Southampton Ltd. and Southwest Reinsurance, Inc. v. Four Horsemen Auto Group, Inc., Chisholm Trail Auto Group, LLC, Chisholm Trail Auto Group II, LLC , Chisholm Trail Real Estate, LLC

• Court: Court of Appeals of Texas
• Decided: July 20, 2016
• Docket: 05-14-01415-CV
• Status: Published

Opinion

Reverse and Remand and Opinion Filed July 20, 2016

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-14-01415-CV

SOUTHAMPTON LTD. AND SOUTHWEST REINSURANCE, INC., Appellants V. FOUR HORSEMEN AUTO GROUP, INC., CHISHOLM TRAIL AUTO GROUP, LLC, CHISHOLM TRAIL AUTO GROUP II, LLC, AND CHISHOLM TRAIL REAL ESTATE, LLC, Appellees

On Appeal from the 101st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-13-13331

MEMORANDUM OPINION Before Justices Bridges, Francis, and Myers Opinion by Justice Bridges Southampton, LTD. and Southwest Reinsurance, Inc. appeal, following the trial court’s

granting of the special appearance of Four Horsemen Auto Group, Inc., Chisholm Trail Auto

Group, LLC, Chisholm Trail Auto Group II, LLC, and Chisholm Trail Real Estate, LLC., after

final judgment in their favor against Michael J. Terry individually. In two issues, appellants

argue (1) this Court has jurisdiction to hear their challenge to the trial court’s order granting the

special appearance of Four Horsemen and the Chisholm entitities, and (2) the trial court erred in

granting the special appearance because Terry had authority to enter agreements containing

Texas forum selection clauses on behalf of Four Horsemen and the Chisholm entities. We reverse the trial court’s order granting the special appearance and remand for further

proceedings.

On November 9, 2012, Southampton and Southwest made a $500,000 loan to Terry for

the purpose of investing in automobile dealerships. Terry, the Chisholm entities, and Four

Horsemen agreed to sell vehicle service contracts and other products offered by Southwest, the

proceeds from which could be used to pay down the note. At that time, Terry was a managing

member of the Chisholm entities and Four Horsemen, and the Chisholm entities and Four

Horsemen agreed to guarantee Terry’s payment obligations under the promissory note and

agreed to be jointly and severally liable for that obligation. The Chisholm entities filed with the

Oklahoma Secretary of State a trade name report showing Chisholm Trail Auto Group would

conduct business as “Mike Terry Chevrolet Buick GMC,” and Chisholm Trail Auto Group II

would conduct business as “Mike Terry Chrysler Dodge Jeep Ram.”

In addition to the promissory note, Terry signed, individually and as managing member

of the Chisholm entities and Four Horsemen, a guaranty and two additional agreements relating

to the vehicle service contracts and guaranteed auto protection contracts offered by Southwest.

The guaranty and additional agreements contained a choice of law provision stating the courts of

Dallas County, Texas would have exclusive jurisdiction over any disputes arising from any

provision of the guaranty or additional agreements. When Terry, the Chisholm entities, and Four

Horsemen failed to pay, Southampton and Southwest sued alleging they owed Southampton

$390,283.80 plus interests, costs, and attorney’s fees. In addition, Terry, the Chisholm entities,

and Four Horsemen allegedly failed to comply with their agreements with Southwest and owed

$103,395 in unpaid service contract and auto protection contract premiums. Southampton and

Southwest alleged Terry, the Chisholm entities, and Four Horsemen breached the promissory

note, the guaranty, and the additional agreements.

–2– In January 2014, the Chisholm entities and Four Horsemen filed a special appearance

alleging they were not citizens of Texas and were not parties to the contracts with Southampton

and Southwest. They argued Terry “secretly negotiated and entered the personal loan and

guaranty contracts,” and “corporate documents” showed Terry did not have the ability to bind

the Chisholm entities and Four Horsemen. Specifically, they argued Terry was a twenty-five-

percent shareholder in Four Horsemen, along with three other shareholders, each with voting

rights. Four Horsemen’s bylaws provided that no loans would be contracted unless authorized

by a resolution of the directors. Any “action without a meeting” also required “a consent in

writing, stating the action to be taken, [and] . . . signed by all of the directors.” Thus, “Terry did

not have the right to enter contracts for indebtedness/securities without prior written consent of a

majority of [Four Horsemen’s] directors.”

