Petition — U-Anchor Advertising, Inc. v. Burt

Supreme Court, U.S.

FILED

7

IN THE MICHAEL RODAK, JR., CLERK

Supreme Court of the Anited States

OCTOBER TERM, 1977

No. 77-61 4°

U-ANCHOR ADVERTISING, INC..

Petitioner,

N. H. BURT, d/b/a GRANOT LODGE,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF TEXAS

Of Counsel:

HAL MINER

1012 Barfield Building

Amarillo, Texas 79101

Attorney at Law

JOHN F. McCARTHY, JR.

Attorney at Law

THOMAS E. KURTH

Attorney at Law

CHARLES L. PERRY

Attorney at Law

of Seay, Gwinn, Crawford,

Mebus & Blakeney

4245 First International Bldg.

Dallas, Texas 75270

Washington. O.C. e CLB PUBLISHERS e LAW PRINTING CO. @ (202) 393-0625

(i)

TABLE OF CONTENTS

Page

ee ee rs Sek 5s were ache ea 8A SS i

ee a ey oles bom ee ae ii

oes ae waa eb ewe bal ee nle eke l

ES ree Ce ee Pe.) 6G at bo a's ee’ 2

re re 2

CONSTITUTIONAL AND STATUTORY PRO-

ts a ee ae we a ae awe 3

DO GUNee GOW CU ME oa ccc cle ewes ctdenss 3

1. THERE IS SUBSTANTIAL CONFUSION IN

THE LOWER COURTS REGARDING DUE

PROCESS AND LONG-ARM — JURIS-

DICTION, WHICH HAS RESULTED IN

ERRONEOUS RESULTS DUE TO IM-

PROPER ANALYSIS OF THE RELATION-

SHIP BETWEEN VARIOUS RECURRING

FACTORS AND THE TWO ELEMENTS OF

THE TEST ENUNCIATED BY _ THIS

COURT

ll. THE DECISION OF THE SUPREME

COURT OF TEXAS BELOW ERRONEOUS.

LY CONCLUDED THAT ASSERTION OF

JURISDICTION, ALTHOUGH WITHIN THE

LITERAL TERMS OF THE TEXAS LONG.

ARM STATUTE, WOULD VIOLATE DUE

PROCESS AND, IN EFFECT, DECLARED

THE STATUTE UNCONSTITUTIONAL

I 6 a5 os 68s ies eRe exciaees: 20

A.

(ii)

TABLE OF AUTHORITIES

Cases: Page

Custom Leasing, Inc. v. Gardner, 307 F. Supp. 161

tf OS eee er ee eee ee 13,14

Delaware, L. & W.R.R. v. Koske, 279 U.S. 7, 12, 49

i es Fe es SEND 6-06 bo cc eeee ene es 17

Electro-Kraft Corp. v. Maxwell Electronics Corp.,

417 F.2d 365 (8th Cir. 1969) ............ 8,10,13,15

Hanson v. Denckia, 357 U.S. 235, 78 S.Ct. 1228, 2

9-6 0a V6 5s eae Oe ee OOO 6,9

In-Flight Devices Corp. v. Van Dusen Air, Inc., 466

F.2d 220 (6th Cir. 1972) ............. 7,9,13,15,17

Inpaco, Inc. v. McDonald's Corp., 413 F. Supp. 415

3 ere eee ae 8,13,15,17

International Shoe Company v. Washington, 326

U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ....... 6,7

Jem Engineering & Mfg., Inc. v. Toomer Elec. Co.,

413 F. Supp. 481 (N.D. Okla. 1976) ............4.. 8

McGee v. International Life Ins. Co., 355 U.S. 220,

Pe RE. FRR, 2 Ree GAP EUPOED 0 ccc cee scscs 9,12

McQuay, Inc. v. Samuell Schlosberg, Inc., 321 F.

fy 8 : erree eee reer eee 8

Pearson v. United States, 150 F.2d 219,221 (10th

i Core er aie eae aS ee wag kn a 17

Product Promotions, Inc. v. Cousteau, 495 F.2d 483

OS Pe rer ae ee ee a . passim

Shaffer v. Heitner, U.S. ' S.Ct.

a bs a x eee 6 Ole s ae 44:0 8

Simpson Timber Co. v. Great Salt Lake Minerals &

Chem. Corp., 296 F. Supp. 243 (D. Ore. 1969)... .. 13

Southerland vy. St. Croix Taxicab Ass'n., 315 F.2d

ee ee ee kL oes bee bo 4s e860 17

Standard Leasing Co. v. Performance Systems, Inc.,

321 F. Supp. 977 (N.D. Tex. 1971) ............ 13,14

(iii)

Page

U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760

I ar Die oth Oe a Se 10

United States Ry. Equip. Co. v. Port Huron &

D.R.R., 495 F.2d 1127 (7th Cir. 1974) 22... .. 10,12,14

Whittaker Corp. v. United Aircraft Corp., 482 F.2d

re I a a he en 8,10,15,16

Wilkerson v. Fortuna Corp., 554 F.2d 745, 746.

eae NP EER aD ie 17

Treatises and Articles:

2 Moore’s Federal Practice, §4.25{/5) 2 ............... 7

Comment, Long-Arm and Quasi in Rem Jurisdiction

and the Fundamental Test of Fairness, 69 Mich.

ER ORNs eae Seen ee 13

Constitution and Statutes:

Fourteenth Amendment ................... Appendix A

Article 2031b (Texas Revised Civil Statutes Anno-

eset so wa oe we ee 6 oe ae Appendix A

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1977

No.

L-ANCHOR ADVERTISING, INC...

N. H. BURT. d b a GRANOT LODGE.

> all

Respondent

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE FIFTH CIRCUIT

The Petitioner, U-Anchor Advertising. Inc.. respect-

fully prays that a writ of certiorari issue to review the

Judgment and Opinion of the Supreme Court of Texas

entered in this proceeding on July 13. 1977

OPINIONS

The opinions of the Supreme Court of Texas. 553

S.W.2d 760 (Tex. 1977), and the Texas Court of Civil

Appeals, 544 S$.W.2d 500 (Tex.Civ.App. 1976), appear

in Appendix B hereto.

OO

tl

JURISDICTION

The Judgment of the Supreme Court of Texas was

entered on July 13, 1977. A timely motion for

rehearing was denied on July 27, 1977, and this

petition for certiorari was filed within 90 days of that

date. This Court's jurisdiction is invoked under 28

U.S.C. §1257(3).

QUESTIONS PRESENTED

|. Whether the Supreme Court of Texas erred in

holding that the literal reach of the Texas Long-Arm

Statute violates due process because it confers juris-

diction where a non-resident enters into a contract with

a resident of Texas to be performed in Texas.

Il. Whether an Oklahoma resident who contracts

with a Texas resident as a result of solicitation in

Oklahoma by the Texas resident may, consistent with

due process, be sued in Texas where the contract has

been substantially performed by those parties in Texas.

Il. Whether the Supreme Court of Texas erred in

holding that assertion of jurisdiction over a non-resident

Defendant would violate due process, even though

within the literal scope of the Texas Long-Arm Statute,

where the Defendant entered into a contract with a

Texas resident which required substantial performance

by both parties in Texas.

STATUTORY PROVISIONS INVOLVED

This case involves the Fourteenth Amendment to the

United States Constitution and Article 2031b of the

Texas Revised Civil Statutes Annotated. which are set

forth in pertinent part in Appendix A.

STATEMENT OF THE CASE

U-Anchor’s sales representative contacted Burt at his

motel. the Granot Lodge. in Oklahoma. As a result of

this contact, U-Anchor and Burt entered into a contract

which called for U-Anchor to erect five (5) roadside

advertisements for the Granot Lodge. The contract

provided that it be accepted by an officer of U-Anchor.

whose office is in Amarillo. Texas. The testimony

shows that no officer of U-Anchor actually signed the

agreement: however. it is undisputed that U-Anchor

undertook to perform upon receipt of the order. Thus.

the contract contemplated that the final act required to

form a binding contract was to be performed in Texas.

The contract also required Burt to make monthly

payments to U-Anchor’s office in Amarillo.

U-Anchor constructed the signs in Amarillo. Once

completed. they were transported to Oklahoma and

installed at various roadside locations. Burt apparently

made six (6) payments to U-Anchor’s office in

Amarillo, but has refused to make the 30 remaining

payments.

U-Anchor filed suit in the 47th District Court of

Texas to recover the unpaid sum under the contract.

with service Of process on Burt accomplished according

OO SSSSSSaaaSaSaQ.4Q20

4

to Article 2031b, Texas Revised Civil Statutes. Burt

filed a Special Appearance under Rule 21a, Texas Rules

of Civil Procedure, contending that the court lacked

personal jurisdiction. The Trial Court sustained the

Special Appearance. This action was affirmed by the

Texas Court of Civil Appeals and Texas Supreme Court.

The Constitutional question involved in this petition

was Originally raised in Burt’s Special Appearance to

Present Motion to the Jurisdiction. wherein he alleged:

Defendant is a non-resident of the State of

Texas and was served with citation outside the

State of Texas. Defendant does not have. with

regards to the cause of action alleged by Plaintiff,

those minimum contacts with the State of Texas

that will constitutionally support jurisdiction over

Defendant's person in this cause.

