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Chow v. San Pedro

Court of Appeals of Texas, Fourteenth District

August 27, 2019

YEW YUEN CHOW AND JEFFERY CHOW, Appellants
v.
JOSE M. RODRIGUEZ SAN PEDRO, Appellee

          On Appeal from the 152nd District Court Harris County, Texas Trial Court Cause No. 2016-76781

          Panel consists of Justices Wise, Zimmerer, and Spain.

          MEMORANDUM OPINION

          Charles A. Spain, Justice.

         This is an interlocutory appeal from orders denying special appearances made by nonresident individual defendants Yew Yuen Chow and Jeffery Chow in a suit brought by appellee Jose M. Rodriguez San Pedro. See Tex. R. Civ. P. 120a; Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (Supp.). San Pedro's suit primarily concerns an alleged earn-out payment arrangement and related discussions. Specifically, he brings claims against Y.Y. Chow and J. Chow for fraud, breach of fiduciary duty, negligent misrepresentation, and promissory estoppel.

         San Pedro alleged that the trial court has general and specific jurisdiction over Y.Y. Chow and specific jurisdiction over J. Chow. Y.Y. Chow contends Texas is not his domicile. Y.Y. Chow and J. Chow contend they are Singapore residents who only acted in Texas in their corporate capacities for defendant Keppel AmFELS L.L.C. (AmFELS) or its predecessor.[1]

         We conclude that Y.Y. Chow's Texas contacts are insufficient to confer general jurisdiction over him. We conclude that the allegations regarding San Pedro's promissory-estoppel claims are insufficient to confer specific jurisdiction over Y.Y. Chow and J. Chow. We conclude that Y.Y. Chow's Texas contacts are insufficient to confer specific jurisdiction over him with regard to San Pedro's fraud claim. However, we conclude that Y.Y. Chow's and J. Chow's Texas contacts are sufficient to confer specific jurisdiction over both of them with regard to San Pedro's breach-of-fiduciary-duty and negligent-misrepresentation claims and that J. Chow's Texas contacts are sufficient to confer specific jurisdiction over him with regard to San Pedro's fraud claim. We also conclude that exercising such jurisdiction over Y.Y. Chow and J. Chow comports with fair play and substantial justice.

         We reverse in part the trial court's order concerning Y.Y. Chow and render judgment granting Y.Y. Chow's special appearance with regard to and dismissing San Pedro's claims against Y.Y. Chow for promissory estoppel and fraud. We reverse in part the trial court's order concerning J. Chow and render judgment granting J. Chow's special appearance with regard to and dismissing San Pedro's claim against J. Chow for promissory estoppel. We otherwise affirm the trial court's orders as challenged.

         I. Background

         Because the parties involved in this appeal have a lengthy business-related history, we endeavor to limit our background discussion. San Pedro, a Florida resident, has experience in power-plant development, financing, and construction in the Caribbean Basin and Latin America. San Pedro founded the Nicaraguan entity Corporacion Electrica Nicaragüense, S.A. (CENSA). In 1995, Empresa Nicaragüense de Electricidad (ENEL), the Nicaraguan state-owned electric generation, transmission, and distribution company, entered into a Power Purchase Agreement (PPA) with CENSA.

         AmFELS, a Texas entity with a principal place of business in Brownsville, Texas, and an office in Houston, was engaged in the construction and repair of mobile drilling rigs and platforms. In the mid-1990s, AmFELS sought to enter the Latin American power-generation business. In 1995, Y.Y. Chow, then president of AmFELS, reached out to San Pedro. They met in Houston and discussed the possibility of requesting an extension to the recently-expired PPA for a possible co-venture with AmFELS. After ENEL granted CENSA a short extension, however, the PPA terminated.

         Also, in 1995, J. Chow, then providing legal services for AmFELS, approached San Pedro regarding spearheading AmFELS's fledgling Power Development Division and preparing AmFELS's bid package for a new PPA with ENEL. San Pedro then met with AmFELS executives, including Y.Y. Chow and J. Chow, in Brownsville. San Pedro began working with AmFELS.

         In March 1996, ENEL entered into a new PPA with AmFELS. In 1996, San Pedro met with Y.Y. Chow and J. Chow in Brownsville to discuss the sale of CENSA to AmFELS and San Pedro's request for an earn-out agreement. San Pedro sold CENSA to AmFELS for $75, 000.

         On January 22, 1997, AmFELS and San Pedro entered into a letter agreement in Brownsville whereby AmFELS agreed to pay San Padro $80, 000 per year, paid quarterly, "as long as the [1996 PPA] is in full force and effect and ENEL has not defaulted thereunder." Y.Y. Chow and J. Chow were both present. Y.Y. Chow signed this earn-out agreement as president of AmFELS; J. Chow prepared and initialed the AmFELS earn-out agreement.

         On January 24, 1997, the 1996 PPA held by AmFELS was assigned to CENSA "completely free of any charge or load" for $20, 000. The assignment was accomplished through a notarized instrument executed in Houston.

