Happy Indus. Corp. v. American Specialties, Inc.

• Decision Date: 10 December 1998
• Docket Number: No. 13-97-531-CV,13-97-531-CV
• Citation: 983 S.W.2d 844
• Parties: HAPPY INDUSTRIAL CORPORATION, Appellant, v. AMERICAN SPECIALTIES, INC.; Texmac, Inc., Appellees.
• Court: Texas Court of Appeals

Page 844

983 S.W.2d 844

HAPPY INDUSTRIAL CORPORATION, Appellant, v. AMERICAN SPECIALTIES, INC.; Texmac, Inc., Appellees.

No. 13-97-531-CV.

Court of Appeals of Texas Corpus Christi.

Dec. 10, 1998.

Gordon M. Shapiro, James M. McCown, Jackson & Walker, L.L.P., Dallas, for appellant.

Fred Shannon, Charles Estee, Shannon, Drake & Estee, San Antonio, J. Benjamin Barlow, Barlow & Garsek, P.C., Fort Worth, Bradley S. Wilder, Ball & Weed, San Antonio, for appellants.

Before Chief Justice SEERDEN, and Justices DORSEY and CHAVEZ.

O P I N I O N

Justice DORSEY.

This is an appeal from the trial court's denial of a special appearance to contest the personal jurisdiction over appellant, Happy Industrial Corporation, a Japanese corporation. The underlying suit involved a dispute between Happy and the appellee, American Specialties, Inc. (ASI), over ASI's purchase of two new commercial embroidery machines manufactured by Happy. The machines were sold to ASI by Data-Stitch, Inc., who received the machines from Texmac, Inc. By two points of error Happy asserts the trial court erred in holding it was subject to personal jurisdiction in Texas, and it challenges the legal and factual sufficiency of the evidence to support an implied finding that Texmac or Data-Stitch were its agents. We reverse and dismiss the suit for want of personal jurisdiction.

Happy is a foreign corporation organized and established under Japanese law. Its corporate residence and principal place of business are in Japan. It manufactures commercial embroidery machines.

ASI, a Texas corporation, manufactures and sells specialty advertising items, including T-shirts, jackets, and caps that have embroidered logos. ASI uses commercial embroidery machines to produce these items. In 1992, Chalmers Mitchell, ASI's president, attended a trade show in Dallas, Texas. Data-Stitch was there displaying embroidery machines manufactured by Happy. "Shawn," a Data-Stitch representative, gave Chalmers information about Happy's embroidery machines. To the best of Chalmers' recollection Data-Stitch made a brochure available to him at the trade show. The brochure described an embroidery machine manufactured by Happy and listed Data-Stitch as an agent.

About February 1993, ASI received a proposal from Data-Stitch to sell it an embroidery machine manufactured by Happy. Over the next several months Chalmers had discussions with Shawn, the Data-Stitch sales representative, during which it was represented that Data-Stitch was Happy's authorized agent, and Happy machines were imported into the United States through Texmac. Chalmers was told ASI had to deal with Data-Stitch as the exclusive Happy representative in the Texas region. During this time and thereafter Chalmers and Chris Mitchell, ASI's vice-president, saw Happy advertisements in trade journals distributed in Texas, identifying Texmac and Data-Stitch as Happy's authorized representatives. One of these journals, Stitches Magazine, was delivered to ASI in Texas and had advertisements similar to those they had seen near the time of purchase.

ASI bought two commercial embroidery machines from Data-Stitch and paid about $100,000 for each machine. Happy manufactured both of these machines, and Data-Stitch installed them in ASI's facilities in San Antonio. After installation of the machines Chalmers and Chris Mitchell had personal contact with representatives of Data-Stitch and Texmac concerning problems with the machines. During those discussions it was represented to Chalmers and Chris that Data-Stitch and Texmac were the agents for Happy and were following up with Happy concerning the problems ASI and other buyers were experiencing with the machines. They were advised that a number of machines manufactured by Happy had been sold in Texas and other states.

On August 30, 1996, ASI sued Happy, Data-Stitch, and Texmac for violations of the DTPA, breach of warranty, fraud, or in the alternative, negligent misrepresentation. ASI alleged that from the outset the machines had repeatedly broken down and interrupted production.

On November 12, 1996, Happy filed a special appearance, under Rule 120(a) of the Texas Rules of Civil Procedure, objecting to personal jurisdiction in Texas. At the hearing on the special appearance neither party offered live testimony. ASI's evidence included the affidavits of Chris and Chalmers Mitchell along with several attached exhibits. Happy's only evidence included the affidavit of Tadaki Harada, its director and general manager. After hearing argument the trial court, on July 21, 1997, signed an order denying Happy's special appearance. Happy appeals from this order.

