Insurance Company of the West v. Smith

Filed 3/9/07 Insurance Company of the West v. Smith CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from an order of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed.

Plaintiff Insurance Company of the West (ICW) appeals an order granting the motions of defendants Davis Smith and Don Colton to quash service of summons on the ground the trial court lacks personal jurisdiction over them. We affirm the order.

BACKGROUND

In February 1998 ICW entered into a General Agency Agreement (Agreement) with Insurance Ventures, Inc. (Insurance Ventures). Under the Agreement, ICW appointed Insurance Ventures its general agent to produce homeowners insurance business in California. Insurance Ventures was charged with various duties, including collecting premiums and holding them, minus commissions, in bank trust accounts until they were to be remitted to ICW. The Agreement provided it "shall be deemed to be a California contract and construed in accordance with the laws of the State of California." It also required mediation of any dispute in San Diego, and if unsuccessful, binding arbitration in San Diego in accordance with the rules of the American Arbitration Association.

In January 1998 ICW and Smith and Colton signed an Indemnification and Guaranty Agreement (Guaranty), which stated the document "shall be attached to and form part of the . . . Agreement." The Guaranty provided that as inducement for ICW's entering into the Agreement, Smith and Colton "shall [jointly and severally] guarantee prompt payment to [ICW] and complete performance in accordance with the terms and limitations of the Agreement, as respects past, present and future obligations, including payment to [ICW] of any court costs, and/or reasonable attorney fees incurred to enforce the Agreement or this Guaranty."

In July 2005 ICW sued Smith and Colton in San Diego County Superior Court for breach of the Guaranty. The complaint alleged Insurance Ventures had breached the Agreement by failing to remit $1,149,211 in premiums due ICW, and by failing to return $6,631.04 in commissions to ICW on cancelled policies, and Smith and Colton failed and refused to pay ICW under the terms of the Guaranty despite having notice of Insurance Ventures' breach of the Agreement.

Smith and Colton specially appeared and moved to quash service of the summons and complaint for lack of personal jurisdiction over them. Smith submitted a declaration that stated he currently lived in the Bahamas; he never resided in, worked in, conducted business in or owned property in California; he never held any California licenses or maintained a mailing address or telephone number here; he was never an officer, director, shareholder, agent, employee or representative of Insurance Ventures; he visited California briefly two times for recreational purposes; the Guaranty was mailed to him in Florida, where he signed it; he never derived any economic benefit from the Guaranty; and, he never communicated with anyone from ICW in person or by telephone or letter.

Colton submitted a declaration that stated he had been a full-time resident of Utah between 1955 and 1974, and from 1978 to the present; he was employed in Utah; he lived in California between 1974 and 1978, and over the previous 25 years had visited California briefly five times for recreational purposes; the Guaranty was mailed to him in Utah and he signed it there; he never derived any economic benefit from the Guaranty; he had no affiliation with ICW; and, he never communicated with anyone from ICW in person or by telephone or letter. The declaration also stated that except for the period between 1974 and 1978, "I have never been a resident of California, have never owned property in California, never been employed in California, have never held any California licenses and have never maintained a mailing address or telephone number in California."

The court issued a tentative ruling granting the motion to quash. The court explained the only evidence ICW submitted was the complaint with attached copies of the Agreement and the Guaranty, which "provides that the individual guarantors will guarantee payment obligations upon default by Insurance Ventures and nothing more." After a hearing, the court affirmed its ruling.

DISCUSSION

I

California's long-arm statute permits courts to exercise jurisdiction over nonresidents on any basis consistent with the federal or state constitutions. (Code Civ. Proc.,  410.10.) Under the federal constitution's due process clause, the court may assume jurisdiction over a nonresident if he or she has constitutionally sufficient "minimum contacts" with the forum state. (Goehring v. Superior Court (1998) 62 Cal.App.4th 894, 904.) " 'The defendant's "conduct and connection with the forum State" must be such that the defendant "should reasonably anticipate being haled into court there." ' " (Ibid.) "Each person has a liberty interest in not being subject to judgments of a forum with which he or she has no minimum contacts." (Hall v. LaRonde (1997) 56 Cal.App.4th 1342, 1345.)

