Steve Augustino and Laura Augustino v. John Handling, Individually And John Handling as Owner of Handling Trailer Sales

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-00-00675-CV

Steve Augustino and Laura Augustino, Appellants

v.

John Handling, Individually; and John Handling as Owner of Handling Trailer Sales,

Appellees

FROM THE DISTRICT COURT OF MILAM COUNTY, 20TH JUDICIAL DISTRICT

NO. 26,659, HONORABLE CHARLES E. LANCE, JUDGE PRESIDING

Appellants Steve Augustino and Laura Augustino sued appellee John Handling in his

individual capacity and as the owner of Handling Trailer Sales for defects in a horse trailer they

purchased from him. Handling filed a special appearance, which the trial court granted. See Tex.

R. Civ. P. 120a. In four points of error, the Augustinos appeal the trial court's order on the grounds

that the trial court erred in (1) granting the special appearance and (2) failing to grant the Augustinos'

request for a continuance to permit further discovery. We will reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

Steve and Laura Augustino own and operate the Four Seasons Ranch in Milam

County. They train and sell horses and mules. Handling owns and operates Handling Trailer Sales

in Blakesburg, Iowa, where he customizes trailers and resells them to the public. The Augustinos

wished to purchase a new horse trailer, particularly one that featured living quarters. The record is

unclear as to which party initiated the business negotiations; nevertheless, the parties contacted one

another on several occasions.

In the course of their dealings, Handling mailed pictures of and information

concerning the trailer to the Augustinos' residence. He also mailed a retail installment contract and

a security agreement to them. Handling and Steve Augustino spoke on the telephone about the

specifics of the trailer. Finally, Handling faxed a consumer credit application and a purchase order

to the Augustinos.

These negotiations resulted in the purchase of a customized Softouch trailer, which

Handling financed for the Augustinos. Kathy Christinson brought the trailer to Steve Augustino and

his associate in Plainview. The record is unclear as to whether Christinson served as an agent for

Handling or for the Augustinos. Furthermore, the extent to which Christinson facilitated the

transaction is vague.

Upon delivery, the Augustinos immediately noticed several defects in the horse

trailer. The propane tank was improperly secured and it separated from the trailer after the

Augustinos drove five miles. Several recreational vehicle and trailer dealers have refused to repair

this defect because the entire propane gas delivery system was improperly installed. The Augustinos

cannot use the customized trailer for its intended purpose and have been informed that the trailer

poses a hazard to themselves, their animals, and other travelers.

The Augustinos brought suit for violation of the Texas Deceptive Trade

Practices--Consumer Protection Act ("DTPA"), (1) breach of contract, and breach of warranties

against Handling. Handling, a nonresident defendant, filed a special appearance, which the trial

court granted. On appeal, the Augustinos assert four points of error: (1) the trial court erred in

applying the applicable law to the facts as presented in Handling's pleadings and through the live

testimony of both parties at the special appearance hearing; (2) the evidence presented by Handling

was insufficient to negate all bases of personal jurisdiction; (3) the quality and nature of Handling's

contacts with Texas were purposeful and the exercise of jurisdiction over Handling comports with

fair play and substantial justice; and (4) the trial court erred by failing to grant the Augustinos'

request for further discovery. The first three points of error are separate elements of a single question

and will be addressed together.

STANDARD OF REVIEW

When a defendant challenges a court's exercise of personal jurisdiction through a

special appearance, he carries the burden of negating all bases of personal jurisdiction. Kawasaki

Steel Corp. v. Middleton , 699 S.W.2d 199, 203 (Tex. 1985); Siskind v. Villa Found. for Educ., Inc .,

642 S.W.2d 434, 438 (Tex. 1982); Nikolai v. Strate , 922 S.W.2d 229, 236 (Tex. App.--Fort Worth

1996, writ denied). When a trial court rules on a special appearance, the losing party should request

that the court make findings of fact according to Texas Rule of Civil Procedure 296. Tex. R. Civ.

