Nelson v. World Wide Lease, Inc.

• Decision Date: 21 February 1986
• Docket Number: No. 14999,14999
• Citation: 110 Idaho 369,716 P.2d 513
• Parties: D.J. NELSON, Plaintiff-Respondent-Cross Appellant, and D.J. Nelson and Donna Nelson, husband and wife, Plaintiffs, v. WORLD WIDE LEASE, INC., Defendant-Appellant-Cross Respondent, and ABC Corporation, and John Does I through X, Defendants.
• Court: Idaho Court of Appeals

Page 513

716 P.2d 513

110 Idaho 369

D.J. NELSON, Plaintiff-Respondent-Cross Appellant and D.J. Nelson and Donna Nelson, husband and wife, Plaintiffs, v. WORLD WIDE LEASE, INC., Defendant-Appellant-Cross Respondent and ABC Corporation, and John Does I through X, Defendants.

No. 14999.

Court of Appeals of Idaho.

Feb. 21, 1986.

Rehearing Denied April 29, 1986.

James C. Tucker, of Nelson, Rosholt, Robertson, Tolman & Tucker, Twin Falls, for defendant-appellant-cross respondent.

Kenneth L. Pedersen, of Webb, Burton, Carlson, Pedersen & Paine, Twin Falls, for plaintiff-respondent-cross appellant.

SWANSTROM, Judge.

D.J. Nelson, a farmer, sued World Wide Lease, Inc., for damages after it repossessed two center pivot irrigation systems ("pivots") that Nelson was leasing. Nelson alleged that World Wide had converted one pivot being leased by Nelson from another company, and had also breached its own lease agreement with Nelson when it took the other pivot. World Wide counterclaimed, alleging Nelson had breached the lease by defaulting in payments. At trial the jury returned a special verdict finding that World Wide had converted a pivot in which World Wide had no interest. The jury awarded Nelson damages resulting from that conversion. However, the jury also found that World Wide had not breached its lease agreement with Nelson by repossessing either pivot. The jury awarded World Wide damages on its counterclaim against Nelson for a deficiency owing under the lease. World Wide has appealed from the net judgment entered against it.

World Wide raises four issues on appeal: (1) whether the trial court had personal jurisdiction over World Wide; (2) whether there was sufficient evidence to establish that the person who actually repossessed the pivots was acting as an agent of World Wide; (3) whether the district court erred in admitting testimony which World Wide contends is hearsay; and (4) whether the lost profits due to the conversion were established by Nelson at trial with reasonable certainty. Nelson has cross-appealed, raising an additional issue of whether the district court erred in failing to instruct on punitive damages. Finally, Nelson requests attorney fees on appeal. For the reasons discussed below, we vacate the judgment and remand for a new trial.

The dispute concerns a development project created by Desert Valley Farms, Inc., on lands owned by Southern Pacific Railroad Company near Winnemucca, Nevada. Nelson, through negotiations with Emery Wiser, a principal in Wiser Irrigation and in Desert Valley Farms, Inc., entered into an oral sublease arrangement with Desert Valley Farms, Inc., and in 1975 began to farm two quarter sections of desert land. Other farmers commenced leasing adjacent parcels about the same time. Wiser Irrigation developed the irrigation systems for Nelson. They consisted of a separate well, sprinkler pivot, pump, engine and controls for each quarter section. World Wide purchased one of those pivot systems and leased it to Nelson. NBC Leasing Co. purchased and leased the second pivot system to Nelson.

Nelson grew crops of potatoes or grain in each of the years 1975 through 1979. Nelson testified that his landlord was supposed to allow him to switch his farming onto different tracts in 1980 but would not do so; and that without the "rotation" his banker would not finance his farming operation for 1980. As a result he did not plant any crop in the Desert Valley project in 1980. In June 1980 he failed to make a semi-annual lease payment on the irrigation equipment leased from World Wide. The leasing company made some unsuccessful attempts to contact Nelson who received, but did not respond to, payment notices sent to his address. In the late fall of 1980, World Wide sent Davis Chausse to Nevada to locate the pivot it had leased to Nelson and also an identical pivot it had leased to a Mr. Butler, another farmer in the project. After receiving Chausse's report, World Wide authorized Chausse to repossess Butler's pivot and Nelson's pivot. Chausse did repossess two pivots, one of which was the pivot leased by World Wide to Nelson. However, after the repossession, Nelson contacted World Wide with the information that the second pivot it had repossessed was the one which Nelson had leased from NBC Leasing Co. World Wide contended that it had repossessed the correct pivots. This lawsuit followed.

