Breeland v. Hide-A-Way Lake, Inc.

• Citation: 585 F.2d 716
• Decision Date: 17 November 1978
• Docket Number: HIDE-A-WAY,Nos. 76-1647,77-1244,A-W,s. 76-1647
• Parties: Mrs. Lucille Jurisich BREELAND et al., Plaintiffs-Appellants, Cross Appellees, v.LAKE, INC. et al., Defendants-Appellees, Cross Appellants, Hide-ay Lake Club, Inc., and Hide-ay Lake Property Owner's Association, Inc., Intervenors. Mrs. Lucille Jurisich BREELAND et al., Plaintiffs-Appellants, v.LAKE, INC., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 716

585 F.2d 716

Mrs. Lucille Jurisich BREELAND et al., Plaintiffs-Appellants, Cross Appellees, v. HIDE-A-WAY LAKE, INC. et al., Defendants-Appellees, Cross Appellants,

Hide-A-Way Lake Club, Inc., and Hide-A-Way Lake Property

Owner's Association, Inc., Intervenors.

Mrs. Lucille Jurisich BREELAND et al., Plaintiffs-Appellants, v. HIDE-A-WAY LAKE, INC., Defendants-Appellees.

Nos. 76-1647, 77-1244.

United States Court of Appeals Fifth Circuit.

Nov. 17, 1978.

Ronald G. Peresich, Biloxi, Miss., Thomas L. Giraud, New Orleans, La., Samuel W. Ethridge, Kenner, La., for plaintiffs-appellants in both cases.

Claiborne McDonald, IV, Lonnie Smith, Picayune, Miss., for Donald Ginn in both cases.

Blake Tartt, Houston Tex., Thomas W. Hathaway, Tyler, Tex., J. Edmand Pace, Picayune, Miss., for Hide-A-Way Lake Inc., et al. in both cases.

Ray M. Stewart, for Intern'l Land, Inc., et al.

Thomas W. Tyner, Hattiesburg, Miss., for other interested parties in both cases.

Dan Hedges, Houston, Tex., Ray M. Stewart, Picayune, Miss., for Hide-A-Way Lake Inc., et al. in 77-1244.

Appeals from the United States District Court for the Southern District of Mississippi.

Before COLEMAN, SIMPSON and TJOFLAT, Circuit Judges.

TJOFLAT, Circuit Judge:

This diversity action ¹ was brought by purchasers of residential sites in the Hide-A-Way Lake development located near Picayune, Mississippi. Joined as defendants were the developer and others purportedly involved in the enterprise. Plaintiffs alleged that they were induced to purchase their sites through various fraudulent misrepresentations made by the defendants, and they sought damages and other relief. Following the first stage of the trial on the merits, the district court, on February 10, 1976, entered a partial final judgment dismissing the case as to some of the defendants for want of in personam jurisdiction. Subsequently, when the trial on the merits was concluded, the court found that the plaintiffs had failed to make out a case as to any of the defendants and on January 6, 1977 entered a final judgment dismissing all claims. We consolidated the plaintiffs' separate appeals from these judgments. ²

I

Hide-A-Way Lake is a weekend resort community located approximately fifty miles from New Orleans, the appellants' place of residence. Appellants were made aware of the community's existence through various newspaper advertisements and other promotional activities conducted in New Orleans. These advertisements and promotional activities, appellants contend, contained fraudulent misrepresentations as to the nature and quality of facilities to be provided and induced them to make their purchases. ³

Named as parties defendant were Hide-A-Way Lake, Inc. (Hide-A-Way), a Mississippi corporation, the developer; International Land, Inc. (International), a Texas corporation and sole stockholder of Hide-A-Way; James W. Fair and Thomas Gordon, Jr., officers and directors of Hide-A-Way; Michael Gulla, formerly a vice-president and director of Hide-A-Way and a director of International; Antoinette M. Gulla, an International stockholder; Crystal Systems, Inc. (Crystal), a Texas corporation licensed in Mississippi, the owner and operator of the development's water system; and Donald Ginn, a real estate salesman. Two parties subsequently intervened as defendants: Hide-A-Way Lake Club, Inc., a Mississippi corporation and owner of the community's common facilities, which had an option to purchase the water system, and Hide-A-Way Lake Property Owners' Association, Inc., a Mississippi nonprofit corporation made up of the residential owners in the subdivision, to which the stock of Hide-A-Way Club, Inc., had been assigned.