P. 296; Runnells v. Firestone , 746 S.W.2d 845, 849 (Tex. App.--Houston [14th Dist.] 1988, writ

denied). Absent such findings, we view the trial court's judgment as impliedly finding all the

necessary facts to support its judgment. Worford v. Stamper , 801 S.W.2d 108, 109 (Tex. 1990). In

the instant cause, appellants have made no request for findings of fact and conclusions of law from

the trial court, and none were filed. See Tex. R. Civ. P. 296. We therefore presume that the trial

court made all necessary findings to support its judgment. See Garner v. Furmanite Austl. Pty., Ltd. ,

966 S.W.2d 798, 802 (Tex. App.--Houston [1st Dist.] 1998, pet. denied). Where a complete

statement of facts appears in the record as here, however, these implied findings are not conclusive

and an appellant may challenge the sufficiency of the evidence. See Roberson v. Robinson , 768

S.W.2d 280, 281 (Tex. 1989). Where such points are raised, the standard of review to be applied

is the same as that to be applied in the review of jury findings or a trial court's findings of fact. Id .

When in personam jurisdiction is challenged, we review all the evidence. Nikolai ,

922 S.W.2d at 236 ; Hotel Partners v. KPMG Peat Marwick , 847 S.W.2d 630, 632 (Tex.

App.--Dallas 1993, writ denied). We apply a factual sufficiency standard in reviewing the evidence,

not a de novo review. Nikolai , 922 S.W.2d at 236 ; Hotel Partners , 847 S.W.2d at 632 ; NCNB Tex.

Nat'l Bank v. Anderson , 812 S.W.2d 441, 443-44 (Tex. App.--San Antonio 1991, no writ). When

reviewing a fact finding to determine the factual sufficiency of the evidence, we must consider and

weigh all the evidence and should set aside the judgment only if the evidence is so weak as to make

the finding clearly wrong and manifestly unjust. Cain v. Bain , 709 S.W.2d 175, 176 (Tex. 1986);

In re King's Estate , 244 S.W.2d 660, 661 (Tex. 1951); Ronnie Loper Chevrolet-Geo, Inc. v. Hagey ,

999 S.W.2d 81, 84-85 (Tex. App.--Houston [14th Dist.] 1999, no pet.).

DISCUSSION

Texas Long-Arm Statute

A Texas court may exercise jurisdiction over a nonresident if two conditions are

satisfied: first, the Texas long-arm statute must authorize the exercise of jurisdiction; second, the

exercise of jurisdiction must be consistent with federal and state constitutional guarantees of due

process. Schlobohm v. Schapir o , 784 S.W.2d 355, 356 (Tex. 1990). The Texas long-arm statute

allows a court to exercise personal jurisdiction over a nonresident defendant who does business in

the state. Tex. Civ. Prac. & Rem. Code Ann. § 17.042 (West 1997). Although the long-arm statute

enumerates three specific acts which constitute "doing business," it also states that there are "other

acts that may constitute doing business." Id. Such broad language allows the "doing business"

requirement of the long-arm statute to reach as far as the federal constitutional requirements of due

process will allow. Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C. , 815

S.W.2d 223, 226 (Tex. 1991); U-Anchor Adver., Inc. v. Burt , 553 S.W.2d 760, 762 (Tex. 1977).

Thus, if the exercise of personal jurisdiction comports with federal due process requirements, the

requirements of the Texas long-arm statute are satisfied. Guardian , 815 S.W.2d at 226 .

Federal Due Process

Federal constitutional due process requirements place limits on a state's power to

assert personal jurisdiction over a nonresident defendant. Helicopteros Nacionales de Colombia,

S.A. v. Hall , 466 U.S. 408, 413-14 (1984). These due process requirements are divided into two

parts: (1) the defendant has established minimum contacts with the forum state, and (2) the exercise

of jurisdiction comports with fair play and substantial justice. Burger King v. Rudzewicz , 471 U.S.

462, 475-76 (1985).

The minimum contacts analysis requires that the nonresident purposefully availed

herself of the privilege of conducting activities within the forum state, and thus has invoked the

benefits and protections of its laws. Id . at 474-75. Furthermore, there must be a substantial

connection between the nonresident defendant and Texas that has arisen because of the purposeful

availment of privileges. See id . at 475. Based on the contact with the forum state, a nonresident

defendant must reasonably anticipate being haled into a Texas court. Project Eng'g USA Corp. v.

Gator Hawk, Inc. , 833 S.W.2d 716, 721 (Tex. App.-- Houston [1st Dist.] 1992, no writ); General

Elec. Co. v. Brown & Ross Int'l Distrib., Inc. , 804 S.W.2d 527, 530 (Tex. App.--Houston [1st Dist.]

1990, writ denied).