The trial court sustained Burt’s Motion by its Order

signed on October 27, 1975. In a timely motion for a

new trial, U-Anchor contended that the trial court erred

in sustaining Burt’s Motion to the Jurisdiction on the

following grounds:

1) The trial court erred in sustaining De-

fendant’s Motion to the Jurisdiction.

2) The trial court erred in concluding that there

was not sufficient contact on the part of the

Defendant with the State of Texas, pursuant to

Article 2031b, Texas Revised Civil Statutes, to

sustain jurisdiction in a Texas Court.

3) The trial court erred in concluding that the

Defendant was not “doing business within the

State of Texas”, pursuant to Article 2031b. Texas

Revised Civil Statutes.

4) The court erred in not sustaining jurisdiction

over the person of the Defendant.

an

This Motion was overruled by the trial court’s Order

signed on October 28, 1975.

Petitioner unsuccessfully presented the following

point of error in the Texas Court of Civil Appeals:

The court erred in sustaining Defendant's

Motion to the Jurisdiction, because there were

sufficient contacts on the part of the Defendant

with the State of Texas so that it would not have

offended traditional notions of fair play and

substantial justice for the trial court to sustain

jurisdiction.

In its application for Writ of Error filed with the

Supreme Court of Texas. petitioner again raised this

point of error, saying:

The Court of Civil Appeals erred in sustaining

the trial court’s dismissal for want of jurisdiction

because there were sufficient contacts on the part

of the Defendant with the State of Texas so that

it would not have offended traditional notions of

fair play and substantial justice for the trial court

to sustain jurisdiction.

The Supreme Court, in passing cn this contention,

Stated:

The facts of this case bring it within the literal

reach of Art. 2031b, but, as detailed above, the

due process clause of the Fourteenth Amendment

prohibits Texas courts from exercising jurisdiction

over Burt in a suit arising out of his contract with

U-Anchor.

6

REASONS FOR GRANTING THE WRIT

I.

THERE IS SUBSTANTIAL CONFUSION IN

THE LOWER COURTS REGARDING DUE

PROCESS AND LONG-ARM_ JURISDIC-

TION, WHICH HAS RESULTED IN ER-

RONEOUS RESULTS DUE TO IMPROPER

ANALYSIS OF THE RELATIONSHIP BE-

TWEEN VARIOUS RECURRING FACTORS

AND THE TWO ELEMENTS OF THE TEST

ENUNCIATED BY THIS COURT.

The rule pertaining to a state’s power to obtain

“Jong-arm”™ jurisdiction over a non-resident was stated

in Jnternational Shoe Co. v. Washington, 326 U.S. 310,

316. 66 S.Ct. 154, 90 L.Ed. 95 (1945):

[D]ue process requires only that in order to

subject a defendant to a judgment in personam, if

he be not present within the territory of the

forum, he has certain minimum contact with it

such that the maintenance of the suit does not

offend “traditional notions of fair play and

substantial justice.” [Citations omitted]

In Hanson vy. Denckla, 357 U.S. 235, 253, 78 S.Ct.

}228. 2 L.Ed.2d 1283 (1958), the Court elaborated on

this test, saying that “there must be some act by which

a defendant purposefully avails itself of the privilege of

conducting activities within the forum State... .”’ These

decisions provide a two-part test by which courts may

determine whether jurisdiction is consistent with due

process. This test requires that “there must be some

minimum contact with the state which results from an

affirmative act of the defendant... [and] it must be

fair and reasonable to require the defendant to come

into the state and defend the action.” 2 Moore's

Federal Practice, §4.25[5]: Product Promotions, Inc. y.

Cousteau, 495 F.2d 483, 495 (Sth Cir. 1974).!

The two requirements pose distinct questions, and

proper analysis requires that they be dealt with

separately. There is a tendency for the courts to address

the problem as a unitary one. At best, this results in

analysis which is confusing because it does not clearly

set out what criteria are relevant to each element. Judge

Celebrezze of the Sixth Circuit, in a well-reasoned

opinion, delineated the differences between these two

requirements. /n-Flight Devices Corp. v. Van Dusen Air,

Inc., 466 F.2d 220, 226-28 (6th Cir. 1972). The first

requirement, that of an affirmative act, focuses on the

nature of the act itself. The question is simply whether

certain conduct reflects that defendant’s involvement

with the forum state was intentional. /d. at 228. This

inquiry is subject to a substantial degree of simple

classification; that is, there are many acts which are,

inherently, sufficiently purposeful to satisfy this

requirement. /d. at 226. The flexibility of the

International Shoe doctrine is contained in the second

requirement, that of fairness. /d. at 268. Thus, even

though the minimum contacts test has been satisfied,

jurisdiction may or may not be proper, depending on

‘Some courts, including the Supreme Court of Texas in this

case, have characterized the test as having three elements. These

ccurts add the requirement that the cause of action arise out of

the defendant’s contacts with the state. Since it is undisputed

that the cause of action arose out of the contact which

petitioner asserts provides the necessary contacts, this element

will not be discussed in the petition.

the circumstances surrounding the contact. See Shaffer

». Heitner, US. , are

L.Ed.2d 683, 698. n. 19 (1977).

The lower courts have essentially developed two

approaches in dealing with “long-arm” jurisdiction cases

involving contracts between business entities that are

residents of different states. One approach is to inquire

whether the non-resident defendant could have reason-

ably anticipated substantial impact on the forum state

as a result of the contract. E.g. Product Promotions,

Inc. vy. Cousteau, 496 F.2d 483, 497 (Sth Cir. 1974):

Electro-Kratt Corp. vy. Maxwell Electronics Corp., 417

F.2d 365, 369 (8th Cir. 1969): dmpaco, Inc. ȴ

McDonald's Corp., 413 F. Supp. 415, 418 (E.D. Pa.

1976).

The second approach involves an “active passive” or

“buyer seller” test for determining whether jurisdiction

is proper. A passive buyer is one who merely purchases

goods without conducting negotiations on contract

terms or requiring the goods to meet his peculiar

specifications. These courts hold that the non-resident

buyer or passive party may not be sued in the seller's

Or active party's home state. E.g Whittaker Corp. y¥

United Aircraft Corp., 482 F.2d 1079, 1084-85 (Ist

Cir. 1973): Jem Engineering & Mfg.. Inc. v. Toomer

klec Co., 413 F. Supp. 481, 484 (N.D. Okla. 1976):

McQuay, Inc. v. Samuell Schlosberg, Inc., 321 F. Supp.

902. 906 (D. Minn. 1971). The Supreme Court of

Texas, in the case below, utilized this approach.

The “buyer/seller” and “active/passive” tests have

resulted in undue weight being given to this single

factor. Properly analysed. the ‘“buyer/seller” and

“active passive” factors are relevant on'y to. the

question of fairness, not the existence of a minimal

contact or purposeful act.? However, the courts which

have utilized this analysis have concluded that this

factor is crucial to determining whether the defendant

has performed the purposeful act required by Hanson.

The courts have determined that merely entering into a

contract with a forum resident does not satisfy the

purposeful act test. They require the additional factor

that the detendant be a seller or active buyer. This

results in holdings, such as that of the Supreme Court

of Texas below, on what constitutes purposeful action,

which holdings conflict with the prior holding of this

Court in McGee.

Once the courts have decided that there is no

purposeful act, their analysis of the fairness of

“long-arm”™ jurisdiction over a non-resident defendant is

tainted; it is difficult to conceive of any court

concluding that jurisdiction would be fundamentally

fair without the existence of a purposeful act.

Therefore, improper consideration of the “buyer/seller”

or “‘active/passive’’ factor in determining whether there

is a purposeful act can result in erroneous holdings,

such as those below, on both elements of the due

*This distinction is discussed at length in Judge Celebrezze’s

opinion in /n-Flight Devices Corp. v. Van Dusen Air, Inc., 466

F.2d 220, 226-28, 233 (6th Cir. 1972). The minimum contact or

purposeful act requirement is a constant; that is, a given act

~ either is or is not purposeful within the meaning of due process.

This is merely a “baseline” requirement. The flexibility of the

due process test is contained in the fundamental fairness

requirement; that is, would it be reasonable, in light of all the

circumstances, to require a defendant who has performed a

purposeful act to defend suit in the forum state.

OOOO Ee

10

process test. Additionally. this confusion has resulted in

decisions by the federal courts of appeals and state

courts which are not consistent in principle because of

the focus of the courts’ analyses. Compare Product

Promotions, Inc. v. Cousteau, 495 F.2d 483 (Sth Cir.

1974): United States Rv. Equip. Co. v. Port Huron &

D.RR.. 495 F.2d 1127 (7th Cir. 1974) and Electro-

Kratt Corp. v. Maxwell Electronics Corp., 417 F.2d 365

(Sth Cir. 1969) with Whittaker Corp. v. United Aircraft

Corp., 482 F.2d 1079 (Ist Cir. 1973) and U-Anchor

Advertising, Inc. v. Burt, 553 $.W.2d 760 (Tex. 1977)

(the case below).

