Hager v. Doubletree

• Decision Date: 17 May 1989
• Docket Number: No. 88-581,88-581
• Parties: William D. HAGER, Commissioner of Insurance of the State of Iowa, as Liquidator of Iowa National Mutual Insurance Company, Appellee, v. DOUBLETREE, A Wyoming Corporation; Roger K. Bower; Alden Insurance Agency, A Wyoming Corporation; and Larry R. Alden, Appellants.
• Court: Iowa Supreme Court

Page 603

440 N.W.2d 603

William D. HAGER, Commissioner of Insurance of the State of Iowa, as Liquidator of Iowa National Mutual Insurance Company, Appellee, v. DOUBLETREE, A Wyoming Corporation; Roger K. Bower; Alden Insurance Agency, A Wyoming Corporation; and Larry R. Alden, Appellants.

No. 88-581.

Supreme Court of Iowa.

May 17, 1989.

Dennis M. Kirven of Kirven & Kirven, Buffalo, Wyo., Harry Perkins III of Patterson, Lorentzen, Duffield, Timmons, Irish, Becker & Ordway, Des Moines, for appellants.

Philip Ostien and John K. Vernon of Davis, Grace, Horvath, Gonnerman & Rouwenhorst, P.C., Des Moines, for appellee.

Considered by HARRIS, P.J., and LARSON, NEUMAN, SNELL, and ANDREASEN, JJ.

LARSON, Justice.

Iowa National Mutual Insurance Company became insolvent and, pursuant to statute, the Iowa Commissioner of Insurance was appointed as liquidator. See Iowa Code § 507C.16-.18 (1987). As a part of his winding up of the company's affairs, the liquidator sued these defendants for unpaid premiums owed to Iowa National. The defendants, all nonresidents of Iowa, challenged the jurisdiction of the court on the ground that they lacked sufficient contact with Iowa to confer personal jurisdiction on an Iowa court. The district court rejected the jurisdictional challenge, and the defendants petitioned for a writ of certiorari. We considered the certiorari petition as an application for interlocutory appeal and granted the application. See Iowa R.App.P. 2, 304. We now affirm. ¹

The defendants Doubletree and the Alden Insurance Agency are Wyoming insurance companies who acted as agents in that state for Iowa National. Defendants Roger K. Bower and Larry R. Alden were personal guarantors for Doubletree and Alden Insurance Agencies, respectively, guaranteeing the companies' accounts with Iowa National. We will frequently refer to these defendants collectively as Doubletree.

William D. Hager, the Iowa Insurance Commissioner, is authorized by statute to collect all "debts and money due and claims belonging to the insurer, wherever located," Iowa Code § 507C.21(1)(f), and to file suit if necessary to collect them. Iowa Code § 507C.21(1)(l ). Iowa Code section 507C.4 provides this grant of jurisdiction for Iowa courts to implement the liquidator's authority:

3. A court having jurisdiction of the subject matter has jurisdiction over a person served pursuant to the Iowa rules of civil procedure or other applicable provisions in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state for any of the following:

a. In an action or incident to an obligation if the person served is obligated to the insurer in any way as an incident to an agency or brokerage arrangement that may exist or has existed between the insurer and the agent or broker.

This section provides for jurisdiction in an action by a receiver; however, section 507C.2(14) includes liquidators within the definition of receivers.

Doubletree attacks the statute on constitutional grounds, claiming it is invalid on its face and invalid as applied.

I. The Facial Challenge.

Doubletree challenges section 507C.4 on its face, because it does not require "minimum contacts" as a prerequisite to the exercise of personal jurisdiction. See International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1940). ²

We will construe a statute in such a way as to preserve it and render it constitutional, if possible. Hines v. Illinois Cent. Gulf R.R., 330 N.W.2d 284, 290 (Iowa 1983). We believe such a construction is appropriate here. Section 507C.4(3) provides that "[a] court having jurisdiction of the subject matter has jurisdiction over a person served pursuant to the Iowa rules of civil procedure or other applicable provisions...." In connection with service of notice, Iowa Rule of Civil Procedure 56.2 provides that

[e]very corporation, individual, personal representative, partnership or association that shall have the necessary minimum contact with the state of Iowa shall be subject to the jurisdiction of the courts of this state, and the courts of this state shall hold such corporation, individual, personal representative, partnership or association amenable to suit in Iowa in every case not contrary to the provisions of the constitution of the United States.

