American Title Ins. Co. v. Stoller Fisheries, Inc.

• Decision Date: 19 March 1975
• Docket Number: No. 2--56743,2--56743
• Citation: 227 N.W.2d 481
• Parties: The AMERICAN TITLE INSURANCE COMPANY, Appellee, v. STOLLER FISHERIES, INC., Appellant.
• Court: Iowa Supreme Court

Page 481

227 N.W.2d 481

The AMERICAN TITLE INSURANCE COMPANY, Appellee, v. STOLLER FISHERIES, INC., Appellant.

No. 2--56743.

Supreme Court of Iowa.

March 19, 1975.

Jack H. Bedell, Spirit Lake, and George T. Qualley, P.C., Sioux City, for appellant.

Wilbur E. Hanson, Spirit Lake, Jacobson, Bristol & Thomson, Waukon, and Duncan, Jones, Riley & Finley, Des Moines, for appellee.

Heard by MOORE, C.J., and RAWLINGS, UHLENHOPP, REYNOLDSON and HARRIS, JJ.

REYNOLDSON, Justice.

Trial court entered summary judgment for plaintiff American Title Insurance Company against defendant Stoller Fisheries. The latter appeals and we affirm.

The following facts appear from various pleadings, exhibits and affidavits in the record before us.

Stoller is an Iowa corporation located at Spirit Lake, Iowa. It is engaged in the purchase, distribution and sale of fish and seafood products. Stoller contracted to purchase seafood products from Gorton Corporation, a Massachusetts corporation located at Gloucester, Massachusetts.

December 27, 1965, Gorton brought suit in Florida circuit court against Stoller on an account in the sum of $9587.90. Service was had by serving Stoller's president, who had a winter home in Miami. Stoller at that time owned a business rental property in Florida.

Stoller filed a motion to dismiss the Florida litigation, alleging lack of jurisdiction of person and subject matter, asserting, among other things, insufficiency of process and service of process. This Iowa corporation also filed an answer denying it was doing business in Florida and alleging the same grounds contained in its motion. When an order was entered denying its motion to dismiss Stoller took an interlocutory appeal to the District Court of Appeals for the Third District of Florida, where the order was affirmed.

Subsequently a final judgment was entered in the Florida circuit court against Stoller for the amount sued on with interest, a total of $11,312.56, and $23.50 costs.

Meanwhile, Stoller had contracted to sell its Florida rental property. American Title insured title for the Florida purchaser, but apparently overlooked the above judgment. In order to avoid liability to the purchaser, it thereupon paid Gorton off in consideration for a written assignment of the judgment.

August 11, 1972, American Title brought this action on the Florida judgment against Stoller in district court. Stoller's answer alleged the Florida court was without proper jurisdiction to enter the judgment, But also asserted 'the question of legal notice as well as jurisdiction of the Court was in fact questioned in the alleged cause of action in the state of Florida, and the same is reasserted here; * * *.'

May 28, 1973, American , title filed motion for summary judgment in the amount (increased by interest) of $14,446.98. The motion was accompanied by affidavits, properly certified copies of the Florida court proceedings, and a certified copy of the recorded judgment assignment. This motion was ultimately set for a July 18, 1973 hearing.

On July 16, 1973, two days before the assigned hearing date, Stoller filed motion for leave to amend its answer. Attached was a proposed amendment to answer consisting of three counterclaims in separate divisions. These counterclaims were grounded on American Title's alleged negligence in not discovering the Florida judgment and in interfering with Stoller's prospective advantage in negotiating a settlement of the judgment with Gorton. Damages were claimed on each of the three counterclaims in sums ranging from $13,110.92 to $15,656.28.

There is nothing in this record to show Stoller's motion for leave to amend was ever ruled on. Nor is there any inkling in trial court's summary judgment ruling that it gave these 'counterclaims' any consideration in reaching its decision.

Stoller asserts this appeal presents two issues for review. Is American Title's cause of action barred by § 496A.120, The Code, which restricts the right of foreign corporations to sue in Iowa courts? Is summary judgment on the principal claim allowable when there is pending before the court compulsory counterclaims raising genuine issues of material fact?

