MacHinery Marketing, Inc. v. Breaux MacHine Works, Inc., and Shamrock MacHinery Company

Opinion issued June 24, 2004 In The Court of Appeals For The First District of Texas NO. 01-03-00881-CV MACHINERY MARKETING, INC., Appellant V. BREAUX MACHINE WORKS, INC. AND SHAMROCK MACHINERY COMPANY, Appellees On Appeal from the 334th District Court Harris County, Texas Trial Court Cause No. 2003-07440 MEMORANDUM OPINION Appellant, Machinery Marketing, Inc. (MMI), brings this interlocutory, accelerated appeal from the denial of a special appearance. See Tex. R. Civ. P. 120a; Tex. Civ. Prac. & Rem. Code § 51.014(a)(7) (Vernon Supp. 2004); see also Tex. R. App. P. 28.1 (“An appeal from an interlocutory order . . . will be accelerated.”). MMI is the defendant is the underlying case. Appellee, Breaux Machinery Works, Inc. (Breaux), had purchased an industrial machine from MMI and sued MMI and appellee, Shamrock Machinery Company (Shamrock), the broker on the transaction, claiming that the machine did not conform to specifications. In seven issues, MMI contends that Breaux’s pleadings were not sufficient to confer jurisdiction, that the trial court erred by admitting an affidavit into evidence at the rule 120a hearing, that the evidence is factually insufficient to support the trial court’s findings of fact, and that exercise of jurisdiction over MMI offends due process. We conclude that Texas may properly exercise specific, personal jurisdiction over MMI and affirm. Background MMI is a broker and seller of used industrial machines. MMI has been incorporated as an Illinois corporation since 1997. MMI is not authorized to do business in Texas and has no agent for service of process in Texas. MMI has no office in Texas and owns neither real nor personal property in Texas. Breaux and Shamrock are Texas corporations whose principal places of business are in Harris County. A. Facts MMI maintained an internet website on which it displays machinery for sale. Prospective customers could not purchase a machine directly from the website and had to inquire, either by e-mail or telecopier, about items posted on the website. In addition, MMI maintained two e-mail mailing lists from which it would broadcast information to promote sales of its inventory of machines. Broadcasts were always sent to an entire list, rather than selectively. MMI’s mass advertising e-mails have been directed to Texas. In addition, MMI advertises in national trade publications, and MMI is aware that those publications are circulated in Texas. MMI promotes its products by purchasing mailing lists from a company that would then mail MMI brochures to those on the lists. During the last seven years, MMI responded to one telecopier inquiry from Breaux. Between 2001 and 2002, Shamrock also made inquiries to MMI. One of these resulted in MMI’s selling the machine at issue to Breaux. MMI had three other sales in Texas during the last seven years, and MMI has purchased a machine in Texas for resale elsewhere. B. This Litigation This case involves three parties. MMI sold the machine to Breaux, the Texas buyer. The broker, Shamrock, while in Texas, located the machine that Breaux eventually purchased by responding to an offer by MMI that a Toshiba machine was available for sale. As described in the offer, the machine was equipped with both “synchronous tapping” and “through the spindle coolant.” Shamrock made the initial contact with MMI, and MMI responded to Shamrock’s inquiry by sending a telecopier communication that included both a quoted price for the machine and a description of the components of the machine. MMI’s president agreed that, by sending out a quotation for a machine, MMI offers to sell that machine. Shamrock contacted Breaux about the machine, and Breaux hired Shamrock to inspect the machine, which was located and had been stored in New Jersey. MMI eventually became aware that Shamrock would inspect the machine on Breaux’s behalf. After Shamrock inspected the machine in New Jersey, Breaux placed a purchase order with MMI from Texas and paid MMI’s invoice. The machine was disassembled and sent to Breaux in Texas, and Shamrock received a commission from Breaux. After acquiring the machine, Breaux sued both Shamrock and MMI, claiming violations of the Deceptive Trade Practices—Consumer Protection Act on the grounds that the machine allegedly lacks characteristics specified in MMI’s initial offer. Shamrock filed a general denial, and MMI filed a rule 120a special appearance to challenge its amenability to suit in Texas. The trial court conducted an evidentiary hearing on MMI’s special appearance, in which all parties participated, and at which MMI’s president testified. MMI appeals the trial court’s order denying the special appearance. A. Standard of Review The Texas long-arm statute authorizes exercise of jurisdiction over nonresidents who “do business” in Texas. Tex. Civ. Prac. & Rem. Code § 17.042 (Vernon 1997). The plaintiff has the initial burden to plead 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, 793 (Tex. 2002). The defendant has the burden of proof to negate all possible grounds for personal jurisdiction. BMC Software, 83 S.W.3d at 793 (citing Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985)). Whether a court has personal jurisdiction over a defendant is a question of law. BMC Software, 83 S.W.3d at 793; Silbaugh v. Ramirez, 126 S.W.3d 88, 94 (Tex. App.