Court of Appeals of Texas, Second District, Fort Worth
OZO CAPITAL, INC., BILTMORE FUNDING II, LLC, AND DFI-OTH, LLC APPELLANTS
VANCE SYPHERS AND CHRIS EDENS APPELLEES
THE 48TH DISTRICT COURT OF TARRANT COUNTY TRIAL COURT NO.
WALKER, MEIER, and BIRDWELL, JJ.
appeal from the trial court's order granting the special
appearance of nonresident appellees Vance Syphers and Chris
Edens, appellants OZO Capital, Inc., Biltmore Funding II, LLC
(Biltmore II), and DFI-OTH, LLC contend that the trial court
erred by determining (1) that it did not have general or
specific jurisdiction over Syphers, or specific jurisdiction
over Edens, and (2) that exercising jurisdiction over both
appellees would offend traditional notions of fair play and
substantial justice. Because we conclude that the trial court
did not err by concluding that exercising jurisdiction over
appellees would violate federal due process guarantees, we
December 2013, Texas resident Mark Hyland and Florida
resident Greg Wright encouraged Texas resident Tim Fleet to
purchase a pool of mortgage loans for the sole purpose of
reselling them. The three created Biltmore II, a Texas
limited liability company, to buy and sell the pool. Biltmore
II's managing member is NTex Realty, LP, a Texas limited
partnership owned by Fleet. The other members of Biltmore II
are OZO, a Florida corporation whose principal is Wright, and
DFI-OTH, a Texas limited liability company whose principal is
Hyland. Fleet funded Biltmore II with a $1.7 million
contribution, but Hyland and Wright did not contribute any
funds to Biltmore II. The company is structured so that
Fleet, through NTex Realty, will receive the return of his
initial $1.7 million investment from any money paid to
Biltmore II before making any distributions to OZO or
began working on a deal to sell Biltmore II's pool to 3
Star Properties, along with two other note pools: one owned
by TM Property Solutions, LLC (TMPS), in which Hyland owns a
fifty percent interest, and another owned by Biltmore
Funding, LLC, a company controlled by Wright. While 3 Star
was negotiating its purchase of the three loan pools, it
entered into an agreement to sell a large group of loans from
each of the three pools to SED Holdings, LLC, a North
Carolina limited liability company, for around $13.8 million.
Syphers is the managing member of SED, and Edens was both a
member and the president.
closed its sale to SED in June 2014 before closing its
purchase from Biltmore II in July 2014; 3 Star used some of
SED's initial $4 million cash payment to fund its
purchase of the Biltmore II, Biltmore Funding, and TMPS
pools. 3 Star paid Biltmore II $1.5 million
and executed a promissory note for the remaining $2.7 million
purchase price for the Biltmore II loans. In the sale
contract with 3 Star, Biltmore II agreed that Brown &
Associates, a "custodian and doc prep vendor"
located in Harris County, Texas, would keep physical
possession of the Biltmore II notes.
contract with 3 Star allowed it to perform due diligence
after closing and "put back" loans that it could
not resell. After the closing of SED's purchase from 3
Star, Edens travelled to Texas to review the notes; SED
decided that at least 600 or more of the notes that it bought
from 3 Star--some of them from the Biltmore II pool--were
"unsellable" and attempted to give those loans
back. For that reason, SED stopped making payments on its
promissory note to 3 Star. As a result, 3 Star never made a
payment on its note to Biltmore II. Biltmore II sent 3 Star a
default notice indicating that it would retain ownership of
its pool unless 3 Star timely objected--it did not.
began a series of lawsuits to obtain ownership of the
Biltmore II pool. First, SED sued 3 Star, its principal Jamie
Johnson, Hyland, and TMPS in North Carolina; Biltmore II was
not a party to that suit. SED obtained an injunction
prohibiting Hyland from selling the notes in the Biltmore II
pool. 3 Star then sued SED in Harris County, Texas. Brown
& Associates interpleaded the notes into the Harris
County suit. Finally, Biltmore II, acting through Fleet, sued
3 Star in Tarrant County in April 2015. At some point, Fleet
became aware that 3 Star had closed its sale to SED before
obtaining ownership of the Biltmore II pool. Biltmore II and
SED each attempted to obtain the notes from Brown &
Associates, who refused to release them because of the
multiple title claims.
intervened in Biltmore II's Tarrant County suit. In an
attempt to salvage the value of the Biltmore II pool, Edens
and Fleet discussed selling the Biltmore II notes.
Eventually, they agreed to a settlement. Under the settlement
agreement, which Syphers approved and signed from North
Carolina, SED and Biltmore II "agree[d] to work together
and cooperate with each other in the [Tarrant County suit] .