The United States Supreme Court has refined the minimum contacts analysis into

specific and general jurisdiction. See Guardian , 815 S.W.2d at 227 . The Augustinos asserted only

specific jurisdiction in their pleadings; therefore we will not discuss general jurisdiction.

When specific jurisdiction is asserted, the cause of action must arise out of or relate

to the nonresident defendant's contact with the forum state in order to satisfy the minimum contacts

requirement. Id . However, the contact must have resulted from the nonresident defendant's

purposeful conduct and not the unilateral activity of the plaintiff or others. Id . When specific

jurisdiction is asserted, the minimum contacts analysis focuses on the relationship among the

defendant, the forum, and the litigation. Id . at 228. If specific jurisdiction exists, a court must then

determine whether a finding of personal jurisdiction is commensurate with notions of fair play and

substantial justice. Id . at 231.

The analysis of whether the exercise of jurisdiction comports with "fair play and

substantial justice" consists of five factors: (1) the burden on the defendant; (2) the interests of the

forum state in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and

efficient relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution

of controversies; and (5) the shared interest of the several states in furthering fundamental

substantive social policies. Id . at 228. If the exercise of jurisdiction does not offend traditional

notions of fair play and substantial justice, then jurisdiction is appropriate. The case at bar requires

only an analysis of the first three factors.

Minimum Contacts

We must first consider the trial court's denial of specific jurisdiction over Handling

individually and as owner of Handling Trailer Sales. Specific jurisdiction refers to jurisdiction in

which the cause of action arises out of, or is substantially related to, the actual contact with the

forum. Memorial Hosp. Sys. v. Fisher Ins. Agency , 835 S.W.2d 645, 649 (Tex. App.--Houston

[14th Dist.] 1992, no writ). Thus, in analyzing minimum contacts, it is not the number, but rather

the quality and nature of the nonresident's contacts with Texas that are important. Id .

First, Handling falls within the reach of the Texas long-arm statute because he

"contract[ed] by mail or otherwise with a Texas resident and either party is to perform the contract

in whole or in part in [Texas]." Tex. Civ. Prac. & Rem. Code § 17.042(1). Handling sought to sell

a customized horse trailer to the appellants. In order to do this, he sent a sales brochure and pictures

of the horse trailer through the mail. The parties also engaged in telephone conversations in order

to solidify the deal. Handling sent the consumer credit application and the retail installment

agreement by facsimile to the Augustinos. Finally, the trailer was delivered to the Augustinos in

Plainview. These facts constitute evidence sufficient to assert that Handling purposefully availed

himself of the privilege of conducting activities within the state of Texas.

The facts of this case are similar to those in Ring Power Systems v. International de

Comercio y Consultoria, S.A. , 39 S.W.3d 350 (Tex. App.--Houston [14th Dist.] 2001, no pet.).

Ring Power involved a breach of contract and misrepresentation action for the sale of defective

power generators. Id . at 351. In Ring Power , business negotiations began when International, a

Guatemalan corporation with an office in Houston, received a brochure from Ring Power Systems,

a Florida corporation. Id . The parties discussed issues of cost, warranty, and power specifications

through telephone and facsimile correspondence between Jacksonville, Florida, and Houston. Id .

International ultimately purchased two power generators, which did not work properly. Id . at 352.

As a result, International filed suit. The court of appeals held that these contacts were sufficient to

invoke Texas long-arm jurisdiction. Id . at 354. We agree with this conclusion.

The case at bar also resembles N. K. Parrish, Inc. v. Schrimscher , 516 S.W.2d 956,

958-59 (Tex. Civ. App.--Amarillo 1974, no writ). Schrimscher involved a breach of contract action

brought by a Texas corporation against Fred Schrimscher, a New Mexico resident. Id . at 957.

Parrish agreed to purchase wheat from Schrimscher. The contract, formed through telephone and

mail correspondence, provided that Parrish would accept the wheat in Albuquerque, New Mexico.

Id . at 957. Parrish later filed suit, alleging that Schrimscher had failed to deliver the minimum

amount of wheat called for by the contract. Id . at 958. Reversing an order granting Schrimscher's

special appearance, the court of appeals held that Schrimscher had sufficient minimum contacts with

Texas. Id . at 959. Although Schrimscher was never physically present in Texas, he purposefully

entered into a contract that was partially performable in Texas. Id . at 959. Furthermore,

Schrimscher could reasonably foresee the need to invoke the benefits and protections of the law of

Texas, particularly with respect to Parrish's obligation to perform under the contract in Texas. Id .

at 959. We also agree with this conclusion.

