Rath Packing Co. v. Intercontinental Meat Traders, Inc.

• Decision Date: 10 November 1970
• Docket Number: No. 54073,54073
• Citation: 181 N.W.2d 184
• Parties: The RATH PACKING COMPANY, a corporation, Appellee, v. INTERCONTINENTAL MEAT TRADERS, INC., a corporation, Appellant.
• Court: Iowa Supreme Court

Page 184

181 N.W.2d 184

The RATH PACKING COMPANY, a corporation, Appellee, v. INTERCONTINENTAL MEAT TRADERS, INC., a corporation, Appellant.

No. 54073.

Supreme Court of Iowa.

Nov. 10, 1970.

Mosier, Thomas, Beatty, Dutton & Braun, Waterloo, for appellant.

Swisher & Cohrt, Waterloo, for appellee.

STUART, Justice.

Rath Packing Company (Rath), an Iowa corporation, brought this action for breach of contract against Intercontinental Meat Traders, Inc. (Traders), an Illinois corporation, in Black Hawk County, Iowa under the provisions of the Iowa long arm statute, section 617.3, Code of Iowa, which in its pertinent part provides:

'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 * * * such acts shall be deemed to be doing business in Iowa by such foreign corporation * * *.'

Traders special appearance challenging the jurisdiction of the Iowa courts was overruled. We granted defendant permission to bring this interlocutory appeal.

In passing on a special appearance we accept the allegations of the petition as true. Plaintiff has the burden of sustaining the requisite jurisdiction, but once it has made a prima facie case, the burden is on defendant to produce evidence to rebut or overcome the prima facie showing. This is a special proceeding in which the findings of the trial court have the force and effect of a jury verdict. Miller v. Vitalife Corporation of America (Iowa, 1969), 173 N.W.2d 91, 92; Tice v. Wilmington Chemical Corp. (1966), 259 Iowa 27, 34--35, 141 N.W.2d 616, 621--622, 143 N.W.2d 86.

Here plaintiff made a prima facie case of jurisdiction by showing the existence of a contract to be performed 'in whole or in part' within the State of Iowa. Midwest Packaging Corporation v. Oerlikon Plastics, Ltd. (D.C.1968), 279 F.Supp. 816, 818. Defendant thus has the burden of showing the statute was unconstitutionally applied to these facts. No contention is made on appeal that section 617.3 is unconstitutional on its face.

The questions before us on appeal are: (1) whether Traders had sufficient minimum contacts with Iowa so that the courts could take jurisdiction of this action seeking a personal judgment without violating the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States; and (2) whether the doctrine of Forum Non Conveniens requires that the action be brought in Illinois.

I. The record upon which the special appearance was determined consisted of the petition and attached contract, a brief stipulation and the uncontradicted testimony of Traders' president. From this evidence we distill the following facts.

In June 1966 Traders entered into an agreement with Rath for the purchase of two million pounds of fresh frozen pork gelatin skins at 12cents per pound F.O.B. Waterloo. The contract negotiations were handled by Midwestern Brokerage Co. (Midwestern) of Oak Lawn, Illinois. The president of Traders testified that he was contacted by Midwestern on behalf of Rath. He advised Midwestern as to how many pounds his company would be willing to buy and the price it would pay. Soon thereafter the negotiations were completed and the sale was confirmed by Midwestern.

Traders stipulated through the broker that it wanted shipments made in 120,000 pound lots or as close to that quantity as could be loaded into a rail car. The procedure followed in ordering a load was for Traders to give a shipment order to Midwestern who in turn would contact Rath. Rath would then load the shipment into a railroad car, obtain a bill of lading from the carrier and forward it along with a sight draft to Traders' Chicago bank. Traders would then pay the bank the amount of the draft and receive the bill of lading entitling it or its consignee to possession at the destination. The skins were shipped from Waterloo before Traders received and accepted the sight drafts.

Pursuant to this arrangement, Traders gave shipping instructions for and cars were sent to: Grays Lake, Illinois; Stoneham, Massachusetts; Scranton, Pennsylvania; Laredo, Texas; and Artificial Ice & Fuel Co., Waterloo. The two shipments to Artificial Ice 'were interim shipments made at Rath's request to reduce the amount of products stored at its warehouse'. These shipments 'were received for the account of Traders pending receipt of shipping instructions from its customers.'