. . to achieve an outcome whereby a [j]udgment is rendered .
. . declaring [Biltmore II] the owner of the [pool] with
clear and negotiable title . . ., free and clear of any
claims by or through 3 Star." Biltmore II further agreed
that if it obtained such a judgment, it would, with Fleet and
SED, "jointly pursue possession of the [pool]" and
upon taking possession, liquidate the pool. SED would receive
sixty percent of the liquidated proceeds and Biltmore II
Tarrant County trial, SED and Biltmore II set forth the
settlement agreement terms on the record. Fleet and Edens
testified. 3 Star did not offer any evidence or sponsor any
witnesses, and its counsel admitted that 3 Star had defaulted
on its payments to Biltmore II because SED had defaulted on
its payments to 3 Star. The trial court signed a judgment
declaring Biltmore II the sole owner of the Biltmore II pool,
free of 3 Star's and its assignees' claims.
the fallout from the sale to 3 Star, Fleet's relationship
with Hyland and Wright soured to the point that they could no
longer work together. Through attorneys, Hyland attempted to
buy out NTex Realty's membership interest in Biltmore II.
As part of these negotiations, Hyland's counsel attempted
to obtain Fleet's verification that Biltmore II had not
"disposed of, assigned, released, transferred, or
otherwise conveyed" the mortgages in the pool, but
Fleet's counsel refused to answer. After Hyland and
Wright found out about the settlement agreement with SED,
they purported to authorize Biltmore II, along with OZO and
DFI-OTH, to sue Fleet, NTex Realty, appellees, and James
Deverfor breach of fiduciary duty, fraud, breach
of contract, and tortious interference with a contract.
Hyland verified appellants' original and amended
petitions. OZO and DFI-OTH also called a members' meeting
of Biltmore II, at which they voted to expel NTex Realty as
alleged in their pleadings that the settlement agreement
Biltmore II entered into with SED is a void Mary Carter
agreement,  characterized it as a "side
deal" to transfer Biltmore II's assets to SED, and
contended that its purpose was to benefit Fleet to their
detriment because Biltmore II's company agreement allows
him to "get his money out first."
sought (1) damages, (2) a temporary restraining order and
temporary injunction preventing the conveyance of the
Biltmore II pool to any third parties, (3) a temporary
injunction ordering that the pool be sold "at a price
agreeable to all parties, " that the parties mutually
agree to hire a broker to effect the sale, and that the sale
proceeds be deposited into an escrow account pending the
suit's resolution, (4) a court order to wind up and
terminate Biltmore II, (5) a declaratory judgment that the
Tarrant County judgment in the 3 Star litigation
"finally, fully, and forever adjudicated any interest
SED . . . had or may have had in the Biltmore II Pool--none,
" and (6) a declaratory judgment that Biltmore II's
settlement agreement with SED is void, illegal, and
unenforceable, that SED's claims to the pool are barred
by res judicata, and that their vote to expel NTex Realty as
a member of Biltmore II comported with the Biltmore II
company agreement and Texas law.
jurisdiction over appellees, appellants alleged in their
original petition that although appellees both resided in
North Carolina,  they did business in Texas and the suit
arose from that business. In their second amended
petition--the live pleading at the time of the special
appearance ruling- -appellants alleged only that appellees
conduct business in Texas, have systematic and continuous
contacts with Texas sufficient to establish general
jurisdiction, have committed torts in Texas in their
individual capacities, and their Texas contacts gave rise to
or relate to appellants' claims in this suit. Appellants
did not plead any alter ego-based theories of jurisdiction.
filed a joint special appearance in which they argued (1)
that appellants failed to plead jurisdictional facts
sufficient to subject them to Texas's jurisdiction, (2)
that they are not Texas residents, (3) that they "have
no business presence in Texas, own no property in Texas, have
no offices in Texas, have no bank accounts in Texas, and have
no employees or agents in Texas, " (4) that they have
not maintained sufficient contacts with Texas or purposefully
availed themselves of the benefits and protections of Texas
laws, and (5) that exercising jurisdiction over them would
offend traditional notions of fair play and substantial
justice. Appellees also attached an affidavit from Syphers
averring the same.
the parties engaged in jurisdictional discovery, appellants
moved to strike Syphers's affidavit claiming that his
entire affidavit was not credible because he had falsely
answered some discovery requests. Appellants attached
evidence purporting to show that contrary to Syphers's
statements in his affidavit, he had some Texas business
connections, Texas business partners, and dealings with Texas
companies sufficient to establish general jurisdiction. In
response, appellees filed five additional exhibits including
an amended affidavit from Syphers. Appellants again objected,
arguing that Syphers was continuing to make false statements
under oath and that his new affidavit suffered from the same
defects as the original.
nonevidentiary hearing, the trial court overruled
appellants' objections to appellees' special
appearance evidence and granted appellees' special
appearance. Although appellants timely requested findings of
fact and conclusions of law, the trial court declined to file
any. Appellants filed this accelerated interlocutory appeal.