         On January 25, 1997, the newly elected CENSA board of directors, including Y.Y. Chow and J. Chow, appointed San Pedro as general manager of CENSA.

         AmFELS did not pay San Pedro any payments under the AmFELS earn-out agreement. In March 1998, J. Chow called San Pedro from Texas regarding his signing an earn-out agreement with CENSA. J. Chow sent San Pedro a fax from Texas containing specific language J. Chow wanted to be included in the CENSA earn-out agreement. After San Pedro read the language and translated it to Spanish, San Pedro called J. Chow in Texas to discuss a clause prohibiting an assignment or sale of the earn-out payments. J. Chow explained that the language would protect San Pedro's wife and son "in case something happened" to him. San Pedro further asked J. Chow "if everything was taken care of and if [the CENSA earn-out agreement] was in proper form." J. Chow assured San Pedro "it was," and based on this statement, San Pedro signed the CENSA earn-out agreement on March 18, 1998.

         The CENSA earn-out agreement stated that, in the 1997 assignment, CENSA had "acquired" from AmFELS "the obligation to pay annually" San Pedro $80, 000 in quarterly installments, as long as the 1996 PPA was "in force." CENSA began making payments to San Pedro under the CENSA earn-out agreement.

         In 2004, Otto Escorcia, CENSA's general manager, and José Francisco Mojica, CENSA's financial manager, requested an addendum to the CENSA earn-out agreement to reflect that San Pedro's payments were "net" for tax purposes. The addendum was executed in December 2004. AmFELS sold CENSA to a Panamanian company in 2009.

         In 2009, CENSA attempted to renegotiate the CENSA earn-out agreement and 2004 addendum with San Pedro to substantially lower his payments by 80 percent. San Pedro did not agree to any reduction. In late 2013, CENSA stopped paying San Pedro's earn-out payments.

         In 2014, CENSA sued San Pedro in Nicaragua over the "veracity" of the CENSA earn-out agreement and 2004 addendum. In 2016, the Nicaraguan court ruled in CENSA's favor because the payment obligation "was never assigned" from AmFELS and was a "nullity." San Pedro was ordered to return payments he received from 1998 to 2013 totaling $969, 292.00.

         San Pedro brought claims against AmFELS, Y.Y. Chow, and J. Chow in Harris County district court. Specifically, San Pedro brought claims against all the defendants for fraud, breach of fiduciary duty, promissory estoppel, and negligent misrepresentation.[2]

         Y.Y. Chow and J. Chow each filed a verified special appearance with attached declaration. San Pedro filed a response, attaching his counter-affidavit.[3]

         Y.Y. Chow filed a reply, attaching excerpts from his deposition and from San Pedro's deposition. J. Chow also filed a reply, attaching excerpts from his deposition and from San Pedro's deposition.[4] The trial court held a hearing; no evidence was admitted at the hearing. On April 30, 2018, the trial court signed orders denying the special appearances. Y.Y. Chow and J. Chow timely appealed.

         II. Analysis

         San Pedro alleged that the trial court has general jurisdiction over Y.Y. Chow as a resident of and owner of real property in Texas at the time this suit was filed. San Pedro alleged that the trial court has specific jurisdiction over Y.Y. Chow and J. Chow because they purposefully directed their activities towards and in Texas and availed themselves of the privilege of conducting business in Texas and benefits under Texas law; their conduct and contacts with and within Texas were neither fortuitous or isolated, but direct and intentional, giving rise to the claims asserted against them; they committed torts in whole or in part in Texas by making or directing others to make multiple fraudulent and/or negligent false representations or statements on or about March 18, 1998, and other times, relied upon by San Pedro to his detriment; and their conduct and contacts in Texas with San Pedro created fiduciary relationships with San Pedro, both formal and informal, which they breached by their conduct in Texas. The trial court denied Y.Y. Chow's and J. Chow's special appearances without specifying which type of jurisdiction it found.

         In one overriding issue, Y.Y. Chow and J. Chow argue that the trial court erred by denying their special appearances. Subissue (1) concerns whether there is general jurisdiction over Y.Y. Chow. Subissue (2) concerns whether San Pedro's allegations and the evidence are sufficient to support specific jurisdiction over Y.Y. Chow and J. Chow. We sustain subissue (1) and sustain in part subissue (2).

         1. Applicable law and standard of review

         Whether a trial court has personal jurisdiction over a defendant is a question of law that we review de novo, but the trial court frequently must resolve questions of fact in order to decide the issue. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). When, as here, a trial court does not issue findings of fact and conclusions of law with its ruling on a special appearance, all findings necessary to support the ruling and supported by the evidence are implied, although the sufficiency of the record evidence to support those findings may be challenged on appeal. Id. at 795.

