Ross v. Thousand Adventures of Iowa, Inc., No. 6-291/04-1546 (Iowa App. 7/12/2006), 6-291/04-1546
| Decision Date | 12 July 2006 |
| Docket Number | No. 6-291/04-1546,6-291/04-1546 |
| Parties | TONY ROSS, BRIAN and TONI HAMMOND, GEORGE and NADINE HESS, DON and DONNA GERBELING, Individually and on behalf of all other persons similarly situated, Plaintiffs-Appellants, v. THOUSAND ADVENTURES OF IOWA, INC., THOUSAND ADVENTURES, INC., ALLSTATE FINANCIAL, n/k/a HARBOURTON FINANCIAL CORPORATION, TRAVEL AMERICA, INC., WESTERN AMERICAN BANK, N.A., n/k/a FIRST NATIONAL BANK OF THE MID-CITIES, LIBERTY BANK, 900 CAPITAL and TRAVELERS ACCEPTANCE CORP., Defendants-Appellees. |
| Court | Iowa Court of Appeals |
Appeal from the Iowa District Court for Lee (North) County, Cynthia Danielson, Judge.
Plaintiff-appellants appeal the district court's order holding that Iowa does not have personal jurisdiction over defendant-appellee, Liberty Bank. AFFIRMED AS MODIFIED.
Douglas H. Napier of Napier, Wolf & Napier, Fort Madison, for appellant.
Kevin J. Driscoll and Kami M. Lang of Finley, Alt, Smith, Scharnberg, Craig, Hilmes & Gafney, P.C., Des Moines, for appellee.
Heard by Sackett, C.J., and Huitink and Miller, JJ.
Plaintiff's-appellants,1 purchasers of campground memberships via retail installment contracts from Thousand Adventures, Inc. (TAI), appealed the district court's August 27, 2004 order dismissing with prejudice for lack of personal jurisdiction their claim against defendant-appellee, Liberty Bank (Liberty). Our supreme court held the August 27, 2004 order was not a final judgment appealable as a matter of right, but granted permission for the case to proceed as an interlocutory appeal.2 The case was transferred to our court on April 11, 2006.
Plaintiffs obtained a judgment against TAI for failing to fulfill contract obligations. TAI then filed for bankruptcy protection. Liberty, a mutual savings bank formed under the laws of Connecticut, had previously extended to TAI a $4.5 million revolving line of credit. As security TAI assigned certain member-borrowers' installment contracts to Liberty. The district court dismissed plaintiffs' subsequent suit against Liberty for lack of personal jurisdiction, wherein plaintiffs claimed that as a lender, Liberty had certain responsibilities to plaintiffs which responsibilities were breached. On appeal, plaintiffs contend (1) Iowa does have personal jurisdiction over Liberty, (2) the suit should not have been dismissed with prejudice, and (3) the district court erred in denying its motion for leave to add party plaintiffs and motion to enlarge and amend.
We affirm the district court's finding of lack of personal jurisdiction. We modify the judgment to dismiss this case without prejudice. We find plaintiffs' appeal of the other issues is not timely. We affirm as modified.
When reviewing a ruling on a motion to dismiss for lack of personal jurisdiction, the trial court's findings of fact have the effect of a jury verdict and are subject to challenge only if not supported by substantial evidence in the record, but we are not bound by the trial court's application of legal principles or its conclusions of law. Hagan v. Val-Hi, Inc., 484 N.W.2d 173, 175 (Iowa 1992). "We accept the allegations of the petition and the contents of uncontroverted affidavits to be true." Ross v. First Savings Bank of Arlington, 675 N.W.2d 812, 815 (Iowa 2004) (quotation marks and citations omitted).
The power of a state to assert personal jurisdiction over a nonresident defendant to a lawsuit is limited by the Due Process Clause of the Fourteenth Amendment to the federal constitution. Ross, 675 N.W.2d at 815 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413-14, 104 S. Ct. 1868, 1872, 80 L. Ed. 2d 404, 410 (1984)). The requirement of establishing personal jurisdiction protects the liberty interest of an individual, in that the individual will not become bound to a judgment of a state court where there is no meaningful contacts or relations with the state. Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72, 105 S. Ct. 2174, 2181, 85 L. Ed. 2d 528, 540 (1985)). Thus, nonresident defendants must have "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice" in order for the forum state to have personal jurisdiction under the Due Process Clause. Heslinga v. Bollman, 482 N.W.2d 921, 922 (Iowa 1992) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95, 102 (1945)).
