Amaral, Scott v. Jeff and Melissa Steele--Appeal from 189th District Court of Harris County

Affirmed as Modified and Opinion filed October 31, 2002

Affirmed as Modified and Opinion filed October 31, 2002.

In The

Fourteenth Court of Appeals

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NO. 14-02-00368-CV

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SCOTT AMARAL, Appellant

V.

JEFF AND MELISSA STEELE, Appellees

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On Appeal from the 189th District Court

Harris County, Texas

Trial Court Cause No. 00-14641

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O P I N I O N

Scott Amaral appeals the denial of his motion to dismiss for lack of personal jurisdiction (the motion ) on the ground that there is insufficient evidence to support the exercise of personal jurisdiction over him. We affirm as modified.

Standard of Review

A plaintiff has the initial burden of pleading sufficient allegations to bring a nonresident defendant within the provisions of the Texas long-arm statute. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 807 (Tex.2002). In a special appearance proceeding, the nonresident defendant then generally bears the burden of negating all bases of personal jurisdiction alleged by the plaintiff. Id. Whether a court has personal jurisdiction over a defendant is a question of law. Id. at 805-06. In resolving this question of law, the trial court must frequently resolve questions of fact. Id. at 806. Therefore, on appeal, a trial court s decision to grant or deny a special appearance is subject to de novo review, but its implied findings of fact supporting that decision may be challenged for legal and factual sufficiency. See id.; BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002).

Personal Jurisdiction

Amaral s sole issue in this appeal argues that there is no evidence in the record that he had sufficient minimum contacts with Texas to warrant a finding of either specific or general jurisdiction.[1] In reviewing a no evidence claim, we view the evidence in the light that tends to support the disputed fact finding and disregard all evidence and inferences to the contrary. Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex.2002). If more than a scintilla of evidence exists, it is legally sufficient. Id. More than a scintilla of evidence exists if the evidence furnishes a basis for reasonable minds to differ about the disputed fact s existence. See id.

A Texas court may exercise jurisdiction over a nonresident if: (1) the nonresident is doing business in the State within the meaning of the Texas long-arm statute;[2] and (2) the exercise of jurisdiction is consistent with constitutional due process guarantees. Coleman, 83 S.W.3d at 806. Because the broad definition of doing business extends the reach of the long-arm statute as far as federal constitutional due process will allow, the doing business requirement is satisfied if the due process requirement is met [3] and thus need not be considered separately from it.

In order for a court s assertion of jurisdiction over a nonresident defendant to comport with due process, (1) the defendant must have purposefully established minimum contacts with the forum state such that it could reasonably anticipate being sued in that state; and (2) the exercise of jurisdiction must comport with fair play and substantial justice.[4] Id. A defendant is not subject to jurisdiction if its contacts with the State are random, fortuitous, or attenuated; rather, the minimum contacts analysis requires that a defendant has purposefully availed itself of the privilege of conducting activities within the State, thus invoking the benefits and protections of its laws. Id.

A defendant s contacts with a forum state can give rise to either general or specific jurisdiction. Id. General jurisdiction exists where the defendant has had continuous and systematic contacts with the forum state, even if the cause of action did not arise from the defendant s purposeful conduct in that state. Id. at 806-07. Conversely, specific jurisdiction is established where the defendant s contacts with the forum are purposeful and the cause of action arises from, or relates to, those contacts. Id. at 806. Specific jurisdiction involves a less demanding minimum contacts analysis than general jurisdiction. See id. at 807.

In this case, the Steeles petition alleged premises liability against Amaral in the capacities of: (1) sole proprietor of Rio Bravo Motocross Park ( Rio Bravo ), the business that allegedly operated or controlled the property (the property ) on which the injury occurred on March 21, 1998; and (2) alter ego of S.E.A. Leasing, Inc. ( S.E.A. ), the corporation that allegedly owned the property at that time.

Alter Ego

Contrary to the general rule, cited above, that a nonresident defendant has the burden to negate all bases for personal jurisdiction, the Texas Supreme Court has held that jurisdiction based on an alter ego theory cannot be found in the absence of evidence supporting the alter ego assertions. See BMC, 83 S.W.3d at 798-99. Although this holding was reached in the context of a parent and subsidiary corporation, it was based on the presumption of separate identity between such corporations. Because the same presumption exists with regard to a corporation and its non-corporate shareholders,[5] it logically follows that the rule would also apply to an assertion of jurisdiction based on alter ego with regard to a non-corporate shareholder. Therefore, we conclude that jurisdiction could only be asserted in this case against Amaral in his alleged capacity as the alter ego of S.E.A. if there was evidence to support the alter ego allegations.

Under the alter ego theory, the separate legal identity of a corporation and its shareholder is disregarded where there is such unity between them that they cease to be separate and holding only the corporation liable would result in injustice. Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex. 1990); Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.1986). Alter ego is shown from the total dealings of the corporation and the shareholder, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separate, the amount of financial interest, ownership, and control the individual maintains over the corporation, and whether the corporation has been used for the shareholder s personal purposes. Mancorp, 802 S.W.2d at 228.