—Houston [1st Dist.] 2002, no pet.). Determining whether Texas may properly exercise personal jurisdiction frequently requires the trial court to resolve preliminary questions of fact. BMC Software, 83 S.W.3d at 794; Silbaugh, 126 S.W.3d at 94. Accordingly, the trial court may, but need not, file findings of fact and conclusions of law. Tex. R. App. P. 28.1; see BMC Software, 83 S.W.3d at 794 (recognizing possibility that trial court may issue findings and conclusions). When, as here, the trial court files findings of fact and conclusions of law, and the record contains the reporter’s record of the rule 120a hearing, we may review the findings of fact on legal and factual sufficiency grounds and review the conclusions of law de novo as legal questions. BMC Software, 83 S.W.3d at 794; Silbaugh, 126 S.W.3d at 94; see Litton v. Airbus Indus., 934 S.W.2d 754, 757 (Tex. App.—Houston [14th Dist.] 1996, writ denied). We do not review the conclusions of law for factual sufficiency, but we review the trial court’s legal conclusions drawn from the facts to determine whether they are correct. BMC Software, 83 S.W.3d at 794; Silbaugh, 126 S.W.3d at 94. If the trial court’s judgment is correct, an erroneous conclusion does not require reversal. BMC Software, 83 S.W.3d at 794. B. Jurisdiction over Nonresident A Texas court may properly assert personal jurisdiction over a nonresident defendant provided the requirements of both the due process clause of the Fourteenth Amendment of the United States Constitution and the Texas long-arm statute are satisfied. Silbaugh, 126 S.W.3d at 94. Personal jurisdiction under the Texas long-arm statute extends to nonresident defendants who are parties to litigation arising from or related to business they conducted in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042; Silbaugh, 126 S.W.3d at 95. When a nonresident enters into a contract with a Texas resident, by mail or otherwise, and either the nonresident or the resident is to perform the contract in whole or in part in Texas, the nonresident “does business” in Texas. Tex. Civ. Prac. & Rem. Code Ann.§ 17.042(1) (Vernon 1997); Silbaugh, 126 S.W.3d at 95. Because the Texas long-arm statute reaches as far as the federal and state constitutional guarantees of due process allow, the statute is satisfied if the exercise of personal jurisdiction comports with federal due process. BMC Software, 83 S.W.3d at 795; Silbaugh, 126 S.W.3d at 95. Federal due process demands (1) that the nonresident defendant have purposefully established sufficient minimum contacts with Texas that he could reasonably anticipate being sued there and (2) that exercising jurisdiction over the nonresident will not offend traditional notions of fair play and substantial justice. Silbaugh, 126 S.W.3d at 95. If the nonresident defendant has purposefully availed himself of the privileges and benefits of conducting business in Texas, then there are sufficient contacts to confer personal jurisdiction. Tex. Civ. Prac. & Rem. Code Ann. § 17.042; BMC Software, 83 S.W.3d at 795; Silbaugh, 126 S.W.3d at 95. Random, fortuitous, or attenuated contacts are insufficient. BMC Software, 83 S.W.3d at 795; Silbaugh, 126 S.W.3d at 95. The quality and nature of the contacts is determinative—not their number. Silbaugh, 126 S.W.3d at 95. Minimum-contacts analysis is divided into general and specific jurisdiction. General personal jurisdiction requires that the contacts in Texas be continuous and systematic, but does not require that the cause of action arise from or relate to activities conducted in Texas. BMC Software, 83 S.W.3d at 796; Silbaugh, 126 S.W.3d at 95. Specific jurisdiction, on the other hand, requires that the alleged liability arise from and relate to the nonresident defendant’s activity conducted in Texas. BMC Software, 83 S.W.3d at 796; Silbaugh, 126 S.W.3d at 95. For a court to exercise specific, personal jurisdiction over a nonresident defendant, the defendant’s contacts with Texas must be purposeful, and the cause of action must arise from or relate to those contacts. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 806 (Tex. 2002). A single contact “of substantial quality and nature” may thus suffice to establish specific, personal jurisdiction when the cause of action arises from that contact. Shapolsky v. Brewton, 56 S.W.3d 120, 132 (Tex. App.—Houston [1st Dist. 2001, pet. denied). Discussion A. Sufficiency of Breaux’s Pleadings In its first issue, MMI contends that, because Breaux did not allege sufficient jurisdictional facts to bring MMI within the long-arm statute, the trial court erred by not summarily dismissing the cause pursuant to rule 120a. Texas courts have long recognized, however, that, because Texas applies notice pleading, defective jurisdictional allegations may be challenged by a motion to quash, but do not warrant dismissal by special appearance. See Kawasaki Steel, 699 S.W.2d at 202-03; see also Magic House AB v. Shelton Beverage L.P., 99 S.W.3d 903, 909 (Tex. App.