State of Texas v. David L. Johnson

• Court: Court of Appeals of Texas
• Decided: November 30, 1998
• Docket: 03-98-00086-CV
• Status: Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

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NO. 03-98-00086-CV

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State of Texas, Appellant

v.

David L. Johnson, Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT

NO. 97-05444, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

The State of Texas ("the State") appeals the dismissal of its suit against appellee, David L. Johnson. The State named Johnson, a California resident and president of a Texas corporation, as an individual defendant in a suit that arose out of the rupture of a sealed radioactive source during an oil field operation. The trial court granted Johnson's special appearance and dismissed the cause for want of personal jurisdiction. In a single point of error, the State presents a two-pronged argument that the trial court erred in granting Johnson's motion to dismiss. First, the State asserts that Johnson's contacts with Texas made through his corporation can be imputed to Johnson personally, and that these constitute sufficient "minimum contacts" when coupled with the state's regulatory interest in this case. Second, the State claims that the assertion of personal jurisdiction over Johnson would not offend the constitutional standards of fair play and substantial justice. As an alternative argument, the State urges that dismissal with prejudice was error. Because we agree with the trial court's conclusion that the State's evidence was insufficient to establish personal jurisdiction over Johnson, we will affirm the trial-court judgment as reformed to be a dismissal without prejudice.

FACTUAL AND PROCEDURAL BACKGROUND ⁽¹⁾

David L. Johnson served as the president, vice-president, and secretary of D&G Operating Company, Inc., a Texas company incorporated in 1994. D&G Operating was the operator of an oil well at the Winnie site in Chambers County, Texas. In August 1995, D&G Operating hired several companies to perform various oil field services at the Winnie site. On August 11, one of the hired companies lost a sealed 3.2 curie Americium-241 neutron source during a well-logging operation. Following several failed attempts to retrieve the source, another company entered the well with a "junk snatcher" and recovered the source on September 15. Subsequent testing showed that the source was leaking radioactive material, and that the well and equipment at the site had become contaminated.

On October 11, the Texas Railroad Commission (the "Commission") ordered D&G Operating to restrict access to the well site, prevent the further spread of radioactive materials, and conduct a survey to assess the level and extent of radioactive contamination at the site. In December 1995 and January 1996, the Commission sent letters to D&G Operating noting that the company was in violation of the Commission's orders because it had failed to fence the well site properly. The Commission sent D&G Operating four more notice letters between February and July 1996 alleging other violations of the October 11, 1995 order. In September 1996, the Commission referred the matter to the Attorney General's Office.

In May 1997, the State filed suit against D&G Operating, Johnson, and the three service companies involved with the lost source; the State also named the president of each service company as an individual defendant. In its petition, the State alleged violations of various environmental laws and agency regulations, and requested injunctive relief and civil penalties. The State sought to hold Johnson personally liable on two theories: (1) that his actions as an officer of D&G Operating created personal liability, and (2) that his actions as a shareholder created personal liability under the "sham to perpetrate a fraud" theory. The State used identical language in its allegations against two of the other individual defendants.

Johnson specially appeared to object to the State's assertion of personal jurisdiction over him as the sole director and shareholder of D&G Operating. At the hearing, his counsel introduced Johnson's affidavit stating that he was a full-time resident of California, did not have a home or personal office in Texas, and was not involved in the day-to-day operations of the company. He stated that his sole connection to the lawsuit was as an officer and director of the corporation and that he had not directed, participated in, or ratified any of the alleged actions of D&G Operating giving rise to the suit. Johnson also denied using the corporation to evade personal legal responsibilities and described himself as an investor in a corporation run by other people. The State offered seven exhibits, mostly consisting of records from the Secretary of State and the Comptroller's offices showing that Johnson had been the initial director of three companies in the state that were later dissolved. This evidence was offered to show that Johnson was the sole shareholder and director of these companies and should therefore be subject to jurisdiction in Texas.

After hearing argument and considering the evidence, the trial court found that: (1) Johnson was a full-time resident of California, had never lived in Texas, and had never committed a tort in Texas; (2) although Johnson was the president and sole shareholder of D&G Operating, the corporation's day-to-day affairs were conducted by its employees, not Johnson; (3) Johnson's contacts with Texas were limited to his position as an officer and a shareholder of D&G Operating; and (4) the State neither alleged nor presented evidence of acts by Johnson in or directed at Texas. The State did not challenge the trial court's factual findings.