In this case, the Steeles petition does not contain any specific factual allegations to delineate their alter ego claim. Although their response to the motion asserted that Amaral was the sole shareholder of S.E.A. and controlled the corporation, such facts alone, even if supported by evidence, would not show alter ego.[6] Nor do we find any evidence to support any indicia of alter ego in the record or cited in the Steeles brief. Lacking such evidence, there was no basis to exercise jurisdiction over Amaral on an alter ego theory, and his challenge to the denial of the motion is sustained to that extent.

Sole Proprietor

With regard to the exercise of jurisdiction over Amaral in his alleged capacity as sole proprietor of Rio Bravo,[7] it was Amaral s burden to negate that ground. The evidence in our record includes, among other things, the following: (1) an assumed name certificate in which Amaral registered Rio Bravo as his sole proprietorship in Harris County in 1996;[8] and (2) a power of attorney dated March 3, 1998, in which Amaral authorized Albert Amaral to act on his behalf in managing Rio Bravo.[9] Because Amaral presented no evidence that he had ceased to be the sole proprietor of Rio Bravo at the time of the alleged injury[10] or to otherwise negate the exercise of specific jurisdiction over him in his capacity as the alleged owner of Rio Bravo,[11] his challenge to the denial of the motion is overruled with regard to jurisdiction over him in that capacity. Accordingly, the trial court s judgment denying Amaral s motion to dismiss for lack of personal jurisdiction is: (1) modified to remove the exercise of jurisdiction over Amaral in his alleged capacity as the alter ego of S.E.A.; and (2) affirmed as to the exercise of jurisdiction over Amaral in his alleged capacity as sole proprietor of Rio Bravo.

/s/ Richard H. Edelman

Justice

Judgment rendered and Opinion filed October 31, 2002.

Panel consists of Justices Edelman, Seymore, and Guzman.

Do Not Publish Tex. R. App. P. 47.3(b).

[1] In particular, Amaral asserts that the record does not contain any evidence of Amaral: (1) doing business in Texas; (2) entering into a contract with a Texas resident; (3) committing a tort in the forum state; or (4) engaging in any culpable act with reasonably foreseeable consequences within the borders of Texas; nor did the Steeles allege sufficient minimum contacts in their pleading to support a finding of personal jurisdiction. Instead, Amaral contends that the evidence reflects that he: (1) has been a resident of Colorado since well before the alleged injury; (2) surrendered his Texas driver s license and residency when he gained residency in Colorado; and (3) has been employed full time in Colorado.

[2] In addition to other, unspecified acts, the long-arm statute defines doing business to include: (1) contracting by mail or otherwise with a Texas resident if either party is to perform the contract in whole or in part in this State; (2) committing a tort in whole or in part in this State; or (3) recruiting Texas residents, directly or through an intermediary located in this State, for employment inside or outside this State. See Tex. Civ. Prac. & Rem. Code Ann. 17.042 (Vernon 1997).

[3] See Coleman, 83 S.W.3d at 806.

[4] To invoke the fair play and substantial justice prong of the due process requirement, a nonresident defendant must present a compelling case that the exercise of jurisdiction over it would be unreasonable. In re S.A.V., 837 S.W.2d 80, 85 (Tex.1992). The factors to be considered include: (1) the burden on the defendant; (2) the interests of the forum state in adjudicating the dispute; (3) the plaintiff s interest in obtaining convenient and effective relief; (4) the interstate judicial system s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental social policies. Id. at 86. However, once minimum contacts are established, the exercise of jurisdiction will rarely fail to comport with fair play and substantial justice. Id.

[5] See, e.g., Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997) (recognizing that a corporation is an entity separate from its shareholders under Texas law).

[6] See Grain Dealers, 943 S.W.2d at 458.

[7] An unincorporated business, such as a sole proprietorship, has no legal existence apart from the sole proprietor. See Cox v. Thee Evergreen Church, 836 S.W.2d 167, 169 (Tex. 1992).

[8] See Tex. Bus. & Com. Code Ann. 36.10 (Vernon 2002) (requiring persons who operate unincorporated businesses to file assumed name certificates).

[9] Although the Steeles alleged that Amaral operated the motocross track individually until April of 1998 and pursuant to a power of attorney thereafter, the power of attorney reflects that it was effective March 3, 1998.

[10] The record contains no evidence, for example, that Amaral filed a subsequent certificate showing any change in the status of this sole proprietorship. See Tex. Bus. & Com. Code Ann. 36.12, 36.14 (Vernon 2002) (requiring new certificate to be filed in the event of a material change, including change of ownership, and allowing a statement of abandonment to be filed where a registrant ceases to do business under the assumed name).

[11] Because we conclude that Amaral s contacts with Texas are sufficient to support specific jurisdiction, we do not address general jurisdiction.