(Emphasis added.)

We have stated that rule 56.2 "expands Iowa's jurisdictional reach to the widest due process parameters of the federal constitution." Larsen v. Scholl, 296 N.W.2d 785, 788 (Iowa 1980). Iowa Code section 507C.4 must be considered as incorporating the requirements of "necessary minimum contact[s]" as embodied in rule 56.2 thereby adopting the minimum contacts principles of International Shoe. We conclude that the statute when considered in this manner is facially valid.

II. Validity of Section 507C.4(3) as Applied.

Doubletree's second issue raises the validity of section 507C.4(3) as applied, arguing that under the facts of this case the agents lacked sufficient contacts with Iowa to permit an Iowa court to exercise personal jurisdiction over them or their guarantors. In order to resolve this issue, a short statement of the facts is necessary. The agency agreements in evidence were signed by Iowa National with Doubletree and Alden Insurance on May 8, 1984, and August 9, 1983, respectively. Under these agreements, the agents were to represent Iowa National in the State of Wyoming. Roger K. Bower and Larry R. Alden, principals in their respective companies, signed the agency agreements as guarantors. These agency agreements remained in force until Iowa National was placed in liquidation on October 10, 1985, under Iowa's "Insurers Supervision, Rehabilitation and Liquidation Act," Iowa Code ch. 507C (1985). At this time, both Doubletree and Alden Insurance were indebted to Iowa National for premiums collected by them.

Any discussion of personal jurisdiction under facts such as these must begin with International Shoe, which held that sufficient "minimum contacts" must exist between the defendant and the forum state in order to make the court's assertion of jurisdiction consistent with "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316, 66 S.Ct. at 158, 90 L.Ed. at 102.

These principles of due process and the exercise of jurisdiction over nonresidents have been further developed by the Supreme Court in later cases. See, e.g., Burger King v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1958). Our court has also considered similar issues of personal jurisdiction. See, e.g., Al-Jon, Inc. v. Garden St. Iron & Metal Co., 301 N.W.2d 709 (Iowa 1981); Larsen v. Scholl, 296 N.W.2d 785 (Iowa 1980); Kagin's Numismatic Auctions, Inc. v. Criswell, 284 N.W.2d 224 (Iowa 1979).

Doubletree claims that section 507C.4(3) is insufficient to confer jurisdiction on an Iowa court even though its language purports to do so. Doubletree argues that the statute may not create its own jurisdiction, that personal jurisdiction must be based on the facts in the case, and that the defendants' contacts with Iowa were not sufficient to satisfy the test for constitutionality. The statute must therefore be held to be unconstitutional as applied.

Doubletree's claim of insufficient contacts is based on several factors: the agency agreements were signed by the agents in Wyoming and for Iowa National by its authorized representative in either Colorado or Wyoming; none of the parties signed in Iowa. The initial contacts to establish the agency relationships were by Iowa National which sent representatives to Wyoming for that purpose. The Wyoming agents did not write any insurance for persons in Iowa, and they did not maintain any offices or hire any employees in Iowa. All direct contacts between Iowa National and the defendants, they claim, occurred outside of Iowa or were handled by mail or telephone. Most contacts between the defendants and Iowa National were through a branch office of Iowa National in Denver, Colorado. The only direct dealings on a day-to-day basis between the defendants and the home office in Iowa were in connection with commercial umbrella policies, which apparently had to be approved by the home office. (Only Alden Insurance was shown to have had direct dealings with the home office on these policies, and that dealing was quite limited. The record is silent as to any direct contact between Doubletree and the home office concerning such policies.)

Doubletree's argument is that, to obtain personal jurisdiction over the defendants, Hager would have to show that the defendants "purposefully established minimum contacts with the foreign state," and those contacts would "be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with 'fair play and substantial justice.' " Doubletree argues that the record lacks any showing that the defendants "purposefully established" contacts in Iowa. Without a showing that a nonresident defendant affirmatively sought to avail itself of the laws or benefits of the State of Iowa, Doubletree argues, there can be no finding of sufficient minimum contacts.

Hager, understandably, sees the matter of contacts in a different light. As to the individual guarantors, Bower and Alden, he points out they were principal officers in their respective companies and signed the guaranty agreements in order to induce Iowa National to designate the defendant companies as agents. The guarantors and their respective companies signed the agency agreements with Iowa National and therefore created substantial, ongoing connections with the State of Iowa.

Moreover, Iowa...