Based on these findings, the trial court made several conclusions of law. First, the court ruled that Johnson did not have continuous and systematic contacts with Texas. Next, it found that Johnson did not conduct activities in or related to Texas sufficient to establish specific jurisdiction, and had not purposefully established minimum contacts with Texas. Additionally, the court concluded that Johnson had presented sufficient evidence to show he did not operate D&G Operating as a sham to perpetrate a fraud. Finally, the court concluded that Texas did not have jurisdiction over Johnson in his capacity as a corporate officer.

The district court granted Johnson's motion objecting to jurisdiction and ordered the cause dismissed with prejudice as to Johnson. In its sole point of error on appeal, the State complains that the district court erred in dismissing the suit against Johnson for want of personal jurisdiction. The State makes a two-pronged argument that reflects the dual constitutional requirements of (1) minimum contacts with the forum state and (2) fairness to the non-resident defendant. Toward the "minimum contacts" analysis, the State argues that Johnson should be held liable "because he either directed, ratified, or otherwise participated in the violations of state law"; in the alternative, the State argues that Johnson should be held "indirectly liable for using the corporate existence (a) as a sham to perpetrate a fraud; (b) for an illegal purpose; (c) to circumvent state statutes; (d) to evade existing legal obligations; and (e) to justify wrong." On the fairness prong, the State claims that the assertion of jurisdiction over Johnson would not offend "traditional notions of fair play and substantial justice." Finally, should we conclude that the trial court correctly found jurisdiction lacking, the State urges that the court below erred in dismissing the cause with prejudice to refiling.

DISCUSSION

Standard of Review

The proper standard for reviewing the evidence in a case involving a challenge to in personam jurisdiction is factual sufficiency, not de novo review. See Fish v. Tandy Corp., 948 S.W.2d 886, 891 (Tex. App.--Fort Worth 1997, writ denied); Nikolai v. Strate, 922 S.W.2d 229, 236 (Tex App.--Fort Worth 1996, writ denied); Hotel Partners v. KPMG Peat Marwick, 847 S.W.2d 639, 642 (Tex. App.--Dallas 1993, writ denied). Thus, we may reverse the decision of the trial court only if its ruling is so against the great weight and preponderance of the evidence as to be manifestly erroneous or unjust. See In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951). In reviewing such a point of error, we must consider and weigh all of the evidence, both the evidence that tends to prove the existence of a vital fact as well as evidence that tends to disprove its existence. See Ames v. Ames, 776 S.W.2d 175, 176 (Tex. 1986). Considering the evidence, if a finding is so contrary to the great weight and preponderance of the evidence as to be manifestly unjust, the point of error should be sustained, regardless of whether there is some evidence to support it. See Watson v. Prewitt, 320 S.W.2d 815, 816 (Tex. 1959); King's Estate, 244 S.W.2d at 661.

Constitutional Requirements for Asserting Personal Jurisdiction

A Texas court may exercise personal jurisdiction over a nonresident if two conditions are met: (1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise of jurisdiction is consistent with the due process guarantees of the federal and state constitutions. See Schlobohm v. Schapiro, 784 S.W.2d 355, 356 (Tex. 1990). The long-arm statute extends personal jurisdiction to nonresident defendants doing business in Texas when the business conducted by the nonresident in Texas is continuous and systematic, or when litigation arises out of or is related to the business conducted by the nonresident defendant in Texas. See Nikolai, 922 S.W.2d at 233. The Texas Supreme Court has held that the broad language of the "doing business" requirement allows the long-arm statute to reach as far as the federal constitution permits. See Guardian Royal Exch. Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991); Schlobohm, 784 S.W.2d at 357.

To satisfy due process, the plaintiff must overcome two hurdles. First, the plaintiff must show that the nonresident defendant has purposefully established minimum contacts with Texas. See Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 105 (1987); International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Second, the plaintiff must show that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316; Schlobohm, 784 S.W.2d at 357.