We must next ask whether the alleged violation of the DTPA constitutes the

minimum contacts necessary to subject Handling to specific personal jurisdiction in Texas. First,

the jurisdictional requirements of the Texas long-arm statute are satisfied if the nonresident

defendant "commits a tort in whole or in part in [Texas]." Tex. Civ. Prac. & Rem. Code

§ 17.042(2). The Augustinos allege that Handling made certain misrepresentations and omissions

about the trailer during the period of correspondence. They further allege that they detrimentally

relied upon Handling's information regarding the quality of the trailer and accepted the trailer

without ever leaving Texas. In a negligent misrepresentation case, if the representation occurs

outside the state of Texas, a tort is committed in Texas if reliance thereon occurred in Texas. Ring

Power , 39 S.W.3d at 354 ; Fisher , 835 S.W.2d at 648 (holding that hospital that admitted patient on

the basis of single, false representation of insurance coverage could assert long-arm jurisdiction for

negligent misrepresentation). A tort may occur even if the party made the misrepresentation or

omission outside of Texas without initiating the communication. Fisher , 835 S.W.2d at 648 .

Because the appellants have alleged a tort committed in part in Texas, the requirement for

jurisdiction under the Texas long-arm statute has been satisfied. See Ring Power , 39 S.W.3d at 353-54 ; Fisher , 835 S.W.2d at 648 .

In analyzing Handling's minimum contacts with the state of Texas, we must be

mindful of the standard of review, which is a sufficiency of the evidence review. See Roberson , 768

S.W.2d at 281 . When reviewing the factual sufficiency of the evidence, we consider all the evidence

and should set aside the judgment only if the evidence is so weak as to make the finding clearly

wrong and unjust. Cain v. Bain , 709 S.W.2d 175, 176 (Tex. 1986); Ronnie Loper Chevrolet-Geo,

Inc. v. Hagey , 999 S.W.2d 81, 84-85 (Tex. App.--Houston [14th Dist.] 1999, no pet.). Even if we

view the evidence in Handling's favor, minimum contacts are nonetheless satisfied. Handling

mailed a sales brochure and pictures of the horse trailer to the Augustinos, faxed a consumer credit

application and retail installment agreement to them, financed the trailer for them, and engaged in

numerous telephone conversations with them. These business activities were purposefully directed

toward and were substantially related to the state of Texas. See Ring Power , 39 S.W.3d at 354 .

After considering and weighing all of the evidence in the record, we conclude that the trial court's

finding that Handling did not have sufficient minimum contacts is clearly wrong and manifestly

unjust.

Having determined that Handling's actions satisfy the minimum contacts analysis,

we must next decide whether Handling, a nonresident defendant, could have reasonably anticipated

being haled into a Texas court. See Guardian , 815 S.W.2d at 227 . The record reveals a nexus

between the alleged tort that occurred in part in Texas and the contact with Texas: the Augustinos

detrimentally relied on Handling's representations, and Handling could reasonably foresee that such

representations would be relied upon by the Augustinos. The fact that the Augustinos purchased the

trailer shows that they seriously relied on Handling's representations. Due to these dealings,

Handling should have foreseen the possibility of being haled into a Texas court. Handling's

misrepresentations and omissions allow the inference that any injurious consequence of such actions,

whether physical or economic, would be felt by the residents in their domicile. See Fisher , 835

S.W.2d at 650 .

Fair Play and Substantial Justice

The final step of our jurisdictional analysis is to ask whether the assertion of personal

jurisdiction comports with traditional notions of fair play and substantial justice. See Guardian , 815

S.W.2d at 225 . We acknowledge that only in rare cases will the exercise of jurisdiction not comport

with fair play and substantial justice when the nonresident defendant has purposefully established

minimum contacts with the forum state. Id .; see also Schlobohm , 784 S.W.2d at 358 (noting that

it becomes less likely that exercise of jurisdiction will fail fair play analysis).

The first factor in this analysis is whether subjecting the nonresident defendant to suit

in Texas would be burdensome on the defendant. First, distance alone is not ordinarily sufficient

to defeat jurisdiction as "modern transportation and communication have made it much less

burdensome for a party to defend himself in a state where he engages in economic activity."