Contracts between business entities which are resi-

dents of different forums is a common occurrence, and

the question of “long-arm” jurisdiction in such cases

has been the subject of considerable litigation in both

state and federal courts. This Court should clarify

Which criteria may correctly be considered in dealing

with each of the two elements involved in determining

Whether jurisdiction is proper. The harm that results

from this lack of clarification is especially evident in

those decisions incorrectly utilizing the “buyer/seller”

Or “active passive” factor, as discussed above. Ad-

ditionally, many other factors which courts have viewed

as relevant - ¢.g. place of making the contract, place of

performance, who initiates the transaction, the relative

size and bargaining power of the parties. the extent of

defendant's interstate activity unrelated to the cause of

auction in question ure present in all or a substantial

percentage of such cases. Although Petitioner recognizes

that this Court cannot set out rigid rules’ for

determining whether due process is satisfied. it can and

should elaborate on the distinction between factors

relevant to purposeful activity and those relevant to

fundamental fairness. The Court should also provide

some guidelines as to the degree of relevance or weight

to be given factors which recur in similar fact

situations, so as to promote the development of a

consistent and rational body of law by the lower

courts.

THE DECISION OF THE SUPREME COURT

OF TEXAS BELOW ERRONEOUSLY CON-

CLUDED THAT ASSERTION OF JURISDIC-

TION, ALTHOUGH WITHIN THE LITERAL

TERMS OF THE TEXAS LONG-ARM

STATUTE, WOULD VIOLATE DUE PRO-

CESS AND, IN EFFECT, DECLARED THE

STATUTE UNCONSTITUTIONAL.

In its decision, the Supreme Court of Texas

recognized that Burt’s contacts with the State of Texas

fell within the literal terms of the Texas Long-Arm

Statute.2 However, the court concluded that assertion

of jurisdiction would violate both elements of the due

process test; that is, the court concluded that Burt had

performed no purposeful act and that assertion of

jurisdiction would be fundamentally unfair. If the

Supreme Court of Texas is correct in holding that facts

within the literal terms of the statute did not comply

with either element of the due process test, then the

3Several other states have comparable statutory provisions,

which are set out in Appendix D.

1?

-

statute is clearly unconstitutional due to overbreadth.

Similarly, since this Court has held that the due process

question in each long-arm jurisdiction case must be

decided on its individual facts, any statute which

provided that specific acts were a sufficient basis for

long-arm jurisdiction would likewise be unconstitu-

tionally broad in some fact situation. Therefore, this

Court should set out the permissible scope of a state

statute providing that certain acts are a sufficient basis

for long-arm jurisdiction.

Petitioner contends that the Supreme Court of Texas

committed two errors in passing on the due process

question, One grievous and the other somewhat more

subtle. although error nonetheless. These errors resulted

in the lower court’s holdings that neither the purposeful

act nor the fairness element of the due process test was

satisfied. We will discuss the soundness of these

holdings separately.

A.PURPOSEFUL ACT

The contract here is between a resident of Texas and

a resident of Oklahoma. It was freely entered into and

provided that Burt would perform by making monthly

payments in Texas. The act of entering into a contract

with a forum resident which requires the non-resident

to perform in the forum state constitutes minimum

contact or purposeful activity.* Therefore. it is evident

4McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct.

199. 2 L.Ed.Jd 223 (1957). See Product Promotions, Inc. v.

Cousteau, 495 F.2d 483 (Sth Cir. 1974), United States Ry.

Kquip. Co. vy. Port Huron & D.R.R., 495 F.2d 1127 Oth Cir.

(continued)

13

that this “baseline” requirement has been satisfied. and

the Supreme Court of Texas clearly erred in holding

that Burt did not meet the purposeful act test.

B. FAIRNESS

The question presented under this portion of the

jurisdictional test is whether requiring Burt to defend

this action in Texas would offend traditional notions of

fair play and substantial justice. Essentially, this

determination must be made from a consideration of

various factors concerning the nature of the parties and

the circumstances surrounding the transaction in

question.

This transaction was initiated when a U-Anchor

salesman contacted Burt at his motel in Clinton.

Oklahoma. As a result of this contact, Burt placed an

order for five (5) large (S’ x 14’) advertising displays.

U-Anchor was required to construct the signs with an

advertising design agreeable to Burt. Burt agreed to

make 36 monthly payments to U-Anchor’s office in

Potter County, Texas (Amarillo). As a result of this

(Jevtnote continued from preceding page)

1974): In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d

220 (6th Cir. 1972); Electro-Kraft Corp. v. Maxwell Electronics

Corp., 417 F.2d 365 (8th Cir. 1969); /npaco, Inc. v. McDonald's

Corp., 413 F. Supp. 415 (E.D. Pa. 1976); Standard Leasing Co.

v. Performance Svstems, Inc., 321 F. Supp. 977 (N.D. Tex.

1971); Custom Leasing, Inc. v. Gardner, 307 F. Supp. 161 (N.D.

Miss. 1969); Simpson Timber Co. v. Great Salt Lake Minerals &

Chem. Corp., 296 F. Supp. 243, 246 (D. Ore. 1969): Comment,

Long-Arm and Quasi in Rem Jurisdiction and the Fundamental

Test of Fairness, 69 Mich.L.Rev. 300, 321-25 (1970).

14

contract, U-Anchor specially designed and constructed

the five displays at its facility in Amarillo. Once the

signs were prepared, they were mounted on a metal

base and transported to Oklahoma. where they were

installed at the locations stated in the contract. Burt

apparently made six (6) of the payments to U-Anchor’s

office in Amarillo, as required, but has refused to make

the remaining payments.

Thus, we have a situation in which two businessmen

voluntarily entered into a contract. There is nothing in

the record which would indicate that either party

possessed sufficient bargaining power to dictate terms

to the other. This is not a situation in which a small

businessman merely ordered a small amount of stock

goods from a manufacturer in another state. The

contract required the Texas resident to specially prepare

advertising displays for the Granot Lodge: obviously,

these are not goods which could be sold to another

consumer. There are several factors present here which

courts have considered important in sustaining jurisdic-

tion:

(1) THE CONTRACT REQUIRED PAYMENT IN

THE FORUM STATE. United States Ry. Equip. Co. yv.

Port Huron & D.R.R., 495 F.2d 1127, 1129-30 (7th

Cir. 1974): Standard Leasing Co. v. Performance

Systems, Inc., 321 F. Supp. 977, 979 (N.D. Tex. 1971):

Custom Leasing Inc. vy. Gardner, 307 F. Supp. 161,

163-64 (N.D. Miss. 1969).

The contract expressly provides that Burt perform in

Texas by making the required payments at U-Anchor’s

office at Amarillo. This is the only act. other than

approval of the display design, which Burt is required

to perform under the contract, so that it is apparent he

1$

voluntarily contracted to perform his obligations in

Texas.

(2) THERE WAS FORESEEABLE IMPACT ON THE

FORUM STATE. Product Promotions, Inc. vy. Cousteau.

495 F.2d 483. 497 (Sth Cir. 1974): Electro-Kratt Corp.

v. Maxwell Electronics Corp... 417 F.2d 368. 369 (8th

Cir. 1969).

Burt knew that he was contracting with a Texas

resident and did so voluntarily. Since he knew

U-Anchor was a Texas resident. he could reasonably

have anticipated that U-Anchor would undertake

substantial performance in Texas. U-Anchor did. in fact.

perform the bulk of its obligations under the contract

in Texas. The five (5) advertising displays were

constructed and painted in Texas. It is the Texas

company, and potentially its Texas suppliers and

workers, which will be harmed by Burt's failure to

make the required payments under the contract. thus

adversely affecting the State of Texas.

(3) THE DEFENDANT ENTERED INTO NEGOTIA-

TIONS WITH THE PLAINTIFF. /n-Flight Devices Corp.

v. Van Dusen Air, Inc.. 466 F.2d 220, 231 (6th Cir.

1972); Whittaker Corp. v. United Aircraft Corp., 482

F.2d 1079, 1084 (Ist Cir. 1973). Inpaco, Inc. \

McDonald's Corp... 413 F. Supp. 415. 419 (E.D. Pa.

1976).

The face of the contract. reproduced in Appendix C,

reflects at least two items which were the subject of

negotiation between the parties. First. the printed

contract provides for a standard term of 60 months.

However, the parties have changed this to read 37

months. Additionally, the contract requires that the

advertising design placed on the displays be mutually

16

agreed upon. Thus, it is apparent that there were

negotiations between the parties relating to the terms

and subject matter of the contract.

(4) THE CONTRACT REQUIRED THE PLAINTIFF

TO SPECIALLY PRODUCE GOODS TO THE DE-

FENDANT’S SPECIFICATIONS. Whittaker Corp. y.

United Aircraft Corp., 482 F.2d 1079, 1984 (Ist Cir.

1973).

Advertising displays are, by their very nature, a

product which must be specially produced for each

client. The contract recognizes this. providing that the

parties will mutually agree on the design to be placed

on the displays. Thus, a direct result of the contract

was that U-Anchor caused considerable expenditure of

time and material, obtained from Texas workers and

suppliers. to fulfill its contract. These efforts are not

transferable to any other client. Burt could have

reasonably anticipated that the contract would have this

result.