The United States Supreme Court has extensively developed the minimum contacts analysis, the first prong of the jurisdictional test. An essential goal of the minimum contacts test is to protect the nonresident defendant. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). This goal requires the court to determine whether the nonresident defendant has purposely availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985). The purposeful availment requirement ensures that a nonresident defendant will not be haled into a foreign jurisdiction based solely on random, fortuitous, or attenuated contacts or unilateral activity of another party or a third person. See id. at 475.

Furthermore, a nonresident defendant must have fair warning that a particular activity may subject it to the jurisdiction of a foreign sovereign. See id. at 472. Some overt act is required by a nonresident defendant to subject it to the possibility of being haled into a foreign court. See Nikolai, 922 S.W.2d at 234. Isolated contacts with the forum state or its residents are not sufficient for a court to assume personal jurisdiction over a nonresident defendant. See id. (citing Burger King, 471 U.S. at 475 n.18). For a court to find the minimum contacts necessary for jurisdictional purposes, there must be continuing contacts. See id.

The Texas Supreme Court has followed the United States Supreme Court in refining the minimum contacts analysis into two categories: specific and general jurisdiction. When specific jurisdiction is asserted, the cause of action must arise out of or relate to the nonresident defendant's contact with the forum state in order to satisfy the minimum contacts requirement. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 n.8 (1984); CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996). The minimum contacts analysis focuses on the relationship among the defendant, the forum, and the litigation. See Helicopteros, 466 U.S. at 414; Schlobohm, 784 S.W.2d at 357. But the contact must have resulted from the nonresident defendant's purposeful conduct and not the unilateral activity of the plaintiff or others. See Helicopteros, 466 U.S. at 417; World-Wide Volkswagen, 444 U.S. at 298. Furthermore, the nonresident defendant's activities must have been purposefully directed to the forum and the litigation must have resulted from alleged injuries that arise out of or relate to those activities. See Burger King, 471 U.S. at 472.

General jurisdiction may be asserted when the cause of action does not arise from or relate to the nonresident defendant's purposeful conduct within the forum state, but there are continuous and systematic contacts between a nonresident defendant and the forum state. See Helicopteros, 466 U.S. at 414-16; CSR Ltd., 925 S.W.2d at 595. The minimum contacts inquiry is broader and more demanding when general jurisdiction is alleged, requiring a showing of substantial activities in the forum state. See CSR Ltd., 925 S.W.2d at 595; Schlobohm, 784 S.W.2d at 357.

Once it has been determined that a nonresident defendant has purposefully established minimum contacts with the forum state, the contacts are evaluated in light of the factors to determine whether the assertion of personal jurisdiction comports with fair play and substantial justice. See Burger King, 471 U.S. at 476; Schlobohm, 784 S.W.2d at 357-58. These factors include: (1) the burden on the defendant; (2) the interest 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 controversy; and (5) the shared interest of the several states in furthering fundamental substantive social policies. See Asahi Metal, 480 U.S. at 113; Burger King, 471 U.S. at 477; World-Wide Volkswagen, 444 U.S. at 292. However, the Texas Supreme Court has stated that we must avoid the mechanical application of any jurisdictional test. See Schlobohm, 784 S.W.2d at 358.

Minimum Contacts

At the hearing on Johnson's objection to personal jurisdiction, the only evidence offered was documentary and affidavit evidence; the court heard no live testimony. In his affidavit, Johnson stated that he is a full-time resident of California and that at the time of the events giving rise to this lawsuit, he was the president and sole shareholder of D&G Operating. Johnson swore that he was not involved in the day-to-day operations of the company and had no other connections with the State of Texas. He also affirmed in his affidavit that he acted only as an officer and investor in a corporation run by other people, and had not directed, participated in, or ratified any of the actions by D&G Operating that led to this lawsuit. Finally, Johnson denied using D&G Operating's corporate status to evade personal legal responsibilities.

