Rogers v. 5-Star Management, Inc.

• Decision Date: 20 May 1996
• Docket Number: Civ. No. 95-1331 BB/WWD.
• Parties: John A. ROGERS and Albuquerque Allsuite Associates, Plaintiffs, v. 5-STAR MANAGEMENT, INC., Defendant.
• Court: U.S. District Court — District of New Mexico

946 F.Supp. 907

John A. ROGERS and Albuquerque Allsuite Associates, Plaintiffs, v. 5-STAR MANAGEMENT, INC., Defendant.

Civ. No. 95-1331 BB/WWD.

United States District Court, D. New Mexico.

May 20, 1996.

COPYRIGHT MATERIAL OMITTED

Christopher P. Bauman, Albuquerque, NM, for plaintiffs.

Randolph B. Felker, Felker, Ish, Hatcher, Ritchie, Sullivan & Geer, Santa Fe, NM, for defendant.

MEMORANDUM OPINION

BLACK, District Judge.

This Opinion addresses Defendant's December 27, 1995 motion to dismiss for lack of in personam jurisdiction or in the alternative to transfer to the Eastern District of New York (Doc. 6).¹ The Court has reviewed the submissions of the parties and the relevant law, and, for the reasons set forth below, finds that the motion is well taken and should be GRANTED.

I. Facts and Procedural History

Defendant 5-Star Management, Inc. is a Texas corporation. Defendant has never done business in New Mexico, and owns no assets or property in New Mexico, except one "deed of trust" lien on real property located in Bernalillo County, New Mexico. Defendant acquired this lien in the following manner. Some time after January 27, 1988, Defendant purchased a note ("the Note") in the amount of $520,000 from the Resolution Trust Corporation ("RTC") at an auction in Kansas City, Missouri. The Note states that it was "executed, delivered and intended to be performed in the State of New Mexico, and the validity and interpretation of this Note shall be governed by the laws of the State of New Mexico." Pls.' Compl. Declaratory Relief & Other Claims ¶ 18.

Defendant alleges, and Plaintiffs dispute, that the lien on real property in Bernalillo County, New Mexico ("the New Mexico Lien"), and mortgages on three personal residences in Arizona, California, and New York, secure the Note.² Plaintiff Albuquerque Allsuite Associates ("Allsuite"), a New Mexico joint venture, owns the real property in Bernalillo County, and Plaintiff John A. Rogers, a New Mexico resident, owns the personal residences in Arizona, California, and New York. Defendant has not attempted to foreclose the New Mexico Lien, nor has it attempted to participate in the management of the New Mexico real property. Defendant has never met with Plaintiffs in New Mexico regarding the Note, the New Mexico Lien, or the residential mortgages.

Defendant filed suit against Plaintiff Rogers in the United States District Court for the Eastern District of New York on August 3, 1995, seeking to foreclose the mortgage on Plaintiff Rogers' personal residence in New York ("the New York Mortgage"). On November 7, 1995, Plaintiffs filed suit in this Court, seeking a declaratory judgment that Defendant may not foreclose the New York Mortgage, and damages for breach of fiduciary duty, negligence, intentional interference with contractual relations, prima facie tort, and abuse of process in connection with Defendant's attempt to foreclose the New York Mortgage. In response, Defendant filed a motion to dismiss for lack of in personam jurisdiction or in the alternative to transfer to the Eastern District of New York on December 27, 1995, and this motion is now before the Court.

II. Analysis

Plaintiffs argue that the Court may exercise personal jurisdiction over Defendant on the basis of New Mexico's long-arm statute, which states in relevant part that any person who "transact[s] any business within this state" thereby "submits himself ... to the jurisdiction of the courts of this state as to any cause of action arising" from the transaction. N.M.Stat.Ann. § 38-1-16(A) (1987). Defendant denies that it has transacted any business within New Mexico, and argues that the Court's exercise of personal jurisdiction over it would offend due process.

Plaintiffs bear the burden of proving personal jurisdiction. Overton v. United States, 925 F.2d 1282, 1283 (10th Cir.1991); Jemez Agency, Inc. v. CIGNA Corp., 866 F.Supp. 1340, 1342 (D.N.M.1994) (Burciaga, C.J.). At the pre-trial motion stage, Plaintiffs must make a prima facie showing that personal jurisdiction exists. Jemez Agency, Inc., 866 F.Supp. at 1342 (citing Behagen v. Amateur Basketball Ass'n, 744 F.2d 731, 733 (10th Cir.1984), cert. denied, 471 U.S. 1010, 105 S.Ct. 1879, 85 L.Ed.2d 171 (1985)). The Court may consider matters outside the pleadings, "accepts Plaintiffs' allegations in the complaint as true if Defendant ... does not contest them with affidavits or other materials, and resolves all factual disputes raised by conflicting affidavits in the Plaintiffs' favor." Id. (citing Behagen, 744 F.2d at 733). Finally, "the existence of in personam jurisdiction under the forum state's long-arm statute is evaluated by reference to the law of the forum state." Id. (citing Taylor v. Phelan, 912 F.2d 429, 431 (10th Cir.1990), cert. denied, 498 U.S. 1068, 111 S.Ct. 786, 112 L.Ed.2d 849 (1991)).

