Simmons Oil Corp. v. Holly Corp.

• Decision Date: 19 July 1990
• Docket Number: No. 89-447,89-447
• Citation: 796 P.2d 189,244 Mont. 75
• Parties: SIMMONS OIL CORPORATION and Simmons Refining Corporation, Plaintiffs and Appellants, v. HOLLY CORPORATION; Navajo Refining Company; Navajo Northern, Inc.; Wells Fargo Bank, N.A., Defendants and Respondents.
• Court: Montana Supreme Court

Page 189

796 P.2d 189

244 Mont. 75

SIMMONS OIL CORPORATION and Simmons Refining Corporation Plaintiffs and Appellants, v. HOLLY CORPORATION; Navajo Refining Company; Navajo Northern, Inc.; Wells Fargo Bank, N.A. Defendants and Respondents.

No. 89-447.

Supreme Court of Montana.

Submitted Feb. 6, 1990.

Decided July 19, 1990.

James H. Goetz, argued, Goetz, Madden & Dunn, Bozeman, Charles J. Wisch, argued, Weissburg & Aronson, Inc., San Francisco, Cal., H. Charles Stahmer, Bozeman, for plaintiffs and appellants.

Sheldon Oliensis argued, Kaye, Scholer, Fierman, Hays & Handler, New York City, Richard F. Gallagher, Church, Harris, Johnson & Williams, Great Falls, for Holly Corp.

Steve M. Perry, argued, Munger, Tolles & Olson, Los Angeles, Cal., John D. Stephenson, Jr., Jardine, Stephenson, Blewett & Weaver, Great Falls, for Wells Fargo.

HUNT, Justice.

Plaintiffs Simmons Oil Corporation and Simmons Refining Corporation appeal from an order of the Eighth Judicial District Court, Cascade County, dismissing their complaint against defendants Holly Corporation and Wells Fargo Bank, N.A., for lack of personal jurisdiction. We reverse.

The following issues are raised on appeal:

1. Whether sufficient minimum contacts exist with the state of Montana to subject defendant Wells Fargo to personal jurisdiction.

2. Whether sufficient minimum contacts exist with the state of Montana to subject defendant Holly to personal jurisdiction.

Plaintiff Simmons Oil Corporation (SOC) is an Arizona corporation with a principal place of business in that state. Plaintiff Simmons Refining Corporation (SRC), a wholly-owned subsidiary of SOC, is a Delaware corporation that appears from the discovery documents to have a principal place of business in Arizona although it alleges in the complaint that its principal place of business is in Montana. (Hereafter, the plaintiffs will be referred to collectively as "Simmons" unless the need arises to differentiate between the two entities.)

Defendant Holly is a Delaware corporation with a principal place of business in Texas. It is not registered to do business in Montana, does not maintain offices, representatives or agents in this state and does not solicit business in this state.

Defendant Navajo Refining Company is a wholly owned subsidiary of Holly and Holly's wholly owned subsidiary, Navajo Corporation. It is a Delaware corporation, headquartered in New Mexico. Defendant Navajo Northern, Incorporated, a Nevada corporation, is wholly owned by Navajo Refining.

Defendant Wells Fargo is a national banking association with a principal place of business in California. It is not registered to do business in Montana and does not maintain any subsidiaries, offices, branches, employees, agents or representatives in this state.

Beginning in 1980, Wells Fargo provided SOC, and later SRC and related entities, a line of credit. In early 1982, Simmons purchased, and SRC began to operate, the Black Eagle Refinery located in Cascade County near Great Falls. Prior to the purchase, Wells Fargo agreed to extend Simmons an additional $18-million line of credit to be used for working capital and acquisition of inventory for the refinery. Simmons pledged all of its accounts receivable and inventory to secure the loan.

In 1983, Wells Fargo filed in four Montana counties at least 10 UCC financial statements, constituting security interests in Simmons' inventory, equipment, fixtures, accounts receivable and other personal property located in these counties. In that same year, Simmons gave Wells Fargo a mortgage on the refinery, which Wells Fargo recorded in Montana.

In 1983 and 1984, Simmons encountered financial difficulties and Wells Fargo took control of the refinery's operation. During this time, Wells Fargo urged Simmons to search for a partner to operate and provide capital for the refinery.

In 1984, Simmons, Wells Fargo, Holly, Navajo Refining and Navajo Northern entered into a Master Agreement, which authorized the formation of Montana Refining Company, a limited partnership organized under the laws of Montana. Pursuant to the terms of the agreement, the refinery was transferred to Montana Refining. Navajo Northern became the sole general partner and took control of the refinery. SRC became the sole limited partner and assumed a passive role in the refinery's operation.