Traders' customers began complaining that the pork skins were too fat. Traders conveyed their dissatisfaction to Rath through phone calls made by Midwestern. They also wrote some letters directly to Rath. In September or October 1966 Traders' president, at the suggestion of Midwestern, made a one-day visit to the Columbus Junction and Waterloo plants to see the skins. He had a conference with Mr. McGuire of the Rath Company. No other trips to Iowa were made by any of Traders representatives in connection with this contract.

After a shipment in November of 1967 Traders refused to accept any further delivery. At this time almost 1,300,000 pounds of the skins had been delivered. Rath was forced to sell the remaining skins elsewhere at a loss. It then brought this action for breach of contract alleging damages of $51,000.

Defendant's contacts with Iowa upon which plaintiff relies to satisfy the Due Process Clause of the Fourteenth Amendment are: (1) The trip to Iowa by defendant's president to discuss complaints received by Traders about the condition of the pork skins. (2) The temporary storage of the skins in Iowa at plaintiff's request and for its benefit. (3) The contract provision for shipment F.O.B. Waterloo to out of state destinations specified by Traders. (4) The size of the order and the shipping in carload lots at defendant's order contemplated a relationship of considerable duration.

In overruling defendant's special appearance, the trial court found sufficient minimum contacts with Iowa in the 'F.O.B. Waterloo' provision of the contract. This is the most important factor in the case, but the other matters are also relevant. Considering all factors, however, we cannot agree the evidence is sufficient to give the Iowa courts in personam jurisdiction over defendant.

II. Since International Shoe Co. v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, courts and legal writers have endeavored to define the constitutional limits of a state's jurisdiction over nonresidents. Hanson v. Denckla (1958), 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283; McGee v. International Life Insurance Co. (1957), 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; L. D. Reeder Contractors of Arizona v. Higgins Industries Inc. (9th Cir. 1959), 265 F.2d 768; Compania de Astral S.A. v. Boston Metals Co. (1954), 205 Md. 237, 107 A.2d 357; Fourth Northwestern Natl. Bank of Minneapolis v. Hilson Industries (1962), 264 Minn. 110, 117 N.W.2d 732; Dahlberg Co. v. Western Hearing Aid Center (1961), 259 Minn. 330, 107 N.W.2d 381; Sun-X International Company v. Witt (Tex.Civ.App.1967), 413 S.W.2d 761; Conn v. Whitmore (1959), 9 Utah 2d 250, 342 P.2d 871; Tyee Construction Co. v. Dulien Steel Products, Inc. (1963), 62 Wash.2d 106, 381 P.2d 245; Reese and Galston, Doing an Act or Causing Consequences as a Basis of Judicial Jurisdiction, 44 Iowa L.Rev. 249; Thode, In Personam Jurisdiction, 42 Texas Law Rev. 279; Annos.: Doctrine of Pennoyer v. Neff, 2 L.Ed.2d 1664; Jurisdiction--Non-resident--Contracts, 23 A.L.R.3d 551; Jurisdiction--Transaction in State, 20 A.L.R.3rd 1201.

We also have dealt with various aspects of the problem. Miller v. Vitalife Corporation of America (Iowa, 1969), 173 N.W.2d 91; Tice v. Wilmington Chemical Corp. (1966), 259 Iowa 27, 141 N.W.2d 616, 143 N.W.2d 86; Andersen v. National Presto Industries, Inc. (1965), 257 Iowa 911, 135 N.W.2d 639; Hill v. Electronics Corporation of America (1962), 253 Iowa 581, 113 N.W.2d 313. See also: Midwest Packaging Corporation v. Oerlikon Plastics, Ltd. (D.C.1968), 279 F.Supp. 816.

The American Law Institute in the Proposed Official Draft of the Restatement of Conflict of Laws, Second, May 2, 1967 states: 'A state has power to exercise judicial jurisdiction over a foreign corporation which has done, or has caused to be done, an act in the state as to any cause of action not in tort arising from the act unless the nature of the act and of the corporation's relationship to the state makes the exercise of such jurisdiction unreasonable.' § 49(2). See also § 36(2) and the discussion thereunder. The courts have been more specific in their statement of the requirements for jurisdiction.

'(D)ue 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'.' International Shoe Company v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102.

'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. (Citing cases)

'But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.' Ibid., 326 U.S. at 319, 66 S.Ct. at 160, 90 L.Ed. at 104.

'It is sufficient for...