The trial court did not make findings of fact or conclusions of law relating to Happy's special appearance. Therefore we must imply all necessary findings of fact in support of the trial court's ruling, and we will affirm if the judgment can be upheld on any legal theory supported by the evidence. Nikolai v. Strate, 922 S.W.2d 229, 240 (Tex.App.--Fort Worth 1996, writ denied) (citing Clark v. Noyes, 871 S.W.2d 508, 511-12 (Tex.App.--Dallas 1994, no writ)). See Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex.1987).

Standard of Review

The existence of personal jurisdiction is a question of law, but proper exercise of that jurisdiction must sometimes be preceded by the resolution of underlying factual disputes. The standard of review to determine the appropriateness of the trial court's resolution of those facts is an ordinary sufficiency of the evidence review. Conner v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405, 411 (Tex.App.--Houston [14th Dist.] 1997, no writ); Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d 630, 632 (Tex.App.--Dallas 1993, writ denied). The scope of that review includes all evidence in the record. Puri v. Mansukhani, 973 S.W.2d 701, 708 (Tex.App.--Houston [14th Dist.] 1998, no writ); Conner, 944 S.W.2d at 411; Vosko v. Chase Manhattan Bank, 909 S.W.2d 95, 99 (Tex.App.--Houston [14th Dist.] 1995, writ denied). If a special appearance is based on undisputed or otherwise established facts an appellate court shall conduct a de novo review of the trial court's order granting a special appearance. Conner, 944 S.W.2d at 411. In Guardian Royal Exchange Assurance, Ltd., v. English China Clays, P.L.C., 815 S.W.2d 223 (Tex.1991), the court stated, "[i]n applying the jurisdictional formula to a particular case, the facts must be carefully weighed and mechanical application of any test, including the Texas formula, must be avoided." Guardian Royal, 815 S.W.2d at 231 (citing Schlobohm v. Schapiro, 784 S.W.2d 355, 358 (Tex.1990) and Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477-78, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).

A court may assert personal jurisdiction over a nonresident defendant only if the requirements of the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution and the Texas long-arm statute are satisfied. CSR, Ltd. v. Link, 925 S.W.2d 591, 594 (Tex.1996). See TEX. CIV. PRAC. & REM.CODE ANN. § 17.042 (Vernon 1997); Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 413-14, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). The Texas long-arm statute allows a court to exercise personal jurisdiction over a nonresident defendant that does business in Texas. In addition to a discrete list of activities that constitute doing business in Texas the statute provides "other acts" by the nonresident can satisfy the requirement. See TEX. CIV. PRAC. & REM.CODE ANN. § 17.042 (Vernon 1997); Guardian Royal, 815 S.W.2d at 226. The Texas Supreme Court has repeatedly interpreted this broad statutory language " 'to reach as far as the federal constitutional requirements of due process will allow.' " CSR, 925 S.W.2d at 594 (quoting Guardian Royal, 815 S.W.2d at 226); see also U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). Thus the requirements of the Texas long-arm statute are satisfied if the exercise of personal jurisdiction comports with federal due process limitations. CSR, 925 S.W.2d at 594. See Guardian Royal, 815 S.W.2d at 226.

The United States Constitution permits "a state court [to] take personal jurisdiction over a defendant only if it has some minimum, purposeful contacts with the state, and the exercise of jurisdiction will not offend traditional notions of fair play and substantial justice." Dawson-Austin v. Austin, 968 S.W.2d 319, 326 (Tex.1998); CMMC v. Salinas, 929 S.W.2d 435, 437 (Tex.1996). A nonresident defendant that has purposefully availed itself of the privileges and benefits of conducting business in the foreign jurisdiction has sufficient contacts with the forum to confer personal jurisdiction. CSR, 925 S.W.2d at 594. See Burger King, 471 U.S. at 475-76, 105 S.Ct. 2174. A defendant should not be subject to the jurisdiction of a foreign court based upon "random," "fortuitous," or "attenuated" contacts. CSR, 925 S.W.2d at 595 (quoting Burger King, 471 U.S. at 475-76, 105 S.Ct. 2174). Minimum contacts are particularly important when the defendant is from a different country because of the unique and onerous burden placed on a party called upon to defend a suit in a foreign legal system. CSR, 925 S.W.2d at 595.

A defendant's contacts with a forum can give rise to either general or specific jurisdiction. General jurisdiction is present when a defendant's contacts are continuous and systematic, allowing the forum to exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. CSR, 925 S.W.2d at 595. See Schlobohm, 784 S.W.2d at 357. General jurisdiction requires a showing the defendant conducted substantial activities within the forum, a more demanding minimum contacts analysis than for specific jurisdiction. CSR, 925 S.W.2d at 595. See Guardian Royal, 815 S.W.2d at 228. On the other hand specific jurisdiction is established if the defendant's alleged...