Velco Chemicals, Inc. v. Polimeri Europa Americas, Inc. F/K/A Enichem Americas, Inc. ( 2004 )

Affirmed and Memorandum Opinion filed September 7, 2004

Affirmed and Memorandum Opinion filed September 7, 2004.

In The

Fourteenth Court of Appeals

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NO. 14-03-00395-CV

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VELCO CHEMICALS, INC., Appellant

V.

POLIMERI EUROPA AMERICAS, INC. F/K/A ENICHEM AMERICAS, INC., Appellee

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On Appeal from the 11th District Court

Harris County, Texas

Trial Court Cause No. 01-10878

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M E M O R A N D U M   O P I N I O N

Appellant Velco Chemicals, Inc. appeals because the trial court denied its special appearance, which it filed after a federal court remanded the case for lack of complete diversity.  While in federal court, Velco answered and counterclaimed, admitting the jurisdictional allegations of appellee Polimeri Europa Americas, Inc. f/k/a Enichem Americas, Inc.  Velco never objected to the court=s jurisdiction over it.  We hold that Velco=s actions in federal court waived its objection to personal jurisdiction in the Texas state court, and we therefore affirm the trial court=s judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Velco is a Delaware corporation with its principal place of business in New York.  EniChem is a Delaware corporation with its principal place of business in Houston, Texas. EniChem sued Velco for failing to pay two of three invoices for shipments of a chemical known as Tedimon 31. Thereafter, Velco removed the case to the United States District Court of the Southern District of Texas, alleging diversity of citizenship.  Shortly after removing the case, Velco answered and counterclaimed in federal court. Velco neither objected to personal jurisdiction nor moved to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b).  Instead, in its answer, Velco admitted EniChem=s allegations that Velco was subject to personal jurisdiction in Texas. 

Four months later, the federal court, finding that complete diversity was lacking, remanded the case to the trial court.  Velco then filed a special appearance, supported by the affidavit of its chief executive officer.^[1]  The trial court overruled the special appearance. 

Once the court had the case before it on the merits, it resolved all issues favorably to EniChem.  Velco then appealed the trial court=s order denying its special appearance.

DISCUSSION AND ANALYSIS

1.         The Standard of Review and Applicable Law

Whether a court has personal jurisdiction over a defendant is a question of law.  Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801, 805B06 (Tex. 2002), cert. denied, 537 U.S. 1191 (2003); BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).  On appeal, we review de novo the trial court=s order granting or denying a special appearance. Coleman, 83 S.W.3d at 806; Marchand, 83 S.W.3d at 794.  When no findings of fact are issued, we must presume the trial court resolved all factual disputes in favor of its judgment.  Coleman, 83 S.W.3d at 806; Marchand, 83 S.W.3d at 795.

A nonresident defendant objects to a Texas court=s exercise of jurisdiction over it by filing a special appearance under Rule 120a of the Texas Rules of Civil Procedure.  See Tex. R. Civ. P. 120a(2).  The special appearance must strictly comply with Rule 120a, Shapolsky v. Brewton, 56 S.W.3d 120, 140 (Tex. App.CHouston [14th Dist.] 2001, pet. denied), and must be made and determined on sworn motion before any other plea, pleading, or motion that seeks affirmative relief.  Tex. R. Civ. P. 120a(1), (2).

A defendant may waive its right to object to a court=s exercise of personal jurisdiction over it. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985); Shapolsky, 56 S.W.3d at 140. It does this by making a general appearance before the court.  A party enters a general appearance whenever it invokes the judgment of the court on any question other than the court=s jurisdiction; if a defendant=s act recognizes that an action is properly pending or seeks affirmative relief from the court, then that is a general appearance. See Dawson‑Austin v. Austin, 968 S.W.2d 319, 322 (Tex. 1998), cert. denied, 525 U.S. 1067 (1999) (noting test for general appearance is whether party requests affirmative relief inconsistent with assertion that the district court lacks jurisdiction); Von Briesen, Purtell & Roper, S.C. v. French, 78 S.W.3d 570, 575 (Tex. App.CAmarillo 2002, pet. dism=d w.o.j.) (AAny answer or other appearance before judgment is a general appearance unless it is made a >special appearance= for the purpose of challenging the trial court=s jurisdiction over the party.@).  Thus, filing an answer and counterclaim before a special appearance is filed and ruled on constitutes a general appearance that waives a special appearance.

