Vosko v. Chase Manhattan Bank, N.A.

• Decision Date: 24 August 1995
• Docket Number: No. 14-93-00494-CV,14-93-00494-CV
• Parties: Michael H. VOSKO, Appellant, v. The CHASE MANHATTAN BANK, N.A., Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 95

909 S.W.2d 95

Michael H. VOSKO, Appellant, v. The CHASE MANHATTAN BANK, N.A., Appellee.

No. 14-93-00494-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

Aug. 24, 1995.

Rehearing Overruled Nov. 22, 1995.

Carol Stephenson, Kimberly A. Satz, Houston, for appellant.

Mark C. Harwell, Kenneth M. Morris, David A. Furlow, Houston, for appellee.

Before MURPHY, C.J., and LEE and EDELMAN, JJ.

OPINION

EDELMAN, Justice.

Michael Vosko ("Michael") appeals a judgment in favor of The Chase Manhattan Bank ("Chase") on several grounds, including lack of personal jurisdiction. Because we find that personal jurisdiction was lacking, we reverse and render judgment dismissing the action.

In 1984, Michael's father, Irwin L. "Smitty" Vosko ("Smitty"), borrowed money from Chase's branch in the Bahamas, where he lived. Chase eventually sued for and received a summary judgment for over $5.5 million against Smitty in federal court in New York on January 26, 1990 in connection with that debt (the "federal court judgment"). That judgment was not appealed.

Smitty formerly lived in a house in the Bahamas, referred to as the Findan House. The title to this house was held in the name of Findan Properties, Ltd., a Bahamian corporation ("Findan"). Findan was a wholly owned subsidiary of I.L. Vosko & Associates, Ltd. ("Associates"). ¹ On January 19, 1990, just before entry of the federal court judgment, the stock of Findan was transferred by Associates to Young Holdings, Ltd., ("Young"), a Bahamian corporation wholly owned by a Bahamian charitable trust known as the Norfolk Trust or Norfolk Settlement (the "Trust").

Smitty continued to live in the Findan House after the transfer until April of 1990, when it was sold to a third party for $3.5 million. After the $1.3 million mortgage balance was paid, net proceeds of the sale were $2.2 million. Thereafter, $900,000 was paid to buy a new home for Smitty, the title to which was held in the name of Denby Holdings, Ltd. ("Denby"), a Bahamian corporation also wholly owned by Young. Although the transfer of funds was not traced in the record, Michael testified, and the trial court found, that proceeds from the sale of the Findan house were used to purchase this house.

Petroder (USA) Ltd. ("Petroder") is a Delaware corporation doing business in Texas. Michael was President of Petroder during the events in issue in this case. Petroder is wholly owned by Bassett Investments, Ltd., ("Bassett"), a Bahamian corporation owned by the Trust. Michael owned Bassett's shares until 1975 when he transferred them to the Trust. Michael was a director of Bassett, Young and Petroder.

Chase sued Michael under the Texas Fraudulent Transfer Act claiming that Michael, as the alter ego of several corporations, received assets transferred from Smitty with the intent to defraud Chase, a judgment creditor of Smitty. See TEX.BUS. & COM.CODE ANN. §§ 24.005(a)(1), 24.006(a), 24.006(b) (Vernon 1987 & Supp.1995). Petroder and Bassett were also defendants in the case. Michael, a Canadian citizen and resident of England, and Bassett filed a special appearance. See TEX.R.CIV.P. 120a. After a hearing, the trial court entered an order stating that both were amenable to the court's jurisdiction, and overruling the special appearance, without specifying the basis therefor. The claims against Petroder were later severed after it filed bankruptcy.

The case was tried to the court and judgment was entered against Michael, personally, for $2.2 million. A take nothing judgment was entered in favor of Bassett from which Chase has not appealed. In its findings of fact and conclusions of law, the trial court concluded that: Young and the Trust were the alter egos of Michael; Findan was the alter ego of Smitty; and the Findan House was fraudulently transferred to Michael (presumably by Smitty), resulting in $2.2 million of equity value being realized by Michael. Neither the judgment nor the findings of fact or conclusions of law addressed the issue of personal jurisdiction over Michael.

In Michael's first point of error, he complains that the trial court erred in denying his special appearance because the court had no personal jurisdiction over him.

