Shapolsky v Brewton

Citation56 S.W.3d 120
Parties<!--56 S.W.3d 120 (Tex.App.-Houston 2001) IAN SHAPOLSKY, ANITA SHAPOLSKY, and SURE SELLER, INC., Appellants v. PETE BREWTON, Appellee NO. 14-00-00714-CV Court of Appeals of Texas, Houston (14th Dist.)
Decision Date28 June 2001
CourtCourt of Appeals of Texas

Page 120

56 S.W.3d 120 (Tex.App.-Houston [14th Dist.] 2001)
IAN SHAPOLSKY, ANITA SHAPOLSKY, and SURE SELLER, INC., Appellants
v.
PETE BREWTON, Appellee
NO. 14-00-00714-CV
Court of Appeals of Texas, Houston (14th Dist.).
June 28, 2001
Rehearing Overruled Sept. 20, 2001

On Appeal from the 55th District Court Harris County, Texas Trial Court Cause No. 95-37132

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Panel consists of Justices Yates, Wittig, and Frost.

OPINION

Kem Thompson Frost, Justice

This is an interlocutory, accelerated appeal from the trial court's denial of special appearances filed by appellants, Ian Shapolsky, Anita Shapolsky, and Sure Seller, Inc.

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I. Factual and Procedural Background

Appellee, Pete Brewton, is an investigative journalist. At the behest of national book publisher Simon & Schuster, he authored a political expose entitled The Mafia, the CIA and George Bush. Brewton wanted the book published soon after its completion in July 1992, to coincide with the November 1992 presidential election. However, Simon & Schuster was unable to publish the book in 1992. Several other publishers approached Brewton to publish his book. Among them was Shapolsky Publishers, Inc. ("SPI"), a New York based specialty book publisher. When SPI confirmed that it could publish the book well before the 1992 election, Brewton began negotiations with its president, sole shareholder, and director, Ian Shapolsky.

A. Brewton's Publishing Contract with SPI

Brewton, who was then living in Austin, Texas, engaged in contract negotiations by telephone, fax, and mail with SPI (through Ian Shapolsky) in New York. Through these communications, Ian represented to Brewton that SPI had the resources to publish and market the book nationally. The parties' negotiations culminated in a publishing contract, which provided that SPI would use its best efforts to print, publish, and sell the book before election day. The only parties to this agreement were SPI and Brewton.

After the parties had executed the publishing contract, Ian notified Brewton that SPI did not have the resources to print the book and that the printer would not extend credit for its publication. Without time to find another publisher who could meet the target publication date, Brewton agreed to make a short-term loan to SPI by advancing $44,500, half the cost to print and ship the book. From Texas, Brewton sent a cashier's check for $39,500 directly to the printer in Virginia, and sent a separate check for $5,000 to SPI for shipping costs. To document this loan, the parties entered into a second contract, entitled "Agreement between Mr. Peter Brewton & SPI Books-Shapolsky Publishers, Inc.," in which (1) SPI promised to repay the $44,500 within thirty days at a 12% per year interest rate and (2) the parties agreed to adjust the agreed royalty rates 10-15% upward in favor of Brewton.

By the first week of October 1992, nearly 31,000 copies of the book had been printed, but few were actually available for sale in bookstores by election day. SPI spent less than $15,000 to promote and advertise Brewton's book, $5,500 of which Brewton advanced to pay for television and radio publicity.

In December 1992, when the $44,500 loan repayment was already past due, SPI sent Brewton, in Texas, four post-dated checks totaling $30,000, in partial payment for Brewton's advance. Of this $30,000, a check for $10,000, drawn on a New York bank, failed to clear. SPI did not reimburse Brewton for the $5,500 publicity advance or for $9,000 (excluding interest) in advances he made for printing and shipping.

Under the publishing contract, SPI was obligated to send Brewton, on or about July 31, 1993, a royalty check and a statement disclosing the number of books sold. Brewton received neither. A few days later, SPI filed for Chapter 11 bankruptcy protection in New York.

B. Formation of Sure Seller, Inc.

Within six weeks after SPI filed for bankruptcy, Ian's sister, Lisa Cohen, formed a new publishing company, Sure Seller, Inc. ("SSI"), which was incorporated in Florida. At some point, Haim Zitman

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purchased 100% of SSI's authorized shares.1

SSI's original formation documents list Cohen as the sole officer, director, subscriber, and registered agent. Anita Shapolsky, Ian's mother, served as SSI's secretary. Eventually, she became SSI's sole officer and director. SSI had the same address, telephone and fax number as Anita's art gallery in New York.

