Micromedia v. Automated Broadcast Controls
| Decision Date | 12 September 1986 |
| Docket Number | No. 85-1585,85-1585 |
| Citation | 799 F.2d 230 |
| Parties | 2 UCC Rep.Serv.2d 48 MICROMEDIA, Plaintiff-Appellee, v. AUTOMATED BROADCAST CONTROLS, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
David T. Lopez, Houston, Tex., for defendant-appellant.
Thomas M. Wheeler, Wagstaff, Alvis, Stubbeman, Seamster & Longacre, Roy B. Longacre, Abilene, Tex., for plaintiff-appellee.
Appeal from the United States District Court for the Northern District of Texas.
Before CLARK, Chief Judge, and IRVING L. GOLDBERG, and GARWOOD, Circuit Judges.
In this Texas law diversity case removed from state court, appellant challenges the district court's in personam jurisdiction over it due to faulty service of process. In addition, appellant claims that the district court erred in allowing recovery on a contract that was barred by the statute of frauds, and in denying appellant's claim for the sales price of other goods accepted but not paid for by appellee. We determine the district court had personal jurisdiction over appellant. The district court did, however, err in overruling appellant's statute of frauds defense as to a part of appellee's claim and in denying appellant any recovery or setoff for the sales price of other goods retained by appellee. Accordingly, we reverse and remand to the district court for further proceedings consistent herewith.
Plaintiff-appellee Micromedia, a partnership of Texas citizens formed for the purpose of establishing and operating a radio station in Eastland, Texas, accepted a bid from Parcom for the design, purchase, and installation of broadcasting equipment for its radio station. Parcom, a company essentially consisting of one individual, David Lee Parker, had an informal relationship as a representative of defendant-appellant Automated Broadcast Controls (ABC), a Maryland corporation with its principal place of business in that state. Under the agreement between ABC and Parcom, Parcom could relay price, delivery, and feature information to prospective buyers of ABC equipment and, upon delivery and payment for the equipment, ABC would pay Parcom a commission.
Micromedia wanted to obtain an automated broadcasting system which would permit its radio station to use prerecorded programs without having a live broadcaster present. Parcom convinced Micromedia to select an ABC system then being developed, known as the System 80. Micromedia arranged with a leasing company to purchase the System 80 with the understanding that Micromedia would then lease the equipment from that company. Shortly after the leasing company ordered the System 80, problems arose with its final development. Micromedia decided to remain with the System 80, but requested equipment for an interim system to get the station on the air. ABC put together an interim system to meet Micromedia's immediate need and shipped the equipment with an invoice to Micromedia. Micromedia attempted to use those items at its radio station. However, shortly after the delivery of the interim system, Micromedia contacted Parcom and said there were problems with the interim system equipment. Neither Micromedia nor the leasing company ever paid for the interim system equipment received from ABC or for the System 80. Micromedia had agreed to pay fifty percent of the order for the System 80 upon receipt of the interim equipment from ABC, but did not do so, claiming that the interim system did not work properly. The leasing company informed Micromedia that ABC had refused to furnish additional equipment without payment and then wrote ABC voiding the purchase order. The System 80 was never furnished. Micromedia ultimately filed suit against ABC.
Micromedia originally filed suit in a Texas district court, and attempted to serve ABC through the Texas long-arm statute, Tex.Rev.Civ.Stat.Ann. art. 2031b Sec. 3, by serving the Texas Secretary of State. Micromedia alleged in its petition that ABC was conducting business in the state and could be sued through the Secretary of State in accordance with the Texas long-arm statute. The petition failed to allege that ABC did not maintain a place of regular business in the State of Texas or have a designated agent there upon whom service could be made in accordance with the statute. ABC then petitioned for removal to the United States district court, asserting that the federal court would have original jurisdiction as the case was one between citizens of different states and the amount in controversy exceeded $10,000.
After the case was removed, ABC filed a motion under Fed.R.Civ.P. 12(b) to dismiss for lack of personal jurisdiction. ABC alleged that the district court lacked in personam jurisdiction because ABC was not served in accordance with the Texas long-arm statute, that it was not subject to service under the Texas long-arm statute, and, furthermore, that ABC lacked sufficient minimum contacts with the State of Texas.