Jurisdiction over a nonresident may be general or specific. "If a nonresident defendant's activities may be described as 'extensive or wide-ranging' [citation] or 'substantial . . . continuous and systematic' [citation], there is a constitutionally sufficient relationship to warrant jurisdiction for all causes of action asserted against him. In such circumstances, it is not necessary that the specific cause of action alleged be connected with the defendant's business relationship to the forum." (Cornelison v. Chaney (1976) 16 Cal.3d 143, 147-148.) For general jurisdiction to arise, a nonresident's contacts with the forum state must be "so wide-ranging that they take the place of physical presence." (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 446 (Vons).)

"If the nonresident defendant does not have substantial and systematic contacts in the forum sufficient to establish general jurisdiction, he or she may be subject to the specific jurisdiction of the forum, if the defendant has purposefully availed himself or herself of forum benefits [citation], and the 'controversy is related to or "arises out of" a defendant's contacts with the forum.' " (Vons, supra, 14 Cal.4th at p. 446.)

" ' "Purposeful availment" requires that the defendant "have performed some type of affirmative conduct which allows or promotes the transaction of business within the forum state." ' [Citation.] A contract with an out-of-state party does not automatically establish purposeful availment in the other party's home forum. [Citations.] Rather, a court must evaluate the contract terms and the surrounding circumstances to determine whether the defendant purposefully established minimum contacts within the forum. Relevant factors include prior negotiations, contemplated future consequences, the parties' course of dealings, and the contract's choice-of-law provision." (Goehring v. Superior Court, supra, 62 Cal.App.4th at p. 907, citing Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472, 478-482.) Due process requires a "substantial connection" between the contract at issue and the forum state. (McGee v. International Life Insurance Company (1957) 355 U.S. 220, 223.)

"When a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction. [Citation.] Once facts showing minimum contacts with the forum state are established, however, it becomes the defendant's burden to demonstrate that the exercise of jurisdiction would be unreasonable." (Vons, supra, 14 Cal.4th at p. 449.) Where the evidence is undisputed, as here, the jurisdiction question is purely one of law subject to de novo review. (Ibid.)

II

A

ICW contends the court erred by finding Smith and Colton are not amenable to its general jurisdiction. ICW's theory is that under the Guaranty, Smith and Colton "had a duty to conduct continuing and systematic . . . insurance activities and/or money transactions in California" in the event of Insurance Ventures' breach of the Agreement.

ICW asserts Smith and Colton agreed to collect premiums on ICW's behalf in California, remit premiums to ICW in California and maintain premium trust accounts in California.

The Guaranty does state that on Insurance Ventures' breach of the Agreement, Smith and Colton "shall guarantee prompt payment to [ICW] and complete performance in accordance with the terms and limitations of the Agreement." (Italics added.)

Investment Ventures, however, was presumably licensed to conduct insurance activities in California, and under the Agreement it was required to perform a variety of such tasks, including soliciting and accepting insurance business, dealing with insurance agents and brokers, and being responsible for underwriting risks and determining appropriate premiums. Certainly, despite the "complete performance" language of the Guaranty, it can only be reasonably interpreted as a guarantee by Smith and Colton to cover ICW's monetary losses, and not to engage in the insurance business. Their declarations state they hold no California licenses, and thus they are not licensed by the insurance industry. Further, ICW presented no evidence that Smith or Colton collected any premiums in California, or did anything else in California pertaining to the Guaranty or Agreement, and their declarations defy that notion. ICW produced no evidence that either Smith or Colton had the "substantial and systematic contacts" with California required for an exercise of general jurisdiction. (Vons, supra, 14 Cal.4th at p. 446.)

