De Claire Mink Ranches v. Federal Foods, Inc.

• Decision Date: 07 March 1961
• Docket Number: Civ. No. 1158.
• Citation: 192 F. Supp. 148
• Parties: DE CLAIRE MINK RANCHES, a corporation, Plaintiff, v. FEDERAL FOODS, INC., a corporation, Defendant.
• Court: U.S. District Court — Northern District of Iowa

192 F. Supp. 148

DE CLAIRE MINK RANCHES, a corporation, Plaintiff, v. FEDERAL FOODS, INC., a corporation, Defendant.

Civ. No. 1158.

United States District Court N. D. Iowa, W. D.

March 7, 1961.

Sylvester F. Wadden (of Sifford & Wadden), Sioux City, Iowa, for the plaintiff.

Robert R. Eidsmoe (of Gleysteen, Nelson, Harper, Kunze & Eidsmoe), Sioux City, Iowa, for defendant.

GRAVEN, District Judge.

This action was brought by the plaintiff to recover damages for an alleged breach of an implied warranty of fitness in regard to a commercial mink food. The food in question was manufactured by the defendant and sold by it to the plaintiff for use in feeding the animals raised on the plaintiff's mink ranch. The action was originally commenced in the District Court of Iowa, in and for Woodbury County, and was subsequently removed to this Court pursuant to the provisions of Section 1441 of Title 28 U.S. C.A. The plaintiff is a corporation organized and existing under the laws of the State of Iowa. The defendant is a corporation organized and existing under the laws of the State of Wisconsin. The defendant has moved to quash the service of process (original notice) made upon it when the action was commenced in the state court, and this is a ruling upon that motion.

The service of process (original notice) in question was made in Sioux City, Iowa, upon one Richard Wood, who was employed by the defendant as a truck driver. Richard Wood was, at the time of the service, a resident of Cedarburg, Wisconsin, and had been sent to Sioux City by the defendant to pick up and return to the defendant a quantity of mink food which had previously been delivered by it to the plaintiff and which had been rejected by the plaintiff. Defendant urges in support of its motion to quash service that the defendant was not "doing business" in the State of Iowa so as to make it amenable to service of process here. Defendant further asserts that, even if it is found to be "doing business" in Iowa, Richard Wood was not a person authorized either by appointment or by law to receive process (original notice) on behalf of the defendant. In support of its motion, the defendant has offered the affidavit of its secretary-treasurer which describes the extent of defendant's activities in the State of Iowa and the relationship between the defendant and Richard Wood. In resistance to the motion, the plaintiff has offered the affidavit of its president as to his knowledge of the activities of the defendant in the State of Iowa and the nature of the mission being performed by Richard Wood at the time of the challenged service. The two affidavits are not in basic disagreement as to the facts involved.

The defendant has not formally qualified under the laws of this state to do business in Iowa. It has no agents or representatives who reside in Iowa and maintains no office, agency, inventories, telephone listings, or bank account in this state. It does not own or lease any real or personal property in Iowa. Defendant engages one salesman for the Iowa territory. That salesman resides in Illinois and his territory includes the states of Illinois and Minnesota as well as Iowa. The salesmen of defendant contact mink ranchers and explain the defendant's products and quote general prices. If orders are obtained, the salesmen fill out an order form and mail it to the home office in Thiensville, Wisconsin. All orders must be approved and accepted by the home office and selling and pricing is controlled entirely by that office. The defendant makes most of the deliveries of its product in refrigerated trucks. The drivers of the trucks, such as Richard Wood, are employees of the defendant. The drivers do not engage in selling and are not qualified consultants as to the use of defendant's products. The drivers make deliveries, help the customers unload their orders, and obtain the customer's signature on a delivery receipt. It is not customary for the drivers to make collections although occasionally this is done in the case of a delinquent account. On the few occasions when payment of an account is made to a driver, the payment is remitted in kind by the driver directly to the home office.

It is well settled that the jurisdiction acquired by a Federal Court in an action removed from a state court is derived from the state court. If that court lacked jurisdiction over the parties, the Federal Court is powerless to proceed even if under the applicable federal standards for service of process the service would have been proper. Lambert Run Coal Co. v. Baltimore & Ohio R. Co., 1922, 258 U.S. 377, 382, 42 S.Ct. 349, 66 L.Ed. 671; Bomze v. Nardis Sportswear, Inc., 2 Cir., 1948, 165 F.2d 33; Shannon v. Brown & Williamson Tobacco Corp., D.C.1958, 167 F.Supp. 493, 494; Samson v. General Cas. & Ins. Co., D.C.N.D.Iowa 1952, 104 F.Supp. 751, 752. In the case of Bomze v. Nardis Sportswear, Inc., supra, Judge Learned Hand stated (at page 35 of 165 F.2d):

"By removal a defendant does not lose his right to challenge the invalidity of the service in the state court; and thus the first question is whether the service was valid under the New York state court decisions. If we conclude that it was not, of course the case ends * *."

