Sanford v. 202 Racing, Inc. , 2011 Ohio 3987 ( 2011 )

[Cite as Sanford v. 202 Racing, Inc., 2011-Ohio-3987.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 96059
MALCOLM SCOTT SANFORD
PLAINTIFF-APPELLEE
vs.
202 RACING INC., DBA
ACCU-PRODUCTS, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-729419
BEFORE: Rocco, J., Blackmon, P.J., and E. Gallagher, J.
RELEASED AND JOURNALIZED: August 11, 2011
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ATTORNEY FOR APPELLANTS
John P. Malone, Jr.
614 W. Superior Avenue
Suite 1150
Cleveland, Ohio 44113
ATTORNEYS FOR APPELLEE
Scott S. Weltman
David S. Brown
Weltman, Weinberg & Reis Co., L.P.A.
Lakeside Place, Suite 200
323 W. Lakeside Avenue
Cleveland, Ohio 44113
KENNETH A. ROCCO, J.:
{¶ 1} Defendants-appellants 202 Racing, Inc., dba “Accu-Products,” and Richard
Merhar appeal from the order of the Cuyahoga County Court of Common Pleas that
overruled their “notice of objection and motion for [a] stay” of the filing of a judgment
obtained against them in a Texas court by plaintiff-appellee, Texas resident Malcolm
Scott Sanford.
{¶ 2} Appellants present two assignments of error. They argue the trial court
wrongly determined the Texas judgment was entitled to “full faith and credit” in Ohio,
because the Texas judgment was void. Appellants assert the Texas court not only lacked
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personal jurisdiction over them, but its judgment in Sanford’s favor was based upon a
fraud on the court.
{¶ 3} Upon a review of the record, this court agrees that the Texas court never
acquired valid personal jurisdiction over appellants. Consequently, the trial court erred
in permitting Sanford to file the Texas judgment pursuant to R.C. 2329.022. Appellants’
second assignment of error, therefore, is moot. The trial court’s order is reversed, and
this case is remanded for further proceedings consistent with this opinion.
{¶ 4} The record reflects that on February 26, 2009, Sanford filed a petition in the
county court of Smith County, Texas against appellants, who are based in Rocky River,
Ohio. Therein, Sanford alleged causes of action for deceptive trade practices, “common
law fraud,” breach of contract, “economic and actual damages” and “damages for mental
anguish”; Sanford also made claims for “multiple damages,” “exemplary damages,” and
“attorney’s fees.”
{¶ 5} With respect to the Texas court’s “general” personal jurisdiction over
appellants, Sanford claimed that the court’s assumption of jurisdiction over appellants
would not “offend traditional notions of fair play and substantial justice and [wa]s
consistent with the constitutional requirements of due process.” He based this claim on
the following assertions: 1) appellants “purposefully availed” themselves of the privilege
of conducting business in Texas; 2) appellants had “continuous and systematic contacts”
with Texas; and, 3) appellants “engaged in activities constituting business * * * in Texas
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as provided by [state law], in that [appellants] contracted with a Texas resident and
performance of the agreement in whole or in part thereof was to occur in Texas.”
{¶ 6} After being served with a copy of Sanford’s petition, appellant Merhar,
proceeding pro se on his own behalf and on behalf of his company, filed a motion to
dismiss the action. He stated simply that the court lacked personal jurisdiction “as
demonstrated in the attached Affidavit.” In his affidavit, Merhar averred that neither he
nor his business “contracted by mail or otherwise with any Texas resident to perform a
contract in whole or part in Texas.”
{¶ 7} Sanford filed a “response” to appellants’ motion to dismiss. He argued that
appellants’ motion was deficient for failure to strictly comply with the requirements set
forth in Texas Rule of Civil Procedure (“TRCP”) 120a(1). Sanford further argued that
appellants’ internet activity was sufficient for the Texas court to exercise personal
jurisdiction over them. Neither of these arguments was supported by any documentary
evidence.
{¶ 8} Nevertheless, on July 29, 2009, without conducting a hearing, the Texas
court denied appellants’ motion to dismiss the case. In October 2009, the Texas court
sent notice to appellants of a trial date. The trial took place on December 2, 2009; that
same day, the Texas court issued a judgment entry finding in favor of Sanford on his
complaint.
