J & J Marine, Inc. v. Le

• Decision Date: 10 December 1998
• Docket Number: No. 13-98-336-CV,13-98-336-CV
• Citation: 982 S.W.2d 918
• Parties: J & J MARINE, INC. and Fred B. Johnson, Appellants, v. Ha Van LE and Bay V. Nguyen, Appellees.
• Court: Texas Court of Appeals

Page 918

982 S.W.2d 918

J & J MARINE, INC. and Fred B. Johnson, Appellants, v. Ha Van LE and Bay V. Nguyen, Appellees.

No. 13-98-336-CV.

Court of Appeals of Texas,

Corpus Christi.

Dec. 10, 1998.

F. E. Billings, Billings & Solomon, Houston, for Appellants.

Isidro O. Castanon, Allen Stein Powers, Durbin & Hunnicutt PC, Palacios, William L. Powers, Plunkett, Gibson & Allen, San Antonio, for Appellees.

Before Justices HINOJOSA, YANEZ and RODRIGUEZ.

OPINION

HINOJOSA, Justice.

Appellees, Ha Van Le and Bay V. Nguyen, sued appellants, J & J Marine, Inc. ("J & J") and Fred B. Johnson, for negligence, breach of contract, breach of fiduciary duty, breach of the Uniform Commercial Code, fraud, and misrepresentation/violations of the Texas Deceptive Trade Practices--Consumer Protection Act. Appellants filed a special appearance, which the trial court denied. This is an interlocutory appeal from the trial court's order denying appellants' special appearance. ¹ We reverse the trial court's order and dismiss this case for lack of personal jurisdiction.

A. THE TRIAL COURT'S FINDINGS OF FACT

The trial court found that on February 11, 1995, appellees entered into a written contract; appellants agreed to construct a shrimp boat and appellees agreed to pay the purchase price of $480,000. Appellees are residents of Palacios, Matagorda County, Texas. Johnson, a citizen of Alabama, is the president and sole shareholder of J & J and SEE, Inc., ² both Alabama corporations. Johnson does business as J & J and SEE, Inc. Appellants knew appellees were Texas residents and that the vessel would be moored in Palacios. Appellees have experienced numerous problems with the vessel, including defective paint, since delivery.

Appellants have constructed seven shrimp boats, including the one at issue, for Texas residents. Total value of these vessels is approximately $3.5 million. J & J's annual revenue is approximately $6 million. The value of appellees' vessel was approximately ten percent of J & J's annual revenue. Six of the vessels built for Texas residents, including the one at issue, have Palacios as their hailing port. At least three owners of these vessels, including appellees, have experienced problems with defective paint. One other owner has a suit pending before the trial court against appellants. SEE, Inc. sold electronic equipment to at least five vessels, similar to the one at issue, which hail from the port at Palacios. SEE, Inc. sells electronic equipment to J & J to be placed on shrimp boats. The average cost for this equipment is $12,000. For every vessel constructed by appellants, an "Application for Admeasurement" must be submitted to the American Bureau of Shipping, located in Houston, Texas. Michael Johnson, ³ J & J's vice-president, submitted the application for appellees' vessel.

Thuy Vu, a Palacios resident, received one telephone call from appellants asking whether she was interested in purchasing vessels appellants had available. Tuyen Nguyen, a Palacios resident, was involved in negotiations for two vessels with Johnson. These negotiations were for individuals with whom Tuyen was associated. These negotiations involved the sale price and were done by telephone either from Tuyen's office or Johnson's office in Alabama.

The trial court concluded the above facts established substantial activities and/or connections that were continuously, systematically, and purposefully directed by appellants toward Texas, and that a substantial connection between Texas and appellants arose from this conduct. The court further concluded that asserting general personal jurisdiction over appellants would comport with fair play and substantial justice because the burden of prosecuting appellants in Alabama would be greater for appellees than the burden of defending this claim in Texas would be on appellants, and that any potential clash of laws could be accommodated by Texas choice of law rules. In addition, the court reasoned Texas, particularly Matagorda County, had a manifest interest in providing an effective means of redress for its residents, especially because several individuals have the same complaints.

