Opinion
No. 10-06-00131-CV
Filed: May 30, 2007.
Appeal from the 220th District Court Hamilton County, Texas Trial Court No. 04-11-40303.
Before Chief Justice GRAY, Justice VANCE, and Justice REYNA.
Reversed and rendered.
MEMORANDUM OPINION
In this accelerated appeal, Stephens Equipment, Inc (Stephens) challenges the denial of its special appearance on the grounds that: 1) evidence was erroneously admitted to establish personal jurisdiction; 2) there is factually insufficient evidence to support personal jurisdiction; 3) there is no evidence supporting specific jurisdiction; and 4) there is no evidence supporting general jurisdiction. We will reverse and render.
A plaintiff bears the burden of pleading sufficient allegations to bring a nonresident defendant within the long-arm statute. Moki Mac River Expeditions v. Drugg, 50 Tex. Sup. Ct. J. 498, 2007 WL 623805, at *5-6 (Mar. 2, 2007). The defendant then bears the burden of negating all jurisdictional bases alleged. Id. Whether to exercise personal jurisdiction is a question of law which we review de novo. Barnhill v. Automated Shrimp Corp., No. 10-06-00038-CV, 2007 WL 926160, at *2 (Tex.App.-Waco March 28, 2007, no pet. h.) (citing BMC Software Belg. N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002)). When the trial court does not make 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.
This dispute stems from Selman purchasing from Stephens a bulldozer engine which did not work properly. Stephens, a Nevada corporation, sells parts and components for construction equipment and has its only office and employees in Sarver, Pennsylvania. It advertises in heavy-equipment trade publications. A friend of Selman's saw Stephens's advertisement in a national, machine-trader magazine. The ad was given to Selman, and based solely on that advertisement, Selman called Stephens about purchasing an engine for his bulldozer. Stephens negotiated for Selman to purchase a new engine while Stephens purchased Selman's old engine to rebuild. Selman paid shipping costs but incurred no Texas state sales tax on the transaction. Upon arrival, the engine failed to work properly, and Selman filed suit claiming damages under the Deceptive Trade Practices Act (DTPA) for breach of warranty.
In its first issue, Stephens contends that evidence regarding sales in Texas was erroneously admitted over its objection. The evidence of which Stephens complains is information on the number and the value of previous transactions with Texas customers. Stephens contends that this evidence is unrelated to any jurisdictional basis pleaded by Selman. Stephens relies on Zimmerman v. Glacier Guides in which this Court said that where the nonresident defendant fails to object to evidence on an unpleaded basis for jurisdiction, the defendant must negate all bases pleaded or raised by the evidence. 151 S.W.3d 700, 704 (Tex.App. — Waco 2004, no pet.). Because it objected, Stephens argues it need not negate any assertion of jurisdiction based on those contacts.
However, the larger holding of Zimmerman was that the court would not follow a mechanical test in determining what jurisdictional bases were pleaded by the plaintiff and would instead consider all filings before the court in determining jurisdiction. Id. at 703-04. Stephens's application of Zimmerman urges a narrow view of the bases for jurisdiction pleaded which this Court specifically rejected. See id. at 703. In his original petition, Selman stated that the court had jurisdiction because Stephens advertised in Texas and the transaction was a result of that advertisement. In briefing the special appearance, Selman stated the additional transactions in Texas proved that Stephens's contacts with the state were purposeful. Selman also argued that the Stephens's contacts with Texas supported specific and general jurisdiction. The admission or exclusion of evidence is reviewed for abuse of discretion. In re J.P.B., 180 S.W.3d 570, 575 (Tex. 2005) (per curiam). The trial court acted within its discretion in admitting this evidence. See IRA Res., Inc. v. Griego, 50 Tex. Sup. Ct. J. 645, 2007 WL 1164002, at *5 (Apr. 20, 2007). We overrule issue one.
Stephens's remaining issues challenge the sufficiency of the evidence to support the exercise of personal jurisdiction. Beyond the acts in the transaction between Stephens and Selman, the evidence showed: (1) that Stephens advertised in four national and regional trade publications distributed in Texas, including Rock and Dirt, a regional publication targeting Texas and eleven other Western states; (2) that in the two years prior to suit Stephens made about 50 sales in Texas totaling just over $40,000; and 3) two affidavits from Stephens employees were filed stating that the company never had offices or employees in Texas and did not have a sales staff.
Texas courts may assert personal jurisdiction over a nonresident 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 due-process guarantees. Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex. 1990). The Texas long-arm statute authorizes jurisdiction, in relevant part, where a nonresident is doing business in the state by "contract[ing] by mail or otherwise with a Texas resident and either party is to perform the contract in whole or part in this state." TEX. CIV. PRAC. REM. CODE ANN. § 17.042 (Vernon 1997). Stephens's contract with a Texas resident constitutes doing business in this state. See Moki Mac, 2007 WL 623805, at *2-3. Though authorized by statute, the exercise of jurisdiction must also comply with the guarantees of due process.