B

Indeed, ICW did not even establish Smith or Colton is amenable to the special jurisdiction of California courts. In Sibley v. Superior Court (1976) 16 Cal.3d 442 (Sibley), the Supreme Court held a guaranty signed by a Florida resident to guaranty performance of a partnership agreement under which a Georgia corporation was to make payments to a California limited partnership pertaining to the operation of mobile home parks in Georgia did not establish minimum contacts with California for purposes of jurisdiction. The court concluded that the signing of the guaranty in Florida was intended to cause and did cause an effect in California, but the "mere causing of an 'effect' in California . . . is not necessarily sufficient to afford a constitutional basis for jurisdiction; notwithstanding this 'effect,' the imposition of jurisdiction may be 'unreasonable.' " (Id. at p. 446.)

In finding the exercise of jurisdiction unreasonable, the Sibley court explained the guarantor was not a party to the partnership agreement and took no part in its negotiation; his only connection with the transaction apparent from the record was as a guarantor of the performance of a Georgia corporation; he was a resident of Florida and signed the guarantee there; he never lived in California, owned no real or personal property or had any business interests here; and he had not visited California since 1973 when he was here on an unrelated matter. (Sibley, supra, 16 Cal.3d at p. 445.) The court found the guarantor did not purposefully avail himself of the privilege of conducting business in California or of the benefits and protections of California laws, or anticipate he would derive any economic benefit here associated with the guaranty. (Id. at p. 447.) Further, the guaranty was not subject to regulation in California. (Id. at p. 448.)

Likewise, ICW did not meet its burden of showing Smith and Colton purposefully availed themselves of the benefits of conducting business in California. (Vons, supra, 14 Cal.4th at p. 446.) Here, as in Sibley, the only connection with California was the signing of a guaranty in a foreign jurisdiction, the breach of which may have an effect in this state. Smith and Colton were not parties to the Agreement and the record does not indicate they were involved in its negotiation; they were residents of other states and their only connection was signing the Guaranty in their home states; Smith never lived in California or had any business dealings here; Colton lived in California only between 1974 and 1978, approximately 20 years before he signed the Guaranty, and he had no business dealings in California after 1978; and neither Smith nor Colton owned any property in California or derived any economic benefit here.

ICW claims Smith and Colton agreed to arbitrate any disagreement pertaining to the Guaranty in California in accordance with California law, and thus they are subject to the jurisdiction of California courts. Under Code of Civil Procedure section 1293, the "making of an agreement in this State providing for arbitration to be had within this State shall be deemed a consent of the parties thereto to the jurisdiction of the courts of this State to enforce such agreement." The Guaranty, however, does not contain an arbitration or choice of law clause. ICW relies on the statement in the Guaranty that it "shall be attached to and form part of the . . . Agreement," and the Agreement's provision for arbitration of any disagreement arising from the Agreement.

ICW, however, provides no authority for the proposition that such language in a guaranty subjects the guarantors to an arbitration provision in an underlying contract, or somehow makes the guarantors parties to the contract. Parties are required to include citation to authority in their appellate briefs, and the failure to do so allows us to treat an issue as waived. (Interinsurance Exchange v. Collins (1994) 30 Cal.App.4th 1445, 1448.)

In any event, a guaranty or forum selection clause does not subject a nonresident to the jurisdiction of California courts unless it gives sufficient notice of consent to litigate in California. (Hunt v. Superior Court (2000) 81 Cal.App.4th 901, 908.) ICW has not shown that by merely entering into the Guaranty, Smith and Colton should have reasonably anticipated being haled into court in California. (Goehring v. Superior Court, supra, 62 Cal.App.4th at p. 904.) The Guaranty was executed before the Agreement was executed, and there is no indication in the record that Smith and Colton were even aware of the Agreement's arbitration and forum selection clauses. ICW cites World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 297, but it explains that notice of the forum state's jurisdiction over a party is based on his or her purposeful availment of the privilege of conducting activities within the state. The relationship between ICW and Insurance Ventures does not satisfy the requirement of minimum contacts with California.^[1]

DISPOSITION

The order is affirmed. Smith and Colton are entitled to costs on appeal.

McCONNELL, P. J.

WE CONCUR:

McDONALD, J.

McINTYRE, J.

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^[1] In its briefing, ICW treats "special" and "limited" jurisdiction as separate concepts, but they are the same.