Davenport Mach. & Foundry Co., A Division of Middle States Corp. v. Adolph Coors Co.

• Decision Date: 20 January 1982
• Docket Number: No. 65167,65167
• Citation: 314 N.W.2d 432
• Court: Iowa Supreme Court
• Parties: DAVENPORT MACHINE & FOUNDRY COMPANY, A DIVISION OF MIDDLE STATES CORPORATION, an Iowa Corporation, Appellant, v. ADOLPH COORS COMPANY, a Foreign Corporation, Appellee.

Page 432

314 N.W.2d 432

31 A.L.R.4th 395

DAVENPORT MACHINE & FOUNDRY COMPANY, A DIVISION OF MIDDLE STATES CORPORATION, an Iowa Corporation, Appellant, v. ADOLPH COORS COMPANY, a Foreign Corporation, Appellee.

No. 65167.

Supreme Court of Iowa.

Jan. 20, 1982.

Considered by REYNOLDSON, C. J., and UHLENHOPP, HARRIS, McGIVERIN, and SCHULTZ, JJ.

UHLENHOPP, Justice.

This appeal involves a question of the jurisdiction of Iowa courts over a foreign corporation. No claim is made that the corporation qualified to transact business in this state under sections 496A.109, 496A.110, and 496A.112, The Code 1979.

Plaintiff Davenport Machine & Foundry Company (Foundry) is an Iowa corporation which manufactures grain dryer parts in Davenport, Iowa. Defendant Adolph Coors Company (Coors) is a foreign corporation which, inter alia, brews beer in Golden, Colorado, and merchandises the beer in various parts of the country including Iowa.

Coors desired to obtain certain parts for its grain dryers in Golden and to have at least some of the parts installed. It mailed fourteen purchase orders at different times to Foundry. The purchase orders were on printed forms prepared by or for Coors. They included this clause:

Seller acknowledges that it is inducing Coors to purchase and utilize goods and/or services in connection with its brewing, sales, construction and manufacturing operations in Golden, Colorado, and is thereby transacting business with Coors in the State of Colorado. This Purchase Order shall be governed by, subject to and construed according to the laws of the State of Colorado. Any litigation concerning this Purchase Order shall be under the jurisdiction of a state or federal court located within Colorado.

Foundry manufactured the parts in Iowa and shipped them under invoices to Coors in Colorado, and also installed at least some of them. Coors mailed drafts to Foundry in payment of the invoices except for a balance of $6094.39. Coors claims that Foundry's parts or installation was defective to Coors' damage in excess of $240,000.

Foundry sued Coors in the Iowa district court in Scott County for the balance on the invoices. Coors entered a special appearance challenging the jurisdiction of Iowa courts on the grounds that Coors lacks the minimum contacts with Iowa essential for jurisdiction of Iowa courts and that the quoted clause in the purchase orders ousts the Iowa courts of the jurisdiction they might otherwise possess.

The district court held a hearing on the special appearance and then sustained it. Foundry appealed.

I. Minimum contacts. Coors contends that Foundry is restricted, by virtue of its position in district court, to reliance on section 617.3, The Code 1979. For present purposes that section deals with the making of a contract to be performed in whole or part in Iowa. We have held that an Iowa seller of goods to a foreign buyer cannot ordinarily subject the buyer to suit in Iowa courts. Rath Packing Co. v. Intercontinental Meat Traders, Inc., 181 N.W.2d 184, 189 (Iowa 1970); see R. Leflar, American Conflicts Law § 39, at 70-71 (3rd ed. 1977).

The papers in case show, however, that the parties' trial court briefs ranged considerably beyond jurisdiction predicated solely on performance of the contracts sued on. The district court itself found that Coors sells its beer in Iowa, and Coors does not deny that it does so.

We have then the picture of a foreign corporation which does business in this state by distributing and selling its product here. We have the additional factor that the corporation enters into specific contracts for the purchase of parts from an Iowa company, to be manufactured here and shipped from this state to the foreign state and installed there. The litigation arises out of those contracts. Do these factors add up to the minimum contacts which are requisite to jurisdiction of the foreign corporation by the Iowa courts on the contracts in question under such decisions as Kagin's Numismatic Auctions, Inc. v. Criswell, 284 N.W.2d 224 (Iowa 1979); Berkley International Co., Ltd. v. Devine, 289 N.W.2d 600 (Iowa 1980); Larsen v. Scholl, 296 N.W.2d 785 (Iowa 1980); Al-Jon, Inc. v. Garden Street Iron & Metal, Inc., 301 N.W.2d 709 (Iowa 1981); Svendsen v. Questor Corp., 304 N.W.2d 428

(Iowa 1981); International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Estin v. Estin, 334 U.S. 541, 68 S.Ct. 1213, 92 L.Ed. 1561 (1948); National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964); Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977); Kulko v. Superior Court of California, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978); and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)?