The suit was filed in the District Court for the Southern District of Mississippi. The plaintiffs invoked the Mississippi long-arm statute ⁴ for the purpose of obtaining in personam jurisdiction over the nonresident defendants: International, Fair, Gordon, and the Gullas. Each nonresident interposed a timely Fed.R.Civ.P. 12(b)(2) objection to the court's jurisdiction, claiming that the Mississippi long-arm statute was not available to nonresident plaintiffs such as the appellants in this case. Their objections were overruled. Record, vol. 1, at 96. These jurisdictional attacks were reconsidered at the trial and upheld; the partial final judgment was entered dismissing the nonresident defendants. ⁵

On the evidence before it, the court found that Hide-A-Way had made one of the fraudulent misrepresentations charged in the plaintiffs' complaint, the one concerning the availability of a golf course at the development site. In the partial final judgment the court retained jurisdiction for the purpose of receiving further evidence to determine the appropriate measure of damages. Supplemental testimony of witnesses, in the form of depositions, was subsequently filed by the parties. This testimony, together with all the other evidence previously presented in the case, was considered by the court as to all the parties, and a final judgment was entered exonerating the defendants. ⁶ Partial Record at 56- 57. Although the court found that the plaintiffs had not been defrauded or misled, or even subjected to a material misrepresentation, and that they were entitled to no relief, the court taxed the costs of the litigation against one of the prevailing defendants, Hide-A-Way.

In these appeals, appellants contend (1) that the district court erred in holding that the Mississippi long-arm statute is not available to nonresident plaintiffs for the purpose of obtaining in personam jurisdiction over nonresident defendants and (2) that the court's finding that actionable fraudulent misrepresentations were not made is clearly erroneous. Hide-A-Way cross-appeals, asking us to reverse the district court's taxation of costs against it.

II

The amenability of a nonresident defendant to a diversity action in a federal district court is governed by the law of the forum state. Accordingly, a district court may exercise in personam jurisdiction over a foreign defendant only if a state court could do so in the proper exercise of state law, including the state's long-arm statute. Mack Trucks, Inc. v. Arrow Aluminum Castings Co., 510 F.2d 1029, 1031 (5th Cir. 1975); Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963) (en banc); Fed.R.Civ.P. 4(d) (7); See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Under the Mississippi long-arm statute ⁷ there are three categories of nonresident defendants who are subject to personal jurisdiction: (1) any nonresident who makes a contract with a resident of Mississippi to be performed in whole or in part by any party in that state, (2) any nonresident who commits a tort in whole or in part in the State of Mississippi against a Mississippi resident, and (3) any nonresident who does any business or performs any work or service in the state. C. H. Leavell & Co. v. Doster, 211 So.2d 813, 814 (Miss.1968).

Appellants maintain that the third category of defendants may be called to answer when sued by persons not residents of Mississippi. In dismissing this action against the nonresident defendants for lack of in personam jurisdiction, the district court stated as follows:

The plaintiffs in this case are residents and citizens of the state of Louisiana. The contract of sale as to each of the plaintiffs expressly provides that: "Buyer acknowledges that buyer does not expect to use the property as buyer's principal residence." It is not the policy of the courts of Mississippi to extend its jurisdiction under that statute in any controversy wherein a non-resident plaintiff asserts a claim and seeks to procure jurisdiction under this wholesome statute designed and intended for the sole use and protection of residents and citizens of the state of Mississippi who wish to assert some extended jurisdiction of non-residents who are not available for personal service of process and are involved in a controversy with the resident of the state of Mississippi. The motions of the non- resident defendants for dismissal of this claim will be sustained without prejudice or advantage to anyone.

Record, vol. 2, at 509-10. The appellants assert that it is apparent from this language that the trial court misconstrued the statute. They also claim that the court's construction is violative of the privileges and immunities clause of the United States Constitution. ⁸

Neither the briefs of the parties nor our own research indicate that these precise questions have been resolved by the Supreme Court of Mississippi. But existing Mississippi case law, as well as the decisions of the federal district courts in Mississippi, strongly suggest that the appellants' positions are without merit.

The predecessor to the present Mississippi long-arm statute reached nonresident defendants only when it was demonstrated that they had "do(ne) any business or perform(ed) any character of work or service in this state . . . ." 1940 Miss. Laws ch. 246 (formerly codified at Miss.Code Ann. § 1437 (1942)). Mississippi courts construing this "doing business" provisions have consistently found that it was designed for the purpose of providing Mississippi residents with a means of acquiring personal jurisdiction over nonresidents. See Davis-Wood Lumber Co. v. Ladner, 210 Miss. 863, 50 So.2d 615, 621 (1951); Lee v. Memphis Publishing Co., 195 Miss. 264, 14 So.2d 351, 357 (1943) (Roberds, J., dissenting); Brown & Scott, In Personam Jurisdiction Under Mississippi's Long Arm Statute, 43 Miss. L.J. 1, 12 (1972) (only residents of Mississippi may utilize the statute to secure jurisdiction over a nonresident). More recently, the Supreme Court of Mississippi has held that a foreign corporation qualified to do business in the State of Mississippi is a resident within the meaning of the statute and is entitled to utilize its provisions. C. H. Leavell & Co. v. Doster, 211 So.2d...