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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1978
- **Citation:** 434 U.S. 1063

## Text

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

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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)]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2740%3A1. Public record. Not legal advice.