Rheal Bougie and North American Global Protection, Inc. v. Technical Risk, Inc.

• Court: Court of Appeals of Texas
• Decided: December 16, 2004
• Docket: 14-03-01222-CV
• Status: Published

Opinion

Affirmed and Memorandum Opinion filed December 16, 2004

Affirmed and Memorandum Opinion filed December 16, 2004.

In The

Fourteenth Court of Appeals

____________

NO. 14-03-01222-CV

RHEAL BOUGIE AND

NORTH AMERICAN GLOBAL PROTECTION 2000, INC., Appellants

V.

TECHNICAL RISKS, INC., Appellee

_________________________________________________________

On Appeal from the 164th District Court

Harris County, Texas

Trial Court Cause No. 01-49908

M E M O R A N D U M   O P I N I O N

Appellants Rheal Bougie and North American Global Protection 2000, Inc. appeal from a denial of their special appearances regarding a third-party petition filed by appellee Technical Risks, Inc. in the trial court below.  We affirm.

I.  Factual and Procedural Background

The underlying dispute arises out of the sale of insurance.  In its third amended petition asserting claims against Technical Risks, Inc. and others, Alterra Healthcare Corporation alleges the following facts:

!         Alterra owns and operates retirement communities and assisted-living centers throughout the United States.

!         Seeking new insurance coverage for its business, Alterra received a written insurance proposal from Technical Risks, a Texas-based retail insurance broker, in June of 2001, in which Technical Risks offered to obtain professional and commercial-liability insurance for Alterra.  Under Technical Risks=s proposal, the insurance was to be underwritten by Westchester Surplus Lines.  After discussions with Technical Risks, Alterra accepted the proposal.

!         Technical Risks sent a letter dated July 3, 2001, to Alterra indicating that the insurance in question had been obtained from Westchester Surplus Lines for the policy period July 1, 2001 to July 1, 2002.

!         Between late June 2001 and early August 2001, Alterra wired more than $3.1 million to Technical Risks in payment of scheduled premiums and related costs.

!         Although Alterra believed that Technical Risks was dealing directly with Westchester Surplus Lines, Technical Risks was actually dealing with a Texas broker C Monarch Insurance Services, Inc. C and two Canadian brokers C GWB Insurance Managers, Inc. and North American Global Protection 2000, Inc. 

!         Unbeknownst to Alterra, Technical Risks sent by wire transfer $1.875 million of Alterra=s premiums to Monarch on July 30, 2001.

!         On August 3, 2001, unbeknownst to Alterra, Technical Risks received a notice from attorneys for Westchester that Technical Risks was not authorized to issue insurance on Westchester=s behalf.

!         Notwithstanding the August 3rd notice, Technical Risks negligently failed to promptly take steps to protect funds collected from Alterra; consequently, Monarch wired sums of $519,000 on August 7, 2001, and $812,290 on August 9, 2001, to GWB and Global Protection, Canadian brokers of which Alterra was unaware at the time.

!         On or about August 7, 2001, Alterra received a letter from attorneys representing Westchester, advising that the broker or brokers who purportedly issued the insurance to Alterra did not have authority to act on Westchester=s behalf.

!         Despite representations to the contrary by Technical Risks, Westchester never had done business with Technical Risks or the other brokers involved, and none of these parties had authority to bind Westchester.

!         On August 15, 2001, Alterra requested, as a good faith gesture, that Technical Risks return all sums previously paid to it by Alterra, which sums were to be held in the trust account of Alterra=s counsel.  Alterra also requested Technical Risks to provide an explanation of Westchester=s letter and to provide evidence that the insurance in question was actually in force. 

!         Monarch misrepresented to Alterra that the inclusion of Westchester was a clerical error and that insurance, in fact, had been put into effect.

!         In response to Alterra=s request, Technical Risks returned $1,310,340.33 in premiums and Monarch returned $1,312,500 in premiums; however, Alterra did not receive $562,499.50 in premiums that it paid. 

!         Monarch erroneously advised Alterra that the policies Alterra purchased were to be Areinsured by ING Insurance@ and that Monarch had been authorized to bind coverages by GWB.

!         Monarch also advised that GWB held itself out to be a managing general agent of ING.  Upon inquiry by Alterra, ING advised Alterra that GWB had no such authority, that ING never agreed to serve as a reinsurer of the insurance policies, and that any documents purporting to bind ING to such an agreement are forgeries. 

!         After it became evident that neither Westchester nor ING authorized or underwrote the insurance coverage at issue, Monarch represented on August 24, 2001, that Monarch had received a confirmatory letter from Allianz, a major German insurance company, of its agreement to underwrite the insurance that Alterra had purchased from Technical Risks.  However, by letter dated September 6, 2001, counsel for Allianz reported to Alterra that the letter purportedly from Allianz was fraudulent and that neither Allianz nor its subsidiaries issued any insurance coverage for Alterra.

