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L.L.C. v. Private Capital Group, Inc.

Court of Appeals of Texas, First District

April 25, 2019


          On Appeal from the 270th District Court Harris County, Texas Trial Court Case No. 2017-00594.

          Panel consists of Justices Keyes, Higley, and Landau.


          Evelyn V. Keyes, Justice.

         Appellants, 11500 Space Center, L.L.C., Space Center Boulevard Land Development, L.P., Cullen's, L.L.C., and Bermuda Dunes Development, L.P. ("Developers"), sued appellee, Private Capital Group, Inc. ("PCG"), for deceptive trade practices, fraud, negligent misrepresentation, and money had and received. PCG filed a special appearance, which the trial court granted. In four issues, Developers argue that the trial court erred in granting PCG's special appearance because Developers pleaded and proved sufficient jurisdictional facts, which PCG failed to negate; the exercise of jurisdiction would not offend the traditional notions of fair play and substantial justice; and the trial court relied on PCG's legally insufficient affidavit.

         We affirm.


         Developers brought this action against loan servicer PCG, alleging PCG made misrepresentations that caused them to overpay certain fees and interest on their loan.

         According to their pleadings, Houston-based Developers borrowed $11, 450, 000.00 for a four-month period from PCG Credit Partners, L.L.C. ("Lender"), [1] a Delaware entity with its principle place of business in Alpine, Utah, under the terms of a Loan Agreement secured by a promissory note granting interests in both personal and real property. The Loan Agreement provided that Developers would bear all of Lender's cost and expenses in connection with the loan, including servicing, legal, and brokerage fees.[2]

         Lender engaged PCG to service the loan.[3] According to Developers, PCG falsely represented to them and to First American Title Company (the "Title Company") the amount of costs and expenses Lender incurred, which costs and expenses the Loan Agreement obligated Developers to bear.[4]

         Several months after Lender and Developers closed on the loan, PCG, in accordance with its role as loan servicer, issued pay-off statements to Developers. According to Developers, the pay-off statements falsely represented that they owed Lender additional sums not reflected in the closing statement. Developers also alleged that PCG represented to them that Lender would not release liens against their property unless they paid in full.

         Developers paid according to the pay-off statements. Over a year later, Developers' counsel sent PCG and Lender a letter requesting documentation establishing the service, legal, and brokerage fees, and resolving the "discrepancies" regarding the pay-off balances. PCG responded by email and provided the pay-off statements as accountings.

         Developers sued PCG for deceptive trade practices, fraud, negligent misrepresentation, and money had and received.

         PCG filed a special appearance, in which it stated that it is not a resident of Texas, but a Delaware corporation with its principal place of business in Alpine, Utah; it has "no office, place of business, staff, team members, or any other affiliations with the State of Texas"; and it "neither engaged in continuing relationships and obligations with citizens of Texas, profited from Texas' laws, [n]or subject[ed] itself to Texas' jurisdiction." PCG also stated that Developers reached out from Texas to obtain the loan in Utah, and every one of Developers' allegations, if true, "occurred in the State of Utah either before or at the time that the [Loan Agreement] was executed."

         PCG attached the affidavit of its vice president, Benjamin Schramm. In it, Schramm stated that PCG's principal place of business is "solely in the State of Utah" and that PCG has "no connections with the State of Texas." He also stated that Developers "reached out" to PCG in Utah "to obtain the loan" and that "[a]ny and all" of the negotiations occurred in Utah, as did "the work related to this relationship." And while, to make signing the Loan Agreement easier, Developers were permitted to sign documents in Texas, both PCG and Lender executed all agreements including the closing documents, in Utah. Further, "[p]ayments on the loan were to be made through Wells Fargo Bank in Highland, Utah," and "[m]onies lent were escrowed with Charger Title Insurance Agency located in Orem, Utah."

         PCG's special appearance included, in the alternative, a motion to transfer venue, in which PCG argued that venue is mandatory in Salt Lake County, Utah, because the Loan Agreement stated that Developers "submit[] to the jurisdiction of the Federal and District Courts located in Salt Lake County, Utah."

         In response, Developers argued that PCG is subject to personal jurisdiction in Texas because this suit arises from its misrepresentations to Texas residents regarding a loan secured (under the promissory note) by Texas property. They alleged two misrepresentations. The first is the amount of Lender's costs and expenses. Other than providing the affidavit of Kevin Munz[5] stating that PCG "represented" the amount of Lender's costs and expenses to him and to the Title Company at the loan closing in Texas, Developers do not specify how PCG communicated this amount from Utah to them in Texas. The second misrepresentation Developers alleged is the loan pay-off amount reflected in the pay-off statements. Here again, Developers do not indicate how PCG transmitted the pay-off statements to them in Texas.

         Developers also alleged that PCG sent correspondence to them in Texas and was paid for its services with funds sent to Utah from Texas. They further alleged that, after they paid off the loan, PCG repeatedly solicited their business. Finally, Developers asserted that because PCG is not a party to the Loan Agreement, it may not invoke the Loan Agreement's forum selection and choice of law clauses providing for jurisdiction in Utah.

         Developers included in their response a motion to strike Schramm's affidavit, arguing that his testimony was not based on personal knowledge and that he was not competent to testify. See Tex. R. Civ. P. 120a(3) (affidavits in support of special appearance "shall be made on personal knowledge"). They asked, in the alternative, for a continuance to conduct jurisdictional discovery.

         While there is nothing in the record indicating that the trial court ruled on any part of PCG's special appearance (including the motions to transfer venue and for a continuance), the record reflects that the parties conducted jurisdictional discovery including Schramm's deposition. Thereafter, Developers filed a supplemental response to PCG's special appearance, asserting that by testifying at his deposition that PCG agreed to service the loan "from inception through funding through default," including the possibility of foreclosure, Schramm "acknowledged that [PCG] agreed to perform its loan servicing obligations in Texas." They also asserted that PCG's discovery responses showed that it prepared legal documents and perfected Lender's security interest by filing a "financing statement" with the Texas Secretary of State and instructing the Title Company to record the real property deed of trust with the Harris County Clerk. And they averred that Schramm's deposition confirmed the assertion they made in their original response that he lacked personal knowledge to support his prior affidavit testimony.

         In response, PCG filed an amended special appearance, adding the argument that, pursuant to the Loan Agreement's forum selection clause, venue was mandatory in Utah.

         The trial court granted PCG's special appearance and dismissed the case for lack of personal jurisdiction without ...

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