(5S) THE CONTRACT WAS ACCEPTED IN THE

FORUM STATE. Product Promotions, Inc. v. Cousteau,

496 F.2d 493, 495 (Sth Cir. 1974).

The contract provides spaces for acceptance by

U-Anchor’s salesman and its president. The salesman

apparently signed the contract in Oklahoma. However,

Burt reasonably should have known that acceptance by

U-Anchor’s president would occur in Texas. Although

the president never actually signed the contract (Burt

erroneously signed in the space provided for U-Anchor’s

president), the contract required some further act other

than the salesman’s signature to become binding. This

final act, either signing by U-Anchor’s president or

undertaking performance, occurred in Texas, and Burt

reasonably would have expected it to occur in Texas.

vs

17

(6) THE DEFENDANT'S OPERATIONS HAVE

SUBSTANTIAL INTERSTATE ASPECTS. Wilkerson +

Fortuna Corp., 354 F.2d 745. 746. 748 (Sth Cir.

1977): In-Flight Devices Corp. v. Van Dusen Air. Inc.

466 F.2d 220, 233-34 (6th Cir. 1972): Inpaco, Inc. »

McDonald's Corp.. 413 F. Supp. 415, 419 (E.D. Pa.

1976).

The location and purpose of the five (5) displays

installed by U-Anchor are relevant to the fairness of

requinng Burt to defend this suit in Texas. As the

Court will observe from the map reproduced at page Ice

of the Appendix.. Clinton. Oklahoma. where the

Granot Lodge is located. is situated at the cross-roads

of two major federal highways. One. Interstate 40. runs

east from Texas. through Oklahoma and into Arkansas.

The other, U.S. Highway 183. runs north from Texas.

through Oklahoma and into Kansas. Two (2) of the

displays are located on Interstate 40. just east of the

Oklahoma border: a third is located on U.S. Highway

183 just south of Clinton. Oklahoma. The other two

(2) are located on Interstate 40 east of Clinton. All are

located so as to solicit business from travelers utilizing

major highway arteries of interstate commerce. Many of

these travelers would not be Oklahoma residents.

Burt could especially be expected to anticipate that

Texas residents would be attracted by the three (3)

*This map was not part of the record below. However.

geographical locations may be judicially noted. Southerland vy. St.

Croix Taxicab Assn, 315 F.2d 364. 367 (3rd Cir. 1963):

Pearson v. United States, 150 F.2d 219, 221 (10th Cir. 1945).

This Court may take judicial notice of facts. Delaware.

L.&W.R.R. v. Koske, 279 US. 7, 12. 49 S.Ct. 202. 73 L.Ed. 578

(1929) (Judicial notice taken of time of sunrise.)

18

displays located between his motel and the nearby

Texas borders: to a lesser extent, he could anticipate

that Texas residents returning to their homes would be

attracted by the other two (2) signs. The fact that Burt

conducts a business that customarily caters to a large

number of non-residents and that he undertook

advertising which, realistically, would be directed at a

substantial number of Texas residents contribute to the

fairness of Burt being required to defend this suit in

Texas. The increased business contacts with non-

residents increases the likelihood of Burt being required

to defend suit elsewhere. This is especially true as

regards Texas, given the proximity to the Texas border

and the fact that the two major highways connect

Texas and Oklahoma. The increased likelihood of suit

in Texas should cause Burt to be prepared to defend

suit there. or at least disclose a willingness to accept

that risk. Where a party is or reasonably should be

prepared to expect suit in a forum, the fairness of

requiring him to defend suit there is enhanced.

(7) REQUIRING THE DEFENDANT TO COME TO

THE FORUM STATE WOULD RESULT IN NO

SUBSTANTIAL INCONVENIENCE TO THE DE-

FENDANT. Product Promotions, Inc. v. Cousteau, 495

F.2d 483. 498 (Sth Cir. 1974).

Finally. another factor generally considered relevant

by the courts is the inconvenience defendant would be

subjected to by virtue of being required to defend a

lawsuit in a distant state. Here. the relatively small

distance separating Clinton, Oklahoma, and Amarillo,

Texas, indicates. that any inconvenience which de-

fendant might suffer would be comparatively minimal.

The inconvenience suffered by Burt would, at most, be

19

slightly greater than the inconvenience to which he

would be subjected if sued in another part of

Oklahoma. Where the defendant resides near the forum

state, and the inconvenience of defending suit there is

comparatively slight, a lesser showing of other factors

relating to the reasonableness of the forum should

satisfy the requirements of due process.

C. EFFECT OF HOLDINGS

If permitted to stand, the Supreme Court of Texas’

opinion effectively renders this portion of the Texas

“Long-Arm” Statute unconstitutional. A statute which

authorizes the use of “long-arm”™ jurisdiction in a fact

situation where the exercise of that jurisdiction would

violate due process must have been drawn too broadly.

This Court should not permit this decision to stand

since it is based on an erroneous application of the

controlling precedent.

It should be noted that the Texas statute could be

construed consistent with due process requirements

even if the lower court erred only as to the purposeful

act element. This Court could conclude that Article

2031b sets out a standard for determ:iing whether the

purposeful act requirement has been met. Therefore, if

the lower court erred only in that holding, this Court

should still point out the error and permit the Supreme

Court of Texas to properly address the constitutionality

of this statute.

20

CONCLUSION

For the reasons stated above, this petition presents

substantial and recurring questions regarding the

amenability to suit of non-resident business entities

which enter into contracts with residents of the forum

state. The confusion regarding the proper criteria and

method of analysis to be utilized in determining

Whether assertion of long-arm jurisdiction comports

with due process has resulted in an erroneous decision

by the Supreme Court of Texas which effectively

declares a portion of the Texas “Long-Arm” Statute,

Article 2031b, unconstitutional. Additionally, this

confusion has resulted in decisions of the various

federal courts of appeals and highest state courts which

conflict with one another, as well as with decisions of

this Court. This Petition for Writ of Certiorari should

therefore be granted.

Respectfully submitted,

JOHN F. McCARTHY

Attorney at Law

THOMAS E. KURTH

Attorney at Law

CHARLES L. PERRY

Attorney at Law

Seay. Gwinn, Crawford, Mebus

& Blakeney

4245 First International Building

Dallas, Texas 75270

ee

la

APPENDIX “A”

Section | of the Fourteenth Amendment to the

United States Constitution provides in pertinent part:

... Nor shall any State deprive any person of

Lite, Liberty, or Property, without due process of

Yo

Article 20316 of the Texas Revised Civil Statutes

Annotated provides in pertinent part:

Section 3. Any foreign corporation association,

joint stock company, partnership or non-resident

natural person that engages in business in this

State, irrespective of any Statute of law respecting

designation or maintenance of resident agents, and

does not maintain a place of regular business in

this State or a designated agent upon whom service

may be made upon causes of action arising out of

such business within the State shall be deemed

equivalent to an appointment by such foreign

corporation, joint stock company, association,

partnership or non-resident natural person of the

Secretary of State of Texas as agent upon whom

service Of process may be made in any action, suit

Or proceedings arising Out of such business done in

this State, wherein such corporation, joint stock

company, association, partnership or non-resident

natural person is a party or is to be made a party.

Section 4. For the purpose of this Act, and

without including other acts that may constitute

doing business, any foreign corporation, joint stock

company, association, partnership, or non-resident

natural person shall be deemed doing business in

this State by entering into contract by mail or

otherwise with a_ resident of Texas to be

performed in whole or in part by either party in

this Staie, or the committing of any tort in whole

or in part in this State.

Ib

APPENDIX B

U-ANCHOR ADVERTISING, INC..,

Petitioner,

N. H. BURT, d/b/a Granot Lodge,

Respondent.

No. B-6516

Supreme Court of Texas

July 13, 1977

Rehearing Denied July 27, 1977

Plaintiff, a Texas corporation, instituted suit for

breach of contract against defendant, a resident of

Oklahoma. Defendant entered a special appearance to

contest jurisdiction of the Texas court. District Court

No. 47, Potter County, Poff, J.. sustained defendant's

motion to the jurisdiction, and was affirmed by the

Amarillo Court of Civil Appeals, Seventh Supreme

Judicial District, Robinson, J., 544 S.W.2d 500. The

Supreme Court, Steakley, J., held that: (1) defendant,

who mailed checks to plaintiffs office in Texas, was

“doing business” in Texas within meaning of long-arm

statute: (2) defendant could not be said to have

purposefully conducted activities within Texas, and (3)

the exercise of jurisdiction by Texas courts would

offend traditional notions of fair play and substantial

justice, depriving defendant of due process of law.

Affirmed.

1. Courts 12(2)

Defendant. a resident of Oklahoma who entered a

wnitten contract with plaintiff. a Texas resident, which

obligated defendant to perform his payment obligations

at plaintiff's office in Texas was “doing business” in

Texas within meaning of long-arm statute. Vernon's

Ann.Civ.St. art. 2031b. §§3. 4.

See publication Words and Phrases for other

judicial constructions and definitions.

2. Courts 12(2)

Texas long-arm statute reaches as far as the federal

constitutional requirements of due process will permit:

thus. courts may focus on the constitutional limitations

Of due process rather than engaging in technical and

abstruse attempts to consistently define “doing busi-

ness. Vernon’s Ann.Civ.St. art. 2031b.

