Patel v. Roger Pate & Pate Dev., Inc., 02-16-00313-CV

• Decision Date: 06 July 2017
• Docket Number: NO. 02-16-00313-CV,02-16-00313-CV
• Parties: ASHOK B. PATEL, RAMESH PATEL, NARESH PATEL, AND MANILAL B. PATEL APPELLANTS v. ROGER PATE AND PATE DEVELOPMENT, INC. APPELLEES
• Court: Texas Court of Appeals

ASHOK B. PATEL, RAMESH PATEL, NARESH PATEL, AND MANILAL B. PATEL APPELLANTS v. ROGER PATE AND PATE DEVELOPMENT, INC. APPELLEES

NO. 02-16-00313-CV

COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH

July 6, 2017

FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY

TRIAL COURT NO. 017-278274-15

MEMORANDUM OPINION¹

The resolution of this interlocutory appeal from the denial of special appearances turns on an application of the burden-shifting standards described in Kelly v. General Interior Construction, Inc., 301 S.W.3d 653, 658-59 (Tex.2010). Because the appellees in this case brought forward legally and factually sufficient evidence in support of their jurisdictional allegations, we affirm.

Factual and Procedural Background

Roger Pate, through his company Pate Development, Inc. (together, Pate), is a general contractor who invested in and helped develop several hotel properties with Ramesh, Amrit, Naresh, Ashok, and Manilal Patel. In 2005 and 2007, they formed various entities to own and invest in these projects, including Nextgen Hospitality, LLC, Lotustel Group, LLC, Premier Hotels Group, Inc., Bridged Hybrid Financing, LLC, and Premium Hotel Management, Inc. (the Hotel Entities). According to Roger, all of the Hotel Entities engaged Pate to develop hotels.

Around 2011, an accounting dispute arose among Pate and the members of the Hotel Entities. Eventually, Pate sued the Hotel Entities and the Patels individually alleging that they engaged him "for procurement, development, or rehabilitation" of hotel property and did not pay him what they promised. He also sought reimbursement of part of his capital contribution to Nextgen, which he contended that he had overpaid. Pate brought causes of action for breach of contract, quantum meruit, fraud by representation and omission, negligent misrepresentation, an accounting of all capital contributions to the Hotel Entities, a declaratory judgment of his rightful ownership interests in each respective entity, and dissolution of all the Hotel Entities; Pate also sought attorney's fees and exemplary damages.

Nonresidents² Ramesh, Naresh, Ashok, and Manilal (the Nonresidents) each filed a special appearance, in which they denied ever conducting business in Texas in their individual capacities and denied ever committing a tort in Texas.³ The trial court held a series of evidentiary hearings on the special appearances, and—in between the second and third hearings—Pate filed a second amended petition alleging facts to support the exercise of personal jurisdiction over the Nonresidents. After the third evidentiary hearing, the trial court denied the special appearances as to all of the Nonresidents, and they filed this accelerated interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (West Supp. 2016). Neither party requested findings of fact and conclusions of law.

Standard of Review

Whether a trial court has personal jurisdiction over a defendant is a question of law, which we review de novo based on all of the evidence. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex. 2007); TravelJungle v. Am. Airlines, Inc., 212 S.W.3d 841, 845 (Tex. App.—Fort Worth 2006, no pet.). We may review the trial court's resolution of disputed fact issues for legal and factual sufficiency under the same standards of review that we apply in reviewinga jury's or trial court's findings of fact at trial. TravelJungle, 212 S.W.3d at 845. When, as in this case, the trial court does not issue findings of fact and conclusions of law, all facts necessary to support the trial court's order that are supported by the evidence are implied. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002).

The supreme court has explained how the burdens shift between the plaintiff and defendant in a special appearance:

Our special-appearance jurisprudence dictates that the plaintiff and the defendant bear shifting burdens of proof in a challenge to personal jurisdiction. We have consistently held that the plaintiff bears the initial burden to plead sufficient allegations to bring the nonresident defendant within the reach of Texas's long-arm statute. Once the plaintiff has pleaded sufficient jurisdictional allegations, the defendant filing a special appearance bears the burden to negate all bases of personal jurisdiction alleged by the plaintiff. Because the plaintiff defines the scope and nature of the lawsuit, the defendant's corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff's pleading.