"The minimum contacts must show `a sufficient connection between the defendant and the forum state so as to make it fair' and reasonable to require the defendant to come to the state and defend the action." Ross, 675 N.W.2d at 815 (quoting Hodges v. Hodges, 572 N.W.2d 549, 551 (Iowa 1997)). The minimum contacts test makes it "essential in each case that there be some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1240, 2 L. Ed. 2d 1283, 1298 (1958). Random or attenuated contacts are not sufficient for personal jurisdiction to be asserted. Ross, 675 N.W.2d at 816.
The following five factors are considered in determining whether a nonresident defendant has sufficient minimum contacts with Iowa such that the exercise of personal jurisdiction is constitutional: (1) the quantity of the contacts, (2) the nature and quality of the contacts, (3) the source of and connection of the cause of action with those contacts, (4) the interest of the forum state, and (5) the convenience of the parties. Cascade Lumber Co. v. Edward Rose Bldg. Co., 596 N.W.2d 90, 92 (Iowa 1999). The first three factors are most important. Id.
As a preliminary matter we note that Liberty does not have offices, agents, employees, or property in Iowa. Liberty has never conducted any meeting in Iowa, has never been qualified to do business in Iowa, and has never brought a lawsuit in Iowa nor owned any subsidiary that did business in Iowa. However, these facts are not necessarily determinative of personal jurisdiction.
Because the quantity, nature and quality of contacts, and source of and connection of the cause of action with the contacts are closely related, we will consider these factors together.
Plaintiffs argue that because Liberty is an assignee of the original retail installment contracts between TAI and the member-borrowers we must attribute each contract entered into by each member-borrower to Liberty. Thus, plaintiffs claim the contacts between Liberty and State of Iowa are plentiful, as hundreds of the contracts entered into by Iowa residents were assigned to Liberty. The Supreme Court has stated "[e]ach defendant's contacts with the forum State must be assessed individually." Calder v. Jones, 465 U.S. 783, 790, 104 S. Ct. 1482, 1487, 79 L. Ed. 2d 804, 813 (1984); see also Rush v. Savchuk, 444 U.S. 320, 332, 100 S. Ct. 571, 579, 62 L.Ed.2d 516, 520 (1980) (). Thus, in the present case it is improper to judge Liberty's contact with Iowa according to TAI's contacts with Iowa.
The chief contact between Liberty and the State of Iowa, for the purposes of our due process analysis, is the contractual loan agreement between Liberty and TAI which granted Liberty an assignment in certain retail installment contracts held by TAI as security for the loan Liberty extended to TAI. Some of the contracts were executed by Iowa residents.
Pursuant to the loan agreement, Liberty was assigned the right to receive all the amounts due under certain retail installment contracts. Additionally, the language of the loan agreement indicates that Liberty became the physical holder of the contracts assigned.3 The loan agreement further granted Liberty the right to collect on delinquent contracts. Yet, that right was limited, as Liberty could only collect from individual members if TAI failed to pay in full or replace delinquent notes subsequent to Liberty's demand. Additionally, at no time did Liberty actually make any effort to collect payments directly from Iowa members.
"[A] contract alone cannot automatically establish sufficient contacts." Hager v. Doubletree, 440 N.W.2d 603, 607 (Iowa 1989). Rather,
[A] "contract" is "ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of a business transaction." It is these factors—prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing—that must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum. Id. (quoting Burger King, 471 U.S. at 479, 105 S. Ct. at 2185, 85 L. Ed. 2d at 545). When evaluating the contractual dealing between Liberty and TAI the fact that the negotiations between TAI and Liberty did not involve Iowa or take place within the state becomes important. As does the fact that the contract was to be governed by the laws of Connecticut, not Iowa.
Another contact between Liberty and the State of Iowa occurred in the form of Iowa residents making payments on their loans which ultimately went to Liberty. Liberty argues that because these payments were made by the member-borrowers to a third party bank in another state, Nebraska State Bank, pursuant to a "lock box agreement,"4 there was no contact between Iowa and Liberty in the course of these payments. The district court found otherwise, as it was clear all payments made pursuant to the lock box agreement were for the benefit of Liberty and Liberty had approval power over the notice of assignment TAI was to send to members...
To continue reading
Request your trial