In its attempt to prove Johnson had sufficient minimum contacts within Texas, the State introduced seven exhibits at the hearing. The first exhibit consisted of records from the Secretary of State's office; included in these records were the articles of incorporation for D&G Operating Company, naming David L. Johnson as its sole director. The State's second exhibit contained records from the Comptroller's office showing that D&G Operating's corporate charter was forfeited in October of 1996 for failure to pay franchise taxes. Among the records was a franchise tax report of August 9, 1995, signed by David L. Johnson as president. The State's third exhibit included records from the Texas Railroad Commission documenting checks paid by D&G Operating to the Railroad Commission for fees owed in the operation of various wells; also in this exhibit were P-4 forms ⁽²⁾ for the Winnie well site showing D&G Operating as the well operator. However, these forms were signed not by Johnson, but by Ramona Varney, who is listed as manager of operations for D&G Operating. This exhibit also included P-5 forms ⁽³⁾ listing David L. Johnson as president and secretary of D&G Operating. The State's fourth and fifth exhibits contained the documents on file with the Secretary of State and the Comptroller's Office for D&G Energy Corporation. This company was incorporated in 1993 and involuntarily dissolved in 1996 for failing to maintain a registered agent in the state and for failing to satisfy franchise tax requirements; David L. Johnson is listed as its president, vice-president, secretary, and sole director. On a Texas Franchise Tax Public Information Report for D&G Energy, Johnson's address is listed in Lake Forest, California. Exhibits six and seven contained similar documents on file with the Secretary of State and the Comptroller's Office for another company, Attorneys Equity Corporation of Texas, which was incorporated in 1988 and dissolved three years later for failing to satisfy franchise tax requirements. The articles of incorporation for this company list David L. Johnson of Laguna Niguel, California as one of two initial directors.

As the defendant objecting to the assertion of personal jurisdiction, Johnson had the burden of negating all bases of jurisdiction. See Temperature Sys., Inc. v. Bill Pepper, Inc., 854 S.W.2d 669, 673 (Tex. App.--Dallas 1993, writ dism'd by agr.) (citing Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985); Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 438 (Tex. 1982)). However, jurisdiction over an individual generally cannot be based on jurisdiction over a corporation with which he is associated unless the corporation is the alter ego of the individual. See Voskov v. Chase Manhattan Bank, N.A., 909 S.W.2d 95, 99 (Tex. App.--Houston [14th Dist.] 1995, writ denied) (citing Clark v. Noyes, 871 S.W.2d 508, 509 (Tex. App.--Dallas 1994, no writ); Leon Ltd. v. Albuquerque Commons Partnership, 862 S.W.2d 693, 708 (Tex. App.--El Paso 1993, no writ)). Proof that a defendant is a nonresident is sufficient to meet this burden if there are no jurisdictional allegations in the plaintiff's petition. See Temperature Sys., 854 S.W.2d at 673. When a plaintiff alleges jurisdictional facts, however, proof of nonresidency is not enough; the defendant must also negate the jurisdictional facts alleged. See id.

In this case, the only jurisdictional facts pleaded were that as the president of D&G Operating, Johnson personally directed, participated in, and/or ratified violations of an emergency order of the Texas Department of Health; alternatively, the State sought to pierce the corporate veil in this cause, alleging that Johnson used the existence of this corporation to avoid compliance with the law, to perpetrate fraud, to evade existing legal obligations, to circumvent state statutes, and to justify wrong. Although these allegations do not appear in the jurisdictional section of the State's petition, their existence elsewhere in the petition was sufficient to require that Johnson present evidence that he was not involved in the day-to-day operations and decisions of the company. Cf. Vosko, 909 S.W.2d at 99 (if plaintiff does not allege that the defendant performed a specific act in the forum, the defendant's evidence that he is a nonresident is sufficient to carry his burden of proof). The State argued that, contrary to Johnson's statement that he was purely an investor in a corporation run by other people, the public records introduced at the hearing "strongly suggest" that he was involved in managing the day-to-day affairs of the corporation. In essence, the State claims that the fact Johnson only sometimes signed notarized documents in California is sufficient evidence that he was present in Texas and was involved in the day-to-day running of the business.

In its brief, the State argues that personal jurisdiction can be asserted over Johnson because he can be held personally liable as a corporate officer of D&G Operating. The State cites a number of cases in which Texas courts have held a corporate officer responsible for torts of the corporation. See generally Holloway v. Skinner, 860 S.W.2d 217 (Tex. App.--Austin 1993), rev'd, 898 S.W.2d 793 (Tex. 1995); State v. Malone, 853 S.W.2d 82 (Tex. App.--Houston [14th Dist.] 1993, writ denied); N.S. Sportswear, Inc. v. State, 819 S.W.2d 230 (Tex. App.--Austin 1991, no writ); Rio Grande Land & Cattle Co. v. Light, 749 S.W.2d 206 (Tex. App.--San Antonio 1988), rev'd and remanded in part, 758 S.W.2d 747 (Tex. 1988). However, these cases are all distinguishable because they only concern liability; none of them addresses the issue of personal jurisdiction. Furthermore, the above cases stand collectively for the proposition that liability only attaches if a corporate officer had knowledge of, participated in, or knowingly and willfully committed wrongful conduct. The State failed to show that Johnson knowingly participated in or willfully committed any wrongful acts in this case.