C. Termination of Publishing Contract

By stipulation, signed by the New York bankruptcy court, the official unsecured creditors committee, Brewton, and SPI, the publishing contract was terminated in October 1994. The hardcover rights to The Mafia, the CIA, and George Bush were to remain with SPI, who was expressly granted the right "to sell off any remaining inventory without any liability to account to Brewton under the contract or otherwise." The stipulation further provided that "Brewton is only entitled to royalties for books sold as of the date of this stipulation [October 18, 1994] and not after this date."

D. SSI's Acquisition of SPI Assets

In December 1994, Zitman and Anita entered into an asset acquisition agreement in which Anita agreed to loan about $110,000 to SSI to purchase, by highest bid from the bankruptcy trustee, assets from the SPI bankruptcy estate. Under this agreement, Anita was to recoup her advance for the purchase of the SPI assets and her legal expenses, plus 20%. Ian was to earn a salary for work he performed in liquidating the assets SSI purchased from the SPI bankruptcy estate. Any assets purchased from the bankruptcy estate that remained after the liquidation were to be divided, 90% to Anita and 10% to Zitman. In accordance with the agreement, SSI submitted a bid for assets of the SPI bankruptcy estate. In a court approved transaction, SSI purchased SPI's book inventory from SPI's bankruptcy estate. The New York bankruptcy court entered an "Order Approving Sale of Assets, Free and Clear of all Claims, Liens and Encumbrances."

E. Sale of Brewton's Book in Texas

In January 1996, SSI filled an order for three copies of Brewton's book for a Brenham, Texas bookstore. Enclosed with that order was a catalog from SSI offering a variety of books for sale, including The Mafia, the CIA, and George Bush. On May 2, 1999, five copies of Brewton's book were purchased from a Barnes & Noble bookstore in Austin, Texas. It is unclear from the record how or through whom Barnes & Noble acquired these books.

F. Brewton's Claims in the Underlying Litigation

Brewton sued Ian, Anita, and SSI in the Harris County District Court. The suit included claims for breach of contract, fraud, and violations of the Racketeer Influenced and Corrupt Organizations ("RICO") Act. See 18 U.S.C.A. § 1961, et seq. SPI was not made a party to the litigation. All three named defendants filed special appearances challenging the court's exercise of personal jurisdiction over them. The trial court sustained jurisdiction over all three, and they now appeal the denial of their special appearances. We affirm in part and reverse and remand in part.

II. Issues Presented for Review

In seven points of error, appellants complain that the trial court erred in overruling

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their special appearances because each lacks the necessary contacts with Texas to establish either specific or general jurisdiction. In the first point of error, appellants assert that the trial court's order overruling Ian's special appearance, on the grounds that he (1) committed torts, in part, in Texas and (2) entered into a contract with Brewton, a Texas resident, to be partially performable in Texas, is incorrect as a matter of law and not supported by factually sufficient evidence.

In their second and third points of error, appellants complain that the trial court's order overruling SSI's special appearance, on the grounds that (1) SSI sold copies of Brewton's book in Texas and that (2) SSI is a successor-in-interest to SPI, is incorrect as a matter of law and not supported by factually sufficient evidence.

In their fourth through sixth points of error, appellants complain that the trial court's order overruling Anita's jurisdictional challenge on the grounds that (1) Anita waived her special appearance is incorrect as a matter of law and that (2) any finding that Anita is the alter ego of SPI and SSI is not supported by factually sufficient evidence.

Finally, in their seventh point of error, appellants assert that the trial court's order overruling their special appearances is not based on factually sufficient evidence because none of them have the minimum contacts with Texas necessary to establish personal jurisdiction, either general or specific. This point will be discussed in the context of analyzing each appellant's contacts with this forum.

III. Standard of Review

Whether a Texas court may assert personal jurisdiction over a nonresident defendant is a question of law subject to a de novo review. C-Loc Retention Sys., Inc. v. Hendrix, 993 S.W.2d 473, 476 (Tex. App.--Houston [14th Dist.] 1999, no pet.). On appeal from a special appearance, we review the record2 to determine if the nonresident defendant satisfied its burden to negate all possible grounds for personal jurisdiction. Abacan Technical Servs. Ltd. v. Global Marine Int'l Servs. Corp., 994 S.W.2d 839, 843 (Tex. App.--Houston [1st Dist.] 1999, no pet.) (citing Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985)). Often, the trial court's determination of personal jurisdiction involves a resolution of underlying factual disputes. C-Loc, 993 S.W.2d at 476 (citing Conner v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405, 411 (Tex. App.--Houston [14th Dist.] 1997, no writ)). An appellate court reviews the...

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