American Finasco, Inc. v. Jimmy Thrash and Helen Thrash ( 2017 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-15-00195-CV
____________________
AMERICAN FINASCO, INC., Appellant
V.
JIMMY THRASH AND HELEN THRASH, Appellees
_______________________________________________________ ______________
On Appeal from the 284th District Court
Montgomery County, Texas
Trial Cause No. 14-06-06175 CV
________________________________________________________ _____________
MEMORANDUM OPINION
In this appeal, we are asked to review whether the trial court erred by granting
the special appearances of two nonresidents who asserted they were not amenable to
suit in Texas in a case filed by a Texas corporation alleging that the individuals were
liable to it on its claims for breach of contract and unjust enrichment. Because the
record before us demonstrates that the corporation failed to meet its burden to show
that the nonresident defendants could reasonably be expected to be sued in Texas,
1
we hold the trial court properly granted the special appearances and ordered the case
dismissed for lack of jurisdiction.
Background
In 2013, American Finasco, Inc., a Texas corporation, entered into a written
agreement with Ag Pilots, Inc., a Mississippi corporation owned by Jimmy and
Helen Thrash. The Thrashes are Mississippi residents. Under their agreements with
American Finasco, Jimmy Thrash, as Ag Pilots’ president, contracted to pay
American Finasco a percentage of the savings that Ag Pilots might realize should
American Finasco successfully negotiate a reduction in a debt that Ag Pilots owed
to Capital One, N.A. In 2014, Capital One, Ag Pilots, and the Thrashes agreed to
reduce Ag Pilots’ debt to an agreed judgment in a Mississippi federal court. Under
the terms of the agreed judgment, Ag Pilots and the Thrashes are jointly and
severally liable to Capital One for approximately $1,750,000.
In June 2014, American Finasco sued Ag Pilots and Jimmy Thrash for failing
to pay for the services that it claimed it had performed in reducing Ag Pilots’ and
the Thrashes’ debt to Capital One. In its original petition, American Finasco alleged
that Ag Pilots and Jimmy Thrash had failed and refused to pay American Finasco
for the services it rendered in negotiating the reduction of Ag Pilots’ debt. American
2
Finasco also alleged that “Jimmy Thrash should be held personally liable for any
acts of AG Pilots, Inc.”
When Ag Pilots answered American Finasco’s suit, it did not file a special
appearance. Jimmy Thrash, however, responded to American Finasco’s suit by filing
a verified special appearance, and he answered subject to his special appearance. In
his special appearance, Jimmy alleged that he resides in Mississippi, does not
conduct business in Texas, and has no contacts in Texas. He also alleged that he did
not execute the written agreement with American Finasco in his individual capacity.
Several months later, Ag Pilots went into bankruptcy. Shortly after that,
American Finasco amended its petition, dismissing Ag Pilots from the suit.
However, by amended petition, American Finasco also named Helen Thrash as
another defendant, and it alleged that Jimmy and Helen Thrash were guarantors
under the agreements they had executed on Ag Pilots’ behalf. In response to
American Finasco’s amended petition, Helen Thrash filed a verified special
appearance. Helen alleged in her special appearance that she is a Mississippi
resident, that she does not conduct business in Texas, and that she did not execute
any agreements with American Finasco in her individual capacity.
American Finasco filed a response to the Thrashes’ special appearances, and
it supported its response with an affidavit of Mitchell Vicknair, American Finasco’s
3
president and CEO. In Vicknair’s affidavit, Vicknair authenticated the various
documents the Thrashes had executed with American Finasco, which indicate that
they authorized American Finasco to negotiate a settlement of Ag Pilots’ debt. These
agreements, however, are silent regarding the state in which American Finasco’s
services were to be performed. The American Finasco contract documents are also
silent regarding the identity of the state in which American Finasco was
incorporated, and regarding where American Finasco would perform its work. In
addition to its written agreement with Ag Pilots, Vicknair’s affidavit authenticated
(1) a copy of a judgment, rendered in Mississippi, which holds Ag Pilots, Jimmy
Thrash, and Helen Thrash jointly and severally responsible for Ag Pilots’ debt; and
(2) three pages of a twenty-five page settlement agreement made by Ag Pilots, the
Thrashes, and Capital One, which memorialized the agreements between Capital
One, Ag Pilots, and the Thrashes regarding the personal obligations the Thrashes
had to Capital One regarding Ag Pilots’ debt. However, Vicknair’s affidavit is silent
about whether American Finasco negotiated the agreement with Capital One that led
to the agreed judgment between Capital One and the Thrashes, or whether it
negotiated that agreement in whole or in part in Texas. Vicknair’s affidavit does state
that American Finasco’s agreement with Ag Pilots and the Thrashes was based on
4
documents created in Texas, which were then forwarded to the Thrashes for their
signatures.