The formation of Montana Refining entailed a series of debt transactions between the parties. In one transaction, Montana Refining assumed $5 million of Simmons' debt to Wells Fargo. The loan assumption and accompanying security agreement were deemed to have been made in Montana and governed by Montana laws. Wells Fargo agreed to venue in Montana and waived the right to object to venue or assert the doctrine of forum non conveniens.

Holly guaranteed this debt on behalf of Montana Refining. The guaranty was deemed a Montana agreement, governed by Montana laws. The agreement provided that jurisdiction and venue would be in Montana.

In collateral agreements, Simmons executed a $6.5-million replacement credit note in favor of Wells Fargo, which reduced Simmons' existing $21.8-million debt. The replacement credit note, which was secured by a mortgage on the refinery, was to be paid by 100 percent of the share of Simmons' cash flow from Montana Refining up to the first $700,000 each fiscal year. The agreement also provided that Wells Fargo would be entitled to 100 percent of Simmons' share of the Montana Refining partnership property in the event of liquidation of the company. The agreement recited that it was made, executed and entered into within the state of Montana and governed by Montana laws.

In another agreement, Simmons pledged all of its right, title and interest in Montana Refining to Wells Fargo, including its right to receive distributions of money and property other than money from Montana Refining. In addition, Simmons sold, assigned and transferred to Wells Fargo "as outright owner" all distributions of money or other property made by Montana Refining to Simmons. This agreement was governed by the laws of California.

In 1985, Wells Fargo and Simmons restructured Simmons' total debt. In conjunction with the restructuring, Wells Fargo agreed to release Jerry Simmons, SOC's sole shareholder, from his personal guarantee of Simmons' indebtedness. In return, Jerry Simmons and SOC, but not SRC, agreed to release Wells Fargo from "any and all debts, claims, demands, liabilities, obligations, cause or causes of action, known or unknown ..." that arose prior to the date of the release. The restructuring agreement provided for the application of California law.

A condition of the $5-million loan assumption by Montana Refining required the company to obtain the express written approval of Wells Fargo before making any plant or fixed capital expenditure or before purchasing any real or personal property in excess of $200,000. Pursuant to this provision, Wells Fargo approved Montana Refining's 1985 and 1986 budgets and, in 1987, it approved the funding for a capital expenditure project, a project that was financed by Holly. In 1985 and 1986, two employees from Wells Fargo traveled to Montana to meet with refinery officials and local bankers concerning future production of the refinery.

On January 1, 1988, Holly and Wells Fargo negotiated, outside of the state of Montana, the sale of the Simmons' debt and the $5-million Montana Refining debt. Holly purchased the debt for approximately $2.5-million cash plus a promise to pay up to $2.8 million from Montana Refining's future cash flow. As part of the agreement, Wells Fargo transferred to Holly all of its security interest in the refinery, the refinery's inventory and other real property belonging to the Simmons entities located in Montana. Holly recorded the security interests in Montana.

Simmons filed this action in the Cascade County District Court, alleging that Holly and Wells Fargo wrongfully refused to allow it to purchase the debt on the same terms given to Holly. Simmons sought damages from Holly for breach of fiduciary duty, bad faith and conversion and from Wells Fargo for breach of fiduciary duty and bad faith. It also claimed that each of the defendants had conspired to deprive Simmons of the benefit of the various agreements they had entered into with Simmons.

Holly and Wells Fargo both moved to dismiss for lack of personal jurisdiction. (The remaining two defendants, Navajo Refining and Navajo Northern, did not contest jurisdiction.) After a hearing, the District Court granted the motion and dismissed the actions against Holly and Wells Fargo. The court denied Simmons' subsequent motion for reconsideration, but certified the dismissal for immediate appeal.

I. PRELIMINARY DISCUSSION

In Simmons v. State, 206 Mont. 264, 271, 670 P.2d 1372, 1376 (1983), we noted that the determination of whether jurisdiction may be exercised over a nonresident defendant involves a two-part analysis. The court must first examine the long-arm statute to ascertain whether the defendant's activities fall within the provisions of the statute. If the defendant's activities comply with the long-arm statute, the court must then discern whether the exercise of jurisdiction comports with the traditional notions of fair play and substantial justice embodied in the due process clause. Simmons, 206 Mont. at 271, 670 P.2d at 1376.

Montana's long-arm statute is codified at Rule 4B(1), M.R.Civ.P., which provides:

All persons found within the state of Montana are subject to the jurisdiction of the courts of this state. In addition, any person is subject to the jurisdiction of the courts of this state as to any claim for relief arising from the doing personally through an employee, or through an agent, of any of the following acts:

(a) the transaction of any business within this state;

(b) the commission of any act which results in the accrual within this state of a tort action;

(c) the...