Lattin v. Barrett, No. 10-03-00287-CV (TX 11/17/2004)
| Decision Date | 17 November 2004 |
| Docket Number | No. 10-03-00287-CV.,10-03-00287-CV. |
| Parties | KENNETH LATTIN, CHARLES RICE, DOUGLAS BENSON, AND RAVIN VENTURE CAPITAL FUND, L.L.C., Appellants, v. ELLWOOD T. BARRETT AND ELLWOOD T. BARRETT, II, Appellees. |
| Court | Texas Supreme Court |
Appeal from the 12th District Court, Madison County, Texas, Trial Court # 02-9896-012-10.
Affirmed in part, Reversed and rendered in part.
Before Chief Justice GRAY, Justice VANCE, and Justice REYNA.
Ellwood T. Barrett and his son Ellwood T. Barrett, II, filed suit against Appellants alleging statutory fraud and common law fraud in connection with the Barretts' purchase of shares in a California corporation. Appellants filed special appearances, which the court denied. Appellants contend that they established as a matter of law that they do not have minimum contacts with Texas and that the court's decision is contrary to the great weight and preponderance of the evidence. Because the court's decision with respect to Appellants Douglas Benson and Kenneth Lattin is not contrary to the great weight and preponderance of the evidence, we will affirm as to them. Because there is no evidence to support the court's decision with respect to the other appellants, we will reverse and render as to them.
When the parties engaged in the transaction which is the subject of this litigation, the Barretts1 were Texas residents.2 The Barretts have had a longstanding relationship with Benson, who used to live in Texas. During the pertinent time period, Benson was a resident of California.3 Benson is a managing director of Ravin Venture Capital Fund, L.L.C., a California corporation, and serves on the board of directors of CNM Networking, Inc., also a California corporation. Benson first told the Mr. Barrett about CNM in 1999 in the course of a friendly conversation. Mr. Barrett testified at the special appearance hearing that Benson called him from California in 2000 and told him, "[Y]ou have to come out here and see my operation." According to Mr. Barrett, Benson told him that he would "get a sweetheart deal." Benson denies inviting Mr. Barrett to come to California.
The parties agree that Mr. Barrett spent the night at Benson's home in California on July 10 and that they discussed investing in CNM the following morning. According to Benson, Mr. Barrett did not seem interested at that time. Nevertheless, Mr. Barrett met Ellwood at CNM's headquarters later that day. According to Ellwood, they met with Charles Rice, Kenneth Lattin, and Benson at CNM's headquarters.4 Rice is CNM's president and CEO. Lattin is a CNM vice president and also a managing director for Ravin.5
At this meeting, Lattin gave the Barretts a tour of CNM's facilities and explained CNM's operations to them. He explained that their investments would be made through a limited liability corporation. Rice was present for part of the meeting with the Barretts, but they presented no evidence that he made any representations to them on that occasion or that they had any further contact with him.
The Barretts contend that Lattin and/or Benson told them that: (1) this would be CNM's last round of funding; (2) CNM had adequate assets and cash on hand to cover day-to-day operations; (3) CNM did not need further investors; (4) they were offering this investment to the Barretts to help them maintain majority ownership of CNM; (5) this was a "super investment" and a "sweetheart deal"; and (6) CNM would begin trading its shares publicly in the last quarter of 2000.
The Barretts complain that Lattin and Benson failed to tell them that: (1) they would not actually be receiving shares in CNM but rather would receive shares in Ravin; (2) their shares would be restricted; (3) their shares were not registered with the SEC or the Texas State Securities Board; (4) CNM had net operating losses in 1999 of $13.2 million; (5) CNM had a shareholder deficit of $7.9 million in December 1999; and (6) CNM had only $109,794 cash on hand at the end of 1999.
The Barretts returned to Texas and Ellwood made numerous telephone calls to Lattin regarding the investment opportunity. Ellwood usually left a message, and Lattin returned the call. Ellwood says that Lattin reiterated in these phone conversations the same representations Lattin and/or Benson had made in their California meeting.