A defendant's contacts with Texas may give rise to two types of personal jurisdiction, general or specific. BMC Software, 83 S.W.3d at 795-96. General jurisdiction is established where the defendant's contacts with the state are continuous and systematic resulting in personal jurisdiction for all purposes. Id. at 796; CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996). Specific jurisdiction arises where the alleged liability has a substantial connection with the defendant's purposeful contacts with the state. CSR Ltd., 925 S.W.2d at 595. The trial court did not specify the basis for finding jurisdiction.
The minimum contacts analysis for specific jurisdiction requires the court to review whether: (1) the nonresident defendant's contacts are purposeful and (2) the facts of the litigation bear a substantial connection to the defendant's contacts with the state. Moki Mac, 2007 WL 623805, at *5 *12. The Texas Supreme Court has set out three "aspects" of purposeful availment to consider in analyzing minimum contacts. Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005). First, the court must ignore the unilateral activity of another party, considering only the nonresident defendant's contacts with Texas. Id. Second, the acts considered must indeed be purposeful rather than "random, isolated, or fortuitous." Id. Finally, a defendant must avail itself of the benefits and protection of Texas, thereby evidencing an implied consent to jurisdiction. Id.
The facts of this case do not support the exercise of specific jurisdiction. "[T]he mere sale of a product to a Texas resident will not generally suffice to confer specific jurisdiction upon our courts." Moki Mac, 2007 WL 623805, at *5. Communications between the parties were initiated by Selman and cannot be considered purposeful. See Michaina, 168 S.W.3d at 785; Zimmerman, 151 S.W.3d at 704. The shipment of a product to Texas is also insufficient to support jurisdiction in that the destination was dictated by Selman and he paid for the shipping. Michiana, 168 S.W.3d at 788. Advertising in a national publication, alone, is not purposeful availment to any state. Zimmerman, 151 S.W.3d at 704-05. Rather there must be evidence of an effort to target the Texas market specifically. Moki Mac, 2007 WL 623805, at *5. Though Stephens had served other customers in Texas, these transactions are not relevant to an analysis of specific jurisdiction. Zimmerman, 151 S.W.3d at 705; see also Griego, 2007 WL 1164002, at *5 (additional transactions in Texas relevant to general jurisdiction). Stephens did not advertise in any local or state publication. Neither did it actively solicit sales from Texas or any state. Based on these facts, Stephens's contacts were not sufficient to conclude that it had purposefully availed itself of the protections of the law of Texas. We sustain Stephens's second and third issues.
The minimum contacts inquiry is broader and more demanding when general jurisdiction is alleged, requiring a showing of substantial activities in the forum state. Schlobohm, 784 S.W.2d at 357. General jurisdiction is premised on the nonresident having consented to jurisdiction through its continuous contact invoking the benefits and protections of Texas. Am. Type Culture Collection v. Coleman, 83 S.W.3d 801, 810 (Tex. 2002). This analysis focuses on the nature and quality of the contacts, as opposed to the quantity. Id.
The evidence of Stephens's contacts with Texas fails to show it had continuous and systematic contact with the state. Stephens was organized in 2003, and in that year, the company made twenty-three sales in Texas to twelve customers totaling $15,000. The following year showed an increase in sales, however, those sales were not divided between those which occurred prior to the March 1, 2004 sale to Selman. We may only consider those contacts with Texas which occurred prior to the date of the transaction. Zimmerman, 151 S.W.3d at 705. Nonetheless, the single sale to Selman represents approximately one quarter of the value of the 2004 sales in Texas. These minimum sales are not sufficient to support general jurisdiction. See Am. Type Culture, 83 S.W.3d at 807 (product sales for eighteen years generating approximately $350,000 in revenue held insufficient basis for general jurisdiction).
Title passing outside of Texas is a factor weighing against general jurisdiction. Am. Type Culture, 83 S.W.3d at 808. In Stephens's contracts, the buyer paid the cost of shipping through a third party carrier which resulted in title passing in Pennsylvania. TEX. BUS. COM. CODE ANN. § 2.401 (Vernon Supp. 2006); see also C-Loc Retention Sys. Inc. v. Hendrix, 993 S.W.2d 473, 478-79 (Tex.App.-Houston [14th Dist.] 1999, no pet.). Therefore, Stephens specifically structured its contracts so that it would not invoke the benefits or privileges of doing business in Texas. Am. Type Culture, 83 S.W.3d at 808.
Further, Stephens's advertisement in a regional trade publication which Selman introduced at the trial court occurred in June 2004 and cannot be considered in extending general jurisdiction. Id. Stephens's president indicated that all of the sales were due to responses to advertisement in trade publications and were initiated by the buyer. Stephens has no employees, offices, or bank accounts in Texas, has no mailing address or a telephone number in Texas, pays no taxes in Texas, owns no real or personal property in Texas, nor has a registered agent for service of process in Texas. See CSR Ltd., 925 S.W.2d at 595; Meader v. IRA Res., Inc., 178 S.W.3d 338, 350 (Tex.App.-Houston [14th dist.] 2005, no pet.). Stephens's contacts with Texas cannot be considered of a continuous and systematic nature to support general jurisdiction. We sustain Stephens's fourth issue.
Accordingly, we reverse the trial court's denial of Stephens's special appearance motion and render judgment sustaining the special appearance.