Magnolia Gas Co v. Knight Equip. & MFG.

• Decision Date: 23 September 1998
• Docket Number: No. 04-98-00156-CV,04-98-00156-CV
• Citation: 994 S.W.2d 684
• Parties: (Tex.App.-San Antonio 1998) MAGNOLIA GAS COMPANY & MKP Production Company, Appellants v. KNIGHT EQUIPMENT & MANUFACTURING CORPORATION, Appellee
• Court: Texas Court of Appeals

Page 684

994 S.W.2d 684 (Tex.App.-San Antonio 1998)

MAGNOLIA GAS COMPANY & MKP Production Company, Appellants v. KNIGHT EQUIPMENT & MANUFACTURING CORPORATION, Appellee

No. 04-98-00156-CV

Court of Appeals, Fourth District of Texas

September 23, 1998

From the 218th Judicial District Court, Atascosa County, Texas Trial Court No. 97-09-0572-CVA Honorable Olin B. Strauss, Judge Presiding

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Before Phil Hardberger, C.J., and Green and Duncan, JJ.

OPINION

Green, Justice

This accelerated appeal arises from the trial court's denial of the special appearances of Magnolia Gas Company and MKP Production Company. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(7) (Vernon Supp. 1998). Because we hold the trial court lacked jurisdiction over Magnolia and MKP, we reverse its order and dismiss the case against them.

Factual and Procedural Background

Knight Equipment & Manufacturing Corporation (KEMCO) sued Magnolia and MKP in Atascosa County for breach of contract, in quantum meruit, on sworn account, and for civil conspiracy and fraud. KEMCO is a Texas corporation with its principal office in Jourdanton, Texas. Both Magnolia and MKP are nonresidents of Texas.

KEMCO owned a cryogenic gas processing plant in Kellyville, Oklahoma. In February 1996, KEMCO contracted with M&M Gathering, LLC to dismantle that plant and to refurbish, transport, and install it at M&M Gathering's plant in McKamie, Arkansas.¹ M&M Gathering subsequently assigned its rights and obligations under this contract to Magnolia and MKP in September 1996.² The assignment was negotiated in Oklahoma, where it was ultimately executed. The contract is entitled "Agreement for Movement, Refurbishment and Installation of Cryogenic Gas Plant Facility" and is simple in concept:

WHEREAS, [Magnolia's and MKP's assignor] desires to have installed at its McKamie Plant location in Lafayette County, Arkansas, a Cryogenic Gas Plant and related treating facilities to allow recovery of gas liquids and removal of inerts; and

WHEREAS, [KEMCO] has in its inventory the Cryogenic Gas Plant known as [the] Kellyville plant near Kellyville, Oklahoma, and desires to engineer, refurbish, and install said plant and related treating facilities at the McKamie location for [Magnolia's and MKP's assignor];

NOW, THEREFORE, IT IS MUTUALLY AGREED, AS FOLLOWS:

ARTICLE 1 - SCOPE OF WORK

[KEMCO] shall furnish materials and supplies, and shall design, fabricate, recondition modify, transport and assist in start-up of a Cryogenic Gas Plant and related treating facilities at [Magnolia's and MKP's assignor's] McKamie, Arkansas location, in accordance with the Exhibits which are attached hereto and made a part hereof. . . .

The heart of the jurisdictional dispute in this case arises out of a brief description under the first of twelve items listed to be performed by KEMCO, the contractor, under the "project scope" exhibit attached to the contract, which says KEMCO agreed to "dismantle, remove, and transport all Kellyville equipment to contractor's yard. . . ." KEMCO says it informed Magnolia and MKP that its yard was in Jourdanton, Texas, and therefore Magnolia and MKP knew at least a portion of the contract would be performed in Texas. The affidavit of Deral Knight, chief executive officer of KEMCO, states that the Jourdanton plant performs the refurbishing work under its contracts, and that Magnolia and MKP knew this because they were given copies of the KEMCO brochure which includes this information. KEMCO further asserts that Magnolia and MKP, exercising due diligence prior to the contract's assignment, acquired knowledge that a portion of the contract was to be performed in Texas. KEMCO estimates its performance in Texascomprised eighty percent of the engineering and refurbishment called for by the contract--"the majority of the work contemplated by any party." Magnolia and MKP contend neither they, nor the contract assigned to them, required performance in Texas. George N. Keeney, III, vice president of Okland Oil Company, the managing member of MKP, admitted in his deposition, however, that he knew some of the work under the contract would be performed in Texas and that some of the materials for the Arkansas plant would also originate there.