In February 2015, American Finasco filed its second amended petition. In it,
American Finasco alleged that the Thrashes “reached out and retained [American
Finasco] in Texas[.]” However, this allegation, which is not supported by any
evidence, is inconsistent with the affidavits that were filed by Jimmy and Helen
Thrash to support their special appearances. According to the affidavits they filed,
the Thrashes swore that they had not personally conducted any business activity in
Texas and had no purposeful business contacts in Texas. Other than Vicknair’s first
affidavit and the documents that the affidavit authenticated, American Finasco
provided the trial court with no additional evidence to show where it had performed
its work. Approximately three weeks after American Finasco amended its petition,
the trial court granted the Thrashes’ special appearances and dismissed American
Finasco’s suit.
Consent to Jurisdiction
In its first issue, American Finasco argues that the Thrashes executed
“contracts with a forum selection clause naming Texas as the forum state for all
disputes.” American Finasco concludes that based on the forum-selection clause in
Ag Pilots’ contract, the Thrashes waived their right to contest its claim that the
5
Thrashes were subject to the jurisdiction of a Texas court for disputes relating to
American Finasco’s work.
Under Texas law, if a party contractually consents to jurisdiction in a
particular forum, no due-process or minimum-contacts analysis is necessary. See In
re Fisher, 433 S.W.3d 523, 532 (Tex. 2014). As creatures of contract, courts must
first determine whether a forum-selection clause applies to the claims the plaintiff
has asserted in its suit. See Phx. Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177
S.W.3d 605, 611 (Tex. App.—Houston [1st Dist.] 2005, no pet.). To determine if
the forum-selection clause in the Ag Pilots/American Finasco contract applies, we
make a “common-sense examination of the claims and the forum-selection clause to
determine if the clause covers the claims.” In re Int’l Profit Assocs., Inc., 274 S.W.3d
672, 677 (Tex. 2009) (per curiam).
The forum-selection clause at issue in this case is contained in the Retainer
and Fee Agreement, an agreement signed by Jimmy Thrash in his capacity as the
president of Ag Pilots. The clause provides that “[a]ny claims, suits[,] or causes of
action against American Finasco arising directly or indirectly from this agreement
shall be brought exclusively in the jurisdiction of Montgomery County, TX.”
(emphasis added). While the parties dispute whether Jimmy Thrash signed this
agreement in any capacity other than as president of Ag Pilots, we need not resolve
6
whether American Finasco alleged sufficient facts to demonstrate that Jimmy could
be sued individually based on the American Finasco/Ag Pilots contract to determine
whether the forum-selection clause applies to American Finasco’s case against the
Thrashes. The forum-selection clause contemplates that actions filed against
American Finasco would be filed in Texas if a dispute arose under the agreement,
but it does not indicate that the clause applies to a case in which the Thrashes did
not file any claims against American Finasco. In summary, the forum-selection
clause does not encompass claims, suits, or causes of actions filed by American
Finasco against other parties under the express terms of the parties’ written
agreements.
We conclude the forum-selection clause does not apply to American Finasco’s
claims against the Thrashes. Therefore, American Finasco’s first issue is overruled.
See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005) (providing
that courts are to give contract terms their plain, ordinary, and generally accepted
meaning unless the contract shows otherwise).
Specific Jurisdiction
In its second issue, American Finasco contends that the Thrashes did business
with American Finasco under the terms of its written agreement in Texas, that their
contacts were purposeful, and that they should have foreseen they could be sued in
7
a Texas forum should the written agreements regarding Ag Pilots’ debt be
dishonored. American Finasco concludes that the trial court erred in failing to find
that it could exercise specific jurisdiction over the Thrashes based on the contacts
they had with Texas under the written agreements they executed with American
Finasco.
Standard of Review
Trial courts are required to resolve special appearances based on the parties’
pleadings, any stipulations between the parties, the affidavits and attachments the
parties filed, the results of any discovery, and the oral testimony that is before the
court, if any. Tex. R. Civ. P. 120a(3). In resolving the issues raised by a defendant’s
special appearance, “the plaintiff and the defendant bear shifting burdens of proof in
a challenge to personal jurisdiction.” Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d
653, 658 (Tex. 2010). In this case, American Finasco bore the initial burden of
making sufficient allegations in its pleadings to bring the Thrashes, nonresidents of
the State, within the provisions of the Texas long-arm statute. See BMC Software
Belgium, N.V. v. Marchand, 83 S.W.3d 789, 793 (Tex. 2002); see also Tex. Civ.
