Court Opinion

ID: 2986718
Source: CourtListenerOpinion
Date Created: 2015-09-23 00:38:21.081427+00
Date Added: 2024-06-11T11:38:15.444606
License: Public Domain

Affirmed and Majority and Dissenting Opinions filed June 4, 2013.

                                    In The

                   Fourteenth Court of Appeals

                             NO. 14-12-00534-CV

              BAKER HUGHES INCORPORATED, Appellant
                                      V.

                      ROBERT E. BROOKS, Appellee

                  On Appeal from the 333rd District Court
                           Harris County, Texas
                     Trial Court Cause No. 2012-02744

                    MAJORITY OPINION

      This appeal asks whether an individual who signs a contract on behalf of a
Delaware corporation that has forfeited its corporate charter concedes personal
jurisdiction in Texas under the contract’s forum selection clause. Baker Hughes
Inc. sued Robert E. Brooks on a promissory note that he signed as president of
Delphi Consulting, Inc. The trial court granted Brooks’s special appearance and
dismissed Baker’s Hughes’s lawsuit. We affirm.
                                           Background

       The parties generally agree on the underlying facts pertinent to this appeal.
As president of Delphi, Brooks signed both a settlement agreement—settling a
dispute between Delphi and BJ Services Company, U.S.A. (a Baker Hughes
subsidiary)—and a promissory note required by the settlement agreement. In the
promissory note, Delphi promised to pay Baker Hughes $123,302.04 in 24
monthly installments of $5,464.82 each, beginning on January 31, 2011. The note
also contained a forum selection clause stating that the ―venue for any dispute
concerning this note shall be in Harris County, Texas.‖1

       Delphi made the monthly payments through September 30, 2011, but on the
due date for the October installment, Delphi informed Baker Hughes that it would
not be able to make the payment. In November, Baker Hughes advised Delphi that
it was in default on the note. On December 21, 2011, Delphi sent a check for
$5,464.82, but on December 22, Baker Hughes sent a letter to Delphi accelerating
all payments due under the note as authorized in the note.2 When Delphi did not
pay the full amount owed, Baker Hughes filed suit against Brooks on January 13,
2012 in Harris County, Texas.3

       On February 16, 2012, Brooks filed a special appearance contesting personal
jurisdiction over him in Texas. In the special appearance and accompanying
affidavit, Brooks, a Louisiana citizen, described in detail his connections with
       1
           The settlement agreement contained a substantially similar forum selection clause.
       2
          In his brief, Brooks explains that the interruption in payments was caused by an
interruption in the sale of natural gas and that Delphi told Baker Hughes that as soon as sales
resumed, Delphi’s payments would resume. Brooks also asserts that Delphi tendered to Baker
Hughes both the amount required to cure the one-month default and the subsequent month’s
installment. In order to resolve this appeal from the grant of a special appearance, however, we
need not consider the merits of the underlying action or possible defenses.
       3
        In its Original Petition, Baker Hughes named as defendant, ―Robert E. Brooks d/b/a
Delphi Consulting, Inc.‖ It then used the name ―Delphi‖ throughout to reference Brooks.

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Louisiana and his lack of appreciable contact or connection with Texas. Although
the settlement agreement and promissory note identified Delphi as a Louisiana
corporation, Brooks states in his special appearance and affidavit that Delphi is
incorporated in Delaware. In his special appearance, Brooks further states that
―[w]hen suit was filed, it was learned that Delphi Consulting had fallen out of good
standing in the State of Delaware; however, it has been reinstated and is now in
good standing.‖      The record also contains a certification from the Delaware
Secretary of State explaining that ―Delphi Consulting, Inc.‖ was incorporated in
that state in 1988 and was in good standing (with all franchise taxes paid) as of
February 7, 2012.

      In its response to the special appearance, Baker Hughes argued that because
Delphi had forfeited its Delaware corporate charter by failing to pay franchise
taxes prior to execution of the settlement agreement and note, Brooks effectively
became a party to the contract and should be held to the forum selection clause
contained therein.     The trial court granted Brooks’s special appearance and
dismissed the lawsuit. The parties renew their arguments on appeal.