A Texas court may exercise jurisdiction over a nonresident if it is authorized by the Texas long-arm statute, ² and if it is consistent with federal and state constitutional due process guarantees. Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex.1990). The Texas long-arm statute authorizes the exercise of jurisdiction over nonresidents "doing business" in Texas, as defined in that provision. TEX.CIV.PRAC. & REM.CODE ANN. § 17.042 (Vernon 1986). ³ In addition to the acts specified, the long-arm statute provides that other, unspecified acts by a non-resident may also constitute "doing business." Moreover, the broad language of this "doing business" requirement permits the statute to reach as far as federal constitutional requirements of due process will allow. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991).

Since the "doing business" concept extends as far as due process will allow, it follows that any activity or contact which satisfies due process also constitutes doing business, and that any activity or contact which does not satisfy due process does not constitute doing business. As a practical matter, therefore, we need not analyze the "doing business" requirement apart from the due process requirement since the scope of each is coextensive.

The two prongs of the due process requirement have recently been reiterated by the Texas Supreme Court as follows:

In order for a court's assertion of jurisdiction over a nonresident defendant to comport with due process, the defendant must have purposefully established minimum contacts with the forum state such that it could reasonably anticipate being sued in the courts of the state. The exercise of jurisdiction must also comport with fair play and substantial justice.

Nat'l Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 772 (Tex.1995) (citations omitted).

The minimum contacts requirement is satisfied if either general or specific jurisdiction exists. General jurisdiction is present where the defendant has had continuous and systematic contacts with Texas, even if the cause of action did not arise from the defendant's purposeful conduct in the state. Id.

For a trial court to have specific jurisdiction, the plaintiff's cause of action must arise out of or relate to the nonresident defendant's contacts with Texas. Id. The defendant's activities must have been "purposefully directed" to the forum, and the litigation must result from injuries arising from or relating to those activities. Guardian Royal, 815 S.W.2d at 228.

To invoke the fair play and substantial justice prong of due process, a nonresident defendant must present a compelling case that the exercise of jurisdiction would be unreasonable. In re S.A.V., 837 S.W.2d 80, 85 (Tex.1992). ⁴ However, once minimum contacts have been established, the exercise of jurisdiction will rarely fail to comport with fair play and substantial justice. Id. at 86.

A defendant asserting lack of personal jurisdiction by special appearance has the burden of negating all bases of jurisdiction. Gibson, 897 S.W.2d at 772. However, if the plaintiff does not allege that the defendant performed a specific act in Texas, the defendant's evidence that he is a nonresident is enough to carry his burden of proof. Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 437-38 (Tex.1982).

On appeal, the scope of review of a ruling on a special appearance includes all evidence in the record. Carbonit Houston, Inc. v. Exchange Bank, 628 S.W.2d 826, 829 (Tex.Civ.App.--Houston [14th Dist.] 1982, writ ref'd n.r.e.). Therefore, in reviewing the assertion of personal jurisdiction over Michael, we will consider the evidence adduced at trial as well as the special appearance hearing.

We first address whether Michael's contacts with Texas were continuous and systematic enough to afford general jurisdiction. The facts relevant to this issue are that: Michael is a citizen of Canada; he owned a home and resided in Houston from July of 1982 until September of 1987, and has since resided in England; he held a Texas driver's license until 1985 or 1987; he held an immigration permit to live and work in Houston through January of 1986; he was an officer and director of Bassett while he resided in Texas; Michael was an officer and director of Petroder until at least March of 1990; Petroder's only place of business was Houston; after moving his residence from Texas, Michael returned to the State to conduct Petroder business on one occasion in 1988 and one in 1989; and, since that time, Michael has personally had no business activity in Texas, owned no property in Texas, and has had no employees, servants or agents in Texas.

Notably, after 1987, Michael's only contacts with the State were to conduct Petroder business. Thus, his personal contacts with the State ended roughly three years before Chase's cause of action arose. Moreover, his former residence and contacts in Texas did not avail him of the benefits and protections of the State after that residency was relinquished. ⁵

Similarly, jurisdiction over an individual generally cannot be based on jurisdiction over a corporation with which he is associated unless the corporation is the alter ego of the individual. Clark v. Noyes, 871 S.W.2d 508, 509 (Tex.App.--Dallas 1994, no writ); Leon Ltd. v. Albuquerque Commons Partnership, 862 S.W.2d 693, 708 (Tex.App.--El Paso 1993, no writ). ⁶ Therefore, although Texas clearly had general jurisdiction over Petroder, that did not create jurisdiction over Michael since Petroder was not alleged or proved to be Michael's alter ego. Nor was jurisdiction over Michael conferred by his being found to be the alter ego of the Trust or Young since jurisdiction was not established with...