3. Courts 12(2)

For a defendant to be subject to Texas long-arm

jurisdiction, although the cause of action against

defendant is connected with a contractual obligation

assumed by defendant and partially performable in

Texas. defendant must also have purposefully done

some act Or consummated some transaction in Texas,

and the assumption of jurisdiction by the Texas courts

must be found not to offend traditional notions of fair

play and substantial justice.

A.

3b

4. Courts 12(2)

Defendant, whose contract with Texas resident was

solicited, negotiated, and consummated in Oklahoma,

who did nothing to support an inference of any

purpose to exercise the privilege of doing business in

Texas, and whose contacts with Texas were not

grounded on any expectation or necessity of invoking

Texas law, could not be said to have purposefully

conducted activities within Texas, for purposes of

long-arm jurisdiction.

5. Constitutional Law 305(5)

Where the quality, nature, and extent of defendant's

activity in Texas were minimal consisting only of

mailing checks to plaintiff's office in Texas, and fact

that his contract with plaintiff was solicited, negotiated

and consummated in Oklahoma might have led de-

fendant to reasonably expect its enforcement to be

governed by Oklahoma law, the exercise of jurisdiction

by Texas courts would offend traditional notions of fair

play and substantial justice, depriving defendant of due

process of law. U.S.C.A. Const. Amend. 14.

6. Constitutional Law 305(5)

The nature and extent of the contacts of a

nonresident with the forum state determine whether or

not the forum may exercise in personam jurisdiction

over the nonresident, but the infinite variety of such

4b

contacts and the vagueness of the constitutional

standard render a more definitive articulation of due

process requirements impossible: narrow factual distinc-

tions will often suffice to swing the due process

pendulum. U.S.C.A. Const. Amend. 14.

B. Hal Miner. Amarillo. for petitioner.

Kenneth A. Back, Amarillo, for respondent.

STEAKLEY. Justice.

This is a suit for breach of contract. It was instituted

in the 47th District Court of Potter County, Texas by

U-Anchor Advertising. Inc.. Petitioner. against N. H.

Burt. doing business as Granot Lodge, Respondent.

U-Anchor is a Texas corporation domiciled in Amarillo,

Potter County. Texas. Burt is a resident of Clinton,

Custer County. Oklahoma. Citation was served upon the

Secretary of State of Texas as the presumed agent of

Burt for service of process pursuant to Article 2031b,

Tex.Rev.Civ. Stat.Ann., the Texas “long-arm” statute.

Burt entered a special appearance to contest the

jurisdiction of the Texas court pursuant to Rule | 20a

of the Texas Rules of Civil Procedure. The trial court

sustained Burt's Motion to the Jurisdiction, and this

was affirmed by the Court of Civil Appeals. It was the

view of the court that while Burt was unquestionably

doing business in Texas within the terms of Article

2031b. his contacts with Texas fell short of the

requirements of due process. 544 S.W.2d 500. We

affirm the judgment of the Court of Civil Appeals.

Sb

Certain additional facts bearing upon the question of

jurisdiction appear undisputed. The written contract

upon which suit was brought was executed by the

parties in Clinton, Oklahoma. It resulted from solicita-

tion by a salesman for U-Anchor who signed the

contract for U-Anchor. The contract called for

U-Anchor to place five advertising displays for Burt at

various Oklahoma highway locations for a period of 36

months. Burt agreed to pay U-Anchor $80 monthly at

its office in Amarillo, Potter County, Texas. U-Anchor

constructed the signs in Amarillo and erected them at

the Oklahoma locations. Burt mailed six and perhaps

seven monthly payment checks to U-Anchor at its

office in Amarillo, but he had no other contacts with

Texas.

The controlling provisions of Section 3 and 4 of

Article 2031b are as follows:

Sec. 3. Any... non-resident natural person that

engages in business in this State, irrespective of

any Statute or law respecting designation § or

maintenance of resident agents, and does not

maintain a place of regul: > business in this State or

a designated agent upon whom service may be

made upon causes of action arising out of such

business done in this State, the act or acts of

engaging in such business within this State shall be

deemed equivalent to an appointment by such...

non-resident natural person of the Secretary of

State of Texas as agent upon whom service of

process may be made in any action, suit or

proceedings arising out of such business done in

this State, wherein such...non-resident natural

person is a party or is to be made a party.

Sec. 4. For the purpose of this Act, and without

including other acts that may constitute doing

6b

business, any ... non-resident natural person shall

be deemed doing business in this State by entering

into. contracts by mail or otherwise with a resident

of Texas to be performed in whole or in part by

either party in this State... .(ltalics are added for

emphasis).

[1.2] Article 2031b provides that a non-resident

entering into a contract with a Texas resident

performable in part by either party in Texas shall be

deemed to be doing business in Texas. The contract in

question obligated Burt to perform his payment

obligations at the office of U-Anchor in Amarillo,

Texas, and thus he was “doing business” in Texas,

within the meaning of the statute. We agree that in this

respect, as well as with respect to “other acts that may

constitute doing business.” Article 2031b reaches as far

as the federal constitutional requirements of due

process will permit. We let stand the statement in

Hoppenfeld vy. Crook, 498 S.W.2d 52. (Tex.Civ.

App. -Austin 1973, writ refd n.r.e.) “that the reach of

Art. 2031b is limited only by the United States

Constitution.” See also National Truckers Services, Inc.

v. Aero Systems, Inc., 480 S.W.2d 455 (Tex.Civ.App.—

Fort Worth 1972, writ ref'd n.r.e.).' The federal courts

‘It may be noted that in 1975 Rule 108 of the Texas Rules

ot Civil Procedure was amended to add the words shown in

italics:

A defendant served with such notice shall be required to

“ppear and answer in the same manner and time and under

the same penalty as if he had been personally served with

citation within the State to the full extent that he may be

required to appear and answer under the Constitution of

the United States in an action either in rem or in personam.

We stated thet the purpose of the amendment is to permit

acquisition of in) personam jurisdiction to the constitutional

limits.

Sene~w.«- lb seine

7b

have similarly construed Article 2031b. See Product

Promotions, Inc. v. Cousteau, 495 F.2d 483 (Sth Cir.

1974), and the cases there cited. Furthermore. such a

construction is desirable in that it allows the courts to

focus on the constitutional limitations of due process

rather than to engage in technical and abstruse attempts

to consistently define “doing business.” See Thode. /n

Personam Jurisdiction; Article 2031]b, the Texas “Lone-

Arm” Jurisdiction Statute: and the Appearance to

Challenge Jurisdiction in Texas and Elsewhere, 42

Tex.L.Rev. 279, 307 (1964).

[3] The question, then, becomes one of due process.

In Cousteau, supra, the Fifth Circuit concluded that the

relevant federal decisions established a dual test for

determining whether a court may exercise its juris-

diction without depriving a non-resident defendant of

due process of law: “First. ‘there must be some

minimum contact with the state which results trom an

affirmative act of the defendant.” Secondly. ‘it must be

fair and reasonable to require the defendant to come

into the state and defend the action. ~ Cousteau, supra,

at 494. See also Jetco Electronic Industries, Inc. y.

Gardiner, 473 F.2d 1228 (Sth Cir. 1973). 2 J. Moore.

Moore’s Federal Practice €4.25{5] (1975). In OBrien

vy. Lanpar Company, 399 S$.W.2d 340 (Tex. 1966), this

Court recognized the following sta\ement of the three

basic elements that must exist to sustain jurisdiction

over a non-resident:

(1) The nonresident defendant or foreign corpora-

tion must purposefully do some act or consum-

mate some transaction in the forum state: (2) the

cause of action must arise from, or be connected

with, such act or transaction: and (3) the

8b

assumption of jurisdiction by the forum state must

not offend traditional notions of fair play and

substantial justice, consideration being given to the

quality, nature, and extent of the activity in the

forum state, the relative convenience of the

parties, the benefits and protection of the laws of

the forum state afforded the respective parties. and

See Tyee Construction Co. v. Dulien Steel Products,

Inc.. 62 Wash.2d 106, 381 P.2d 245 (1963). It is

evident that U-Anchor’s cause of action against Burt is

connected with the contractual obligation assumed by

Burt and partially performable in Texas. However, Burt

must also have purposefully done some act or

consummated some transaction in Texas, and the

assumption of jurisdiction by the Texas courts must be

found not to offend traditional notions of fair play and

substantial justice.

[4] In Hanson vy. Denckla, 357 U.S. 235, 78 S.Ct.

1228, 2 L.Ed.2d 1283 (1958), the Supreme Court

admonished that it would be “a mistake” to assume

that the liberal due process standard enunciated in

International Shoe Co. v. Washington, 326 U.S. 310, 66

S.Ct. 154, 90 L.Ed. 95 (1945), “heralds the eventual

demise of all restrictions on the personal jurisdiction of

state courts.” Hanson, supra, 357 U.S. at 251, 78 S.Ct.

at 1238. Explaining the requirements of due process,

~ the Court continued:

The unilateral activity of those who claim some

relationship with a non-resident defendant cannot

satisfy the requirement of contact with the forum

State. The application of that rule will vary with

the quality and nature of the defendant's activity,

but it is essential in each case that there be some

ens ce en on

es en a ee oe ee eS mg A ee ee ne a ee eee

ae ae

9b

act by which the defendant purposefully avails

itself of the privilege of conducting activities

within the forum State, thus invoking the benefits

and protections of its laws. [Emphasis added].