!         Alterra never received the insurance coverage that Technical Risks agreed to provide.

In the same pleading, Alterra asserts a breach-of-contract claim against Technical Risks as well as claims against both Technical Risks and Monarch for breach of contract, negligent misrepresentation, violations of article 21.21 of the Texas Insurance Code, negligence, money had and received, and breach of fiduciary duty.^[1]  

Technical Risks, in turn, filed a cross-claim against Monarch, alleging that Monarch or other entities were responsible for the remaining money owed to Alterra.  Technical Risks also filed a third-party petition against Christopher Purser, president of Monarch, Mark Kletter, appellant North American Global Protection 2000, Inc. (AGlobal Protection@), appellant Rheal Bougie (a principal of Global Protection), GWB, and William Ballachey (a principal of GWB), as third-party defendants.  In its first amended third-party petition, Technical Risks asserts that the third-party defendants did all of the following:

(1)       assured that the coverage for Alterra by Westchester Surplus Lines was in place,

(2)       represented to Technical Risks that a reinsurance agreement existed between ING Insurance and ACE of Bermuda, the purported parent company of Westchester, that another insurance agent had objected to the use of Westchester as the Afronting carrier,@ and that a new Afronting carrier@ was being arranged,

(3)       induced Technical Risks to forward premiums from Alterra to the third-party defendants,

(4)       knew the funds were for the purpose of purchasing specific insurance policies and were to be used for no other purpose,

(5)       converted these funds,

(6)       breached fiduciary duties owed to Technical Risks,

(7)       were negligent and failed to ensure that they had actual and legal authority from Westchester,

(8)       failed to obtain insurance from Westchester,

(9)       failed to comply with the laws and regulations regarding insurance transactions,

(10)     engaged in fraud and failed to make necessary disclosures, and

(11)     engaged in racketeering activity. 

In its third-party petition, Technical Risks also asserts that, though it denies any liability to Alterra, if Technical Risks is held liable to Alterra, such liability would be based on the acts or omissions of the third-party defendants, and therefore, Technical Risks would be entitled to indemnity from the third-party defendants.

Bougie and Global Protection filed a special appearance contesting the trial court=s ability to exercise personal jurisdiction over them.  Both parties then filed a motion for leave to file amended special appearances, claiming they did not receive notice of the docket control order that required the parties to set special-appearance hearings on or before September 1, 2003.  Both Alterra and Technical Risks separately filed objections to the request for leave to file amended special appearances.  On September 29, 2003, the trial court granted the motion and allowed Bougie and Global Protection to file amended special appearances.  The trial court also ordered the special-appearance hearing set for October 20, 2003.  After conducting the hearing, the trial court denied the special appearances.

II.  Standard of Review

Whether appellants are subject to personal jurisdiction in Texas is a question of law subject to de novo review.  BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).  The trial court did not issue any findings of fact or conclusions of law.  Therefore, all facts necessary to support the trial court=s ruling and supported by the evidence are implied in favor of the trial court=s decision.  Id. at 795.  Parties may challenge the legal and factual sufficiency of these implied factual findings.  Id.  In conducting a no-evidence analysis, we review the evidence in a light that tends to support the disputed findings and disregard all evidence and inferences to the contrary.  Lee Lewis Constr., Inc. v. Harrison, 70 S.W.3d 778, 782 (Tex. 2001).  If more than a scintilla of evidence exists, it is legally sufficient.  Id.  More than a scintilla of evidence exists if the evidence furnishes some reasonable basis for differing conclusions by reasonable minds about a vital fact=s existence.  Id. at 782B83. 

When reviewing a challenge to the factual sufficiency of the evidence, we examine the entire record, considering both the evidence in favor of, and contrary to, the challenged finding.  Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).  After considering and weighing all the evidence, we set aside the fact finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.  Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986).  The trier of fact is the sole judge of the credibility of the witnesses and the weight to be given to their testimony.  GTE Mobilnet of S. Tex. v. Pascouet, 61 S.W.3d 599, 615B16 (Tex. App.CHouston [14th Dist.] 2001, pet. denied).  We may not substitute our own judgment for that of the trier of fact, even if we would reach a different answer on the evidence.  Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998).  The amount of evidence necessary to affirm a judgment is far less than that necessary to reverse a judgment.  Pascouet, 61 S.W.3d at 616.