—Dallas 2003, no pet.) (noting that lack of jurisdictional allegations does not relieve defendant of duty to negate all bases of jurisdiction). Accordingly, the trial court had no authority to dismiss MMI summarily in response to its special appearance, based solely on MMI’s claim that Breaux’s jurisdictional allegations were insufficient, without also inquiring whether MMI had met its duty to negate all bases of jurisdiction that MMI did allege. Kawasaki Steel, 699 S.W.2d at 202-03; Magic House, 99 S.W.3d at 909. We overrule MMI’s first issue. B. Admissibility of Affidavit of Shamrock’s President In its second issue, MMI presents several arguments to support its contention that the trial court erred by overruling MMI’s objection to the admissibility of the affidavit of Shamrock’s president. We review the trial court’s ruling for abuse of discretion. Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998). In addition to showing that the trial court erred, MMI must demonstrate that the error was calculated to cause and probably did cause an improper ruling. See id.; Tex. R. App. P. 44.1. MMI argues that admitting the affidavit into evidence violated rule 120a(3), which requires that any affidavits to be presented at the hearing on the special appearance “shall be served at least seven days before the hearing.” The record reflects that, when Shamrock’s counsel offered the affidavit, MMI objected as follows: “My only objection, Your Honor, is I think it’s an improper exhibit. It may be as a response to [MMI’s] special appearance but I don’t think it—.” Shamrock’s counsel then replied, “Well, I’ll do it as a response. [MMI’s president] just admitted everything in there is true, your Honor.” The trial court requested additional objections and, hearing none, overruled MMI’s objection. MMI reasons that, if Shamrock had complied with rule 120a(3)’s seven-day requirement for filing the affidavit of its president, MMI would have had the opportunity to compel the president’s appearance at the rule 120a hearing. This argument ignores, however, that rule 120a(3) authorizes the trial court to “order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or make any other order as is just.” Tex. R. Civ. P. 120a(3). Because these avenues were available for MMI to seek additional time to compel the appearance of Shamrock’s president, we cannot say that the trial court abused its discretion by overruling MMI’s objection to admitting Shamrock’s president’s affidavit. MMI further contends that (1) the trial court denied MMI its right to cross-examine Shamrock’s president by admitting his affidavit, (2) the affidavit was fundamentally flawed and violated rule 120a(3) because its allegations were conclusory, and (3) Shamrock’s failure to object to MMI’s special appearance before the hearing date required that the trial court grant MMI’s objections to the admissibility of Shamrock’s president’s affidavit. We conclude that MMI did not preserve error concerning these complaints. Having failed to present them to the trial court, and having thereby deprived the trial court of an opportunity to rule on those complaints, MMI waived any possible error. See Tex. R. App. P. 33.1(a); Tex. R. Evid. 103(a)(1). We overrule MMI’s second issue. C. Challenges to Findings of Fact The trial court issued 15 findings of fact. A portion of MMI’s third issue challenges eight of these findings of fact on the grounds that the evidence is factually insufficient to support them, and that they are therefore against the great weight and preponderance of the evidence and manifestly unjust. We first address a second portion of MMI’s third issue, in which it contends that the trial court’s findings of fact distort the record because they omit material facts. Fact findings that the trial court omits, however, are deemed found to support the trial court’s ruling. See BMC Software, 83 S.W.3d at 795. These deemed, or implied, findings are not conclusive and are subject to legal and factual sufficiency challenges, see id., but MMI has not challenged any of the trial court’s implied findings. Moreover, MMI concedes that many of the trial court’s findings are actually correct “in principle.” Most importantly, as Breaux contends in responding to MMI’s factual-sufficiency challenges, other findings by the trial court—that MMI does not challenge—fully support the trial court’s decision to deny MMI’s special appearance. Breaux contends that these unchallenged findings are sufficient to confer personal jurisdiction over MMI. We agree. MMI does not challenge the following of the trial court’s findings of fact: 4. When a potential client contacts [MMI] to buy or sell a machine, [MMI] directly contacts the potential client. [MMI] responds to an inquiry by directly transmitting (usually by facsimile) a quotation on a machine (herein “Quotation”). The Quotation is an offer to sell the machine. 5. Defendant [Shamrock], a Texas corporation, contacted Defendant [MMI] regarding the machine in question. 6. In response to the inquiry, [MMI] sent a Quotation (by facsimile) directly to [Shamrock] in Texas regarding the subject machine. 