The State also relies on a statement made by the supreme court in Guardian Royal Exchange Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223 (Tex. 1991), that a state's special regulatory interest is an "important consideration" in deciding whether the exercise of jurisdiction is reasonable, and that jurisdiction may be decided on a lesser showing of minimum contacts. Id. at 229. However, the Guardian Royal court also observed that "a state's regulatory interest alone is not in and of itself sufficient to provide a basis for jurisdiction." Id. Furthermore, this Court noted in an earlier decision that there were "serious problems" with the concept of extending personal jurisdiction based solely on a state's regulatory interest, and that other courts were confusing "legislative wishes to assert jurisdiction with a constitutional right to do so." See Beechem v. Pippin, 686 S.W.2d 356, 360-61 (Tex. App.--Austin 1985, no writ). The State's reliance on Guardian Royal is misplaced because the State cannot establish jurisdiction based on its regulatory interest alone, and the evidence it presented to the trial court is not sufficient to support the exercise of personal jurisdiction over Johnson.

Johnson asserts that he should be shielded from personal jurisdiction under the rule that contacts made on behalf of the corporation do not create personal jurisdiction over the individual. Generally, jurisdiction over an individual cannot be based upon jurisdiction over a corporation. See Vosko, 909 S.W.2d at 99; Clark v. Noyes, 871 S.W.2d 508, 518 (Tex. App.--Dallas 1994, no writ). As an alternative argument, the State asks this Court to disregard the corporate existence because Johnson used D&G Operating "(a) as a sham to perpetrate a fraud; (b) for an illegal purpose; (c) to circumvent state statutes; (d) to evade existing legal obligations; and (e) to justify wrong." However, the State has presented no arguments on this point and cites no cases to support its theory. The State has failed to properly brief this alternative argument on appeal, and we will not address it. See Tex. R. Civ. P. 38.1(h).

The evidence the State presented to the trial court does not show that Johnson had sufficient contacts with Texas to justify the assertion of personal jurisdiction. Furthermore, the cases the State cites do not support its theory that Johnson's status as a shareholder and corporate officer of D&G Operating constitute sufficient minimum contacts. We find the evidence sufficient to support the trial court's conclusion that Johnson did not purposefully establish minimum contacts with Texas.

"Fair Play and Substantial Justice"

The second prong of the State's argument is that asserting personal jurisdiction over Johnson would not offend "traditional notions of fair play and substantial justice." The fairness prong is separate and distinct from the minimum contacts analysis; therefore, both must be satisfied to pass constitutional muster. See Burger King, 471 U.S. at 476; Schlobohm, 784 S.W.2d at 357-58. Because the State failed to establish that Johnson had minimum contacts with the State of Texas, we do not reach the issue of whether the exercise of personal jurisdiction in this case would satisfy the constitutional "fairness" requirement.

The trial court correctly determined that Johnson's affidavit contradicted the facts alleged in the State's petition, and that the State's documentary evidence was insufficient to establish jurisdiction over Johnson. We find the evidence factually sufficient to support the trial court's conclusion. The State's single point of error is overruled.