{¶ 9} The Texas judgment entry stated in pertinent part: 1) the trial court in Smith
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County, Texas, held a bench trial on Sanford’s claims against appellants; 2) appellants
failed to appear; and, 3) “after considering the pleadings and official records on file in
this cause, the evidence presented, and the parties’ [sic] arguments,” Sanford was entitled
to judgment as follows: $4,700 in actual damages, $14,100 in multiple damages, $176 in
prejudgment interest, $5,125 in attorney’s fees, and postjudgment interest on both the
judgment and the attorney’s fees “from the day this judgment is rendered until satisfied.”1
{¶ 10} On June 16, 2010, Sanford filed in the trial court a certified copy of the
Texas judgment entered in his favor. Attached to this document was Sanford’s Ohio
attorney’s affidavit; the attorney stated that appellants’ “last known address” was in
Rocky River, Ohio.
{¶ 11} On July 28, 2010, appellants filed their “notice of objection [to the] foreign
judgment and motion for [a] stay of proceedings.” Appellants asserted the Texas court
never acquired personal jurisdiction over them; they argued the judgment, therefore, was
void, and the trial court should not enforce it.
{¶ 12} Appellants attached to their motion Merhar’s affidavit. Merhar averred as
follows: 1) Merhar never directed any sales or marketing activity toward any person in
Texas; 2) Sanford initiated contact with him via the internet and telephone; 3) Sanford
solicited an agreement to purchase a “Zip go cart” from Accu-Products for $4,000; 4)
1 The
total amount of Sanford’s judgment thus added up to $24,101, plus
postjudgment interest.
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appellants agreed in Ohio to the resulting order of sale of the item to Sanford; 5) in
October, 2007, after making partial payment on the account, Sanford came to Ohio to take
the “rolling chassis” of the “Zip go cart” home with him while awaiting appellants’
supplying of the engine; 6) prior to “or about the time” Sanford filed his action in Texas,
appellants performed the rest of the agreement in Ohio and shipped the item to Sanford
“F.O.B. Ohio”;2 and 7) appellants’ contacts with the state of Texas were minimal because
they neither availed themselves of the privilege of conducting business there, nor entered
the state, nor carried on any business efforts there for themselves, nor sought protection
for themselves under Texas law.
{¶ 13} Sanford filed a brief in opposition to appellants’ objection and motion. He
argued that, by virtue of the fact that Merhar filed a pro se motion in the Texas court to
dismiss Sanford’s claims, appellants had submitted to the Texas court’s jurisdiction.
Sanford cited TRCP 120a(1) in support of his argument. Sanford also argued that the
issue of personal jurisdiction had been “briefed and adjudicated” by the Texas court;
therefore, that issue was barred by the doctrine of res judicata, and the Texas judgment
2 As defined in R.C. 1302.32(A)(1), the term F.O.B. (which means ‘free on
board’) at a name place is a delivery term. When goods are to be shipped F.O.B.
seller’s plant, the seller is required only to place the goods in the possession of a
carrier, make a reasonable contract for shipment, tender documents of title, and
notify the buyer of the shipment. See, e.g., Alliance Wall Corp. v. Ampat Midwest
Corp. (1984), 17 Ohio App. 3d 59, 62, 477 N.E.2d 1206.
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deserved “full faith and credit” from the trial court pursuant to the United States
Constitution, Section I, Article IV.
{¶ 14} Sanford attached to his brief as exhibits copies of several documents.
These included the docket sheet of the Texas court’s case file, his original petition against
appellants, appellants’ motion to dismiss and his response, and the Texas court’s denial of
appellants’ motion. Sanford supplied no affidavit.
{¶ 15} Subsequently, the trial court issued an order in this case that denied
appellants’ “motion for a stay of foreign judgment proceedings,” and declared that the
Texas judgment “shall be treated in the same manner as a judgment of the Cuyahoga
County Court of Common Pleas pursuant to R.C. [Section] 2329.02.”
{¶ 16} Appellants filed a timely appeal of the trial court’s order. They present the
following two assignments of error.
{¶ 17} “I. The trial court erred by giving full faith and credit to a Texas judgment,
since the Texas judgment was void for lack of personal jurisdiction.
{¶ 18} “II. The trial court erred by giving full faith and credit to a Texas
judgment, since the Texas judgment was based on fraud and thus void.”