                                Standards of Review

      Determining whether a trial court has personal jurisdiction over a defendant
presents a question of law subject to de novo review. BMC Software Belg., N.V. v.
Marchand, 83 S.W.3d 789, 794 (Tex. 2002). The plaintiff bears the initial burden
of pleading sufficient allegations to bring a nonresident within the provisions of the
Texas long-arm statute. Id.; Cerbone v. Farb, 225 S.W.3d 764, 766–67 (Tex.
App.—Houston [14th Dist.] 2007, no pet.).           The burden then shifts to the
nonresident defendant to negate all bases of personal jurisdiction asserted by the
plaintiff. Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569, 574 (Tex.
2007).

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      Trial courts frequently must resolve fact questions before deciding
jurisdictional issues. BMC Software, 83 S.W.3d at 794. When, as occurred here,
the trial court does not file findings of fact and conclusions of law, all facts
necessary to support the trial court’s ruling and supported by the evidence are
implied in favor of the trial court’s decision. Id. at 794–95. When the appellate
record includes the reporter’s record, if any, and the clerk’s record, parties may
challenge the legal and factual sufficiency of these implied findings. Id. at 795. If
the appellate court determines that the trial court’s findings are supported by
sufficient evidence, or if the material facts are undisputed, then the appellate court
decides as a matter of law whether those facts negate all bases for personal
jurisdiction. Id. If evidence supports the implied findings of fact, we must uphold
the trial court’s judgment on any legal theory supported by the findings. Aduli v.
Aduli, 368 S.W.3d 805, 814 (Tex. App.—Houston [14th Dist.] 2012, no pet.)
(citing Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990)).

      Texas courts may not exercise personal jurisdiction over a nonresident
defendant unless federal due process requirements and the Texas long-arm statute
are satisfied.   See Tex. Civ. Prac. & Rem. Code § 17.042(1); Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 412–13 (1984). Texas courts
may exercise jurisdiction over a nonresident defendant if the Texas long-arm
statute authorizes the exercise of jurisdiction and the exercise of jurisdiction is
consistent with federal and state due process guarantees. Max Protetch, Inc. v.
Herrin, 340 S.W.3d 878, 884 (Tex. App.—Houston [14th Dist.] 2011, no pet.)
(citing Moki Mac, 221 S.W.3d at 574).

                                     Discussion

      The only basis for personal jurisdiction Baker Hughes alleges in this lawsuit
is that Brooks signed a settlement agreement and a promissory note containing

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provisions mandating Texas as the forum for deciding any disputes under the
instruments. A mandatory forum selection clause is one of several ways a party
may expressly or impliedly consent to personal jurisdiction within a forum.
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14 (1985); Tri–State Bldg.
Specialties, Inc. v. NCI Bldg. Sys., L.P., 184 S.W.3d 242, 248 (Tex. App.—
Houston [1st Dist.] 2005, no pet.).            Forum-selection clauses are generally
enforceable and presumptively valid. In re Laibe Corp., 307 S.W.3d 314, 316
(Tex. 2010) (per curiam).

      Baker Hughes acknowledges that Brooks signed the settlement agreement
and promissory note in his capacity as president of Delphi and not in his individual
capacity. Baker Hughes, however, points to authority indicating that when an
individual executes a contract purportedly as an agent for a principal, knowing or
with reason to know that the purported principal does not possess legal capacity to
enter the contract, the purported agent in effect becomes a party to the contract and
is liable for any breach thereof. See, e.g., Marrocco v. Hill, No. 14-10-01077-CV,
2011 WL 5009489, at *4 n.4 (Tex. App.—Houston [14th Dist.], pet. denied)
(mem. op.); Carter v. Walton, 469 S.W.2d 462, 471 (Tex. Civ. App.—Corpus
Christi 1971, writ ref’d n.r.e.); Restatement (Third) of Agency § 6.04 (2006).

      Baker Hughes further points out that at the time Brooks executed the
instruments on behalf of Delphi, Delphi’s corporate charter had been forfeited for
failure to pay franchise taxes. Delphi is incorporated under the laws of Delaware,
so we look to the laws of Delaware to determine whether Delphi had the capacity
to enter a contract at the time of execution. See Restatement (Third) of Agency §
3.04(2) & cmt. D (2006); cf. Miller Mgmt. Co. v. State, 140 Tex. 370, 373, 167
S.W.2d 728, 730 (1943) (―The question of whether a foreign corporation continues
in existence, after the surrender of its charter, for the purpose of pending suits is to

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be determined by the statutes and laws of the State in which the corporation was
created.‖); Pellow v. Cade, 990 S.W.2d 307, 312 (Tex. App.—Texarkana 1999, no
pet.) (―The capacity of a foreign corporation to defend a suit is determined by the
laws of the state in which the corporation is created.‖).