We may assume without deciding that if Coors did not do business generally in Iowa by distributing and merchandising its product here, and that if its sole activity here was the order of these dryer parts and their installation, under the Rath decision Coors would have insufficient contacts to give Iowa courts jurisdiction. Coors overlooks, however, the traditional doctrine that a foreign corporation has a "presence" in a state when it "does business" there, making it amenable to the laws and courts of that state. This was the law before the enactment of the single act statutes, and it is still the law. R. Leflar, supra, § 39, at 68 ("Until recently, the most common basis, and in some states almost the only basis, for subjecting a nonconsenting foreign corporation to the judicial jurisdiction of a state was the fact of the corporation's 'doing business' in the state. This basis for exercising jurisdiction still exists, though in all states it has been supplemented by the more comprehensive basis of 'transacting any business in the state', applicable under the police power not only to corporations but to all persons who may be defendants."); 36 Am.Jur.2d Foreign Corporations §§ 473, 485 (1968); 20 C.J.S. Corporations § 1919 (1940).

If the present litigation arose out of Coors' distribution and sale of beer in Iowa, clearly Iowa courts would have jurisdiction of the suit. What is the effect upon jurisdiction of the fact that the litigation does not arise from Coors' regular line of business here, but rather from the fourteen purchase orders? The United States Supreme Court confronted a somewhat similar problem in Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485, rehearing denied, 343 U.S. 917, 72 S.Ct. 645, 96 L.Ed. 1332 (1952). The Court upheld the jurisdiction of the Ohio courts over a foreign corporation doing business in that state although the cause of action arose wholly outside the state. The corporation was, however, doing much of its business in Ohio and in many respects had its actual headquarters there. The Court described the corporation's activity in Ohio as "continuous and systematic." 342 U.S. at 445, 72 S.Ct. at 418, 96 L.Ed. at 492. The Court stated:

The instant case takes us one step further to a proceeding in personam to enforce a cause of action not arising out of the corporation's activities in the state of the forum. Using the tests mentioned (in International Shoe) we find no requirement of federal due process that either prohibits Ohio from opening its courts to the cause of action here presented or compels Ohio to do so. This conforms to the realistic reasoning in International Shoe Co. v. Washington, supra (326 U.S. (310) at 318, 319, 66 S.Ct. 154 (at 159), 90 L.Ed. 103, 104, 161 A.L.R. 1057).

"... there have been instances in which the continuous corporate operations within a state were thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.

"... some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to service and suit, consent being implied from its presence in the state through the acts of its authorized agents. But more realistically it may be said that those authorized acts were of such a nature as to justify the fiction.

"... Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations."

Id. at 446-47, 72 S.Ct. at 418-19, 96 L.Ed. at 493 (citations omitted). The Court then found the corporation's continuous and systematic activities in Ohio sufficient to warrant Ohio's assumption of jurisdiction on actions arising out of activities unrelated to Ohio.

The result reached in Perkins has been said to represent the majority view. 20 C.J.S. Corporations § 1922 (1940); but see Restatement (Second) of Conflict of Laws § 47, Comment e (1971). Perkins is certainly authority for the proposition that a state is not forbidden under all circumstances from entertaining lawsuits against foreign corporations doing business within its borders based on transactions unconnected with that business. As applying the Perkins doctrine, see Nova Biomedical Corp. v. Moller, 629 F.2d 190, 193 n.3 (1st Cir. 1980); Data Disc, Inc. v. Systems Technology Associates, 557 F.2d 1280, 1287 (9th Cir. 1977) ("If the nonresident defendant's activities within a state are 'substantial' or 'continuous and systematic,' there is a sufficient relationship between the defendant and the state to support jurisdiction even if the cause of action is unrelated to the defendant's forum activities."); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 413 (9th Cir. 1977) ("The rules which emerge from these cases may be summarized...