As to Chisholm Trail Auto Group and Chisholm Trail Auto Group II, two car dealerships,

the petition alleged they were formed in Oklahoma in January and February 2012, with Four

Horsemen as the sole original investing “member” and Terry as the “dealer principal” having

day-to-day control of the dealerships. In August 2012, through a written amendment, Terry and

Four Horsemen became “co-managers” of the dealerships. The dealerships’ operating

agreements provided that, if the dealership had more than one manager, it would “be governed

by the decisions of a majority” of the managers.

As to Chisholm Trail Real Estate, the special appearance noted it was formed in

Oklahoma in March 2012 and owned the property on which one of the dealerships was located.

Four Horsemen was Chisholm Trail Real Estate’s only designated “manager” and Four

Horsemen had sole authority to borrow money or encumber its property. The Chisholm entities

pointed out that Terry alone signed the promissory note, guaranty, and additional agreements and

argued he did so fraudulently and without authority.

–3– In their response to the special appearance, Southampton and Southwest objected that the

petition was not verified, and an attached affidavit was not verified and not based on personal

knowledge. Southampton and Southwest argued the Chisholm entities and Four Horsemen had

waived all jurisdictional challenges by making a general appearance; had agreed to the forum-

selection clauses in the promissory note, guaranty, and additional agreements; and had failed to

show that the promissory note, guaranty, and additional agreements were invalid. Southampton

and Southwest argued Four Horsemen’s bylaws provided that one member constituted a quorum

for the transaction of business, and “[t]he act of the majority of the directors at a meeting at

which a quorum is present shall be the act of the directors.” Thus, the bylaws “expressly

permitted Terry alone to authorize himself to execute the contracts on Four Horsemen’s behalf.”

Alternatively, Southampton and Southwest argued Four Horsemen and the Chisholm entities

waived the bylaws’ requirements by “entering into numerous contracts affecting and

encumbering their property without conducting a formal meeting, passing a resolution, or

otherwise granting or limiting the signor’s authority to execute such contracts.”

As an example, Southampton and Southwest attached the asset purchase agreement under

which Chisholm Trail Auto Group and Chisholm Trail Auto Group II purchased dealership

property and General Motors and Chrysler automobiles for $3,530,000. The purchase agreement

was signed only by Terry on behalf of Chisholm Trail Auto Group and Chisholm Trail Auto

Group II. Attached to the response was the affidavit of Vahid Salalati, who testified he was the

CEO of Four Horsemen, “an entity that exists on paper only.” Salalati testified the Four

Horsemen board of directors did not pass any resolutions, did not have a minute book, and did

not conduct a meeting and approve the purchase of the dealerships. The board never approved a

contract and never rejected a contract. Also attached to the response was a November 2012

–4– “certificate of incumbency” listing Terry as “Dealer Principal/Managing Member” of Four

Horsemen and signed by Salalati.

Following a hearing, the trial court granted the special appearance and dismissed from the

lawsuit Four Horsemen and the Chisholm entities. In October 2014, the trial court entered final

judgment against Terry individually awarding Southampton and Southwest $394,634.70 plus

attorney’s fees. After final judgment was entered, Southampton and Southwest filed this appeal

from the order granting Four Horsemen and the Chisholm entities’ special appearance.

In their first issue, Southampton and Southwest argue this Court has jurisdiction to hear

their challenge to the order granting the special appearance. Specifically, they argue their

decision not to pursue an interlocutory appeal from the order did not waive their right to appeal

the order after final judgment. We agree. A person may appeal from an interlocutory order that

grants or denies the special appearance of a defendant under Rule 120a, Texas Rules of Civil

Procedure. TEX. CIV. PRAC. & REM. CODE ANN. §51.04(a)(7) (West Supp. 2015). Other courts

have specifically held that a challenge to a ruling on a special appearance may be made after

final judgment. See DeWolf v. Kohler, 452 S.W.3d 373, 384 (Tex. App.—Houston [14th Dist.]