The remaining record evidence of activities undertaken by Magnolia and MKP in Texas involves the parties' course of dealing after the contract assignment. First, Magnolia and MKP remitted payment to KEMCO's bank account in Texas. Second, James Moore, an engineer for the Arkansas plant and Magnolia and MKP's designated representative for the project, lived in Texarkana, Texas during the plant's installation. By affidavit, Moore stated that M&M Gas moved its principal place of business to Texarkana, Texas in March 1997, and that Magnolia and MKP reimbursed him for his expenses while residing in Texarkana. Magnolia and MKP assert they did not direct Moore to live in Texas and hypothesize that either Moore chose to live there or did so at M&M Gas' direction. Finally, Magnolia and MKP hired an engineering consultant from Richardson, Texas to evaluate the Arkansas project.

Additional activity taking place in Texas transpired once performance under the agreement was questioned. For example, Magnolia and MKP attended a meeting at the Jourdanton plant to discuss conflict over the second set of change orders. Magnolia and MKP contend that KEMCO insisted they travel to Texas for the meeting. Furthermore, the parties met in the Dallas office of Energy Income Fund, the project's lender, to review performance under the agreement. Although the lender's principal office was in Massachusetts, the meeting was held in Dallas at its request.

According to George Keeney's affidavit, disputes between the parties arose in spring 1997. Complaints about KEMCO's performance included inferior quality and workmanship; untimeliness; the propriety, approval, and amount of KEMCO's change orders;³ failure to pay third-party vendors, suppliers, and laborers; failure to keep the plant free of encumbrances; a stated intent to cease work; and failure to address other deficiencies identified by Magnolia. On September 26, 1997, Magnolia and MKP filed a declaratory judgment action against KEMCO in an Arkansas federal court. The parties dispute whether KEMCO received notice of the filing. On September 30, 1997, KEMCO filed the suit in Atascosa County from which this appeal arises.

On November 26, 1997, Liberty Supply, Inc. filed suit in Arkansas state court against KEMCO to recover for materials and supplies it provided to KEMCO for use in KEMCO's contract with Magnolia and MKP. On January 26, 1998, the same day the Atascosa court held its hearing on the special appearances at issue in this appeal, KEMCO filed an amended original answer and a third-party claim against Magnolia and MKP, alleging Magnolia and MKP breached the contract underlying this appeal.⁴

Standard and Scope of Review

In a special appearance, the nonresident defendant bears the burden of negating all bases of personal jurisdiction. Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985). The parties to this appeal maintain we review the evidence for factual sufficiency while we review legal conclusions de novo. See Nikolai v. Strate, 922 S.W.2d 229, 236 (Tex. App.--Fort Worth 1996, writ denied). Although we agree that we review the lower court's legal conclusions de novo, we disagree that we review the record of an interlocutory appeal for factual sufficiency of the evidence.

Trial court decisions derived from both factual determinations and legal conclusions are generally reviewed for an abuse of discretion. Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 820 (Tex. App.--San Antonio 1996, no writ). Personal jurisdiction involves questions of law and fact. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 230-31 (Texas 1991). Thus, the abuse of discretion standard is more appropriate than factual sufficiency review, at least in the interlocutory setting.⁵

Under the abuse of discretion standard, we may not substitute our judgment for that of the trial court regarding its resolution of factual issues, and we cannot disturb its decision absent a showing of arbitrariness or unreasonableness. See Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992). Magnolia and MKP must therefore establish that the trial court could reasonably have reached only one conclusion. See id. Where controlling legal principles are concerned, we exercise less deference and examine whether the trial court analyzed and applied the law correctly. Id. The trial court abuses its discretion when in misapplies the law. See Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 935 (Tex. App.--Austin 1987, no writ). If legally correct, its ruling is immune from appellate revision. Id. at 936.

Although Magnolia and MKP requested findings of fact and conclusions of law, the trial court entered none. Therefore, all questions of fact are presumed to support the judgment. See Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex. 1987); Hawsey v. Louisiana Dep't of Soc. Svcs, 934 S.W.2d 723, 725 (Tex. App.--Houston [1st Dist.] 1996, writ denied). Because the appellate record contains a reporter's record, however, these findings of fact are inconclusive. See Zac Smith, 734 S.W.2d at 666.

Jurisdiction

A nonresident defendant need not defend itself in a Texas court unless the exercise of jurisdiction over that party comports with both (1) the Texas long-arm statute, and (2) state and federal constitutional guarantees of due process. Guardian Royal Exch., 815 S.W.2d at 226. The Texas long-arm statute permits the exercise of jurisdiction over nonresidents "doing business" in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (Vernon 1997). Although the statute enumerates certain acts which constitute "doing business," it...