I. Stoller argues American Title's action is barred by the following statute:

'496A. 120 Transacting business without certificate of authority. No foreign corporation transacting business in this state without a certificate of authority shall be permitted to maintain nay action, suit or proceeding in any court of this state, until such corporation shall have obtained a certificate of authority, nor shall any action, suit of proceeding be maintained in any court of this state by any successor or assignee of such corporation on any right, claim or demand arising out of the transaction of business by such corporation in this state, until a certificate of authority shall have been obtained by such corporation or by a corporation which has acquired all or substantially all of its assets; provided, however, that no foreign corporation transacting business in this state shall maintain any action, suit or proceeding in this state upon any contract made by it in this state prior to the effective date of this chapter unless prior to the making of such contract it shall have procured a permit to transact business in this state as required by the laws in force at the time of making such contract, which prohibition shall also apply to any assignee of such foreign corporation and to any person claiming under such assignee of such foreign corporation or under either of them.

'The failure of a foreign corporation to obtain a certificate of authority to transact business in this state shall not impair the validity of any shall not prevent such corporation, and shall not prevent such corporation from defending any action, suit or proceeding in any court of this state.'

Stoller contends Gorton Corporation was never licensed to do business in Lowa; the underlying contract was an Iowa contract (a doubtful conclusion on the record before us); Gorton was doing business in Iowa (another questionable conclusion); and it could not therefore have sued Stoller on the contract in Iowa. To render Iowa judgment on the Florida judgment, Stoller argues, would allow Gorton (or its assignee American Title) to do indirectly what it could not do directly and would evade the intent of § 496A.120, supra.

Of course, American Title, in bringing this litigation, is not required to obtain a certificate of authority. See § 496A.103 ('* * * a foreign corporation shall not be considered to be transacting business in this state * * * by reason of * * * 1. Maintaining or defending any action or suit * * *'); rule 5, Rules of Civil Procedure ('Foreign corporations may sue and be sued in their corporate name, except as prohibited by statute'). Stoller concedes this point.

While § 496A.120 has not had judicial interpretation, we have said its predecessor, § 464.9, 'cannot be extended beyond its plain terms and clear meaning.' Heyl v. Beadel, 229 Iowa 210, 214, 294 N.W. 335, 338 (1940).

We have held contracts in violation of § 494.9 were not void but merely unenforceable in Iowa courts. Credit Industrial Company v. Happel, Inc., 252 Iowa 213, 218, 106 n.W.2d 667, 669 (1960); Heyl v. Beadel, supra, 229 Iowa at 214, 294 N.W. at 338. We find no good reason to place any different interpretation on § 496a.120, and foresee clear constitutional dangers in departing from our precedential decisions, supra.

The distinction we drew in our decisions under the prior statute (§ 494.9) is important because, as noted in Heyl, it may allow the foreign corporation to sustain an action on the contract in another jurisdiction without the action being barred by the Iowa statute. See Kemp v. Darke County Farm Bureau Cooperative Ass'n, 115 Ohio App. 1, 184 N.E.2d 103; (1961); 36 Am.Jur.2d, Foreign Corporations § 304, p. 305; see also Strampe v. Minnesota Farmers' Mut. Ins. Co., 109 Minn. 364, 123 N.W. 1083 (1909).

As a general rule, if that action results in judgment for the foreign corporation the doctrine of merger would merge the contract in the judgment and no further action could be taken on the contract. See Reinertson v. Consolidated Chemical Products Co., 205 Iowa 417, 419, 216 N.W. 68, 69 (1927); Harford, Thayer & Co. v. Street, 46 Iowa 594, 595 (1877); North & Scott v. Mudge & Co., 13 Iowa 496, 498--99 (1862); 46 Am.Jur.2d, Judgments § 390, pp. 555--56; 47 Am.Jur.2d, Judgments § 915, pp. 34--35; 50 C.J.S. Judgments § 870, p. 445, § 890, p. 491; see also Milwaukee County v. White Co., 296 U.S. 268, 275, 56 S.Ct 229, 233, 80 L.Ed. 220, 227 (1935); Tomlin v. Woods, 125 Iowa 367, 374, 101 n.W. 135, 138 (1904).

Confining the sweep of § 496A.120 to its plain language, it is apparent the instant litigation is not a '* * * suit * * * on any right, claim or demand arising out of the transaction of business by (a foreign corporation) * * * in this state * * *.' It is a suit on a judgment arising out of litigation in a foreign state. To adopt the interpretation which Stoller's rationale requires might well invalidate the statute as unconstitutional. Constitution of the United States, Article IV, Section 1 ('Full Faith and Credit shall be given in each State to the * * * judicial Proceedings of every other State.'); Morris v. Morris, 197 N.W.2d 357, 359 (Iowa 1972) ('Full faith and credit must, of course, be accorded a valid judgment entered by any sister state.'); see Spear v. Virginia-Carolina Chemical Corporation, 225 Ala. 17, 19, 142 So. 33, 34 (1932); 18 Fletcher Cyclopedia, Corporations § 8621, p. 31.

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