If the plaintiff fails to plead facts bringing the defendant within reach of the long-arm statute (i.e., for a tort claim, that the defendant committed tortious acts in Texas), the defendant need only prove that it does not live in Texas to negate jurisdiction. When the pleading is wholly devoid of jurisdictional facts, the plaintiff should amend the pleading to include the necessary factual allegations, thereby allowing jurisdiction to be decided based on evidence rather than allegations, as it should be.

The defendant can negate jurisdiction on either a factual or legal basis. Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations. The plaintiff can then respond with its own evidence that affirms its allegations, and it risks dismissal of its lawsuit if it cannot present the trial court with evidence establishing personal jurisdiction. Legally, the defendant can show that even if the plaintiff's alleged facts are true, the evidence is legally insufficient toestablish jurisdiction; the defendant's contacts with Texas fall short of purposeful availment; for specific jurisdiction, that the claims do not arise from the contacts; or that traditional notions of fair play and substantial justice are offended by the exercise of jurisdiction.

Kelly, 301 S.W.3d at 658-59 (footnotes omitted) (citations omitted).

We may sustain a legal sufficiency challenge only when (1) the record discloses a complete absence of evidence of a vital fact, (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a mere scintilla, or (4) the evidence establishes conclusively the opposite of a vital fact. Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620 (Tex. 2014); Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998), cert. denied, 526 U.S. 1040 (1999). In determining whether there is legally sufficient evidence to support the finding under review, we must consider evidence favorable to the finding if a reasonable factfinder could and disregard evidence contrary to the finding unless a reasonable factfinder could not. Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005).

When reviewing an assertion that the evidence is factually insufficient to support a finding, we set aside the finding only if, after considering and weighing all of the evidence in the record pertinent to that finding, we determine that the credible evidence supporting the finding is so weak, or so contrary to the overwhelming weight of all the evidence, that the answer should be set aside anda new trial ordered. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986) (op. on reh'g); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965).

Applicable Law

A Texas court may assert personal jurisdiction over a nonresident defendant only if the requirements of due process under the Fourteenth Amendment and the Texas long-arm statute are satisfied. U.S. Const. amend. XIV, § 1; Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041-.045 (West 2015); Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-14, 104 S. Ct. 1868, 1871-72 (1984); Moki Mac, 221 S.W.3d at 574.

A. Long-arm Statute

The Texas long-arm statute governs Texas courts' exercise of jurisdiction over nonresident defendants. Tex. Civ. Prac. & Rem. Code Ann. §§ 17.041-.045; BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845. That statute permits Texas courts to exercise jurisdiction over a nonresident defendant who "does business" in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042; BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845. The statute lists some activities that constitute "doing business" in Texas, including committing a tort, in whole or in part, in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042; Moki Mac, 221 S.W.3d at 574; TravelJungle, 212 S.W.3d at 845. The list of activities set forth in section 17.042 is not exclusive, however. BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845.

Because the long-arm statute reaches "as far as the federal constitutional requirements for due process will allow," a Texas court may exercise jurisdiction over a nonresident if doing so "comports with federal due process limitations." TV Azteca v. Ruiz, 490 S.W.3d 29, 36 (Tex. 2016) (quoting Spir Star AG v. Kimich, 310 S.W.3d 868, 872 (Tex. 2010)), cert. denied, 2017 WL 2722433 (June 26, 2017). Therefore, in determining whether such requirements have been met, we rely on precedent from the United States Supreme Court and other federal courts, as well as our own state's decisions. BMC Software, 83 S.W.3d at 795; TravelJungle, 212 S.W.3d at 845-46.

B. Due Process

Due process is satisfied when (1) the defendant has established minimum contacts with the forum state and (2) the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945); TV Azteca, 490 S.W.3d at 36; TravelJungle, 212 S.W.3d at 846. A nonresident defendant who has "purposefully availed" himself of the privileges of conducting business in a foreign jurisdiction, invoking the benefits and protections of its laws,...