III.  Analysis and Discussion

A.        Did Bougie and Global Protection waive their special appearances?

As a preliminary matter, Technical Risks contends Bougie and Global Protection waived their special appearances because they did not meet the September 1, 2003 deadline set in the trial court=s amended docket control order for setting all hearings relating to personal jurisdiction.  Texas Rule of Civil Procedure 166, governing pre-trial conferences, provides that an order shall be made at the pre-trial conference hearing, and Asuch order when issued shall control the subsequent course of the action.@  Tex. R. Civ. P. 166.  Nevertheless, the trial court retains the authority under Rule 166 to modify an order to prevent manifest injustice.  See id.  Because the trial court has a Aduty to schedule its cases in such a manner as to expeditiously dispose of them@ and is given Awide discretion in managing its docket . . . we will not interfere with the exercise of that discretion absent a showing of clear abuse.@  Clanton v. Clark, 639 S.W.2d 929, 931 (Tex. 1982).

In this case, the trial court=s order states that Bougie and Global Protection did not have notice of the AJoint Motion for Continuance, Docket Control Order, and Preferential Trial Setting@ before the September 1, 2003 deadline.  Therefore, it seems the trial court allowed the late-filed motions to prevent manifest injustice because it found that Bougie and Global Protection did not receive notice of the deadline.  The trial court did not abuse its discretion when it allowed Bougie and Global Protection to file their amended special appearances and set them for hearing after September 1, 2003.

B.        Did the trial court properly conclude that it could exercise personal jurisdiction over Bougie and Global Protection based on specific jurisdiction?

In their sole issue on appeal, Bougie and Global Protection challenge the trial court=s  denial of their special appearances.  The Texas long-arm statute governs Texas courts= exercise of jurisdiction over nonresident defendants.  Tex. Civ. Prac. & Rem. Code '' 17.041B.045; Guardian Royal Exch. Assur. Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991).  It allows courts to exercise personal jurisdiction Aas far as the federal constitutional requirements of due process will permit.@  BMC Software, 83 S.W.3d at 795.  Thus, we rely on precedent from the United States Supreme Court and from other federal courts, as well as Texas decisions, in determining whether a nonresident defendant has shown the exercise of personal jurisdiction violates federal due process guarantees.  Id.

Personal jurisdiction over a nonresident defendant is constitutional when two conditions are met: (1) the defendant has established Aminimum contacts@ with the forum state, and (2) the exercise of jurisdiction comports with Atraditional notions of fair play and substantial justice.@  BMC Software, 83 S.W.3d at 795.  A nonresident defendant that has Apurposefully availed@ itself of the privileges and benefits of conducting business in Texas has sufficient contacts to allow Texas courts to exercise personal jurisdiction over the nonresident.  Id.  Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant has purposefully established Aminimum contacts@ with Texas.  Id.  The concept of Aforeseeability@ is implicit in the requirement that there be a Asubstantial connection@ between the appellants and Texas arising from their conduct purposefully directed toward Texas.  See Guardian Royal Exch. Assur., Ltd., 815 S.W.2d at 227.  A defendant should not be subject to a Texas court=s jurisdiction based upon random, fortuitous, or attenuated contacts.  BMC Software Belgium, N.V., 83 S.W.3d at 795.  Because of the unique burden placed on a party called upon to defend a suit in a foreign legal system, the minimum contacts analysis is particularly important when the defendant is from a different country.  Id. 

A nonresident defendant=s contacts with a forum can give rise to either general or specific jurisdiction.  Id.  There is no contention in this case that the trial court can exercise jurisdiction over Bougie and Global Protection based on general jurisdiction.  In conducting a specific-jurisdiction analysis, we must focus on the relationship among appellants, Texas, and the litigation.  See Guardian Royal Exch. Assur., Ltd., 815 S.W.2d at 228.  Specific jurisdiction exists if Technical Risks=s claims against Bougie and Global Protection arise from or relate to their purposeful contacts with Texas.  American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002).  Technical Risks argues that its claims against Bougie and Global Protection arise from or relate to their contacts with Texas.

When reaching a decision to exercise or decline jurisdiction, the trial court should rely only on the necessary jurisdictional facts and should not reach the merits of the case.  Arterbury v. Am. Bank & Trust Co., 553 S.W.2d 943, 947 (Tex. Civ. App.CTexarkana 1977,  no writ).  Ultimate liability in tort is not a jurisdictional fact, and the merits of Technical Risks=s claims are not at issue in determining whether the trial court erred in concluding that it could exercise personal jurisdiction over Bougie and Global Protection.  See Baldwin v. Household Intern, Inc., 36 S.W.3d 273, 277 (Tex. App.CHouston [14th Dist.] 2001, no pet.). Therefore, when a party alleges a tort claim arising out of an act committed in Texas, the necessary proof is only that the purposeful act was committed Texas.  Id.  In determining personal jurisdiction, the court does not inquire into whether the purposeful act allegedly giving rise to tort liability actually does give rise to tort liability.  Id.