2014) (complaint regarding special-appearance ruling not waived by failing to pursue

interlocutory appeal); GJP, Inc. v. Ghosh, 251 S.W.3d 854, 866-67 (Tex. App.—Austin 2008, no

pet.) (appellate jurisdiction to review special-appearance rulings is not limited solely to

interlocutory appeals); Canyon (Austl.) Pty., Ltd. v. Maersk Contractors, Pty., Ltd., No. 08–00–

00248–CV, 2002 WL 997738, at *4 (Tex. App.—El Paso May 16, 2002, pet. denied) (not

designated for publication) (interlocutory appeal not “mandatory” and trial court’s order granting

special appearance reviewable on appeal from final judgment); see also Hernandez v. Ebrom,

289 S.W.3d 316, 327 (Tex. 2009) (Jefferson, C.J., dissenting) (pointing “prevailing view . . . that

an order granting or denying a special appearance may be challenged after final judgment”). But

–5– see Matis v. Golden, 228 S.W.3d 301, 305 (Tex. App.—Waco 2007, no pet.) (challenge to trial

court’s order denying defendant’s special appearance, raised for first time on appeal from final

judgment, was untimely). This Court has not considered this specific issue but has considered an

analogous question and concluded that, in the context of denials of motions to dismiss under the

anti-SLAPP statute, failure to pursue an interlocutory appeal does not result in the waiver of the

right to appeal. Am. Heritage Capital, LP v. Gonzalez, 436 S.W.3d 865, 872-73 (Tex. App.—

Dallas 2014, no pet.) (permissive language creating right of interlocutory appeal in anti-SLAPP

statute does not require interlocutory appeal, and party may appeal after final judgment). We

conclude this Court has jurisdiction to consider Southampton and Southwest’s challenge to the

special appearance in this case. Gonzalez, 436 S.W.3d at 872-73; Ghosh, 251 S.W.3d at 866-67.

We sustain Southampton and Southwest’s first issue.

In their second issue, Southampton and Southwest argue the trial court erred in granting

Four Horsemen and the Chisholm entities’ special appearance. Specifically, they argue Terry

had authority to enter agreements containing Texas forum selection clauses on behalf of Four

Horsemen and the Chisholm entities. They argue Four Horsemen and the Chisholm entities were

required to prove that the forum selection clauses themselves were the result of fraud and

characterize the Four Horsemen and the Chisholm entities’ argument as an unsupported

argument that the agreements were void as a whole because of fraud.

Four Horsemen and the Chisholm entities argue they did not know about the contracts at

issue, and Terry executed the contracts alone without actual or apparent authority. Thus, they

argue, fraud exists in this case as a matter of law, and the forum-selection clauses are invalid.

The plaintiff bears the initial burden of pleading sufficient allegations to bring a

nonresident defendant within the personal jurisdiction of a Texas court. BMC Software Belgium,

N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002). When this burden is met, the burden shifts

–6– to the nonresident to negate all bases of personal jurisdiction asserted by the plaintiff. Id. A

defendant may negate jurisdiction on a legal basis by showing that even if the plaintiff’s

allegations are true, they do not establish jurisdiction. Kelly v. Gen. Interior Constr., Inc., 301

S.W.3d 653, 658 (Tex. 2010). A defendant may also negate jurisdiction on a factual basis by

introducing evidence that rebuts the allegations in the pleadings. Id.

The determination of whether a court has personal jurisdiction over a defendant is a

question of law. Moncrief Oil Int’l, Inc. v. OAO Gazprom, 414 S.W.3d 142, 150 (Tex. 2013).