The Barretts ultimately decided to pursue this opportunity. According to the Barretts, Benson personally instructed each of them in separate telephone conversations to wire the necessary funds to Benson's bank account in California. Mr. Barrett directed his bank to wire $500,000 to Benson's account on July 25. Ellwood directed his bank to wire $152,000 to Benson's account on July 27. Benson denies giving them wiring instructions but does not deny that the funds were wired to his account. Benson later had those funds transferred to CNM's account.
Benson and Lattin filed the necessary incorporating documents for Ravin with the appropriate California agency on July 28. Ravin did not commence operations until September, after its incorporation had been approved by the pertinent state agency.
The Barretts later received certificates indicating their ownership of shares in Ravin, not CNM. CNM did not begin trading its shares publicly in the last quarter of 2000, and has not yet done so. After Ellwood obtained a financial statement for CNM for 1998 and 1999 and learned that the Barretts' shares were restricted, this litigation ensued.
Benson, Lattin, Rice, and Ravin all filed special appearances, which the court denied after a hearing. CNM did not pursue a special appearance and is not a party to this interlocutory appeal.
Appellants contend that: (1) the undisputed evidence that they are nonresidents satisfied their burden at the special appearance hearing because the Barretts failed to make factually-specific jurisdictional allegations in their petition; (2) they established as a matter of law that they do not have minimum contacts with Texas; (3) the court's implied finding of minimum contacts is contrary to the great weight and preponderance of the evidence; and (4) the court's exercise of personal jurisdiction over them does not comport with fair play and substantial justice.6
Texas courts may exercise personal jurisdiction over a nonresident defendant only if the long-arm statute permits it and only if the exercise of jurisdiction is consistent with due process. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). To satisfy due process, a nonresident defendant must have established "minimum contacts" with Texas and the exercise of jurisdiction over the defendant must not offend "traditional notions of fair play and substantial justice." Id. (quoting Intl. Shoe Co. v. Wash., 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945)).
A nonresident defendant's contacts can give rise to general or specific jurisdiction. Although the Barretts trial pleadings mention both general and specific jurisdiction, the evidence suggests that, if Texas has personal jurisdiction over any of the appellants, it is by specific jurisdiction. Specific jurisdiction exists when (1) a nonresident defendant has purposeful contacts with the forum state and (2) the plaintiff's cause of action arises from or relates to those contacts. Id. The requirement of "purposeful" contacts "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528 (1985); accord Am. Type Culture Collection, 83 S.W.3d at 806.
A nonresident defendant bears the burden of negating all bases for personal jurisdiction alleged. Am. Type Culture Collection, 83 S.W.3d at 807. Although the existence of personal jurisdiction over a nonresident defendant is a question of law, courts must frequently resolve disputed fact issues to resolve this legal issue. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). Therefore, traditional "no evidence" and factual insufficiency standards apply on appeal to such disputed fact issues. Id.
Because the court made no findings of fact, we must presume that the court made all findings necessary to support its judgment. Id. at 795 (citing Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990) (per curiam)). The judgment must be affirmed if it can be upheld on any legal theory supported by the evidence. Worford, 801 S.W.2d at 109; Treadway v. Shanks, 110 S.W.3d 1, 5 (Tex. App.—Dallas 2000), aff'd, 110 S.W.3d 444 (Tex. 2003).
Citing this Court's decision in Lacefield v. Electronic Financial Group, Appellants contend in their first issue that the undisputed evidence that they are nonresidents satisfied their burden at the special appearance hearing because the Barretts failed to make factually-specific jurisdictional allegations in their petition. 35 S.W.3d 755, 761 (Tex. App.—Waco 2000, no pet.).
However, we recently disavowed this aspect of Lacefield, concluding instead that the Supreme Court has expressly rejected such a narrow approach for special appearance hearings. Zimmerman v. Glacier Guides, Inc., No. 10-03-00036-CV, 2004 Tex. App LEXIS 10112, at *3-5 () (citing Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985) (per curiam)); see also TEX. R. CIV. P. 120a(3) (); contra Bruno's Inc. v. Arty Imports, Inc., 119 S.W.3d 893, 897 (Tex. App.—Dallas 200...
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