The New Mexico courts

use a three-step test to decide whether personal jurisdiction exists over nonresident, out-of-state defendants: (1) the defendant's act must be one of the five enumerated in the long-arm statute; (2) the plaintiff's cause of action must arise from the act; and (3) minimum contacts sufficient to satisfy due process must be established by the defendant's act.

State Farm Mut. Ins. Co. v. Conyers, 109 N.M. 243, 244, 784 P.2d 986, 987 (1989). As noted supra, the "transaction of any business" is one of the five acts enumerated in New Mexico's long-arm statute. N.M.Stat. Ann. § 38-1-16(A)(1). Because the courts "have equated `transaction of any business' ... with sufficient minimum contacts to satisfy due process," Valley Wide Health Servs., Inc. v. Graham, 106 N.M. 71, 72, 738 P.2d 1316, 1318 (1987),

[i]t is not necessary to determine whether [Defendant] transacted business ... in any technical sense.... When the state courts have construed the state long-arm statute as being coextensive with the requirements of due process the usual two-step analysis collapses into a single search for the outer limits of what due process permits.

Jones v. 3M Co., 107 F.R.D. 202, 205 (D.N.M. 1984) (Burciaga, J.) (internal quotation omitted). Thus, the only issues before the Court are: (1) whether Plaintiffs' cause of action arises from Defendant's acts that allegedly confer jurisdiction; and (2) whether these acts establish sufficient minimum contacts with New Mexico to satisfy due process. State Farm Mut. Ins. Co., 109 N.M. at 244, 784 P.2d at 987.

Plaintiffs raise several arguments in support of their claim that this Court may exercise personal jurisdiction over Defendant on the basis of New Mexico's long-arm statute. Plaintiffs first assert that Defendant is subject to this Court's jurisdiction because Defendant possesses the New Mexico Lien. Accordingly, the Court must first determine whether Plaintiffs' cause of action arises from Defendant's possession of the New Mexico Lien. See id. "[T]he test for determining whether [the plaintiff's] claims arise from [the defendant's] activities must be decided on a case by case basis." Winward v. Holly Creek Mills, Inc., 83 N.M. 469, 472, 493 P.2d 954, 957 (1972). Further, "[t]here must be a close relationship between the claimed transaction of business in New Mexico and the cause of action." Visarraga v. Gates Rubber Co., 104 N.M. 143, 146-47, 717 P.2d 596, 599-600 (Ct.App.), cert. quashed sub nom. Visarraga v. Littlejohn's Equip. Co., 104 N.M. 137, 717 P.2d 590 (1986).

Plaintiffs' claims concern whether Defendant properly attempted to foreclose, or may ever properly foreclose, the New York Mortgage. See generally Pls.' Compl. Declaratory Relief & Other Claims. Plaintiffs' claims do not concern whether Defendant properly possesses or could properly foreclose the New Mexico Lien. See id. The Court is aware that Defendant acquired its interests in the New York Mortgage and the New Mexico Lien at the same time, as security for the same Note. Nevertheless, Plaintiffs' cause of action arises from Defendant's attempt to foreclose the New York Mortgage, and not from its possession of the New Mexico Lien. The relationship between Plaintiffs' cause of action and the New Mexico Lien is therefore tangential rather than "close." Visarraga, 104 N.M. at 146-47, 717 P.2d at 599-600. In short, because Plaintiffs' cause of action does not arise from Defendant's possession of the New Mexico Lien, Defendant cannot be subject to the Court's personal jurisdiction on the basis of its possession of this Lien.³ See State Farm Mut. Ins. Co., 109 N.M. at 244, 784 P.2d at 987; N.M.Stat.Ann. § 38-1-16(C).

Plaintiffs also argue that Defendant is subject to this Court's personal jurisdiction because Defendant possesses an interest in, and has attempted to foreclose, the New York Mortgage. Regarding the first element necessary to find personal jurisdiction under New Mexico's long-arm statute, Plaintiffs' cause of action unquestionably arises from Defendant's possession of and attempt to foreclose the New York Mortgage. Thus, the Court need only consider the second element, specifically, whether these acts have established minimum contacts with New Mexico sufficient to satisfy due process. State Farm Mut. Ins. Co., 109 N.M. at 244, 784 P.2d at 987; Jones, 107 F.R.D. at 205.

According to the United States Supreme Court,

due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.

International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (internal quotation omitted). Courts have subsequently applied this test in two parts. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985). First, courts must determine whether a defendant has established minimum contacts with the forum state such that the defendant...