Id. at 253, 78 S.Ct. at 1239. See Shaffer v. Heitner,

nad ae . 97 S.Ct. 2569, 53 L.Ed.2d

(1977). In the instant case the contacts of Burt

with Texas are minimal and fortuitous. and he cannot

be said to have “purposefully” conducted activities

within the State. Burt’s contacts with Texas were not

grounded on any eXpectation or necessity of invoking

the benefits and protections of Texas law. nor were

they designed to result in profit from a_ business

transaction undertaken in Texas. The contract was

sOlicited, negotiated. and consummated in Oklahoma.

and Burt did nothing to indicate or to support an

inference Of any purpose to exercise the privilege of

doing business in Texas. Simply stated. Burt was a

passive customer of a Texas corporation who neither

sought, initiated. nor profited from his single and

fortuitous contact with Texas.

{[$] Furthermore. in the instant case the exercise of

jurisdiction by Texas courts would offend traditional

notions of fair play and substantial justice. As noted

above. the only contact of Burt with Texas consisted of

his execution of a contract stipulating that certain

payments were to be made in Amarillo and_ his

remittance of several payments to U-Anchor in

Amarillo. Thus the quality. nature. and extent of Burt's

activity in Texas is minimal. Indeed, it can be said that

Burt has engaged in no “activity” in Texas. his only

“activity” being the preparation and mailing of checks

from his place of business in Oklahoma. Resolution of

10b

the. question of the relative convenience of the parties

results in a stalemate since it is no doubt more

convenient to each party to litigate in his home state.

However, since the contract was solicited, negotiated,

and consummated in Oklahoma, Burt might reasonably

expect its enforcement to be governed by Oklahoma

law. Considering the basic equities and circumstances of

the case. we hold that Burt would not be accorded due

process of law if required to defend the suit of

U-Anchor in Texas. See Hoppenfeld vy. Crook, supra,

Sun-X International Company y. Witt, 413 S.W.2d 761

(Tex.Civ.App. Texarkana 1967, writ ref'd n. r. e.).

Numerous decisions of the Texas courts of civil

appeals hold that on the facts there presented the

non-resident defendant would not be denied due

process by being subjected to suit in Texas. With one

exception, those cases are distinguishable on their

facts. For example. in National Truckers Service, Inc. vy.

Aero Systems, Inc., 480 S.W.2d 455 (Tex.Civ.App.-

Fort Worth 1972, writ ref'd n. r. e.), the defendant had

been doing business in Texas through its subsidiary,

Transystems, Inc. When the subsidiary became delin-

quent on its accounts, Aero agreed to guarantee the

debts of Transystems. executed a guaranty agreement,

and mailed it to National Truckers Service in Fort

Worth. In reliance on this guaranty agreement, National

Truckers continued to extend credit to Transystems.

The guaranty agreement provided that payment would

be made in Fort Worth and that the guaranty itself was

pertormable at Fort Worth. Subsequently Transystems

became delinquent on its accounts, and National

Truckers filed suit in Texas to enforce the guaranty

agreement. The Court of Civil Appeals held the contacts

es res re ee

Re pet a Oe

11b

of Aero with Texas were sufficient to justify the

assertion of in personam jurisdiction by the Texas

courts, and we found no reversible error in that

holding. Of significance in that case was the fact that

Aero voluntarily and purposefully agreed to guarantee

the Texas debts of its Texas subsidiary. Aero should

reasonably have expected to face suit in the Texas

courts in the event its subsidiary defaulted on its

obligations.

In Uvalde Rock Asphalt Company vy. Consolidated

Carpet Corporation, 457 S.W.2d 649 (Tex.Civ.App.-

Beaumont 1970, writ refd n. r. e.), the contract

forming the basis of the business relationship was

solicited in Arizona by a Texas manufacturer. All debts

were payable in San Antonio, Texas. Pursuant to the

contract, the Arizona wholesaler placed several orders

with the Texas manufacturer. The goods were delivered

F.O.B. Houston, and on some orders the Arizona

wholesaler requested delivery to Texas retailers. The

Court of Civil Appeals concluded that the activity of

the Arizona wholesaler was calculated to extract protits

from markets in Texas. This factor, coupled with the

additional contacts enumerated above. was sufficient to

supply the “minimum contacts” demanded by due

process.

Estes Packing Company vy. Kadish and Milman Beef

Co., 530 $.W.2d 622 (Tex.Civ.App.—Fort Worth 1975,

no writ), did not reach this Court. In that case a

Chicago broker ordered beef from a Fort Worth packing

company and resold it to a Massachusetts corporation.

The broker sent both parties written confirmations of

sale giving shipping instructions stating the beef was to

be delivered by truck to the defendant’s plant in

12b

Boston. The shipper was an independent contractor

unrelated to either the Texas seller or the Boston

buyer. The shipment was accompanied by an invoice

Stating the meat was offered for sale at the prices

quoted on the invoice. The invoice also provided ‘All

Bills Payable in Fort Worth.’ Kadish sent a check to

Estes covering a portion of the shipment and noted on

the back of the check that it was in full payment of all

debts of Kadish to Estes. Estes refused to accept the

check with that notation and subsequently filed suit.

The Court of Civil Appeals concluded that these facts

established the existence of a contract between Kadish

and Estes. Further. the court held that due process

would not be violated by the exercise of jurisdiction

Over Kadish even though Kadish’s only contact with

Texas was the remittance of one check to the Texas

seller. This holding conflicts with our holding in the

instant case and is disapproved.

[6] The facts of this case bring it within the literal

reach of Art. 2031b. but, as detailed above, the due

process clause of the Fourteenth Amendment prohibits

Texas courts from exercising jurisdiction over Burt in a

Suit arising out of his contract with U-Anchor. The

nature and extent of the contacts of a non-resident

with tie forum state determine whether or not the

forum may exercise in personam jurisdiction over the

non-resident, but the infinite variety of such contacts

and the vagueness of the constitutional standard render

a more definitive articulation of due process require-

ments impossible. As noted in Cousteau, supra, no one

formulation of the constitutional test could possibly

encompass all the potentially important factors, nor

could a formula perform the crucial task of weighing

6 A BA ee BE

ee a AN iin es 5 el a

Oe ee ee a

Dersustalnoeinds out

ets, Anti sublbadboosttien,

13b

and balancing the relevant considerations. Narrow

factual distinctions will often suffice to swing the due

process pendulum. Here, as elsewhere, important

constitutional questions prove immune to solution by

checklist. See Annot., 20 A.L.R.3rd 1201 (1968):

Thode, supra: Kurland, The Supreme Court, the Due

Process Clause and the In Personam Jurisdiction of

State Courts—From Pennoyer to Denckla: A Review, 25

U.Chi.L.Rev. 569 (1958); Comment, The Texas Long-

Arm Statute, Article 2031b: A New Process Is Due, 30

Sw.L.J. 747 (1976); Comment, Long-Arm and Quasi in

Rem Jurisdiction and the Fundamental Test of Fairness,

69 U.Mich.L.Rev. 300 (1970): Note, 34 U.La.L.Rev.

691 (1974).

The judgment of the Court of Civil Appeals is

affirmed.

* * %

inference that Salyers & Walley, Inc. had some sort of

contract with the owners. Since it is undisputed that

Ralph Salyers was one of the owners of the land and

was also the person who acted for the corporation in

contracting with McPhail for the electrical work, and

since “Salyers” is one of the names used in the

corporate name. we hold that the evidence supports the

further inference that the owners of the land had

“control” of the corporation within the meaning of the

sham contractor statute. Thus the trial court) was

authorized to treat appellee as a contractor in a direct

contractual relationship with the owner and as entitled

to perfect his lien against the property in the same

manner as any other original contractor, that is. by

taking the steps prescribed by article 5453(1), without

complying with the additional requirements applicable

14b

to subcontractors in article 5453(2). Da-Col Paint

Manufacturing Co. v. American Indemnity Co., $17

S.W.2d 270, 272-73 (Tex. 1974).

[4] Appellant's third contention is that appellee

failed to comply with the notice requirements of article

5453(1) because it failed to mail the notice to Salyers

and Caballero. who owned the property at the time the

materials were first delivered. rather than to appellant

Shaw. who had bought the property in the meantime.

We do not agree that the notice must be sent to a

former owner rather than the current owner. The

Statute requires only that notice be sent “to the

owner. It is reasonable to interpret this language as

requiring notice to the owner at the time the notice is

sent because his property is being subjected to the lien.

Accordingly. we hold that appellee perfected its lien

against appellant’s property by timely filing of its

affidavit with the county clerk and sending copies to

the owner, appellant. by certified mail.

