Waterval v. District Court In and For El Paso County

• Decision Date: 27 October 1980
• Docket Number: No. 80SA332,80SA332
• Citation: 620 P.2d 5
• Parties: Richard WATERVAL, Petitioner, v. DISTRICT COURT IN AND FOR EL PASO COUNTY, Colorado, in the Fourth Judicial District, and the Honorable Bernard R. Baker, one of the Judges thereof, Respondents.
• Court: Colorado Supreme Court

Page 5

620 P.2d 5

Richard WATERVAL, Petitioner, v. DISTRICT COURT IN AND FOR EL PASO COUNTY, Colorado, in the

Fourth Judicial District, and the Honorable

Bernard R. Baker, one of the Judges

thereof, Respondents.

No. 80SA332.

Supreme Court of Colorado.

Oct. 27, 1980.

Rehearing Denied Nov. 17, 1980.

Kane, Donley & Wills, Lee R. Wills, Colorado Springs, for petitioner.

Orville A. Kenelly, Colorado Springs, for respondents.

QUINN, Justice.

In this original proceeding under C.A.R. 21, Richard Waterval (petitioner) seeks relief in the nature of prohibition against the respondent district court on the ground that its assertion of jurisdiction over him for transacting business in the State of Colorado violates due process of law. We issued a rule to show cause. We now determine that the district court may constitutionally exercise jurisdiction over the petitioner under the Colorado long-arm statute, section 13-1-124(1)(a), C.R.S.1973, and discharge the rule.

I.

Petitioner is an attorney licensed to practice law in Virginia. He, Willard J. Miller and Potomac Investment Advisors, Ltd., are defendants in pending litigation in the district court of El Paso County. The complaint was filed by Janet S. Stephens (Mrs. Stephens) and alleges that the petitioner was negligent and breached his fiduciary duty in relation to the establishment and administration of a discretionary investment account, thereby causing a substantial money loss to Mrs. Stephens. The facts underlying the jurisdictional issue in this matter can be reconstructed from testimony presented to the court on petitioner's motion challenging jurisdiction. ¹

In 1970 petitioner performed legal services for Mrs. Stephens in connection with her deceased husband's estate while Mrs. Stephens was still a resident of Virginia. Part of these services consisted of establishing and overseeing the administration of a discretionary investment account for Mrs. Stephens with the American Bank at Arlington, Virginia. In 1972 Mrs. Stephens moved to Colorado. However, the attorney-client relationship continued. Petitioner reviewed several documents relative to the sale of Mrs. Stephens' Virginia home and in January 1973, he handled the closing for that sale. Upon petitioner's advice the cash proceeds from the house sale were added to the discretionary investment account. The petitioner and Mrs. Stephens exchanged correspondence over these matters and petitioner sent bills to Mrs. Stephens for services performed in connection with her deceased husband's estate and the house sale. Mrs. Stephens remitted payment to petitioner by checks on her account at a Colorado bank.

Early in 1973 Willard Miller, a trust officer of the Virginia bank overseeing the Stephens' discretionary investment account, advised petitioner that he was leaving the bank in order to establish his own investment firm, Potomac Investment Advisors, Ltd., at McLean, Virginia, and that he was interested in soliciting the Stephens account. Petitioner contacted Mrs. Stephens by placing telephone calls to her in Colorado and on several occasions they discussed the feasibility of transferring her assets to Miller's new investment service. On February 20, 1973, petitioner mailed the proposed investment contract, along with an explanatory letter of its general provisions, to Mrs. Stephens at her Colorado address. Pursuant to petitioner's letter, Mrs. Stephens executed the contract on February 22, 1973, and returned it to him by mail. Petitioner reviewed the investment contract and transfer-documents, confirmed the transfer of funds from the Virginia bank to Potomac Investment Advisors, Ltd., and then delivered the executed documents to Miller. Petitioner later billed Mrs. Stephens for these services and, once again, she remitted payment to him by check drawn on her Colorado account.

Shortly after the investment account with Potomac Investment Advisors, Ltd., was established, Mrs. Stephens, acting on the joint recommendation of petitioner and Miller, consented to the liquidation of the account assets and their reinvestment in real estate investment trusts. Quarterly reports on the investment account were sent to Mrs. Stephens and petitioner. Petitioner periodically exchanged phone calls with Mrs. Stephens about the account and informed her that he was in frequent contact with Miller. Toward the end of 1973, the quarterly reports from Miller indicated a steady decline in the market value of the investment assets. According to Mrs. Stephens, she telephoned the petitioner about the declining assets and he relieved her concern and said that he would discuss the matter with Miller. Petitioner, however, failed to take corrective action to minimize the losses.