When, as in this case, the trial court does not issue findings of fact and conclusions of law, all

facts necessary to support the judgment and supported by the evidence are implied. BMC

Software, 83 S.W.3d at 795. When the appellate record includes the reporter’s record and clerk’s

record, these implied findings are not conclusive and may be challenged for legal and factual

sufficiency. Id. When the trial court’s findings are supported by sufficient evidence, or when

the material facts are undisputed, we review the trial court’s ruling on a special appearance de

novo. Baker Hughes Inc. v. Brooks, 405 S.W.3d 246, 249 (Tex. App.—Houston [14th Dist.]

2013, pet. denied).

Texas courts may assert jurisdiction over a nonresident defendant if (1) the Texas long-

arm statute authorizes the exercise of jurisdiction and (2) the exercise of jurisdiction is consistent

with federal and state constitutional guarantees of due process. Moki Mac River Expeditions v.

Drugg, 221 S.W.3d 569, 574 (Tex. 2007); see TEX. CIV. PRAC. & REM. CODE ANN. § 17.042

(Texas long-arm statute). The Texas long-arm statute allows Texas courts to exercise personal

jurisdiction “as far as the federal constitutional requirements of due process will permit.” BMC

Software, 83 S.W.3d at 795 (quoting U–Anchor Advert., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.

1977)). Consequently, “the requirements of the Texas long-arm statute are satisfied if an

–7– assertion of jurisdiction accords with federal due-process limitations.” Moki Mac River

Expeditions, 221 S.W.3d at 575.

Forum-selection clauses are contractual arrangements whereby parties agree in advance

to submit their disputes for resolution within a particular jurisdiction. RSR Corp. v. Siegmund,

309 S.W.3d 686, 700 (Tex. App.—Dallas 2010, no pet.). In Texas, forum-selection clauses are

generally considered valid and enforceable, unless enforcement is shown to be unreasonable and

unjust. Phoenix Network Techs. v. Neon Sys., 177 S.W.3d 605, 611 (Tex. App.—Houston [1st

Dist.] 2005, no pet.). A forum-selection clause obtained through freely negotiated agreements

does not offend due process, provided it is not unreasonable and unjust. Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 473 n. 14, (1985); CNOOC S.E. Asia Ltd. v. Paladin Res. (SUNDA)

Ltd., 222 S.W.3d 889, 894 (Tex. App.—Dallas 2007, pet. denied). When claims fall within the

scope of a forum-selection clause, application of the Texas long-arm statute and analysis of a

defendant’s contacts with Texas are unnecessary. RSR Corp., 309 S.W.3d at 700.

We construe a contract containing a forum-selection clause as we do any contract,

according to its plain language. See Phoenix, 177 S.W.3d at 615. If a contract is worded so that

it can be given a certain or definite legal meaning or interpretation, we will construe the contract

as a matter of law. Enter. Leasing Co. v. Barrios, 156 S.W.3d 547, 549 (Tex. 2004); Coker v.

Coker, 650 S.W.2d 391, 393 (Tex. 1983). We presume the parties intended every contractual

provision to have meaning. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 180 (Tex.

1997). We examine the entire contract in an attempt to harmonize its provisions, and we give

effect to all of its provisions so that none will be rendered meaningless. Frost Nat’l Bank v. L &

F Dist., Ltd., 165 S.W.3d 310, 311–12 (Tex. 2005); Coker, 650 S.W.2d at 393.

An agent’s authority to act on behalf of a principal depends on some communication by

the principal either to the agent (actual or express authority) or to the third party (apparent or

–8– implied authority). Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). Apparent authority is

based on estoppel, arising either from a principal knowingly permitting an agent to hold himself

out as having authority or by a principal’s actions which lack such ordinary care as to clothe an

agent with the indicia of authority, thus leading a reasonably prudent person to believe that the

agent has the authority he purports to exercise. Id. The principal’s full knowledge of all material

facts is essential to establish a claim of apparent authority based on estoppel. Id. Moreover,

when making that determination, only the conduct of the principal is relevant. Id. Finally, the

standard is that of a reasonably prudent person, using diligence and discretion to ascertain the

agent’s authority. Id. at 183. Thus, to determine an agent’s apparent authority we examine the

conduct of the principal and the reasonableness of the third party’s assumptions about authority.

