Buchhop v. General Growth Properties and General Growth Management Corp.

Decision Date12 November 1975
Docket NumberNo. 2--56744,2--56744
Citation235 N.W.2d 301
PartiesSandra Maureen BUCHHOP, as Executor of the Estate of David Donald Buchhop, Deceased, Plaintiff, v. GENERAL GROWTH PROPERTIES AND GENERAL GROWTH MANAGEMENT CORPORATION, Appellant and Defendant Cross-Petitioner, v. DAVID B. CHESKIN & COMPANY, Appellee and Defendant on Cross-Petition.
CourtIowa Supreme Court

James R. Snyder and William H. Carmichael, of Simmons, Perrine, Albright & Ellwood, Cedar Rapids, for appellant.

John D. Randall, Cedar Rapids, for appellee.

Heard by MOORE, C.J., and MASON, REYNOLDSON, HARRIS and McCORMICK, JJ.

REYNOLDSON, Justice.

This appeal concerns the jurisdictional reach of certain Iowa statutes providing for service on foreign corporations. Defendant cross-petitioners General Growth Properties and General Growth Management Corporation (General Growth) challenge a district court ruling sustaining the special appearance of cross-petition defendant, David B. Cheskin & Company (Cheskin), an Illinois Corporation. We affirm.

The underlying action was brought by the executor of David Donald Buchhop's estate for wrongful death damages. Her petition alleged Buchhop's death on October 30, 1971 was caused by freon gas which escaped from a defectively designed, installed or maintained air conditioning unit located in a basement of General Growth's Lindale Plaza Shopping Center at Cedar Rapids, Iowa.

General Growth obtained permission to bring in Cheskin as third-party defendant. Its cross-petition asserted Cheskin and Bernard Greenbaum & Associates (another Illinois corporation), as architects and engineers, designed and constructed the shopping center under a contract with the first owner, Lindale Plaza, Inc. It was further alleged Lindale Plaza, Inc. conveyed to Cedar Rapids Lindale, Inc. which conveyed to General Growth. The cross-petition contained the usual allegations to support its prayer for contribution or indemnity, asserting Cheskin's faulty design of the air conditioning and heating system, and its failure to supervise, instruct and warn.

Cheskin never attempted to obtain a certificate of authority to transact business in Iowa. General Growth sought to obtain jurisdiction of Cheskin by serving the notice and related papers on the Iowa Secretary of State pursuant to §§ 494.2(6) and 496A.112, The Code. It is agreed the procedural staps required by those statutes were properly taken. As above noted, there followed Checkin's special appearance which was presented to district court on the papers filed, including affidavits and answers to interrogatories.

Cheskin contends the above statutes employed to obtain jurisdiction were not applicable because it was neither authorized to transact business in Iowa nor did it in fact transact business so as to be subjected to the reach of those code provisions under applicable case law. General Growth asserts Cheskin actually transacted business in Iowa, failed to obtain the required authority, and falls within the sweep of our decisions which would forbid it to assert such failure as a jurisdictional defense.

In the course of this appeal Cheskin filed a motion to dismiss on the ground General Growth had settled and compromised plaintiff's claim, therefore would not be held liable to plaintiff and consequently the issues raised by its cross-petition for contribution or indemnity were moot. General Growth's resistance admitted the compromise but asserts Cheskin, upon request, refused to participate in the payment to plaintiff and in any event the unchallenged settlement agreement (attached to the resistance) expressly reserved cross-petitioner's rights against Cheskin for contribution or indemnity.

I. We dispose of this motion first. General Growth's settlement of the underlying controversy instead of awaiting judgment would not, of course, defeat its right to seek indemnity or contribution from Cheskin. Ke-Wash Company v. Stauffer Chemical Company, 177 N.W.2d 5, 10 (Iowa 1970); Federated Mut. Imp. & H. Ins. Co. v. Dunkelberger, 172 N.W.2d 137, 143 (Iowa 1969). In general, an action is moot if it no longer presents a justiciable controversy because the issues involved have become academic or nonexistent. Board of Dir. of Ind. Sch. Dist. of Waterloo v. Green, 259 Iowa 1260, 1264, 147 N.W.2d 854, 856 (1967). Assuming plaintiff's petition has been dismissed, the controversy between General Growth and Cheskin is still extant. We overrule the motion to dismiss. See Cooley v. Ensign-Bickford Company, 209 N.W.2d 100, 102 (Iowa 1973).

II. In resolving the substantive issue, we first isolate and remove from controlling consideration § 617.3, The Code, which provides in pertinent part:

'617.3 Foreign Corporations or nonresidents contracting or committing torts in Iowa.