Mrs. Stephens commenced an action against petitioner in July 1979. The summons and complaint were served personally on him in his office in Falls Church, Virginia. The claim against petitioner alleges, in pertinent part, as follows:

"As Plaintiff's attorney, the Defendant, Waterval, actively recommended the transfer of Plaintiff's assets to Potomac Investment Advisors and actively recommended that the portfolio be overconcentrated in the real estate investment trust area.

"Subsequent to the overconcentration, Defendant, Waterval, was kept informed on the status of the account and had continuous contact with the Defendants, Potomac Investment Advisors Ltd. and Willard J. Miller, concerning the account.

"Despite his active role as an attorney and investment advisor to Plaintiff, the Defendant, Richard A. Waterval, took no steps to advise the Plaintiff to take corrective action when the need for such became obvious, and made no requests or demands of the other Defendants to minimize losses in the account, even though he had a duty to do so.

"As a direct and proximate result of the actions and inactions of the Defendant, Richard A. Waterval, and as a direct and proximate result of his failure to carry out the fiduciary obligations owed to the Plaintiff, the Plaintiff has been damaged in the amount of $127,000.00."

The petitioner filed a motion to quash the summons, contending that the court's exercise of in-personam jurisdiction was invalid. The district court conducted an evidentiary hearing, considered Mrs. Stephens' testimony and the petitioner's deposition, and denied the motion. It concluded that the petitioner transacted business in Colorado with Mrs. Stephens and caused important consequences to her in the state; therefore, the exercise of jurisdiction was proper under provisions of section 13-1-124, C.R.S.1973. Original proceedings followed in this court.

We conclude that the district court's exercise of jurisdiction over the petitioner comported with due process of law under the federal and state constitutions. U.S. Const. Amend. XIV; Colo. Const. Art. II, Sec. 25. ²

II.

Section 13-1-124(1)(a), C.R.S.1973, provides:

"Engaging in any act enumerated in this section by any person, whether or not a resident of the State of Colorado, either in person or by agent, submits such person ... to the jurisdiction of the courts of this state concerning any cause of action arising from: (a) the transaction of any business within this state ...."

In enacting the long-arm statute, the Colorado legislature intended to extend the jurisdiction of Colorado courts to the fullest extent permitted by the due process clause of the United States Constitution. Safari Outfitters, Inc. v. Superior Court, 167 Colo. 456, 448 P.2d 783 (1969). Due process requires that in order to subject a non-resident defendant to an in-personam judgment, the defendant "have certain minimum contacts with (the state) 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, 102 (1945). A person need not be physically present within the state in order to transact business therein. Contact with the forum state by telephone or mail may furnish the necessary minimum contacts essential for the exercise of jurisdiction under the transaction-of-business standard. E. g., McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); White-Rodgers Co. v. District Court, 160 Colo. 491, 418 P.2d 527 (1966).

Where a single act or a minimum contact is the basis of jurisdiction, we have utilized a three-pronged test in determining whether the activity of the non-resident falls within the limits of in-personam jurisdiction:

"First, the defendant must purposefully avail himself of the privilege of acting in the forum state or of causing important consequences in that state. Second, the cause of action must arise from the consequences in the forum state of the defendant's activities. Finally, the activities of the defendant or the consequences of those activities must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable." Van Schaack v. District Court, 189 Colo. 145, 147, 538 P.2d 425, 426 (1975), quoting White Lumber Sales, Inc. v. Sulmonetti, 252 Or. 121, 448 P.2d 571 (1968).

Accord, Mr. Steak v. District Court, 194 Colo. 519, 574 P.2d 95 (1978); At Home Magazine v. District Court, 194 Colo. 331, 572 P.2d 476 (1977); Duckworth v. M. M. Cole Publishing Co., 38 Colo.App. 33, 552 P.2d 520 (1976). "(W)here there are substantial continuous contacts with the forum state, jurisdiction may be found even when the cause of action does not arise out of the forum related activity." Tucker v. Vista Financial Corp., 192 Colo. 440, 443, 560 P.2d 453, 456 (1977); see Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952); Wilkerson v. Fortuna Corp., 554 F.2d 745 (5th Cir. 1977), cert. denied, 434 U.S. 939, 98 S.Ct. 430, 54 L.Ed.2d 299 (1977). ³

The instant case does not neatly fit into either the "single contact" or "continuous contact" categ...