Id.

Here, Terry owned a twenty-five-percent interest in Four Horsemen. Four Horsemen’s

bylaws provided that one member constituted a quorum for the transaction of business, and

“[t]he act of the majority of the directors at a meeting at which a quorum is present shall be the

act of the directors.” Thus, the bylaws “expressly permitted Terry alone to authorize himself to

execute the contracts on Four Horsemen’s behalf.” Salalati testified Four Horsemen was “an

entity that exists on paper only.” Salalati testified the Four Horsemen board of directors did not

pass any resolutions, did not have a minute book, and did not conduct a meeting and approve the

purchase of the dealerships. The board never approved a contract and never rejected a contract.

Four Horsemen and Terry were “co-managers” of the dealerships, with Terry being the

“dealer principal.” Both dealerships conducted business under the trade names of “Mike Terry”

dealerships. When the Chisholm entities purchased the dealerships initially for $3,530,000,

Terry alone signed the purchase documents as “Manager & Dealer Principal.” A November 9,

2012 “certificate of incumbency” listed Terry as “Dealer Principal/Managing Member” of Four

–9– Horsemen and was signed by Salalati. That same day, Terry signed the promissory note,

guaranty, and additional agreements with Southampton and Southwest as “Dealer

Principal/Managing Member” of Four Horsemen and the Chisholm entities. Thus, it appears

Terry was, at the very least, acting with apparent authority to sign the promissory note, guaranty,

and additional agreements on behalf of himself, Four Horsemen, and the Chisholm entities. Four

Horsemen and the Chisholm entities put the name “Mike Terry” on the dealerships, represented

on the day of the contracts at issue that Terry was “Dealer Principal/Managing Member” of Four

Horsemen. See id. Because we conclude Terry had apparent authority to enter the contracts, we

reject Four Horsemen and the Chisholm entities’ argument that Terry committed fraud in

entering the contracts. The promissory note, guaranty, and additional agreements all contain

Texas choice-of-law provisions, and nothing in the record indicates that provision was not freely

negotiated. See Burger King, 471 U.S. at 473 n. 14; CNOOC, 222 S.W.3d at 894. Under these

circumstances, we conclude the trial court erred in granting the special appearance of Four

Horsemen and the Chisholm entities and dismissing Southampton and Southwest’s claims

against them. See Moncrief Oil, 414 S.W.3d at 150. We sustain Southampton and Southwest’s

second issue.

We reverse the trial court’s order granting the special appearance of Four Horsemen and

the Chisholm entities and remand for further proceedings consistent with this opinion.

/David L. Bridges/ DAVID L. BRIDGES JUSTICE

141415F.P05

–10– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

SOUTHAMPTON LTD. AND On Appeal from the 101st Judicial District SOUTHWEST REINSURANCE, INC., Court, Dallas County, Texas Appellants Trial Court Cause No. DC-13-13331. Opinion delivered by Justice Bridges. No. 05-14-01415-CV V. Justices Francis and Myers participating.

FOUR HORSEMEN AUTO GROUP, INC., CHISHOLM TRAIL AUTO GROUP, LLC, CHISHOLM TRAIL AUTO GROUP II, LLC , CHISHOLM TRAIL REAL ESTATE, LLC, Appellees

In accordance with this Court’s opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for further proceedings consistent with this opinion.

It is ORDERED that appellants SOUTHAMPTON LTD. AND SOUTHWEST REINSURANCE, INC. recover their costs of this appeal from appellees FOUR HORSEMEN AUTO GROUP, INC., CHISHOLM TRAIL AUTO GROUP, LLC, CHISHOLM TRAIL AUTO GROUP II, LLC , CHISHOLM TRAIL REAL ESTATE, LLC.

Judgment entered July 20, 2016.

–11–