{¶ 19} Appellants assert the trial court wrongly determined the Texas judgment
was entitled to “full faith and credit” in Ohio because the Texas judgment was void.
Appellants argue the Texas court lacked personal jurisdiction over them, and also argue
the Texas court’s judgment in Sanford’s favor was based upon a fraud on the court. This
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court finds it necessary to address only appellants’ first argument, and agrees.
{¶ 20} Under the Full Faith and Credit Clause, a valid judgment rendered in
another state must be recognized in Ohio. Section 1, Article IV, United States
Constitution; R.C. 2329.022. However, a foreign judgment is subject to collateral attack
in Ohio if the other state’s court lacked either subject matter jurisdiction or personal
jurisdiction. Litsinger Sign Co. v. American Sign Co. (1967), 11 Ohio St. 2d 1, 227
N.E.2d 609; Discount Bridal Services, Inc. v. Kovacs (Apr. 16, 1998), Cuyahoga App.
No. 72409, citing Speyer v. Continental Sports Cars, Inc. (1986), 34 Ohio App. 3d 272,
518 N.E.2d 39.
{¶ 21} The court in Trimax Holdings, Inc. v. Larson (June 30, 1998), Franklin
App. No. 97APE-10-1355, explained the doctrine of collateral attack in the following
terms:
{¶ 22} “Only foreign judgments which are void are subject to collateral attack in
Ohio. * * * [I]f the foreign judgment is merely voidable, relief must be sought in the
foreign state.”
{¶ 23} If the sister state lacked jurisdiction over the person to render the judgment
under its own internal law, under that law the judgment is void. Litsinger Sign Co.,
paragraph one of the syllabus. Collateral attack is precluded if the defendant submitted
to the jurisdiction of the sister state. Speyer. Therefore, the procedural law of the state
where the original judgment was rendered governs the issue of personal jurisdiction. Id.
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{¶ 24} Sanford argued in the Texas court that appellants’ motion to dismiss his
petition was defective, and thus served to subject them to the Texas court’s “general”
jurisdiction. TRCP 120a provides in pertinent part:
{¶ 25} “1. * * * [A] special appearance may be made by any party * * * for the
purpose of objecting to the jurisdiction of the court over the person * * * of the defendant
on the ground that such party * * * is not amenable to process issued by the courts of this
state. * * * Such special appearance shall be made by sworn motion filed prior to * * *
any other plea, pleading or motion; provided, however, that * * * any other plea, pleading
or motion may be contained in the same instrument * * * without waiver of special
appearance; and may be amended to cure defects. Every appearance, prior to judgment,
not in compliance with this rule is a general appearance.
{¶ 26} “ * * *
{¶ 27} “3. The court shall determine the special appearance on the basis of the
pleadings, * * * [and] such affidavits and attachments as may be filed by the parties * * *.
{¶ 28} “4. * * * If the objection to jurisdiction is overruled, the objecting party may
thereafter appear generally for any purpose. Any such special appearance or such
general appearance shall not be deemed a waiver of the objection to jurisdiction when the
objecting party * * * is not amenable to process issued by the courts of this State.”
(Emphasis added.)
{¶ 29} A review of the case file from the Texas county court reveals Sanford’s
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jurisdictional argument was unsupported. While appellants challenged the court’s
personal jurisdiction over them in compliance with the foregoing rule by submitting
Merhar’s sworn affidavit, Sanford’s responsive brief provided the Texas court with no
evidence upon which to assume jurisdiction over appellants. Moreover, the legal
authority Sanford cited to the Texas court in support of his position was actually contrary
to it.
{¶ 30} For example, in Exchequer Fin. Group, Inc. v. Stratum Devel. Inc. (2007),
239 S.W.3d 899, cited by Sanford as controlling over the Texas county court’s decision
on the issue, the Texas Fifth District Court of Appeals set forth the applicable analysis as
follows:
{¶ 31} “Whether a court has personal jurisdiction over a nonresident defendant is a
question of law. Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 805-06
(Tex. 2002). In reviewing a trial court’s ruling on a special appearance, we examine all
the evidence in the record to determine if the nonresident defendant negated all possible
grounds for personal jurisdiction. Reiff v. Roy, 115 S.W.3d 700, 705 (Tex. App.-Dallas
2003, pet. denied). When, as in this case, the trial court does not file findings of fact and
conclusions of law, all facts necessary to support the order and supported by the evidence
are implied. Id. We reverse the trial court’s ruling only when the court’s implied
findings and resulting order are so against the overwhelming weight and preponderance
of the evidence as to be manifestly wrong. Id.
