner of several aircraft. In July of 1981 he observed an ad in the Wall Street Journal offering for sale a Schafer Piper Comanchero airplane. He responded to the ad by calling from Louisiana to Texas to speak with Shelby L. Richardson, a vice president at Clifton Bank, predecessor in interest of Interfirst Bank Clifton ("Interfirst"). Richardson and a representative of the manufacturer of the airplane thereafter flew to Patterson, Louisiana, to take Fernandez on a test flight. Some time later, Fernandez again called Richardson in Texas and offered to purchase the plane for $610,000. The bank accepted the offer and agreed to finance the sale. Fernandez signed sale and loan documents including a Loan Commitment Agreement, a $550,000 Promissory Note, and a Security Agreement, all dated July 27, 1981. Fernandez later signed a Louisiana security instrument entitled Collateral Chattel Mortgage, in Amelia, Louisiana. The mortgage was recorded in the clerk's office of the Parish of St. Mary, Louisiana, on September 21, 1981.

Fernandez became unable to make his payments on the note. He delivered the airplane to a broker in Pennsylvania to attempt its sale. After several months in which the broker was unable to sell the plane, Interfirst contacted Fernandez and informed him of an interested buyer in Texas. Based on this representation, Fernandez agreed to let Interfirst's pilot fly the plane back to Texas in early April of 1983. In this manner, Interfirst effectively repossessed the plane.

In September 1983, with the plane back in Texas, Interfirst accelerated the note and made demand for full payment. Fernandez then received and signed a letter from Interfirst in which he consented to Texas foreclosure procedures and waived his rights under Louisiana law. Approximately two years later, on December 20, 1985, Interfirst sold the plane in a private foreclosure sale for less than half the price at which it was sold to Fernandez in 1981. Interfirst then filed suit in state district court in Bosque County, Texas to recover the deficiency between the balance due on the note and the selling price of the plane. This being a diversity case, Fernandez removed to the United States District Court, Western District of Texas, Waco Division pursuant to 28 U.S.C. Secs. 1441 and 1332. Fernandez then filed a Fed.R.Civ.P. 12(b)(2) motion to dismiss for lack of personal jurisdiction. The motion was denied, and the case proceeded to a bench trial in which Interfirst was awarded $447,921.29 in deficiency on the note, plus interest and reasonable attorney's fees. Fernandez filed this appeal.

II. Personal Jurisdiction

A federal court sitting in diversity may exercise jurisdiction over a nonresident defendant, provided state law confers such jurisdiction and its exercise comports with due process under the Constitution. Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 489 (5th Cir.1974). Because the Texas long-arm statute extends to the limits of due process, Hall v. Helicopteros Nacionales De Colombia S.A., 638 S.W.2d 870, 872 (Tex.1982), rev'd on other grounds, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), we consider only whether jurisdiction over Fernandez satisfies federal constitutional requirements.

The United States Supreme Court divides this inquiry into two parts: whether the nonresident defendant purposefully established "minimum contacts" with the forum state and, if so, whether the exercise of jurisdiction results in "fair play and substantial justice." Asahi Metal Industry Co. v. Superior Court of California, --- U.S. ----, ----, 107 S.Ct. 1026, 1029, 94 L.Ed.2d 92 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985). We consider these due process considerations in turn.

A. Minimum Contacts

The minimum contacts of a nonresident defendant may support either "specific" or "general" jurisdiction. Specific jurisdiction refers to a suit "arising out of or related to the defendant's contacts with the forum." Helicopteros, supra, 466 U.S. at 414 n. 8, 104 S.Ct. at 1872 n. 8, 80 L.Ed.2d at 411 n. 8. General jurisdiction refers to a suit which does not arise from the nonresident's contacts with the forum, and is asserted only over defendants who maintain "continuous and systematic" contacts in a particular forum. Id. 466 U.S. at 415, 104 S.Ct. at 1873. The theory of general jurisdiction clearly is not applicable in this case. ¹ This deficiency action is directly related to Fernandez's airplane purchase and financial arrangements with Interfirst, a Texas bank. Thus, we examine these contacts to determine whether they support a finding of specific jurisdiction.

We are guided by the Supreme Court's discussion of minimum contacts in Burger King, supra, 471 U.S. at 473-82, 105 S.Ct. at 2183-87. ² In Burger King the Court found specific jurisdiction based upon relatively few contacts between a nonresident defendant and the forum state of Florida. The defendant, Rudzewicz, was a Burger King franchise owner who lived in Michigan and had dealt almost exclusively with the Michigan Burger King office. Rudzewicz had signed a twenty-year Burger King franchise agreement which contained a Florida choice-of-law clause, and which specified that payments would be made to Miami, Florida, the location of the Burger King main office. The Court held that neither the contract nor the choice-of-law clause alone justified exercising jurisdiction over the defendant, but that the combined effect of the two, along with the long-term nature of the business arrangement, evinced "purposeful availment" of Florida laws and provided a reasonable basis on which to anticipate litigation in Florida. Id. 471 U.S. at 481-82, 107 S.Ct. at 2187.

Fernandez's contacts with Texas are somewhat analogous to those of the franchise owner in Burger King. Although the loan agreement between Fernandez and Interfirst is less involved than a twenty-year franchise agreement, it combines with other contacts to show a purposeful application of the laws of Texas. Fernandez called to Texas to purchase the plane. He voluntarily agreed to finance the plane through a Texas bank, and signed a loan agreement containing a Texas choice-of-law clause. He later agreed to return the plane to Texas for sale. And most significantly, he signed a letter consenting to sale under Texas foreclosure procedures and agreeing to liability for any deficiency between the sale price and the amount of the note. ³

We find that this letter, in addition to Fernandez's other Texas contacts, shows purposeful choice of the laws of Texas and a reasonable basis on which to anticipate suit there. He consented to Texas foreclosure procedures and to liability for any deficiency. It strains logic that a party could consent to deficiency liability under a state's foreclosure procedures without anticipating litigation in the courts that issue and enforce that state's deficiency judgments. Based upon the letter, the voluntarily assumed loan agreement containing a Texas choice-of-law clause, and the presence of the airplane in Texas, we find that Fernandez reasonably could have anticipated litigation in Texas. ⁴

B. "Fair Play and Substantial Justice"

The second prong of the due process analysis set out in Burger King and Asahi requires that once minimum contacts have been found, we consider other factors to determine whether the assertion of jurisdiction comports with "fair play and substantial justice." Asahi, supra, --- U.S. at ----, 107 S.Ct. at 1033; Burger King, supra, 471 U.S. at 476, 105 S.Ct. at 2184. A nonresident defendant who, like Fernandez, has been found to have purposely directed his activities toward the forum, "must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Burger King, supra, 471 U.S. at 477, 105 S.Ct. at 2185. Such other factors or considerations include "the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiff's interest in maintaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of the several State's in furthering fundamental substantive social policies." Id. 471 U.S. at 477, 105 S.Ct. at 2184. In Burger King, the Supreme Court applied these guidelines to the facts of the case, noting throughout that many of the concerns could be accommodated either with a change of venue or through application of the forum's choice-of-law rules. Id. 471 U.S. at...