Guardian , 815 S.W.2d at 231 (quoting McGee v. International Life Ins. Co. , 355 U.S. 220, 223

(1957)). In addition, the case at bar does not include a large number of litigants and witnesses, and

so the nonresident defendant will not incur significant financial burdens. Finally, there is no

evidence that submitting to Texas's jurisdiction would be more burdensome to Handling than

submitting to Iowa's jurisdiction.

The next factor to consider is the forum state's interest in adjudicating the dispute.

The mere fact that Handling is not physically located in Texas is not persuasive in deciding personal

jurisdiction. It is an inescapable fact of modern commercial life that a substantial amount of business

is transacted solely by mail and wire communications across state lines, thus obviating the need for

physical presence within the state in which business is conducted. See Burger King , 471 U.S. at 476 .

Handling's lack of physical presence in Texas is not the crux of the matter; rather, it is significant

that Handling contacted the Augustinos at their domicile via telephone conversations and facsimile

transmissions. Texas courts have an interest in cases where there is an alleged tort arising out of

deceptive business practices. See Ring Power , 39 S.W.3d at 355 . According to the record, the

defective trailer is not only less useful to the appellants, but is also a potential road hazard to other

Texans. The state of Texas undoubtedly has an interest in adjudicating matters involving products

that could pose physical and economic threats to its citizens.

Finally, the Augustinos have a legitimate interest in convenient and effective relief.

See Guardian , 815 S.W.2d at 231 . They received representations about the trailer and completed

the contract at their private residence. They also received their trailer in Texas. These facts, as

stated above, make it reasonably foreseeable that Handling could be brought before a Texas court

for his alleged negligence. We sustain the Augustinos' first three points of error.

Request for Further Discovery

The Augustinos' last point of error is that the trial court erred in refusing to grant their

motion for continuance to permit further discovery. Because we have determined that the trial court

has personal jurisdiction over Handling, we need not reach the Augustinos' final point of error.

CONCLUSION

Having concluded that Handling has sufficient contacts with Texas to establish

personal jurisdiction, we reverse the trial court's order granting Handling's special appearance, and

remand the cause for further proceedings.

David Puryear, Justice

Before Justices Kidd, B. A. Smith and Puryear

Reversed and Remanded

Filed: July 26, 2001

Do Not Publish

1. Tex. Bus. & Com. Code Ann. § 17.46 (West 1987 & Supp. 1998).

tial justice. See Guardian , 815

S.W.2d at 225 . We acknowledge that only in rare cases will the exercise of jurisdiction not comport

with fair play and substantial justice when the nonresident defendant has purposefully established

minimum contacts with the forum state. Id .; see also Schlobohm , 784 S.W.2d at 358 (noting that

it becomes less likely that exercise of jurisdiction will fail fair play analysis).

The first factor in this analysis is whether subjecting the nonresident defendant to suit

in Texas would be burdensome on the defendant. First, distance alone is not ordinarily sufficient

to defeat jurisdiction as "modern transportation and communication have made it much less

burdensome for a party to defend himself in a state where he engages in economic activity."

Guardian , 815 S.W.2d at 231 (quoting McGee v. International Life Ins. Co. , 355 U.S. 220, 223

(1957)). In addition, the case at bar does not include a large number of litigants and witnesses, and

so the nonresident defendant will not incur significant financial burdens. Finally, there is no

evidence that submitting to Texas's jurisdiction would be more burdensome to Handling than

submitting to Iowa's jurisdiction.

The next factor to consider is the forum state's interest in adjudicating the dispute.

The mere fact that Handling is not physically located in Texas is not persuasive in deciding personal

jurisdiction. It is an inescapable fact of modern commercial life that a substantial amount of business

is transacted solely by mail and wire communications across state lines, thus obviating the need for

physical presence within the state in which business is conducted. See Burger King , 471 U.S. at 476 .

Handling's lack of physical presence in Texas is not the crux of the matter; rather, it is significant

that Handling contacted the Augustinos at their domicile via telephone conversations and facsimile

transmissions. Texas courts have an interest in cases where there is an alleged tort arising out of

deceptive business practices. See Ring Power , 39 S.W.3d at 355 . According to the record, the

defective trailer is not only less useful to the appellants, but is also a potential road hazard to other

Texans. The state of Texas undoubtedly has an interest in adjudicating matters involving products

that could pose physical and economic threats to its citizens.