Great Atlantic & Pacific Tea Co. v. Hill-Dodge Banking Co., HILL-DODGE

• Decision Date: 11 June 1963
• Docket Number: No. 50951,HILL-DODGE,50951
• Citation: 255 Iowa 272,122 N.W.2d 337
• Parties: The GREAT ATLANTIC & PACIFIC TEA COMPANY, Inc., Appellee, v. TheBANKING COMPANY, Appellant.
• Court: Iowa Supreme Court

Page 337

122 N.W.2d 337

255 Iowa 272

The GREAT ATLANTIC & PACIFIC TEA COMPANY, Inc., Appellee, v. The HILL-DODGE BANKING COMPANY, Appellant.

No. 50951.

Supreme Court of Iowa.

June 11, 1963.

Boyd, Walker & Concannon, Keokuk, for appellant.

McManus & McManus and George L. Norman, Keokuk, for appellee.

PETERSON, Justice.

The question presented is whether the District Court of Lee County obtained jurisdiction over a foreign corporation, in connection with a case involving an alleged tort, partially committed in Iowa.

Defendant raises no question about the service of notice. In its Reply Brief appellant states: '* * * there is no dispute that service of notice was had upon the appellant foreign corporation as provided by Rule of Civil Procedure 56(f).'

The Lee County court held jurisdiction was acquired in the case, and overruled the special appearance filed by defendant. Appeal was granted by this court from interlocutory order in accordance with the provisions of R.C.P. 332. Defendant appealed.

I. On February 21, 1962, plaintiff filed petition in the District Court of Lee County, at Keokuk, in which it alleged that plaintiff is a corporation duly engaged in business in Lee County and that defendant is a banking corporation conducting business in the town of Warsaw, Illinois. Warsaw is located immediately across the Mississippi River from Keokuk. For some years past a customer of defendant bank by the name of Seabold had a checking account therein, and during said time had written numerous checks which were cashed by plaintiff and were honored and paid by defendant bank. During the months of June and July of 1960 said depositor was hard pressed for funds and with the aid, approval, connivance and consent of defendant, the defendant and said customer commenced a fraudulent scheme known as 'check-floating' and continued said scheme until August 17, 1961. At said time payment of checks was stopped and defendant was damaged through such un-cashable checks in the amount of $1977.59.

Plaintiff contends defendant honored and paid checks of this depositor when there were insufficient funds in his account at the time of presentation and that money to pay said deficiency was subsequently raised by Seabold issuing other checks, all with the approval and knowledge of defendant. That by engaging in such activities the defendant concealed from plaintiff the true state of the depositor's account, and that concealment of the condition of the depositor's account was done with the intent to deceive and defraud plaintiff. That plaintiff relied thereon and was induced to continue to cash many checks of said depositor, which it would not have done if it had known the true state of facts, and that by reason of such fraud plaintiff was damaged. Plaintiff alleges defendant was negligent in knowingly permitting a bank depositor to commence and continue a check-floating scheme by the use of its banking facilities, and by failing to dishonor said checks at the inception of the scheme, and by failing to notify plaintiff of the insolvent condition of Seabold's account.

On April 11, 1962, defendant filed special appearance objecting to the jurisdiction of the court, in which it alleged that defendant was a foreign corporation, not licensed to, and was not doing business in the State of Iowa so as to be amenable to service of process in Iowa. Defendant alleges the action is in personam against a foreign corporation and that the acts upon which the action is based occurred outside the State of Iowa and that the District Court of Lee County, Iowa, has no jurisdiction, and any judgment rendered would be void. The special appearance is supported by affidavits stating that defendant is a nonresident foreign corporation, not engaged in business in the State of Iowa other than to own mortgages on real estate and personal property and the officers upon whom the notice was served stated they were not conducting any business of defendant in the State of Iowa at the time of service.

Plaintiff filed counter affidavit stating defendant banking corporation had been recording real estate and chattel mortgages in Lee County, Iowa, and had resorted to the courts of Iowa on occasions to collect the notes and enforce the mortgages.

On November 6, 1962, the court entered an order in which it overruled defendant's special appearance, under the theory of minimum contacts in Iowa and also under Sec. 617.3 of the Code, as amended, I.C.A.

II. Fifty years ago the question of jurisdiction in the state courts as to foreign corporations was not important. The use of corporate entities was very rare. As business conditions became more complex more corporations were organized in all the states of our Union. For some years this also was not important because the business was ordinarily confined to the state in which a corporation was formed. After some years the matter of the jurisdiction of the courts of a sister state did become important because the activities of corporations soon reached far beyond the boundaries of their home state.

The matter was well stated in the United States Supreme Court case of McGee v. International Life Insurance Co., (1957) 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. In this case the doctrine of minimum contacts of a foreign corporation within a state was discussed. We will consider this doctrine, infra. The court found that defendant had such adequate contract with the forum as to be subject to a suit for a cause of action based on a contract which was substantially connected with the state. The Court speaking of the policy behind the trend toward expansion of permissible state jurisdiction over foreign corporations stated: 'In part this is attributable to the fundamental transformation of our economy over the years. * * * With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.' III. We have recently considered the question of Iowa jurisdiction in connection with foreign corporations which have not filed application for authority to do business in Iowa. Our pronouncement was made in the case of Hill v. Electronics Corporation of America, 253 Iowa 581, 113 N.W.2d 313, in which the Court spoke through Chief Justice Garfield. The case involved a suit by an Iowa citizen against one Massachusetts corporation, and one New York corporation. It involved the explosion of a boiler in Meredith Publishing Company plant in Des Moines. The explosion resulted in serious personal injuries to plaintiff. The trial court sustained special appearance with reference to the jurisdiction of the Polk County, Iowa, District Court as to the two corporations involved. The court was confronted with the especially restrictive provisions of what is now Section 496A.103 of the Code, I.C.A. In said section appears ten paragraphs outlining actions of foreign corporations which exempt such corporations as to jurisdiction of Iowa courts. There were three activities of the foreign corporation defendants in the Hill case which excluded the corporations from the jurisdiction of the Iowa court.

However, we adopted an optimistic attitude as to extension of the area in which jurisdiction of a foreign corporation should be acceptable. After citing the pivotal case of International Shoe Company v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, we said: 'The shoe company case applies a new yardstick by which a state may acquire personal jurisdiction over a foreign corporation without violating due process under the federal constitution. It holds 'due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.''

The doctrine of minimum contact was analyzed and established in the International Shoe Company case. There had been considerable confusion and conflicting decisions in many states with reference to the question of the jurisdiction of a state in which a foreign corporation was doing business of some kind without complying with statutes of the state.

International Shoe Company had been conducting business in the State of Washington for some years. It had developed its business in the state to the point where it had from eleven to thirteen salesmen traveling and living in the state. The State of Washington had adopted an unemployment tax Act. Under the act a certain fee...