See Tex. Civ. Prac. & Rem. Code Ann. §
51.014(a)(7) (West Supp. 2017).
on Personal Jurisdiction
court may assert personal jurisdiction over a nonresident
defendant only if the requirements of the Texas long-arm
statute and of due process under the Fourteenth Amendment are
satisfied. U.S. Const. amend. XIV, § 1; Tex. Civ. Prac.
& Rem. Code Ann. §§ 17.041-.045 (West 2015);
Bristol-Myers Squibb Co. v. Super. Ct. of Cal., 137
S.Ct. 1773, 1779 (2017); TV Azteca v. Ruiz, 490
S.W.3d 29, 36 (Tex. 2016), cert. denied, 137 S.Ct.
2290 (2017). The Texas long-arm statute permits Texas courts
to exercise jurisdiction over a nonresident defendant who
"does business" in Texas, which includes committing
a tort in whole or in part in the state. Tex. Civ. Prac.
& Rem. Code Ann. § 17.042; TV Azteca, 490
S.W.3d at 36. Due process is satisfied when (1) the defendant
has established minimum contacts with the forum state and (2)
the exercise of jurisdiction comports with traditional
notions of fair play and substantial justice. BNSF Ry. v.
Tyrrell, 137 S.Ct. 1549, 1558 (2017); TV
Azteca, 490 S.W.3d at 36. In determining whether federal
due process requirements have been met, we rely on precedent
from the United States Supreme Court and other federal
courts, as well as our own state's decisions. BMC
Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795
(Tex. 2002); TravelJungle v. Am. Airlines, Inc., 212
S.W.3d 841, 845-46 (Tex. App.--Fort Worth 2006, no pet.).
United States Supreme Court has distinguished two types of
jurisdiction, depending on the types of contacts: general
(all-purpose) jurisdiction and specific (case-linked)
jurisdiction. BNSF Ry., 137 S.Ct. at 1558. A trial
court may assert general jurisdiction over a nonresident
defendant when that defendant's contacts with the forum
are so continuous and systematic that they render the
defendant "at home" in the forum state. Daimler
AG v. Bauman, 134 S.Ct. 746, 754 (2014); TV
Azteca, 490 S.W.3d at 37. The paradigm forum for
exercising general jurisdiction over an individual is the
person's domicile; for a corporation, it is an equivalent
place in which the company is fairly regarded as at home,
such as its domicile, place of incorporation, or principal
place of business. Goodyear Dunlop Tires Operations, S.A.
v. Brown, 564 U.S. 915, 924, 131 S.Ct. 2846, 2853-54
(2011). Only a limited set of affiliations with a forum will
render a defendant amenable to general jurisdiction in a
state. Bristol-Myers Squibb, 137 S.Ct. at 1780.
contrast, a trial court may exercise specific jurisdiction
over a defendant only if the suit arises out of or relates to
the defendant's forum contacts. Id. In other
words, specific jurisdiction depends on the existence of
activity or an occurrence that takes place in the forum state
and is therefore subject to its regulation.
Goodyear, 564 U.S. at 919, 131 S.Ct. at 2851.
Burdens in Trial Court and Appellate Standard of
a trial court has personal jurisdiction over a defendant is a
question of law, which we review de novo based on all of the
evidence. Searcy v. Parex Res., Inc., 496 S.W.3d 58,
66 (Tex. 2016). At trial, the plaintiff bears the initial
burden to plead sufficient allegations that would permit the
trial court to exercise personal jurisdiction over a
defendant. Id. Once the plaintiff has done so, the
defendant bears the burden to negate all potential bases for
personal jurisdiction pleaded by the plaintiff. Id.
The defendant can negate jurisdiction on a factual basis by
presenting evidence that he has no contacts with Texas,
effectively disproving the plaintiff's allegations; the
plaintiff risks dismissal of its suit if it does not present
the trial court with evidence affirming its jurisdictional
allegations and establishing personal jurisdiction over the
defendant. Kelly v. Gen. Interior Constr., Inc., 301
S.W.3d 653, 659 (Tex. 2010). The defendant can also negate
jurisdiction on a legal basis by showing that even if the
plaintiff's alleged jurisdictional facts are true, (1)
those facts are not sufficient ...