JURISDICTION OF THE TRIAL COURT

We first consider World Wide's contention that the district court lacked personal jurisdiction over World Wide, a Washington corporation. The district court held that objection to the court's jurisdiction was waived by World Wide's appearance in court and filing of a counterclaim. Rule 12(b), I.R.C.P., states in relevant part: "No defense or objection is waived by being joined with one or more other defenses or objections in a responsive pleading or motion." The relevant portion of the rule is identical to the federal rule and is considered to have abolished the distinction between special and general appearances. Orange Theatre Corporation v. Rayherstz Amusement Corporation, 139 F.2d 871 (3d Cir.1944), cert. denied 322 U.S. 740, 64 S.Ct. 1057, 88 L.Ed. 1573 (1944). Rule 12 requires that the defense of lack of jurisdiction over the person be raised either by a pre-answer motion or in the answer itself no later than the raising of other defenses under the rule. Wright v. Yackley, 459 F.2d 287 (9th Cir.1972). The record establishes that World Wide raised the objection to jurisdiction in its answer. Therefore, the objection was properly and timely raised.

The next question is whether the counterclaim filed with the answer, seeking a judgment against Nelson for the deficiency due under the lease contract, constitutes a waiver of jurisdiction. A counterclaim is compulsory "if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction." I.R.C.P. 13(a). The counterclaim in this case is compulsory, because it arose out of the lease transaction which is the subject matter of a portion of Nelson's complaint. The preferred rule is that a compulsory counterclaim does not waive jurisdictional defenses. 5 C. WRIGHT & A. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1397 (1969). See also Dragor Shipping Corporation v. Union Tank Car Company, 378 F.2d 241 (9th Cir.1967); ANNOT., 17 A.L.R. FED. 388 (1973). We hold that World Wide did not waive its jurisdictional objection by filing a compulsory counterclaim.

We now turn to World Wide's contention that Idaho does not have jurisdiction because Nelson's cause of action did not arise out of World Wide's minimum contacts with Idaho. World Wide bases this argument on the facts that it is a Washington corporation authorized to do business in Idaho, Nelson is a resident of Oregon and the conversion occurred in Nevada. World Wide also notes, correctly, there is no finding or clear proof in the record that the lease agreement between World Wide and Nelson was entered into in the State of Idaho. World Wide has cited various cases stating that a cause of action must arise out of minimum contacts occurring within the state. E.g., Intermountain Business Forms, Inc. v. Shepard Business Forms Co., 96 Idaho 538, 531 P.2d 1183 (1975); B.B.P. Association, Inc. v. Cessna Aircraft Co., 91 Idaho 259, 420 P.2d 134 (1966). These cases are not dispositive, as they set forth the standard for application of the long-arm statute, I.C. § 5-514. They do not establish the standards for application of the theory asserted by Nelson that World Wide cannot contest jurisdiction when it has become authorized to do business in Idaho, has actively engaged in the business of leasing personal property in this state and has appointed a resident agent upon whom process was served.

States often impose conditions upon foreign corporations seeking authorization to operate within the state. Idaho requires that the corporation maintain a registered office within the state and designate an agent within the state to receive process. I.C. § 30-1-113. "The registered agent so appointed by a foreign corporation authorized to transact business in this state shall be an agent of such corporation upon whom any process, notice or demand required or permitted by law to be served upon the corporation may be served." I.C. § 30-1-115. This statute does not expressly limit consent to jurisdiction to those causes of action arising only from corporate activities within the state. States with statutes similar to Idaho's have reached varying conclusions on whether jurisdiction provided by these statutes extends to any cause of action or only to those associated with the corporation's activity in the state. See CASAD, R., JURISDICTION IN CIVIL ACTIONS 3.02 (1983).

World Wide argues that jurisdiction acquired upon a foreign corporation by service of process upon a registered agent under I.C. § 30-1-115, ought to be limited only to those cases where the corporation's activities in Idaho give rise to the suit. See Budde v. Ling-Temco-Vought, Inc., 511 F.2d 1033 (10th Cir.1975). However, such a limitation has not been adopted by the Legislature or by any decision of this state. Other states in considering the effect and purpose of similar statutes compelling an authorized corporation to designate an in-state agent for service of process have refused to adopt such a restrictive view. See Cowan v. Ford Motor Company, 694 F.2d 104 (5th Cir.1982); Junction Bit & Tool Co. v. Institutional Mortgage Co., 240 So.2d 879 (Fla.App.1970); Goldman v. Pre-fab Transit Company, 520 S.W.2d 597 (Tex.App.1975). The rationale for claiming jurisdiction is that "in return for the privilege of doing business in the state, and enjoying the same rights and privileges as a domestic corporation, [cite omitted] the foreign corporation has consented to...