Prac. & Rem. Code Ann. §§ 17.001-.093 (West 2015). The long-arm statute provides
that nonresident defendants are considered to be conducting business in Texas if they
have contracted “by mail or otherwise with a Texas resident and either party is to
8
perform the contract in whole or in part in this state[.]” Tex. Civ. Prac. & Rem. Code
Ann. § 17.042(1).
Once the plaintiff has alleged sufficient facts to meet its burden to show that
a defendant is subject to the State’s long-arm statute, the defendant is required to file
verified pleadings negating the plaintiff’s factual allegations that, otherwise, would
show that the trial court had jurisdiction over the nonresident defendants. BMC
Software, 83 S.W.3d at 793; Tex. Civ. Prac. & Rem. Code Ann. §§ 17.001-.093. In
this case, the Thrashes’ verified special appearances negated American Finasco’s
claim that the Thrashes, in their individual capacities, had done business in Texas.
Before the special appearance hearing occurred, the Thrashes also filed affidavits to
support their special appearances. In their affidavits, the Thrashes swore that they
reside in Mississippi and that they did not do business in Texas.
Given the burden-shifting analysis used in special appearance proceedings,
and in light of the verified pleadings and evidence the Thrashes filed to support their
special appearances, American Finasco bore the burden to prove that American
Finasco performed all or part of its work under its agreements with Ag Pilots and
the Thrashes in Texas. See Kelly, 301 S.W.3d at 659 (noting that after the defendant
negates plaintiff’s allegations regarding jurisdiction, “[t]he plaintiff can then respond
with its own evidence that affirms its allegations, and it risks dismissal of its lawsuit
9
if it cannot present the trial court with evidence establishing personal jurisdiction”).
We further note that as a matter of due process, evidence that a nonresident entered
into a contract with a Texas resident does not necessarily establish that the
nonresident had sufficient minimum contacts in a state to allow a trial court to
exercise jurisdiction over a nonresident defendant. Burger King Corp. v. Rudzewicz,
471 U.S. 462, 478-79 (1985).
In an appeal from a trial court’s decision granting a special appearance, we
review the trial court’s conclusion that it could not exercise jurisdiction over the
defendant as a question of law. See Am. Type Culture Collection, Inc. v. Coleman,
83 S.W.3d 801, 805-06 (Tex. 2002).
Scope of Review
Because American Finasco’s appellate argument relies heavily on information
that is found in the evidence that it filed with its motion for new trial, we identify the
evidence that we have considered in reviewing the arguments American Finasco has
made in its appeal. In support of its motion for new trial, American Finasco provided
the court with a second affidavit of Mitchell Vicknair. Vicknair’s second affidavit
contains evidence that was not before the trial court when it conducted the special
appearance hearing. Additionally, Vicknair’s second affidavit contains information
that was designed to show that American Finasco performed all or part of its work
10
under its agreements with the Thrashes in Texas. For example, Vicknair’s second
affidavit states that the Thrashes communicated with American Finasco employees
who were located in Texas on numerous occasions when it negotiated to reduce the
Thrashes’ debt to Capital One.
Nonetheless, American Finasco has not raised an issue in its appeal that
complains that the trial court erred by allowing its motion for new trial to be
overruled by operation of law. See Tex. R. Civ. P. 329b(c). In our opinion, no such
issue has been raised because such an argument would have no merit, given that
nothing in the record shows that Vicknair could not have provided the information
in his second affidavit before the special appearance hearing. See Tex. R. Civ. P. 320
(allowing trial court to grant new trials on a showing of good cause); see also Risner
v. McDonald’s Corp., 18 S.W.3d 903, 909 (Tex. App.—Beaumont 2000, pet.
denied) (“Generally speaking, a party may not present any additional evidence upon
a motion for new trial, where that evidence is not newly discovered.”).