           Under Title 8, section 510 of the Delaware Code, if a corporation under the
laws of that state neglects to pay required franchise taxes, its corporate charter
―shall be void, and all powers conferred by law upon the corporation . . . declared
inoperative.‖ Del. Code tit. 8, § 510.4 Baker Hughes argues that Delphi’s failure
to pay franchise taxes for seventeen years was not ―inadvertent.‖ Under Delaware
law, the fact a corporate charter was forfeited for inadvertent failure to pay
franchise taxes does not render the officer who signed the contract for the
corporation personally liable absent knowledge of the forfeiture. Del. Code tit. 8, §
312; Plummer & Co. Realtors v. Crisafi, 533 A.2d 1242, 1245 (Del. Super. Ct.
4
    Section 510 reads in its entirety as follows:

           § 510. Failure to pay tax or file a complete annual report for 1 year; charter
           void; extension of time
           If any corporation, accepting the Constitution of this State and coming under
           Chapter 1 of this title, or any corporation which has heretofore filed or may
           hereafter file a certificate of incorporation under said chapter, neglects or refuses
           for 1 year to pay the State any franchise tax or taxes, which has or have been, or
           shall be assessed against it, or which it is required to pay under this chapter, or
           shall neglect or refuse to file a complete annual franchise tax report, the charter of
           the corporation shall be void, and all powers conferred by law upon the
           corporation are declared inoperative, unless the Secretary of State, for good cause
           shown, shall have given further time for payment of the tax or taxes or the
           completion of an annual franchise tax report, in which case a certificate thereof
           shall be filed in the office of the Secretary of State stating the reason therefor. On
           or before November 30 in each year, the Secretary of State shall notify each
           corporation which has neglected or refused to pay the franchise tax or taxes
           assessed against it or becoming due during the year or has refused or neglected to
           file a complete annual franchise tax report, that the charter of the corporation shall
           become void unless such taxes are paid and such complete annual franchise tax
           report is filed on or before March 1 of the following year.
Del. Code tit. 8, § 510.

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1987). Baker Hughes also contends that Brooks, as president of Delphi, either
knew or should have known that Delphi had failed to pay its franchise taxes for
several years preceding execution of the settlement agreement and promissory
note.5

         The very statute and case Baker Hughes relies upon, however, further
explain that when a corporation renews and revives its corporate charter, any acts
taken by its officers and agents (including entering into contracts on behalf of the
corporation) during the time of forfeiture are thereby validated as acts of the
corporation and only the corporation itself shall be liable thereon. Del. Code tit. 8,
§ 312(e); Plummer & Co., 533 A.2d at 1245. Section 312(e) expressly provides:

         Upon the filing of the certificate [of renewal or revival] the
         corporation shall be renewed and revived with the same force and
         effect as if its certificate of incorporation had not been forfeited or
         void pursuant to this title, or had not expired by limitation. Such
         reinstatement shall validate all contracts, acts, matters and things
         made, done and performed within the scope of its certificate of
         incorporation by the corporation, its officers and agents during the
         time when its certificate of incorporation was forfeited or void
         pursuant to this title, or after its expiration by limitation, with the
         same force and effect and to all intents and purposes as if the
         certificate of incorporation had at all times remained in full force and
         effect. All real and personal property, rights and credits, which
         belonged to the corporation at the time its certificate of incorporation
         became forfeited or void pursuant to this title, or expired by limitation
         and which were not disposed of prior to the time of its revival or
         renewal shall be vested in the corporation, after its revival and
         renewal, as fully and amply as they were held by the corporation at
         and before the time its certificate of incorporation became forfeited or
         void pursuant to this title, or expired by limitation, and the corporation
         after its renewal and revival shall be as exclusively liable for all
         contracts, acts, matters and things made, done or performed in its

         5
          Brooks contends that he only learned of the fact Delphi’s corporate charter had been
forfeited when Baker Hughes filed suit against him personally on the promissory note.

                                              7
       name and on its behalf by its officers and agents prior to its
       reinstatement, as if its certificate of incorporation had at all times
       remained in full force and effect.