If a foreign corporation makes a contract with a resident of Iowa to be performed in whole or in part by either party in Iowa, or if such foreign corporation commits a tort in whole or in part in Iowa against a resident of Iowa, such acts shall be deemed to be doing business in Iowa by such foreign corporation for the purpose of service of process or original notice on such foreign corporation under this section, and, if the corporation does not have a registered agent or agents in the state of Iowa, shall be deemed to constitute the appointment of the secretary of state of the state of Iowa to be its true and lawful attorney upon whom may be served all lawful process or original notice * * *.'

The above concept first appeared in § 617.3 by virtue of a 1961 amendment. 59th G.A., Ch. 287, § 1. The enactment, devoid of provisions for due process requirements of reasonable notice and opportunity to be heard, was open to serious constitutional challenge. See Marshfield Homes, Inc. v. Eichmeier, 176 N.W.2d 850, 852 (Iowa 1970); Note, 'Some Problems Under Iowa's Judicial Jurisdiction Statutes', 48 Iowa L.Rev. 968, 978--979 (1963). In 1963 the 1961 provision was repealed and a substitute enacted which contained notice and hearing provisions. 60th G.A., Ch. 325, § 1.

In the appeal Sub judice all pertinent conduct of Cheskin occurred before 1961. This is the apparent reason General Growth neither asserts its notice was served pursuant to § 617.3 nor asks us to overrule our decisions holding the statute does not operate retroactively, Chrischilles v. Griswold, 260 Iowa 453, 150 N.W.2d 94 (1967); Krueger v. Rheem Manufacturing Company, 260 Iowa 678, 149 N.W.2d 142 (1967), and that the crucial consideration is the time of the non-resident's relevant act. Marshfield Homes, Inc. v. Eichmeier, supra at 852--853; Schnebly v. St. Joseph Mercy Hosp. of Dubuque, Iowa, 166 N.W.2d 780, 784 (Iowa 1969); Snakenburg v. Jason Mfg., Inc., 261 Iowa 1083, 1087, 157 N.W.2d 110, 112 (1968).

General Growth argues jurisdiction over Cheskin was obtained by service of process through the secretary of state under either § 494.2(6) or § 496A.112, or both. Chapter 494, The Code, is entitled 'Permits to Foreign Corporations'. Section 494.1 requires a corporation desiring 'to transact business in this state' to file application for permit with the secretary of state. Section 494.2 is entitled 'Details of application--secretary of state as process agent'. Subsection 6 thereof requires the applying corporation to file a certified copy of its resolution giving the name and address of its registered agent for service,

'* * * (f)ailing which * * * service of such process may then be made upon said corporation through the secretary of state * * *.'

The 'Iowa Business Corporation Act' first appeared in 1959 as Chapter 321, Acts of the 58th General Assembly, and is now designated as chapter 496A, The Code. Section 496A.112 contains, Inter alia, provisions similar to those in § 494.2(6):

'496A.112 Service of process on foreign corporation. Each 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.

Whenever a foreign corporation authorized to transact business in this state shall fail to appoint or maintain a registered agent in this state, * * * or whenever the certificate of authority of a foreign corporation shall be suspended or revoked, then the secretary of state shall be an agent of such corporation upon whom any such process, notice or demand may be served.'

The Iowa Business Corporation Act, § 496A.120, The Code, imposes sanctions on foreign corporations transacting business without a certificate of authority. Until stricken by amendment in 1963 (60th G.A., Ch. 287, § 5) the last sentence of § 496A.120 provided:

'If any foreign corporation shall transact business in this state without a certificate of authority, it shall by transacting such business be deemed thereby to have appointed the secretary of state its attorney for service of process.'

General Growth argues without great optimism this language should be resurrected and applied retroactively. Of course the term 'transact business' in the above provision requires the same extensive activities the term invokes wherever it is found in chapter 496A. See Hill v. Electronics Corporation of America, 253 Iowa 581, 587, 113 N.W.2d 313, 317 (1962); Comment, 28B I.C.A., pp. 110--114. But in any event, our relevant rule holds when a law is repealed the rescinded act is operationally deemed never to have existed. Garrison v. Garrison, 179 N.W.2d 466, 468 (Iowa 1970); 1A Sutherland, Statutory Construction § 22.36 (1972). In so ruling here we do not interpret § 4.13, The Code, which was not effective until 1971.

The legislature, in repealing the above quoted provision in § 496A.120, apparently deemed it obsolete following amendments which extended the thrust of § 617.3.

Thus when confronted with the issue raised by Cheskin's special appearance, trial court noted Cheskin had never been granted a permit under chapter...

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