Given the issues raised in the appeal, we cannot consider any evidence the
parties filed after the trial court ruled on the Thrashes’ special appearances. In
reviewing a trial court’s ruling, an “appellate court should consider only the record
as it appeared before the trial court at the time the court made the decision in
question.” 6 Roy W. McDonald & Elaine A. Grafton Carlson, Texas Civil Practice
11
§ 43:4 (2d ed. 1998). The rules governing special appearances contemplate that all
of the evidence supporting or negating the pleadings that are relevant to the special
appearance hearing will be filed before the trial court conducts the special
appearance hearing. For example, affidavits filed in special appearance hearings are
required to be filed at least seven days before the court conducts a hearing. Tex. R.
Civ. P. 120a(3). We conclude that the pleadings and evidence American Finasco
filed with its motion for new trial are not within the scope of review applicable to
the issues American Finasco has raised in its appeal. See Farwah v. Prosperous Mar.
Corp., 220 S.W.3d 585, 592-93 (Tex. App.—Beaumont 2007, no pet.) (noting that
on appeal, the reviewing court would only consider the evidence before the trial
court at the time it ruled on the party’s special appearance); see also 6 McDonald &
Carlson, Texas Civil Practice § 43:4.
In this case, the trial court resolved the Thrashes’ special appearances based
on the pleadings and the evidence before it at the time that it ruled. The relevant
evidence and pleadings before the court at the time of the hearing consisted of the
following: (1) American Finasco’s second amended petition, its live pleading; (2)
the special appearances of Jimmy and Helen Thrash, including their affidavits; and
(3) American Finasco’s response, which included the first affidavit of American
Finasco’s president and CEO, Mitchell Vicknair, and four attached documents.
12
Vicknair’s first affidavit and the exhibits attached to it fail to indicate where
American Finasco performed all or any part of its work. In summary, when the trial
court ruled on the Thrashes’ special appearances, the record included no contextual
evidence proving that American Finasco performed any of its work in Texas.
Analysis
In its appeal, American Finasco argues that the evidence before the trial court
established that it performed the work under its written agreements in Texas. While
Vicknair’s second affidavit addresses where American Finasco performed its work,
his first affidavit did not. Instead, Vicknair asserted in his first affidavit that the
allegations in American Finasco’s petition and response were “true and correct to
the best of my knowledge.” However, given the allegations in the verified special
appearances the Thrashes filed and the sworn statements found in their affidavits,
American Finasco’s pleadings, even if treated as sworn pleadings, are not evidence
that the trial court was required to consider as relevant with respect to proving that
the Thrashes, as individuals, had done business under the agreements they signed
with American Finasco in Texas. Under Texas law, a parties’ pleadings are not a
substitute for competent evidence, even if the pleadings are sworn or verified.
Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex.
1995); Hidalgo v. Surety Sav. & Loan Ass’n., 462 S.W.2d 540, 545 (Tex. 1971).
13
Under the agreement between Ag Pilots and American Finasco, Ag Pilots was
required to pay American Finasco in advance for a portion of its services, and the
contract required that the retainer be paid to an American Finasco office located in
Montgomery County, Texas. However, evidence that a contract has a Texas
remittance clause is alone insufficient to allow a court to acquire jurisdiction over a
nonresident defendant when the only evidence of the nonresident’s contacts is that
it remitted payments to a Texas address. See U-Anchor Advert., Inc. v. Burt, 553
S.W.2d 760, 763 (Tex. 1977), cert. denied, 434 U.S. 1063 (1978) (holding that an
Oklahoma resident could not be required to defend in Texas where his only contacts
with Texas consisted of executing a contract in Oklahoma that stipulated the
nonresident’s payments were to be made in Texas); see also Weatherford Artificial
Lift Sys., Inc. v. A & E Sys. SDN BHD, 470 S.W.3d 604, 615 (Tex. App.—Houston
[1st Dist.] 2015, no pet.) (“An individual’s contract with an out-of-state party alone
cannot automatically establish sufficient minimum contacts in the other party’s
home forum.”).
Given the allegations in the pleadings and verified special appearances that
were before the court when it ruled on the Thrashes’ special appearances, and the
timely filed evidence before the trial court at that time, we conclude that American
Finasco, as a matter of law, failed to show that a Texas court could exercise specific
14
jurisdiction over the Thrashes based on American Finasco’s claims relating to the
written agreements. See Am. Type Culture Collection, 83 S.W.3d at 805-06; BMC
Software, 83 S.W.3d at 794-95. We overrule issue two, and affirm the trial court’s
judgment.
AFFIRMED.
_________________________
HOLLIS HORTON
Justice
Submitted on January 18, 2016
Opinion Delivered January 26, 2017
Before Kreger, Horton, and Johnson, JJ.
15