         The broad "doing business" language in the Texas long-arm statute allows the exercise of personal jurisdiction to "reach[] as far as the federal constitutional requirements of due process will permit." U-Anchor Advert., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977) (interpreting former Revised Statutes art. 2031b, Act of Mar. 18, 1959, 56th Leg., R.S., ch. 43, § 4, 1959 Tex. Gen. Laws 85, 85-86 (amended 1979) (current version at Tex. Civ. Prac. & Rem. Code § 17.042)); see Tex. Civ. Prac. & Rem. Code Ann. § 17.042.[5] Due process is satisfied when the nonresident defendant has established minimum contacts with the forum state and the exercise of jurisdiction comports with traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

         A nonresident defendant's minimum contacts can create either general or specific jurisdiction. TV Azteca v. Ruiz, 490 S.W.3d 29, 37 (Tex. 2016). Minimum contacts exist when the nonresident defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). There are three components to the "purposeful availment" inquiry. Searcy v. Parex Res., Inc., 496 S.W.3d 58, 67 (Tex. 2016). First, the relevant contacts are those of the defendant, not the unilateral activity of another party or a third person. Id. Second, the contacts must be purposeful rather than random, fortuitous, isolated, or attenuated. Id. Third, the defendant must seek some benefit, advantage, or profit by availing itself of the jurisdiction. Id.

         General jurisdiction is party focused. A trial court has general jurisdiction over a nonresident defendant when the defendant's contacts with the forum state are so continuous and systematic that the defendant is essentially at home in the state. TV Azteca, 490 S.W.3d at 37. When a nonresident defendant is subject to general jurisdiction, the trial court may exercise jurisdiction over the defendant even if the plaintiff's cause of action does not arise from or relate to the defendant's contacts with the forum. Id. This test requires substantial activities within the forum and is more demanding than the test for specific jurisdiction. Id. "For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile." Daimler AG v. Bauman, 571 U.S. 117, 137 (2014); see Domicile, Black's Law Dictionary (11th ed. 2019) ("The place at which a person has been physically present and that the person regards as home; a person's true, fixed, principal, and permanent home, to which that person intends to return and remain even though currently residing elsewhere."). We determine an individual's domicile for purposes of general jurisdiction as of the time suit is filed. See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 447-48 (1952).

         Specific jurisdiction is transaction focused. A trial court has specific jurisdiction over a nonresident defendant when (1) the defendant's contacts with the forum state are purposeful and (2) the cause of action arises from or relates to those contacts. Kelly v. Gen. Interior Constr., Inc., 301 S.W.3d 653, 658 (Tex. 2010). When a nonresident defendant is subject to specific jurisdiction, the trial court may exercise jurisdiction over the defendant even if the defendant's forum contacts are isolated or sporadic. TV Azteca, 490 S.W.3d at 37. In conducting a specific-jurisdiction analysis, we focus on the relationship among the defendant, the forum, and the litigation. Kelly, 301 S.W.3d at 658. There must be a substantial connection between the defendant's contacts and the operative facts of the litigation. Moncrief Oil Int'l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 156 (Tex. 2013). Generally, a specific-jurisdiction analysis should be performed on a claim-by-claim basis. Id. at 150. When separate claims are based on the same forum contacts, however, a separate analysis of each claim is not required. Id. at 150-51.

         In a special appearance, the plaintiff and the defendant bear shifting burdens of proof. Kelly, 301 S.W.3d at 658. The plaintiff bears the initial burden of pleading sufficient facts to bring a nonresident defendant within the reach of the Texas long- arm statute. Id.; see Tex. Civ. Prac. & Rem. Code Ann. § 17.042. If the plaintiff meets its initial burden, the burden then shifts to the defendant to negate all bases of personal jurisdiction alleged by the plaintiff. Kelly, 301 S.W.3d at 658. "Because the plaintiff defines the scope and nature of the lawsuit, the defendant's corresponding burden to negate jurisdiction is tied to the allegations in the plaintiff's pleading." Id. At the special-appearance stage, we must take the plaintiff's allegations as true. See Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 585 (Tex. 2007). A defendant can negate jurisdiction on either a factual or a legal basis. Kelly, 301 S.W.3d at 659. "Factually, the defendant can present evidence that it has no contacts with Texas, effectively disproving the plaintiff's allegations." Id. Or the defendant can show that even if the plaintiff's alleged facts are true, the evidence is legally insufficient to establish jurisdiction. Id. If the defendant meets its burden of negating all alleged bases of personal jurisdiction, then the plaintiff must respond with evidence "establishing the requisite link with Texas." See id. at 660.

         Once the court concludes that the defendant has sufficient minimum contacts with the state to establish personal jurisdiction, the defendant bears the burden of establishing that the exercise of personal jurisdiction would offend traditional notions of fair play and substantial justice. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231 (Tex. 1991).

         To determine whether the exercise of personal jurisdiction offends traditional notions of fair play and substantial justice, the court considers: (1) the burden on the defendant, (2) the interests of the forum state in adjudicating the dispute, (3) the plaintiff's interests in obtaining convenient and effective relief, (4) the international justice system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the nations in furthering fundamental substantive social policies. Moncrief Oil, 414 S.W.3d at 155. Only in rare cases will the exercise of personal jurisdiction not comport with fair play and ...


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