In federal court, a defendant preserves his objection to jurisdiction in much the same way.  There, a defendant must either move to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) before pleading, or object to personal jurisdiction in its responsive pleading.  See Fed. R. Civ. P. 12(b), 12(h)(1); see also Morgan Guar. Trust Co. v. Blum, 649 F.2d 342, 345 (5th Cir. Unit B July 1981) (objection to lack of personal jurisdiction is waived by failure to raise it in Rule 12(b)(2) motion or in answer or amendment permitted by Rule 15(a) as a matter of course). Additionally, if a defendant wants to amend its answer to include a personal jurisdiction objection, it must comply with the requirements of Federal Rule of Civil Procedure 15(a), which provides the following in relevant part:

A party may amend the party=s pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend it at any time within 20 days after it is served. Otherwise a party may amend the party=s pleading only by leave of court or by written consent of the other party.

Fed. R. Civ. P. 15(a).  The Blum court specifically held that a personal jurisdiction defense cannot be raised in an amendment that requires leave of court.  Blum, 649 F.2d at 345.  Therefore, if a defendant wishes to amend its answer to include an objection to personal jurisdiction, it must do so before the expiration of time in which the rules allow amendment as a matter of course.  We turn now to the specific facts of this case.

2.         Velco Appeared and Judicially Admitted that Personal Jurisdiction Existed

Here, after the case was removed to federal court, Velco answered and sought affirmative relief in its counterclaim for breach of contract.  It did not object to the federal court=s jurisdiction over it, either by a Rule 12(b) motion before it answered or in its answer.  It also never sought to amend its answer to object to personal jurisdiction while it could have done so without leave of court.  See Fed. R. Civ. P. 15(a).

Velco contends it never had the opportunity to amend, arguing that it would have moved to transfer the case to New York and would have amended had the case not been remanded.  But Velco cannot ignore Rules 12(b) and 15(a).  That Velco did not amend is important because in its answer it also judicially admitted that the exercise of personal jurisdiction over it was appropriate. 

Velco=s admissions in its federal court answer, highlighted here for emphasis, include the following:

[Allegation II.3:] . . . The Defendant has been engaged in business in Texas, does not maintain a regular place of business in Texas, is required to designate or maintain a resident agent and has not done so, and the present cause of action arose out of activities Defendant conducted in Texas. . . .

Answer to Paragraph II-3.  Velco Chemicals, Inc. admits the allegations contained in paragraph II-3, with the qualification that the defendant is not required to designate or maintain a resident agent. 

[Allegation III.5]  This Court has personal jurisdiction over the Defendant pursuant to Chapter 17 of the Texas Civil Practice and Remedies Code because Defendant has conducted business in this state.

Answer to Paragraph III-5.  Velco Chemicals, Inc. admits the allegations contained in paragraph III-5.

Admissions in live pleadings are regarded as formal judicial admissions in the case in which that pleading is filed.  See Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001); DowEnlanco v. Benitez, 4 S.W.3d 866, 871 (Tex. App.CCorpus Christi 1999, no pet.).  A judicial admission that is clear and unequivocal has conclusive effect and bars the admitting party from later disputing the admitted fact.  Wolf, 44 S.W.3d at 568. This rule is based on the public policy that it would be unjust to permit a party to recover after he has sworn himself out of court by clear, unequivocal testimony.  DowElanco, 4 S.W.3d at 871.

Velco contends that its admission of personal jurisdiction should not be given conclusive effect because it is equivocal and not a material admission. Velco contends the admission is equivocal because it conflicts with Velco=s attempt to secure federal subject-matter jurisdiction based on diversity of citizenship.  But the only allegations Velco made to support diversity were that it is a Delaware corporation and a citizen of New York, and it is not a citizen of Texas. Nothing in these statements is inconsistent with an allegation of diversity or the assertion of personal jurisdiction here.  Velco asserts the admissions were not material because the jurisdictional allegation in EniChem=s petition was not a material part of the federal suit, had no impact on federal jurisdiction, and was not part of any argument to the federal court.  However, a federal court must have both personal jurisdiction and subject matter jurisdiction to preside over a case.  See Ins. Corp. of Ireland, Ltd. v Compagnie des Bauxites de Guinee, 456 U.S. 694, 701B02 (1982) (AThe validity of an order of a federal court depends upon that court=s having jurisdiction over both the subject matter and the parties.@); SII MegaDiamond, Inc. v. Am. Superabrasives Corp., 969 P.2d 430, 437 (Utah 1998) (AA federal court sitting in diversity can render a valid judgment only if the state in which it sits would have had personal jurisdiction over the defendant.@).  Thus, contrary to Velco=s assertion, the issue of a court=s personal jurisdiction over a defendant is material to the federal court sitting in diversityCindeed, it is essential to the court=s exercise of jurisdiction.  