Appellant cites Jnman vy. Clark, 485 S.W.2d 372

(Tex.Civ. App.—Houston [Ist Dist.] 1971, no writ) in

support of his contention that the notice must be sent

to the former owner. In that case, contractors who had

dealt with the former owner filed their affidavit after

the property had been sold and mailed a copy to the

former owner. They brought their suit against the new

owners. who defended on the ground that article 5453

required notice to them. The court of civil appeals held

that the new owners had constructive notice of the lien

because after they had bought the property they were

present when the contractors were working and should

have inquired as to whether they had been paid. We do

not read this case as holding, even by implication, that

1Sb

a notice to the new owners would not have complied

with the statute.

All of appellant’s points are overruled for the reasons

Stated.

Affirmed.

U-ANCHOR ADVERTISING,

INC., Appellant,

N. H. BURT, dba Granot Lodge,

Appellee.

No. 8668.

Court of Civil Appeals of Texas.

_— Amarillo.

Nov. 22, 1976.

Rehearing Denied Dec. 20, 1976.

Texas advertising corporation which went into

Oklahoma in order to solicit business from nonresident

defendant brought suit for breach of contract seeking

jurisdiction over nonresident defendant under the

long-arm statute. The District Court, Potter County, H.

Bryan Poff, Jr., J., sustained nonresident defendant's

challenge to jurisdiction, and Texas corporation ap-

pealed. The Court of Civil Appeals, Robinson, J., held

that mere agreement to make payments in Texas did

16b

not establish minimum contacts with state sufficient to

Satisfy due process requirements for long-arm juris-

diction and to require defendant to come into Texas to

defend the suit.

Affirmed.

1. Courts 12(2)

Where contract required nonresident to make _ his

payments in Potter County, Texas. nonresident was

“doing business” in Texas within meaning of statute

defining that term. Vernon’s Ann.Civ.St. art. 2031b.

See publication Words and Phrases for other

judicial constructions and definitions.

2. Constitutional Law 305(5)

Even if a nonresident defendant is “doing business”

within Texas as defined by long-arm statute, court, in

order to establish jurisdiction over nonresident de-

fendant, must still determine whether, under facts of

particular case, eXercise of jurisdiction offends due

process requirements of Fourteenth Amendment. Ver-

non’s Ann.Civ.St. art. 2031b. §4: U.S.C.A.Const.

Amend. 14.

3. Constitutional Law 305(5)

In order that court acquire jurisdiction over non-

resident defendant without violating due process, court

17b

must determine whether defendant has minimum

contact with forum state out of which cause of action

arose and factors to consider in determining whether or

not there have been minimum contacts are nature and

character of business, number and type of activities

within forum, whether such activities give rise to cause

of action, whether forum has some special interest in

granting relief, and relative convenience of the parties.

Vernon’s Ann.Civ.St. art. 2031b, §4:; U.S.C.A.Const.

Amend. 14.

4. Courts 12(2)

In order that court establish constitutional jurisdic-

tion over nonresident defendant, it is essential that

there be some act by which defendant purposefully

avails itself of privilege of conducting activities within

forum state, thus invoking benefits and protections of

its laws. Vernon’s Ann.Civ.St. art 2031b. §4; U.S.C.A.

Const. Amend. 14.

5. Courts 12(2)

Activity relied upon to establish minimum contacts

necessary to establish constitutional jurisdiction over

nonresident defendant may not be mere unilateral acts

of plaintiff in the forum. state. Rules of Civil

Procedures, rule |120a; Vernon’s Ann.Civ.St. art. 203 1b.

1&8b

6. Courts 12(2)

Assumption of jurisdiction over nonresident de-

fendant pursuant to long-arm statute must not offend

traditional notions of fair play and substantial justice,

consideration being given, inter alia, to the quality,

nature and extent of the activity in Texas and the

benefits and protection of the laws of the state of

Texas afforded to the defendant. Rules of Civil

Procedure, rule |120a: Vernon’s Ann.Civ.St. art. 2031b.

7. Courts 12(2)

Where contract between Texas corporate resident and

nonresident, with exception of place of payment, was

referable entirely to state of Oklahoma, and where, by

making payments in Texas, the nonresident defendant

was not afforded any real benefit or protection of laws

of the state of Texas. mere agreement to make

payments in Texas did not establish minimum contacts

with state sufficient to satisfy due process requirements

for long-arm jurisdiction and to require defendant to

come into Texas to detend breach of contract suit.

Vernon’s Ann.Civ.St. art. 2031b, §4; U.S.C.A Const.

Amend. 14.

Hal Miner, Amarillo, tor appellant.

Kenneth A. Back, Amarillo, for appellee.

ROBINSON, Justice.

19b

Plaintiff in this suit for breach of contract sought

jurisdiction over the nonresident defendant under the

long-arm statute. The nonresident defendant made his

special appearance to challenge jurisdiction. The trial

court, after a hearing, sustained the challenge. The

plaintiff appeals. Affirmed.

The plaintiff is a Texas advertising corporation which

went into Oklahoma in order to solicit business from

defendant. Defendant and an agent for the plaintiff

executed a contract in Oklahoma calling for plaintiff to

erect five roadside advertising signs in Oklahoma for

defendant. Payment for the signs was to be made in

Potter County, Texas. Defendant made several pay-

ments by mail to plaintiff before allegedly defaulting.

Defendant is not a Texas resident, maintains no place

of business in Texas, and has no agent for service in

Texas. Plaintiff sued defendant in Potter County. Texas.

and obtained service on defendant by serving the Texas

Secretary of State.

Defendant filed his Tex.R.Civ.P. 120a special appear-

ance, and the trial court dismissed the case for want of

jurisdiction after a hearing on the special appearance

motion. On appeal, plaintiff contends that defendant

was doing business within the meaning of Vernon's

Ann.Civ.Stat.Ann. art. 2031b (1964), and that de-

fendant had sufficient contacts with the State of Texas

so that to sustain jurisdiction over him would not

offend traditional notions of fair play and substantial

justice.

Article 2031b, §4, provides as follows:

For the purpose of this Act. and without

including other acts that may constitute doing

business, any foreign corporation, joint stock

20b

company, association, partnership, or non-resident

natural person shall be deemed doing business in

this State by entering into contract by mail or

otherwise with a_ resident of Texas to be

performed in whole or in part by either party in

this State, or the committing of any tort in whole

or in part in this State.

[1] There can be no question that the nonresident

defendant was “doing business” within the meaning of

the statute. The contract was performable in Texas, to

the extent that it required the defendant to make his

payments in Potter County, Texas. Standard Leasing

Co. vy. Performance Systems, Inc., 321 F.Supp. 977

(N.D.Tex. 1971): Custom Leasing, Inc. v. Gardner, 307

F.Supp. 161 (N.D. Miss. 1969), Estes Packing Company

» Kadish & Milman Beef Co., Inc., 530 S.W.2d 622

(Tex.Civ.App. Fort Worth 1975, no writ).

[2] It is not enough, however, that the facts of a

cause fit into the provisions of art. 2031b, §4. If they

do, the court must still determine whether, under the

facts of the particular case, the exercise of jurisdiction

over the nonresident defendant offends the due process

requirements of the 14th Amendment to the United

States Constitution. Product Promotions, Inc _ y¥.

Cousteau, 495 F.2d 483, 491-92 (Sth Cir. 1974):

Atwood Hatcheries v. Heisdorf & Nelson Farms, 357

F.2d 847 (Sth Cir. 1966); Estes Packing Company vy.

Kadish & Milman Beef Co., Inc., supra, 530 $.W.2d at

623-24; Pizza Inn, Inc. v. Lumar, 513 S.W.2d 251

(Tex.Civ.App. Eastland 1974, writ ref'd n. r. e.).

In O'Brien vy. Lanpar Company, 399 $.W.2d 340, 342

(Tex. 1966). our Supreme Court articulates three basic

elements which must coincide to sustain jurisdiction

over a nonresident defendant, as follows:

21b

(1) The nonresident defendant or foreign corpora-

tion must purposefully do some act or consum-

mate some transaction in the forum state: (2) the

cause Of action must arise from. or be connected

with. such act or transaction: and (3) the

assumption of jurisdiction by the forum state must

not offend traditional notions of fair play and

substantial justice. consideration being given to the

quality, nature, and extent of the activity in the

forum state. the relative convenience of the

parties, the benefits and protection of the laws of

the forum state afforded the respective parties. and

the basic equities of the situation.

[3.4] Due process requires that the nonresident

defendant have certain minimum contacts with the

forum state out of which the cause of action arose.

Hanson v. Denckla, 357 U.S. 235. 78 S.Ct. 1228, 2

L.Ed.2d 1283 (1958): International Shoe Company ¥

Washington, 326 U.S. 310. 66 S.Ct. 154. 90 L.Ed. 95

(1945). Factors to consider in determining whether or

not there have been minimum contacts with the forum

are:

(1) The nature and character of the business:

(2) The number and type of activities within the

forum,

(3) Whether such activities give rise to the cause

of action;

(4) Whether the forum has some special interest

in granting relief: and

(5) The relative convenience of the parties.

Hearne vy. Dow-Badische Chemical Company, 224

F.Supp. 90. 99 (S.D.Tex. 1963): Sun-X International

Company v. Witt, 413 S.W.2d 761. 765 (Tex Civ.App.