After the district court denied ABC's motion to dismiss for lack of personal jurisdiction, ABC filed its answer asserting, inter alia, the defense of the statute of frauds, Tex.Bus. & Com.Code Ann. Sec. 2.201. The answer also contained two counterclaims. In its first counterclaim, ABC asked for the purchase price of the interim system equipment which it had shipped to Micromedia, and Micromedia had accepted and not paid for, and also for consequential damages resulting from Micromedia's failure to pay. The second counterclaim was in essence one for damages for the allegedly malicious prosecution by Micromedia of its suit against ABC.
The case was tried to a jury. ABC, at the close of Micromedia's evidence and again at the close of all the evidence, moved for directed verdict, raising, among other things, its statute of frauds defense. These motions were overruled. The jury returned a verdict based on special interrogatories, finding in favor of Micromedia separately on each of its two contract claims, that respecting the System 80 and that respecting the interim system. It found against Micromedia on its fraud claims. In response to a single, globular interrogatory, it found $23,360 as Micromedia's damages. The jury also found that Micromedia had accepted the interim system goods delivered, exercised ownership over them, and had not paid for these goods, but that, apart from the failure to pay the purchase price, ABC was not damaged thereby. The court instructed the jury in this connection that ABC would be entitled to recover the agreed sales price for these goods, which was established by the evidence. The jury failed to find that the prosecution of this suit by Micromedia was malicious. The district court entered judgment against ABC in favor of Micromedia for $23,360. However, the judgment made no provision for recovery or setoff in ABC's favor respecting the purchase price of the interim system goods, and the district court did not expressly address that matter. ABC filed a motion for judgment notwithstanding the verdict, again raising the statute of frauds issue and ABC's entitlement to recover the purchase price of the interim system goods, and a motion for a new trial, both of which were denied without explanation. This appeal by ABC followed.
This suit was originally filed in Texas state court, and service of process was governed by the Texas long-arm statute. The Texas long-arm statute in effect at the time this suit was filed was Tex.Rev.Civ.Stat.Ann. art. 2031b. 1 Micromedia attempted to serve ABC by serving the Texas Secretary of State in accordance with section 3 of article 2031b. Section 3 states that the Secretary of State may be served as a deemed agent for service of process for any foreign corporation engaged in business in the state if that corporation does not maintain a place of regular business in the state or a designated agent therein upon whom service may be made. Micromedia's original complaint failed to allege that ABC did not maintain in Texas a regular place of business or designated agent upon whom service could be made. ABC contends that the Texas courts hold that failure to allege in the petition facts showing compliance with these requirements of article 2031b renders service thereunder ineffective. McKanna v. Edgar, 388 S.W.2d 927 (Tex.1965). Micromedia admits that its original petition did not contain the required allegations for service under article 2031b; however, it maintains that its amended complaint cured any defects. Section 1448, 28 U.S.C., states that: "In all cases removed from any State court to any district court of the United States in which ... process served proves to be defective, such process or service may be completed or new process issued in the same manner as in cases originally filed in such district court." Once the case is removed, it becomes subject to the Federal Rules of Civil Procedure. Fed.R.Civ.P. 81(c); Usatorres v. Marina Mercante Nicaraguenses, 768 F.2d 1285 (11th Cir.1985). See also 4 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1082 (1969); 1A J. Moore & B. Ringle, Moore's Federal Practice p 9.168[4.-3] (1985). Amendment of service of process is governed by Fed.R.Civ.P. 4(h). Rule 4(h) states that the district court at its discretion may permit amendment of service of process unless such amendment would materially prejudice the other party. The district court granted Micromedia's motion to amend its pleading to conform with the Texas long-arm statute, and there is nothing in the record to show that the amendment prejudiced ABC. 2 The amended complaint conformed to the requirements of Tex.Rev.Civ.Stat.Ann. art. 2031b. There is no indication in the record whether this amended complaint was ever actually served; however, ABC did not at any time below assert, or make any objection on the basis, that the amended complaint was not served, and, therefore, any such objection is...
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