It is manifest that even if a foreign corporation is doing business in a particular state, the courts of that state may not secure jurisdiction over it unless proper service of process is made. This requires that the service must be upon someone who is legally recognized as a proper person to receive the same on behalf of the corporation. See American Asphalt Roof Corp. v. Shankland, 1928, 205 Iowa 862, 219 N.W. 28, 30, 60 A.L.R. 986; Amtorg Trading Corp. v. Standard Oil Co., D.C.1942, 47 F.Supp. 466, 468.

In order to determine the validity of the service which was made to commence the action in the state court, it is necessary to consider Rule 56 of the Iowa Rules of Civil Procedure, 58 I.C.A., and certain Iowa Code provisions relating to the service of original notice. Rule 56 provides, in part:

"Original notices are `served' by delivering a copy to the proper person. Personal service may be made as follows:

* * * * * *

"(f) Upon * * * a domestic or foreign corporation, by serving any present or acting or last known officer thereof, or any general or managing agent, or any agent or person now authorized by appointment or by law to receive service of original notice * * *

"(g) If the action, whether against an individual, corporation, partnership, or other association suable under a common name, arises out of or is connected with the business of any office or agency maintained by the defendant in a county other than where the principal resides, by serving any agent or clerk employed in such office or agency." (Emphasis supplied.)

It may be seen that Rule 56 provides that personal service may be made upon a foreign corporation by serving: (1) any present, acting or last known officer; (2) any general or managing agent; (3) any agent or person authorized by appointment or by law to receive service; or (4) as to actions arising out of the business of an office or ageny maintained in the state, by serving any agent or clerk employed in such office or agency. In 1 Cook & Loth, Iowa Rules of Civil Procedure (rev. ed. 1951), at pages 336-37, the authors set forth comments by the Advisory Committee which assisted in the preparation of the Iowa Rules. The comment pertaining to Rule 56(f) is as follows:

"Subdivision (f). Embraces parts of but does not supersede Code, §§ 11077, 11072, 11073, 11074 Sections 617.6, 617.3, 617.4, 617.5 Code of Iowa 1958, I.C.A.. * * *"

Of the statutes above referred to, only Section 617.3, Code of Iowa 1958, I.C.A., is relevant. That section provides:

"If the action is against any corporation or person owning or operating any railway or canal, steamboat or other river craft, or any telegraph, telephone, stage, coach, or car line, or against any express company, or against any foreign corporation, service may be made upon any general agent of such corporation, company, or person, wherever found, or upon any station, ticket, or other agent, or person transacting the business thereof or selling tickets therefor in the county where the action is brought; if there is no such agent in said county, then service may be had upon any such agent or person transacting said business in any other county." (Emphasis supplied.)

In the case of Kalbach v. Service Station Equipment Co., 1929, 207 Iowa 1077, 224 N.W. 73, the Iowa Supreme Court made a detailed analysis of the scope and effect of Section 617.3 which was then Section 11072, Code of Iowa 1927. In the Kalbach case the Court pointed out that Section 617.3 pertains to individuals who are carrying on certain designated businesses closely related to communication or transportation and that it also pertains to "any foreign corporation." The persons who are designated by Section 617.3 as proper individuals to receive an original notice on behalf of foreign corporations include: (1) any general agent of the corporation wherever found in the state; (2) any other agent (not a general agent) or person "transacting the business" of the corporation in the county where the action is brought; or (3) if there is no agent available in the county where the action is brought, upon any agent or person "transacting said business" in any other county. Kalbach v. Service Station Equipment Co., supra, at pages 75-76 of 224 N.W. Rule 56 and Section 617.3 together set forth seven categories of individuals upon whom personal service may be made on behalf of a foreign corporation. Some of these may be eliminated immediately for purposes of testing the status of Richard Wood, the truck driver in the present case. He is not an officer of the corporation, he has not been authorized by the corporation to receive service on its behalf, and he is not an agent employed in an office or agency maintained in the state by ...