Dismissal with Prejudice

In rendering a judgment of dismissal, a trial court must refrain from rendering a judgment on the merits of the suit. See Attorney Gen. of Tex. v. Sailer, 871 S.W.2d 257, 258 (Tex. App.--Houston [14th Dist.] 1994, writ denied); State v. Schless, 815 S.W.2d 373, 376 (Tex. App.--Austin 1991, original proceeding [leave denied]). A dismissal with prejudice functions as a final determination on the merits. See Mossler v. Shields, 818 S.W.2d 752, 754 (Tex. 1991). Thus, the court below erred in granting a dismissal with prejudice. See Stephanou v. Texas Med. Liab. Ins. Underwriting Ass'n, 792 S.W.2d 498, 500 (Tex. App.--Houston [1st Dist.] 1990, writ denied); Schenker v. City of San Antonio, 369 S.W.2d 626, 631 (Tex. Civ. App.--San Antonio 1963, writ ref'd n.r.e.). The proper correction of the trial court's error is not reversal, but reformation of the judgment as a dismissal without prejudice. See Lane v. Baxter Healthcare Corp. 905 S.W.2d 39, 42 (Tex. App.--Houston [1st Dist.] 1995, no writ). We therefore order that the words "with prejudice" be deleted from the trial court's judgment, and reform the judgment as a dismissal without prejudice.

CONCLUSION

The judgment of the trial court is affirmed as reformed.

Bea Ann Smith, Justice

Before Chief Justice Aboussie, Justices B. A. Smith and Yeakel^*

Reformed and, as Reformed, Affirmed

Filed: November 30, 1998

Do Not Publish

^* Before Lee Yeakel, former appellate justice, Third Court of Appeals, sitting by assignment. See Tex. Gov't Code Ann. § 75.003(a)(1) (West 1998).

1. Because the district court granted Johnson's special appearance and dismissed for lack of jurisdiction, it did not address the merits of the case. Therefore, facts as alleged in the State's petition have not been proved in any court, and are only taken as true for purposes of establishing a context for this appeal.

2. A P-4 form, required to be filed with the Railroad Commission, describes the oil or gas lease, its location, and the name and address of the operator.

3. A P-5 form is an organizational report required to be filed by the Railroad Commission. The report lists the name of the operator, its corporate officers, and addresses for both.

t. See Tex. R. Civ. P. 38.1(h).

The evidence the State presented to the trial court does not show that Johnson had sufficient contacts with Texas to justify the assertion of personal jurisdiction. Furthermore, the cases the State cites do not support its theory that Johnson's status as a shareholder and corporate officer of D&G Operating constitute sufficient minimum contacts. We find the evidence sufficient to support the trial court's conclusion that Johnson did not purposefully establish minimum contacts with Texas.

The second prong of the State's argument is that asserting personal jurisdiction over Johnson would not offend "traditional notions of fair play and substantial justice." The fairness prong is separate and distinct from the minimum contacts analysis; therefore, both must be satisfied to pass constitutional muster. See Burger King, 471 U.S. at 476; Schlobohm, 784 S.W.2d at 357-58. Because the State failed to establish that Johnson had minimum contacts with the State of Texas, we do not reach the issue of whether the exercise of personal jurisdiction in this case would satisfy the constitutional "fairness" requirement.

The trial court correctly determined that Johnson's affidavit contradicted the facts alleged in the State's petition, and that the State's documentary evidence was insufficient to establish jurisdiction over Johnson. We find the evidence factually sufficient to support the trial court's conclusion. The State's single point of error is overruled.

In rendering a judgment of dismissal, a trial court must refrain from rendering a judgment on the merits of the suit. See Attorney Gen. of Tex. v. Sailer, 871 S.W.2d 257, 258 (Tex. App.--Houston [14th Dist.] 1994, writ denied); State v. Schless, 815 S.W.2d 373, 376 (Tex. App.--Austin 1991, original proceeding [leave denied]). A dismissal with prejudice functions as a final determination on the merits. See Mossler v. Shields, 818 S.W.2d 752, 754 (Tex. 1991). Thus, the court below erred in granting a dismissal with prejudice. See Stephanou v. Texas Med. Liab. Ins. Underwriting Ass'n, 792 S.W.2d 498, 500 (Tex. App.--Houston [1st Dist.] 1990, writ denied); Schenker v. City of San Antonio, 369 S.W.2d 626, 631 (Tex. Civ. App.--San Antonio 1963, writ ref'd n.r.e.). The proper correction of the trial court's error is not reversal, but reformation of the judgment as a dismissal without prejudice. See Lane v. Baxter Healthcare Corp. 905 S.W.2d 39, 42 (Tex. App.--Houston [1st Dist.] 1995, no writ). We therefore order that the words "with prejudice" be deleted from the trial court's judgment, and reform the judgment as a dismissal without prejudice.

CONCLUSION