Southmark Corp. v. Life Investors, Inc.

• Citation: 851 F.2d 763
• Decision Date: 11 August 1988
• Docket Number: No. 87-1353,87-1353
• Parties: 7 UCC Rep.Serv.2d 529 SOUTHMARK CORPORATION, Plaintiff-Appellant, v. LIFE INVESTORS, INC., and USLICO Corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 763

851 F.2d 763

7 UCC Rep.Serv.2d 529

SOUTHMARK CORPORATION, Plaintiff-Appellant, v. LIFE INVESTORS, INC., and USLICO Corporation, Defendants-Appellees.

No. 87-1353.

United States Court of Appeals Fifth Circuit.

Aug. 11, 1988.

Charles L. Babcock, Jack Pew, Jr., Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., for plaintiff-appellant.

David Klingsberg, Kaye, Scholer, Fierman, Hays & Handler, Mark R. Weiss, New York City, Hughes & Luce, Eric R. Cromartie, Dallas, Tex., for Life Investors, Inc.

Robert E. Gerber, Debra M. Torres, Fried, Frank, Harris, Shriver & Jacobson, New York City, Morris Harrell, Timothy W. Mountz, Rain, Harrell, Emery, Young & Doke, Dallas, Tex., for USLICO Corp.

Appeal from the United States District Court for the Northern District of Texas.

Before GARWOOD and JONES, Circuit Judges, and BLACK ^*, District Judge.

GARWOOD, Circuit Judge:

In this Texas diversity case, plaintiff-appellant Southmark Corporation (Southmark) appeals the district court's summary judgment that Southmark take nothing against defendant-appellee Life Investors, Inc. (Life) and its dismissal of Southmark's suit against USLICO Corporation (USLICO). We affirm in all respects, except that the wording of the judgment of dismissal of the action against USLICO is modified to reflect that it is a dismissal for lack of in personam jurisdiction.

Facts and Proceedings Below

Prior to the transactions that gave rise to this suit, Life ¹ and General George Olmsted (Olmsted) of Arizona owned a controlling share of stock in International Bank (IB), an Arizona corporation. Olmsted owned approximately forty-one percent of the outstanding IB stock and Life owned approximately twenty-two percent. In November 1984, Life and Olmsted signed a Memorandum of Understanding in which Life agreed that if it wished to sell its IB stock, it would first offer the stock to Olmsted. ² Olmsted would then have thirty days in which to accept the offer. If Olmsted did not accept, Life would then have ninety days in which to sell the stock to any third party at a price equal to or higher than the price offered to Olmsted.

In early 1985, Southmark began negotiating with Life for the sale of Life's IB stock as well as its stock in USLICO. Southmark contends that during the negotiations the two parties came to a meeting of the minds and formed a contract for the sale of the stock to Southmark. Life, on the other hand, contends that no meeting of the minds occurred and thus no contract was formed.

On May 2, 1985, however, Life sent a letter to Olmsted notifying him that Life had "received an unsolicited offer to buy all" of its IB shares and that Life "wish[ed] to sell" a specific number of those shares at a specified price. ³ The letter did not state the identity of the offeror or the party to whom Life wished to sell (nor did it expressly state that they were the same). Within the allowed thirty days, Olmsted accepted the offer and began attempts to close the transaction. During the summer of 1985, however, it became clear that Olmsted would not be financially able to purchase the shares. On August 22, 1985, Life signed a written agreement to sell its IB shares to USLICO. That transaction was closed in October 1985.

Southmark then brought suit against Life for breaching its alleged agreement to sell the IB stock to Southmark. Southmark joined USLICO as a defendant claiming that USLICO tortiously interfered with Southmark's alleged contract or prospective advantage with Life. Life moved for summary judgment arguing that any alleged agreement to sell securities to Southmark is unenforceable under Tex.Bus. & Com.Code Ann. Sec. 8.319, which is the statute of frauds pertaining to the sale of investment securities. ⁴ To support its motion, Life argued that there were no writings indicating that the parties had actually entered into a contract for the sale of the stock. USLICO moved for dismissal on the basis of lack of personal jurisdiction over it.

