Lacefield v. Electronic Financial Group

• Decision Date: 20 December 2000
• Docket Number: No. 10-00-205-CV,10-00-205-CV
• Citation: 35 S.W.3d 755
• Parties: (Tex.App.-Waco 2000) PHIL LACEFIELD, Appellant v. ELECTRONIC FINANCIAL GROUP, Appellee
• Court: Texas Court of Appeals

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35 S.W.3d 755 (Tex.App.-Waco 2000) PHIL LACEFIELD, Appellant
v.
ELECTRONIC FINANCIAL GROUP, Appellee No. 10-00-205-CV In the Tenth Court of Appeals December 20, 2000

From the 170th District Court McLennan County, Texas Trial Court # 2000-629-4

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Copyrighted Material Omitted

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Before Chief Justice Davis Justice Vance and Justice Gray

OPINION

DAVIS, Chief Justice

Phil Lacefield appeals the denial of his special appearance. He claims in two points that the court erred by: (1) admitting hearsay evidence in the hearing on his special appearance; and (2) denying his special appearance. We will reverse the court's order and render judgment sustaining the special appearance.

BACKGROUND

Lacefield resides in Tennessee. He is the president of PBS Company, a Tennessee corporation. On PBS's behalf, Lacefield signed an Electronic Services Agreement with SurePay, a division of eCollect, Inc., a bank service provider which has its principal place of business in Pennsylvania. Under the contract, SurePay agreed to provide the following services to PBS:

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• point of sale check conversion, whereby paper checks are converted to electronic funds transfers for origination through the Automated Clearing House (ACH) Network;

• accounts receivable check conversion, whereby paper checks are converted into electronic funds transfers at the end of the business day and originated through the ACH network; and

• electronic check re-presentment, whereby NSF (non-sufficient funds) checks are converted into electronic debits and originated through the ACH network.

The agreement further provides that SurePay is "responsible for transmitting entries through a third party originator to the Federal Reserve Bank."

Magic Processing Company, a Colorado entity, contracted with Electronic Financial Group, Inc. ("EFG"), a Texas corporation, to be the third party originator for the checks transmitted from PBS to SurePay.¹ When EFG processed PBS's transactions, it made electronic deposits "in due time" to PBS's account at the First American Bank of Memphis. EFG alleges that each of the checks it processed for PBS was ultimately dishonored by its maker. As a result, EFG claims that Lacefield owes it $113,932 for the dishonored checks.

EFGG filed suit against Lacefield and First American Bank of Memphis in a McLennan County district court. EFG named the bank as a defendant to prevent the bank from releasing the disputed funds to Lacefield. The court granted EFG a temporary injunction prohibiting the bank from permitting Lacefield to withdraw any of the disputed funds.

EFGG alleges in its First Amended Petition that Lacefield is amenable to personal jurisdiction in Texas because the contract he signed with SurePay on behalf of PBS provides that SurePay will transmit PBS's transactions "through a third party originator." The petition further avers that:

[EFGFG] is the "third party originator" provided for in the contract. [EFG's] cause of action against Defendant Lacefield is based upon fraudulent items created by Lacefield and for which he received payment through a bank in Texas. Therefore, this state has acquired specific jurisdiction to adjudicate controversies involving the items deposited in this state.

Lacefield filed a special appearance alleging that he is not a resident of Texas, does not have sufficient minimum contacts with Texas to be subject to personal jurisdiction in this state, and the exercise of jurisdiction by the Texas court "would offend traditional notions of fair play and substantial justice." Lacefield filed an affidavit in support of his special appearance stating in part:

I have never conducted business with [EFG], nor any of its agents, subsidiaries, or divisions. I have never corresponded with EFG in any manner, nor have I contracted with EFG for any purpose. This action by EFG is based upon transactions pertaining directly to my company's contract with SurePay relating to financial transactions, deposits and transfers. EFG may have served as a depository or transferring agency at the behest of eCollect, Inc. but has otherwise never been a party to the contract between PBS Company and eCollect, Inc., or the related transactions.

. . . .

The agreement by PBS Company, signed by myself, by which PBS Company agreed to bear the risk of uncollectible charges or electronic hot checks, and guaranteed that each such electronic

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transaction represented a genuine order approved by the customer was with eCollect, Inc., as demonstrated in the attached Exhibit "A." I never, personally or as the authorized agent of PBS Company, entered into such an agreement with EFG. I also never, personally or as the authorized agent of PBS Company, requested that EFG process any electronic checks for myself or PBS Company. Any such requests were made to eCollect, Inc., through its main office or its divisions in Pennsylvania and Mississippi, pursuant to the contract attached hereto.

I never, personally or as the authorized agent of PBS Company, directed EFG to take any action, including the transfer of funds to bank accounts in Tennessee. The arrangements with eCollect, Inc. provided for such transfers by eCollect, Inc. or its agents or divisions. Any such request would have been by eCollect, Inc., not at my direction.

Prior to the instigation of this lawsuit I had no idea that a Texas company might be involved in these transactions in any way. Any involvement by EFG was at the request of eCollect, Inc., or in its regular course of business, which was acting as an independent contractor by virtue of its contract with PBS Company.

At the special appearance hearing, Lacefield appeared only by counsel, who relied solely on Lacefield's affidavit and the contract between PBS and SurePay. EFG presented the testimony of its president Jerry Federico. Federico testified that EFG received a request to process PBS's transactions from Magic Processing Company in Colorado. He confirmed that Lacefield never requested EFG to process these transactions. After being contacted by Magic Processing, an EFG representative called Lacefield to obtain additional information necessary to process PBS's transactions. The representative informed Lacefield that EFG is located in Texas and would be the third party originator for the transactions. According to Federico, Lacefield did not voice any objections to EFG serving in this capacity.

Federico reiterated on cross-examination that Magic Processing contacted EFG about handling the processing of PBS's transactions and that Lacefield never initiated any communications with EFG. Rather, EFG contacted him to obtain additional information.

SPECIAL APPEARANCE

Lacefield contends in his second point that he does not have sufficient minimum contacts to be amenable to personal jurisdiction in a Texas court or, alternatively, that the exercise of such jurisdiction does not comport with traditional notions of fair play and substantial justice.

Personal Jurisdiction

A Texas court may assert personal jurisdiction over a nonresident defendant only when the requirements of the Due Process Clause of the Fourteenth Amendment and of the Texas long-arm statute are satisfied. See CSR Ltd. v. Link, 925 S.W.2d 591, 594 (Tex. 1996); BHP de Venezuela, C.A. v. Casteig, 994 S.W.2d 321, 325 (Tex. App. Corpus Christi 1999, pet. denied) (op. on reh'g). The long-arm statute permits the exercise of personal jurisdiction over a nonresident defendant doing business in the State. Id. (citing Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (Vernon 1997)). The statute reaches "as far as the federal constitutional requirements of due process will allow." Id. (quoting Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991)). Thus, the requirements of the long-arm statute are satisfied whenever the requirements of federal due process are met. Id.

To satisfy federal due process, a court may assert personal jurisdiction over a nonresident defendant only when the defendant has sufficient minimum contacts

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with Texas "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343, 84 L. Ed. 278 (1940)); CSR Ltd., 925 S.W.2d at 594. "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 Ltd., 925 S.W.2d at 594 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S. Ct. 2174, 2183-84, 85 L. Ed. 2d 528 (1985)); accord BHP, 994 S.W.2d at 325. Conversely, a nonresident defendant cannot be haled into a Texas...