Next, Velco contends that the admissions are statements from another case, not the same case, and argues that pleadings from another case that are inconsistent with a party=s position in a present action are merely quasi-admissions, which are not conclusive.  See DowElanco v. Benitez, 4 S.W.3d at 871.  First, we disagree that the removed action became Aanother case@ separate and distinct from the present case, and we note that Velco cites no authority to support its contention.  When removal occurs, the federal court merely takes up the same case where the state court left off.  See Granny Goose Foods, Inc. v. Bd. of Teamsters, 415 U.S. 423, 436 (1974).  EniChem=s petition in the state court action became its operative pleading in the federal court after removal, and upon remand, the case was returned to the same state court with the same parties, the same attorneys, the same claims, and the same cause number.

Even if we were to conclude that Velco=s admissions were merely quasi-admissions, Velco=s arguments would still fail.  A quasi-admission is treated as a judicial admission when it appears: (1) the declaration was made during the course of a judicial proceeding; (2) the statement is contrary to an essential fact embraced in the declarant=s theory of recovery or defense; (3) the statement is clear and deliberate, and not a mistake; (4) giving conclusive effect to the admission will not be contrary to the public policy on which the rule is based; and (5) the statement is not destructive of the offering party=s theory of recovery.  DowEnlanco, 4 S.W.3d at 871; see also Daimler-Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 719 (Tex. App.CAustin 2000, pet. dism=d w.o.j.), cert. denied, 535 U.S. 1077 (2002).

Velco argues that its statements do not satisfy the third and fourth requirements because they were Ainadvertent,@ were not probative of any issue in the federal litigation, had no impact on federal jurisdiction, and were not part of any argument to the federal court.

First, we find nothing inadvertent about its admissions.  Our review of the procedural history of the case convinces us that Velco=s admission was designed to support the federal court=s jurisdiction so that it could act on Velco=s admitted intention to transfer the case to New York.  Velco never took any steps contrary to the admission, such as filing a motion contesting personal jurisdiction before filing its answer, or including an objection to personal jurisdiction in its answer, or seeking a timely amendment to include an objection.  Velco=s assertion of a counterclaim for affirmative relief in the federal court further demonstrates that it did not object to the federal court=s exercise of jurisdiction over it.  Thus, we find that Velco=s admission of personal jurisdiction satisfies the third requirement for holding that a quasi-admission rises to the level of a judicial admission.

Second, we find that giving conclusive effect to the admission is consistent with the policy that a party should not be allowed to prevail on its assertions after clearly negating those assertions before a judicial tribunal. Accordingly, even assuming Velco=s admission of personal jurisdiction was only a quasi-admission, it nevertheless satisfies the requirements for finding a judicial admission.  See DowElanco, 4 S.W.3d at 871 (holding that defendant=s statement admitting plaintiff=s jurisdictional allegations in federal court action constituted judicial admission in later state court action after federal was case dismissed for lack of complete diversity); Olson, 21 S.W.3d at 719B20 (holding that manufacturer=s allegations in federal court petition regarding extensive use of trademarks and service marks in Texas that were contrary to stipulations in state court action constituted judicial admissions supporting denial of special appearance).

CONCLUSION

We hold that Velco waived its objection to the trial court=s personal jurisdiction when it answered and counterclaimed in federal court without objecting to the court=s jurisdiction over it.  Therefore, the trial court properly denied Velco=s special appearance.

Finding no reversible error, the judgment of the trial court is affirmed.

/s/        Wanda McKee Fowler

Justice

Judgment rendered and Memorandum Opinion filed September 7, 2004.

Panel consists of Justices Fowler, Edelman, and Seymore.

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^[1]  In the affidavit, the officer stated that Velco has never been a resident or citizen of Texas; it does not own any property in Texas; it has never entered into any contracts with any Texas citizen or resident or business to perform services or sell products in Texas; it does not now nor has it ever maintained a place of business in Texas or ever had an agent for service of process in Texas; it has never been required to maintain a registered agent for service in Texas; it has never committed any tort, in whole or in part, within the state of Texas; it nas no employees, servants, or agents within the state of Texas; and A[o]ther than purchase products sold from the state of Texas,@ it does not do business in Texas.