7. In the Quotation, [MMI] made express representations regarding the properties and features of the machine. 10. Plaintiff [Breaux] and Defendant [MMI] negotiated an agreement for [Breaux] to purchase the machine. 12. [Breaux’s] claims arise out of the express representations made by [MMI] in the [S]tate of Texas regarding properties and features of the machine. The import of these unchallenged findings is that Shamrock, a Texas company, contacted MMI, a foreign corporation, to inquire about the machine in controversy. MMI responded to Shamrock’s inquiry by transmitting a quotation, i.e., an offer to sell the machine, by telecopier to Shamrock in Texas. The quotation contained express representations, made to Shamrock in Texas, concerning the “properties and features” of the machine. Breaux, a Texas corporation, negotiated an agreement with MMI to purchase the machine. Breaux’s claims in the underlying litigation arise out of the representations that MMI made in Texas concerning the properties and features of the machine. The Texas long-arm statute extends to a nonresident who is sued in Texas in a lawsuit that relates to or arises out of business that the nonresident conducts in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042. A nonresident “does business” in Texas by (1) entering into a contract with a resident, and (2) the contract is to be performed in Texas, either in whole or part, and by either the resident or the nonresident. Tex. Civ. Prac. & Rem. Code Ann. § 17.042(1). In this case, the trial court’s unchallenged fact findings reflect that MMI solicited business in Texas by the offer to sell that MMI sent by telecopier to Shamrock. Based on the telecopier-transmitted offer and acceptance between Breaux and MMI, they entered into a contract to sell and purchase the machine. Breaux, the resident, was to perform and did perform under the contract in Texas by paying for the machine. The underlying lawsuit is premised on that transaction. The trial court’s unchallenged findings of fact therefore adequately support the trial court’s denying MMI’s special appearance. Accordingly, Texas may properly exercise specific, personal jurisdiction over MMI, on the grounds that MMI purposefully established sufficient minimum contacts with the plaintiff, Breaux, and thus with Texas, and that MMI could reasonably anticipate being sued in Texas based on those contacts. See Coleman, 83 S.W.3d at 806; Silbaugh, 126 S.W.3d at 95; Shapolsky, 56 S.W.3d at 132. We overrule MMI’s third issue. D. Due Process Challenge MMI’s four remaining issues assert general challenges to the trial court’s concluding, as a matter of law, that exercising both general and specific jurisdiction over MMI comports with due process. In our analysis of MMI’s third issue, we held that MMI had established minimum contacts with Texas, which is the first step of the federal due-process analysis. See Silbaugh, 126 S.W.3d at 796. Under the second step of the due-process analysis, exercise of jurisdiction over the nonresident must comport with traditional notions of fair play and substantial justice. Id. To satisfy federal due process, when a Texas court exercises specific jurisdiction over a nonresident, the liability that the plaintiff seeks to impose must arise from and relate to activity conducted in Texas. BMC Software, 83 S.W.3d at 796; Silbaugh, 126 S.W.3d at 95. Breaux sued both MMI and Shamrock. As against MMI, Breaux seeks to impose liability based on MMI’s having contacted a Texas resident to conduct business by offering to sell a machine, having represented the properties and features of the machine it offered to sell, having entered into a contract with Breaux to purchase that machine, as well as Breaux’s having performed on that contract in Texas by paying for the machine. Thus, the liability that Breaux seeks to impose on MMI arises from and relates to activities that MMI conducted in Texas. We conclude that MMI’s contacts with Texas, with both Breaux and Shamrock concerning the Toshiba machine at issue, were purposeful and sufficiently substantial, and that Breaux’s claims against MMI arise from and relate to those contacts. See Coleman, 83 S.W.3d at 806; Shapolksy, 56 S.W.3d at 132. MMI’s contacts with Texas warrant a Texas court’s exercising specific, personal jurisdiction over MMI, and MMI could have reasonably anticipated being subject to exercise of specific jurisdiction by a Texas court. Coleman, 83 S.W.3d at 806; Shapolksy, 56 S.W.3d at 132. Accordingly, exercise of specific, personal jurisdiction over MMI does not offend traditional notions of fair play and substantial justice and thus satisfies the second test of the requirements of federal due process. See Silbaugh, 126 S.W.2d at 796. Having concluded that Texas may properly exercise specific, personal jurisdiction over MMI, we do not address MMI’s general-jurisdiction challenge. Accordingly, we overrule MMI’s fourth, fifth, and seventh issues and decline to address MMI’s sixth issue. Conclusion We affirm the trial court’s order denying MMI’s special appearance. Elsa Alcala Justice Panel consists of Justices Nuchia, Alcala, and Higley.