B. OTHER RELEVANT INFORMATION

Negotiations for the construction of the vessel at issue occurred in Alabama at the instigation of the appellees. The parties executed the contract in Bayou La Batre, Alabama. According to the terms of the contract, the vessel was constructed at J & J's shipyard in Bayou La Batre. Payment for the vessel was to be made by: (1) cash, (2) cashier's check, (3) certified check issued by a banking institution in Mobile, Alabama, or (4) bankwire to J & J's bank account in Mobile. Appellees took delivery of the boat at J & J's dock at Bayou La Batre. J & J's construction lien was secured pursuant to section 35-11-60 of the Code of Alabama. In addition, J & J received a security interest in the vessel under the Uniform Commercial Code of Alabama. Appellees could choose which U.S. Coast Guard Documentation Office would document the vessel as a United States vessel. Any necessary warranty work would, if practical, be performed at J & J's shipyard. All contract disputes were to be arbitrated by the American Arbitration Association and conducted in Mobile. Although the "Application for Admeasurement" was submitted in Houston, the admeasuring was actually done at J & J's shipyard in Alabama. In the contract, Le's address was listed as Palacios, Texas. The "Application for Admeasurement" and the Coast Guard's "Certificate of Documentation" list the vessel's hailing port as New Orleans, Louisiana and Le's address as Gretna, Louisiana.

After appellees accepted delivery of the vessel, defects in the construction and design became evident. These defects allegedly included faulty hull painting as well as defective engine design, installation, assembly, and welding. Although appellees made demands, appellants have not performed the requested repairs. As a result, appellees brought this cause of action to which appellants filed a special appearance. Appellants then removed the case to federal court. A motion to remand was granted when appellees stipulated that damages did not exceed $75,000. After remand, the trial court heard and denied appellants' special appearance, resulting in this appeal. The trial court's findings of fact and conclusions of law are part of the record.

C. DUE PROCESS

In their first and second issues, appellants contend the trial court erred in denying their special appearance. Appellants question whether the trial court's assertion of personal jurisdiction over appellants is consistent with due process requirements. Specifically, appellants ask us to consider whether they met their burden to negate all bases of jurisdiction. In the alternative, appellants question whether traditional notions of fair play and substantial justice would be offended by the trial court's assertion of personal jurisdiction over them.

A Texas court may assert personal jurisdiction over a nonresident defendant only if the requirements of both the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution and the Texas long-arm statute are satisfied. See U.S. C ONST. amend. XIV, § 1; TEX. CIV. PRAC. & REM.CODE § 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); CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex.1996). The long-arm statute allows a court to exercise personal jurisdiction over a nonresident defendant doing business in Texas. TEX. CIV. PRAC. & REM.CODE § 17.042. In addition to a discrete list of activities that constitute doing business in Texas, the statute provides that "other acts" by a nonresident can satisfy the requirement. Id.; CSR Ltd., 925 S.W.2d at 594; Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex.1991). 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 Ltd., 925 S.W.2d at 594 (quoting Guardian Royal, 815 S.W.2d at 226); see also U-Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). Consequently, the requirements of the Texas long-arm statute are satisfied if the exercise of personal jurisdiction comports with federal due process limitations. CSR Ltd., 925 S.W.2d at 594; see Guardian Royal, 815 S.W.2d at 226.

In order to comply with the Texas long-arm statute and the federal constitutional requirements of due process, a plaintiff must initially show that the defendant has established "minimum contacts" with the forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945); National Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 772 (Tex.1995); In re S.A.V., 837 S.W.2d 80, 85 (Tex.1992); Guardian Royal, 815 S.W.2d at 230; Schroeder v. Valdez, 941 S.W.2d 312, 314 (Tex.App.--Corpus Christi 1997, no writ). There must be a "substantial connection" between the nonresident defendant and Texas arising from action or conduct of the nonresident defendant purposefully directed toward Texas. S.A.V., 837 S.W.2d at 85; Guardian Royal, 815 S.W.2d at 230; Schroeder, 941 S.W.2d at 314. A nonresident defendant purposefully availing itself of the privileges and benefits of conducting business in Texas has sufficient contacts to confer personal jurisdiction. CSR Ltd., 925 S.W.2d at 594; see Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).

A defendant's contacts with a forum can give rise to either specific or general jurisdiction. CSR Ltd., 925 S.W.2d at 594. Specific jurisdiction is established if the defendant's alleged liability arises from or is related to an activity conducted within the forum. CSR Ltd., 925 S.W.2d at 595; National Indus. Sand Ass'n, 897 S.W.2d at 772; S.A.V., 837 S.W.2d at 85; Guardian Royal, 815 S.W.2d at 227; Schroeder, 941 S.W.2d at...