Texarkana 1967, writ ref'd nor. e.): and Trinity Steel

Company vy Modern Gas Sales & Service Co., 392

22b

S.W.2d 861 (Tex.Civ.App.—Texarkana 1965, writ ref d

n. r. e.). It is essential that there be some act “by

which the defendant purposefully avails itself of the

privilege of conducting activities within the forum

State, thus invoking the benefits and protections of its

laws.” Hanson v. Denckla, supra.

Plaintiff cites several cases in which the courts

sustained jurisdiction on facts similar to these. In Estes

Packing Company v. Kadish & Milman Beef Co., Inc.,

supra, the plaintiff shipped meat to the nonresident

defendant on the Etasis of an order given by the

defendant to a broker, who gave the order to plaintiff

for a commission. Plaintiff's invoice. which stated that

it was payable in Fort Worth, was sent with the meat.

When plaintiff sued for the purchase price, the court

found the minimum contacts sufficient to sustain

jurisdiction in Texas. And in National Truckers Service,

Inc. v. Aero Systems, Inc., 480 S.W.2d 455 (Tex.Civ.

App. -Fort Worth 1972, writ ref'd n. r. e.), the court

sustained jurisdiction over a nonresident who executed

a guaranty agreement performable in Texas and mailed

it into the state.

Similarly. in Standard Leasing Co. vy. Performance

Systems, Inc., supra, the Federal district court found

art. 2031b applicable when the nonresident Tennessee

defendant executed an equipment lease agreement with

a Louisiana company. which assigned the contract to the

Texas plaintiff. The nonresident was held amenable to

suit in a Texas federal district court by virtue of having

made several payments to the Texas company before

allegedly defaulting.

There is another line of cases. however, which we

believe more accurately reflects the proper considera-

tion which must be accorded the due = process

23b

requirements. In Pizza Jnn, Inc. v. Lumar, supra, the

nonresident defendant not only sent franchise fee

payments into Texas, but he came to Texas himself for

negotiations, and subsequently executed the franchise

agreement and mailed it to the plaintiff in Texas. The

court properly found that the defendant had estab-

lished the minimum contacts necessary to meet the due

process requirements. Those contacts are substantially

more significant than the ones in the case before us.

[5] In contrast. where the nonresident defendant

never came to Texas in connection with the transaction,

and all negotiations and payments Occurred out-of-state.

but the plaintiff shipped merchandise to the defendant

FOB Houston. the court held that the minimum

contacts had not been established. Sun-X /nternational

Company vy. Witt, supra. This is because the activity

relied upon to establish the minimum contacts may not

be the mere unilateral acts of the plaintiff in the forum

state. Hanson vy. Denckla, supra; Omniplan, Inc. v. New

America Development Corp., 323 S.W.2d 301 (Tex.Civ.

App. Waco 1975, no wnt). But compare Uvalde Rock

Asphalt Co. v. Consolidated Carpet Corporation, 457

S.W.2d 649 (Tex.Civ.App.- Beaumont 1970. writ refd

n.r.e.). Where there was a similar contractual arrange-

ment, except that the nonresident defendant had the

merchandise shipped from one point in Texas to

another for its benefit. and the defendant made

payments into Texas. The addition of these minimum

contacts were necessary to establish jurisdiction.

(6, 7] It is not enough that the nonresident

defendant merely do some act or transaction in Texas

which gives rise to the cause of action. In addition, the

assumption of jurisdiction must not offend traditional

24b

notions of fair play and substantial justice, considera-

tion being given. inter alia to the quality, nature and

extent of the activity in Texas and the benefits and

protection of the laws of the State of Texas afforded

the defendant. /nternational Shoe Company v. Washing-

ton, supra; O'Brien y. Lanpar Company, supra. The

contract in the case sub judice, with the exception of

the place of payment. was refereable entirely to the

State of Oklahoma. Moreover, we cannot say that by

making payments in Texas. the defendant was afforded

any real benefit and protection of the laws of the State

of Texas.

It is our opinion that on the facts before us, the

mere agreement to make payments in Texas does not

establish the minimum contacts with this State

sufficient to satisfy the due process requirements for

long-arm jurisdiction and to require the defendant to

come into Texas to defend the suit. The plaintiff's

contention that permitting the suit to be prosecuted in

Texas would not offend traditional notions of fair play

and substantial justice is overruled. The judgment of the

trial court is affirmed.

25b

IN THE SUPREME COURT OF TEXAS

NO. B-6516 July 13, 1977

U-ANCHOR ADVERTISING. INC. )

)

V. ) From Potter County.

) Seventh District

N. H. BURT d ba GRANOT LODGE })-

This cause came on to be heard on writ of error to

the Court of Civil Appeals for the Seventh Supreme

Judicial District together with the original transcript

and transcript showing the proceedings in the Court of

Civil Appeals because it is the opinion of the Court that

there was no error in the judgment of the Court of

Civil Appeals that affirmed the judgment of the District

Court, it is, therefore. adjudged, ordered, and decreed.

that the judgment of the Court of Civil Appeals be. and

hereby is, affirmed.

It is further ordered that petitioner, U-Anchor

Advertising, Inc., pay all costs expended and incurred in

this Court and Court of Civil Appeals: and that this

decision be certified to the District Court of Potter.

County, Texas for observance.

(Opinion of the Court by Justice Steakley)

le

26b

July 27, 1977 APPENDIX C _

NO. B-6516 ee Tk Eee

e i ee : sae — te

od fT

U-ANCHOR ADVERTISING, INC. ) et if Raunt .

| Bane: #

V. ) From Potter County, i sais _

) Seventh District / — ftfE O

N. H. BURT d/b/a GRANOT LODGE. ) Po R:\

q z

m7 > ~ :

Petitioners motion for rehearing filed herein on July He I;

2) a :, : et c <

-6. 1977 in the above numbered and entitled cause | 4323

having been duly considered. it is ordered that said Fu: > L

; = et ; > =>

motion be. and hereby is, overruled. Justice Barrow not 37 J

sitting.

|. GARSON R. JACKSON, Clerk of the Supreme

Court of Texas, do hereby certify that the foregoing are |

true and correct copies of the judgment & order of this

Court under the dates shown as the originals of same

appear in the minutes of this Court under the dates

shown.

IN TESTIMONY WHEREOF, witness my hand and

the seal of the Supreme Court of Texas at the City of

Austin, this the 13th day of October, 1977.

vi!

28 Son Ce ae

\

Ss

~ * ,

GARSON R. JACKSON, Clerk

By /s/ Mary M. Wakefield

Mary M. Wakefield, Deputy

*

“oo S¥aag won

ee |

2

well tt tu)

A mOHOK

ADYESTS tig

ES

nA ee ee

MOR

—— ————

Amarillo, Texas 1 ¥105 s Phone (806) 376-5975

P-/

ABDVERTISNG

ONTRACT | 9.

we hereby authorize you to place advertising displays

upon S$ - SX G PT dO 4

roadway sigr.s for us ior a period of sixty oH months im

accordance with the provisions of this agreement and the

concitions on the reverse sice. The signe shall bear the

design on the advertiser sice that is mutually agreed upon

and shall be erected at tne locations shown below. For

the above we promise tc pay you, at your office in Poster

County, Texas, $ O f0, > per month.

The effective cate of tunis contract will be the lst day of the

month following installation of the signs on the highway.

day of Dee. ig? 3 .

/

fag I 4 ge

(name e eats rtiser)

¥ /

Signed this W/L _

ACCEPTED:

Pa y

Adress 730 SS. /o"%S

Chutow Cilla Fee0/

(Presicent)

Date of Acceptance:

-_ / / a j y, s/h /

Bank Reference: ~,.7* 1/4 . Vv Mi, sa

yar. : aA

Ped "Am é é

00 Cit istema,, “3 les See ,

sh oh beat

~

~~

gS

4

Uy

a

“long-arm”’

Alaska:

ld

APPENDIX D

Among the states with similar provisions in their

Statutes are, in pertinent part:

[A]nses out of a promise, made anywhere to

the plaintiff or to some third party for the

plaintiff's benefit. by the defendant to perform

services in this state or to pay for services to be

performed in this state by the plaintiff. [Alaska

Statute §09.05.015(5)(a) (1973)]

Florida:

Breaches a contract in this state by failing to

perform acts required by the contract to be

performed in this. state. [Fla. Stat. Ann.

§48.193(g) (Supp. 1977)]

lowa:

If a foreign corporation makes a contract with a

resident of lowa to be performed in whole or in

part by either party in lowa.... [lowa Code Ann.

$617.3 (Supp. 1977)]

Kansas:

Entering into an express or implied contract. by

mail or otherwise, with a resident of this state at

the time of contracting. [Kan. Stat. $60-308(a)(5)

(1976)]

Minnesota:

If a foreign corporation makes a contract with a

resident of Minnesota to be performed in whole or

in part by either party in Minnesota... [Minn.

Stat. Ann. §303.13(3) (1969)}

Mississippi:

Any non-resident... who shall make a contract

with a resident of this state to be performed

whole or in part by any party in this state....

[Miss. Code Ann. §13-3-57 (1972)]

North Carolina

Out of any contract made in this state or to be

performed in this state. [N.C. Gen. Stat.

§ $5-145(a)1) (1975)]

South Carolina.

_..entry into a contract to be performed in

whole or in part by either party in this state. [S.C.

Code §36-2-803(g) (1977)]