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{¶ 32} “Texas courts may exercise personal jurisdiction over a nonresident
defendant only if (1) the defendant has established minimum contacts with Texas and (2)
exercising jurisdiction comports with traditional notions of fair play and substantial
justice. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002).
In evaluating the extent of the defendant’s contacts with Texas, the touchstone of our
jurisdictional analysis is ‘purposeful availment.’ Michiana Easy Livin’ Country, Inc. v.
Holten, 168 S.W.3d 777, 784 (Tex. 2005). In determining whether the defendant has
purposefully availed itself of the privilege of conducting activities within Texas, we look
only to the defendant’s contacts and not unilateral contacts of third parties. See id. at
784-85. We examine only purposeful contacts of the defendant itself that are not
random, isolated, or fortuitous. Id. at 785. We search for evidence showing the
defendant availed itself of the forum by seeking some benefit, advantage, or profit. Id.
{¶ 33} “ * * *
{¶ 34} “ * * * A defendant waives its special appearance and appears generally if it
requests affirmative relief inconsistent with its assertion that the trial court lacks personal
jurisdiction. See Dawson-Austin v. Austin, 968 S.W.2d 319, 323 (Tex. 1998).
{¶ 35} “ * * * We conclude appellee’s filing of the motion to dismiss did not waive
its special appearance. * * * The mere filing of a motion, clearly subject to the special
appearance, does not constitute a general appearance. * * *
{¶ 36} “ * * * The [evidence] establishes appellee provides web development
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services and website hosting from its place of business in Illinois. Although potential
customers can contact appellee through its website, the record does not reveal the extent
of appellee’s interaction with its customers through the website. We note that appellant
negotiated its contracts with appellee by telephone, facsimile, and email rather than
through interaction with appellee’s website.
{¶ 37} “ * * * The evidence shows appellee serves only a small number of Texas
customers, provides its services from Illinois, and has made no effort to seek out
customers in Texas. We conclude the trial court did not err in concluding appellee’s
contacts with Texas do not rise to the level of continuous and systematic contacts that
would support general jurisdiction in Texas. See [Am. Type Culture] at 809-10
(concluding no general jurisdiction existed where defendant did not advertise in Texas,
had no physical presence in Texas, performed all business services outside Texas, and
carefully constructed its contracts to ensure it did not benefit from Texas law). * * *
{¶ 38} “We affirm the trial court’s order granting appellee’s special appearance
and dismissing appellant’s suit against appellee.” (Emphasis added.)
{¶ 39} Clearly, based upon the foregoing principles, the Texas county court lacked
any basis upon which to assert personal jurisdiction over appellants. Simply put, the
evidence in the record demonstrated otherwise.
{¶ 40} The record reflects the issue of jurisdiction was not “fully and fairly
litigated” in Texas because the Texas court: 1) afforded no weight to Merhar’s sworn
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affidavit; 2) failed to give effect to either TRCP 120a or controlling Texas law with
respect to TRCP 120a; and, 3) failed to conduct an evidentiary hearing on the matter prior
to proceeding to a trial on the merits of Sanford’s many claims in appellants’ absence.
Under these circumstances, the trial court erred in ordering the enforcement of the Texas
judgment in Ohio. Holzemer v. Urbanski, 86 Ohio St. 3d 129, 1999-Ohio-91, 712 N.E.2d
713; cf., RACC Industries, Inc. v. Stun-Tech, Inc. (Dec. 29, 1994), Cuyahoga App. No.
66802.
{¶ 41} Appellants’ first assignment of error is sustained. This renders appellants’
second assignment of error moot. App.R. 12(A)(1)(c).
{¶ 42} The trial court’s order is reversed, and this case is remanded for further
proceedings consistent with this opinion.
It is ordered that appellants recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into
execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
_______________________________
KENNETH A. ROCCO, JUDGE
PATRICIA ANN BLACKMON, P.J. and
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EILEEN A. GALLAGHER, J.