The evidence that was before the trial court at the time it denied the special appearances is legally and factually sufficient to support the following implied findings regarding Bougie=s and Global Protection=s contacts with Texas:

(1)       Bougie and Global Protection prepared and sent a document to Monarch in Texas listing  purported coverages for policies under which Alterra was the insured and demanding that payment for unpaid premiums therefor be wired to AGlobal Protection North American 2000 Inc. In Trust.@

(2)       This document does not refer to GWB and it lists AGlobal Protection North American 2000 Inc.@ as the ARecipient/Beneficiary.@

(3)       By means of three wire transfers from Texas to a Global Protection bank account on or before August 9, 2001, Monarch forwarded more than $1.8 million to Global Protection.

(4)       Despite demand, Global Protection never refunded this money to Monarch.

(5)       Some of the money that forms the basis of Alterra=s suit against Technical Risks, and of Technical Risks=s claims against Bougie and Global Protection, was included in the $1.8 million.

(6)       Global Protection forwarded some of the $1.8 million to GWB and retained some of this money as fees for services that it allegedly provided to GWB.

(7)       On August 31, 2001, Bougie and Global Protection sent via fax to Monarch in Texas letters purportedly from an Allianz company stating that A[t]his letter shall serve to confirm that Allianz is issuing coverage on the captioned program [Alterra Healthcare Corporation] as per the terms and conditions of the GWB slip and presentation.@^[2]

Presuming for jurisdictional purposes only that Bougie and Global Protection (1) misrepresented that coverage for Alterra was in place, (2) induced Technical Risks to forward premiums from Alterra, and (3) converted these funds, and presuming that any actionable loss to Alterra was caused by the acts or omissions of Bougie and Global Protection rather than Technical Risks, we conclude that the trial court did not err in impliedly ruling that Technical Risks=s claims against Bougie and Global Protection arise from or relate to their purposeful contacts with Texas.  See Wright v. Sage Eng=g, Inc., 137 S.W.3d 238, 251 (Tex. App.CHouston [1st Dist.] 2004, pet. denied) (holding that nonresident defendant had sufficient minimum contacts to subject it to specific personal jurisdiction in Texas in case in which plaintiff alleged that, during negotiations conducted by telephone and electronic mail, nonresident defendant made misrepresentations regarding protection of trade secrets); Boissiere v. Nova Capital, 106 S.W.3d 897, 904B06 (Tex. App.CDallas 2003, no pet.) (concluding that allegations asserted in fraud and negligent misrepresentation case that nonresident defendants made misrepresentations in telephone calls to Texas resident, who relied on representations in Texas and was induced to provide defendants with plaintiff=s trade secret information, were sufficient to support specific jurisdiction in Texas).^[3]  Accordingly, the trial court did not err in denying their special appearances.

IV.  Conclusion

After carefully reviewing the record, we conclude the trial court did not err in impliedly ruling that the minimum contacts requirement is satisfied under a specific- jurisdiction analysis and that the trial court may exercise personal jurisdiction over Bougie and Global Protection consistent with due process.  Accordingly, we overrule appellants= sole issue on appeal and affirm the trial court=s order denying the special appearances.

/s/        Kem Thompson Frost

Justice

Judgment rendered and Memorandum Opinion filed December 16, 2004.

Panel consists of Chief Justice Hedges and Justices Frost and Guzman.

---

^[1]  In its third amended petition, Alterra also added as defendants Fenchurch Risks, L.P., formerly known as Technical Risks, L.P., Treiser, L.L.C., the general partner of Fenchurch, Tartri Holding, Inc., Thomas A. Reiser, a licensed broker with Tartri, Paul Botker, president of Technical Risks, and Gary W. Schrock, a Technical Risks agent. 

^[2]  Allianz allegedly informed Alterra that this letter was fraudulent and that neither Allianz nor any of its subsidiaries had issued any insurance coverage for Alterra.

^[3]  Bougie and Global Protection have waived the issue of whether the exercise of personal jurisdiction over them would comport with traditional notions of fair play and substantial justice by failing to present any argument, analysis, record citations, or legal authorities in support of this issue in their appellate brief.  See Tex. R. App. P. 38.1(h); Houghton v. Port Terminal R.R. Ass'n, 999 S.W.2d 39, 51 (Tex. App.CHouston [14th Dist.] 1999, no pet.).  In any event, the only evidence they presented to the trial court in this regard was evidence that they are Canadian and that there is a pending suit in Canada regarding the same transaction that was filed by Monarch against them, Ballachey, and GWB.  Even if Bougie and Global Protection had not waived this issue, they still could not have prevailed because the trial court correctly ruled that this is not one of the rare cases in which the exercise of jurisdiction does not comport with fair play and substantial justice when the nonresident defendant has purposefully established minimum contacts with the forum state.  See Ring Power Sys. v. Int=l De Comercio y Consultoria, 39 S.W.3d 350, 354B55 (Tex. App.CHouston [14th Dist.] 2001, no pet.).