Del. Code tit. 8, § 312(e). (Emphasis added)

       The record here contains evidence that Delphi renewed its corporate charter
prior to the filing of Brooks’s special appearance. Baker Hughes filed its original
petition on January 13, 2012. Citation was perfected on or about February 1,
2012.6     A certificate from the Delaware Secretary of State confirms Delphi’s
corporate charter was in good standing and all required franchise taxes had been
paid as of February 7, 2012. Brooks filed his special appearance on February 16,
2012. Similarly, in Plummer & Co., suit was filed on December 5, 1983, and a
certificate for revival was filed on January 13, 1984, prior to the defendants’ filing
a motion to dismiss for want of personal jurisdiction. 533 A.2d at 1244-45. In
keeping with the mandatory language of Delaware Code, title 8, section 312(e), the
court held that even though the renewal or revival occurred after suit was filed, the
fact that the charter had been forfeited at the time the contract was signed was
insufficient to establish that the signatory on the contract was a proper party in his
individual capacity. Plummer & Co., 533 A.2d at 1245-46.7 As in Plummer &
Co., the revival or renewal of Delphi’s corporate charter validated the execution of

       6
          An affidavit in the record from the process server indicates that Brooks’s ―Agent‖
signed for the citation and attached documents on February 1, 2012. Brooks has not challenged
receipt of proper service in this case.
       7
         The court in Plummer & Co. went on to examine whether the corporation was ―merely a
shell‖ for the individual defendants, who without the corporate shield had numerous contacts
with Delaware. 533 A.2d at 1246. The court concluded that the corporation was indeed just a
shell and personal jurisdiction over the individual defendants was proper. Id. at 1247-48. Had
Baker Hughes raised theories of piercing the corporate veil in this case, as grounds for finding
personal jurisdiction over Brooks, our analysis of those arguments would not necessarily have
been limited to Delaware law. See generally Phillips v. United Heritage Corp., 319 S.W.3d 156,
161-68 (Tex. App.—Waco 2010, no pet.) (discussing issues relating to piercing the corporate
veil under both Texas and foreign law as well as choice of law issues).

                                               8
the settlement agreement and promissory note, ―as if its certificate of incorporation
had at all times remained in full force and effect.‖ Del. Code tit. 8, § 312(e).8

       Baker Hughes further argues, from a policy standpoint, that it would be
unfair to permit Brooks to escape personal liability by virtue of the renewal of
Delphi’s corporate charter after Brooks had incurred the obligation to Baker
Hughes by signing the settlement agreement and promissory note for Delphi while
Delphi’s charter was forfeit.9 However, Baker Hughes’s substantive arguments for
personal jurisdiction in this case are based on the forfeit of Delphi’s corporate
charter under Delaware law. As discussed, Delaware law clearly authorizes the
renewal or revival of a corporate charter for the express purpose of validating
actions taken by the corporation’s officers or agents during the period of forfeiture.
See Del. Code tit. 8, § 312(e); Plummer & Co., 533 A.2d at 1245-46. This is a
right afforded to corporations under Delaware law.10 Baker Hughes does not raise
any other arguments, under Texas or Delaware law, for asserting personal
jurisdiction over Brooks. Consequently, we overrule Baker Hughes’s sole issue.

       We affirm the trial court’s order granting the special appearance and

       8
         The record contains legally and factually sufficient evidence to support an implied
finding by the trial court that Delphi’s corporate charter has been revived or renewed. Baker
Hughes does not argue otherwise.
       9
          Baker Hughes suggests that this would be ―judicial creation of a tool to aid a debtor in
his efforts to defraud his creditors,‖ apparently not recognizing that the holding is required by
operation of Delaware Code, title 8, section 312(e). Baker Hughes also does not differentiate
between personal jurisdiction and liability. See generally ACS Partners, LLC v. Gross, No. 01-
11-00245-CV, 2012 WL 1655547, at *4 (Tex. App.—Houston [1st Dist.] May 4, 2012, no pet.)
(discussing distinction between personal jurisdiction and liability). Although Brooks cites ACS
Partners in his briefing, it is distinguishable from the present case because it dealt with a
jurisdictional argument based on the Texas Tax Code and not the Delaware Code and because it
did not involve a contract containing a forum selection clause. Id. at 3-4.
       10
         In terms of policy, it is worth noting that Baker Hughes thought it was contracting with
Delphi and not with Brooks as an individual, and by operation of Delaware law, the contract is
between only Baker Hughes and Delphi.

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dismissing Baker Hughes’s lawsuit.

                                        /s/    Martha Hill Jamison
                                               Justice

Panel consists of Justices Frost, Christopher, and Jamison (Frost, J., dissenting).

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