To overcome the statute of frauds defense, Southmark produced two documents signed by Life's representatives. One document was the 1984 Memorandum of Understanding in which Life agreed to give Olmsted a right of first offer on Life's shares of IB stock. The other document was the May 1985 letter in which Life informed Olmsted that it had received an unsolicited offer for the IB shares and that it wished to sell those shares at a specified price. According to Southmark, these documents, taken together, satisfy the statute of frauds by indicating that Life and Southmark had in fact entered into a contract for the sale of the IB securities. Southmark argued alternatively that Life should be estopped from asserting a statute of frauds defense because Life promised to execute final documents setting forth the terms of its alleged oral agreement with Southmark. With regard to USLICO's motion to dismiss, Southmark argued that its proof established that Texas courts had both specific and general jurisdiction over USLICO.

The district court rejected Southmark's contentions and granted Life's motion for summary judgment as well as USLICO's motion to dismiss. The district court found that the two documents produced by Southmark failed to satisfy the statute of frauds because neither document specifically referred to Southmark. Citing Cohen v. McCutchin, 565 S.W.2d 230 (Tex.1978), the court stated that a writing sufficient to meet the standards of a statute of frauds must be signed by the person to be charged and it must identify the other party to the transaction. Although Life's representatives signed the documents in question, neither document specifically mentions Southmark.

The court also found that Southmark's promissory estoppel claim was meritless because the evidence produced by Southmark did not raise a factual issue as to whether Life promised to sign a written contract. Relying on Nagle v. Nagle, 633 S.W.2d 796 (Tex.1982), the district court explained that a promise to prepare a written contract is not sufficient to overcome the statute of frauds under the doctrine of promissory estoppel; instead, there must be a showing that the defendant promised to sign a particular written agreement.

Finally, the district court found that USLICO's contacts with Texas were not sufficient to establish in personam jurisdiction and granted USLICO's motion to dismiss on this basis. However, the district court's final judgment ordered that Southmark take nothing against either defendant, thus in form being on the merits in favor of USLICO as well as Life. This appeal followed.

Discussion

The issues raised on appeal are whether the district court properly granted Life's motion for summary judgment based on the statute of frauds defense, and whether the district court properly granted USLICO's motion to dismiss for lack of personal jurisdiction. We shall address these issues in turn.

I. The Statute of Frauds Defense

The parties in this case agree that the alleged contract between Life and Southmark falls within the provisions of Tex.Bus. & Com.Code Ann. Sec. 8.319. The question is whether the two documents produced by Southmark together satisfy the requirements of section 8.319. After reviewing the documents, we agree with the district court's conclusion that they do not.

Section 8.319 specifically provides that a contract for the sale of securities is unenforceable unless there is some writing signed by the party against whom enforcement is sought "sufficient to indicate that a contract has been made" for the sale of a stated quantity of described securities at a stated price. Tex.Bus. & Com.Code Ann. Sec. 8.319(1) (emphasis added). The documents produced by Southmark, taken alone or read together, do not sufficiently indicate that a contract for the sale of the IB securities had in fact been made. Indeed, the Memorandum of Understanding merely provides that if Life wishes to sell the IB stock, it will notify Olmsted and give him an opportunity to purchase the same. The Memorandum of Understanding then states that if Olmsted chooses not to buy the shares, Life will be free to sell the shares to any third party. Nothing in the Memorandum of Understanding indicates that Life must enter into a firm agreement with a prospective buyer before notifying Olmsted, nor does anything in it indicate that an offer for the shares must exist before Life can notify Olmsted of its desire to sell. ⁵ Furthermore, assuming a third party has made an offer, nothing in the Memorandum of Understanding indicates that Life must sell the shares to that third party in the event Olmsted chooses not to buy the shares within the prescribed time.

Likewise, the notification letter that Life sent to Olmsted in May 1985, even when read together with the Memorandum of Understanding, does not indicate that a contract had been made. The letter merely states that Life had received an offer to buy the IB stock and that pursuant to the Memorandum of Understanding Life was notifying Olmsted that it wished to sell the shares. The letter did not state that Life had agreed to sell the stock to the party making the offer in the event Olmsted chose not to buy the stock; in fact, it did not even state that Life wished to sell the shares to the party making the offer.

At most, the two documents indicate that Life had received an offer for the shares and that it would consider accepting the offer if Olmsted elected not to purchase the stock. Under Texas law, however, a writing that contemplates a contract to be made in the future does not satisfy the requirements of the statute of frauds. ⁶ Indeed, it is common sense that "futuristic" language in a writing is "not confirmatory of a contract already in existence." See Martco, Inc. v. Doran Chevrolet, Inc., 632 S.W.2d 927, 928-29 (Tex.App.--Dallas 1982, no writ), and cases cited therein. Since the two documents produced by Southmark do no more than indicate the possibility of a future...