Sporcam, Inc. v. Greenman Bros., Inc.

• Decision Date: 10 April 1972
• Docket Number: Civ. No. 11-360-C-2.
• Citation: 340 F. Supp. 1168
• Parties: SPORCAM, INC., Plaintiff, v. GREENMAN BROS., INC., Defendant.
• Court: U.S. District Court — Southern District of Iowa

340 F. Supp. 1168

SPORCAM, INC., Plaintiff, v. GREENMAN BROS., INC., Defendant.

Civ. No. 11-360-C-2.

United States District Court, S. D. Iowa, C. D.

April 10, 1972.

COPYRIGHT MATERIAL OMITTED

Louis A. Lavorato, Des Moines, Iowa, of counsel, Williams & Hart, Des Moines, Iowa, for plaintiff.

Eugene Davis and Glenn L. Smith, Des Moines, Iowa, of counsel, Duncan, Jones, Riley & Davis, Des Moines, Iowa, for defendant.

MEMORANDUM AND ORDER

HANSON, Chief Judge.

This ruling is predicated upon defendant's Motion to Dismiss and Quash Service and plaintiff's Resistance to the same. The matter was heard on December 20, 1971. Plaintiff, Sporcam, Inc., is an Iowa corporation with its principal place of business in Iowa. Defendant, Greenman Bros., Inc., is a New York corporation with its principal place of business in New York. Plaintiff brought this action in state court, alleging breach of contract to purchase certain leaseholds of the plaintiff in Georgia and Florida. Defendant removed the action to federal court and immediately filed its Motion to Dismiss and Quash Service. Defendant asserts that the Court does not have jurisdiction over its person because Iowa Code Section 617.3, the contracts single act statute, was not intended to reach it under these particular facts. Defendant further asserts that it does not have sufficient minimum contacts with the State of Iowa to enable this Court to exercise in personam jurisdiction over it consonent with the due process principles of the Constitution of the United States.

FACTS

From the pleadings and affidavits on file in this cause the following facts appear to be uncontested:

Defendant was not and is not qualified to do business in the State of Iowa, does not have any office or place of business in the State of Iowa, does not maintain any stock of goods or real property in the State of Iowa, and has no resident agent, servant or employee within the State.

In the fall of 1970 plaintiff's president went to New York to talk with the defendant for the purpose of obtaining an open line of credit with the defendant. During these negotiations, in November of 1970, defendant's president, a Mr. Bernard Greenman, and its vice-president, a Mr. Sidney Shotland, asked plaintiff's president if he would be willing to sell plaintiff company. The parties subsequently entered into negotiations on this matter, all face-to-face negotiations occurring outside of the State of Iowa. There were, however, several telephone and letter exchanges between plaintiff in Des Moines and defendant in New York, some of which were initiated by defendant in New York.

In January of 1971, plaintiff mailed to defendant in New York, at defendant's request, a copy of plaintiff's license agreements, additional financial information concerning the company, and a resume of each of plaintiff's managers.

The first draft of the sales contract was prepared in New York by defendant's attorneys and mailed to plaintiff's president in Chicago, where he was attending a meeting. Plaintiff's president took the proposed contract to Des Moines and reviewed it with plaintiff's attorneys. Plaintiff's attorneys called from Des Moines to defendant's attorneys in New York and discussed possible changes in the proposed agreement. Subsequently, in late February of 1971, defendant sent to plaintiff in Des Moines an amendment agreement. Plaintiff's president and its attorneys agreed to further changes, which changes were then agreed to by defendant's attorneys through a telephone conversation between Des Moines and New York. The contract was entered into finally in New York on March 11, 1971.

The contract provided for the sale to the defendant of plaintiff's leasehold interest in license agreements pertaining to leased departments in stores of Bellex Department Stores, Inc., located in Marietta, Hapeville, and Chamblee, Georgia, and in Clearwater, Florida. In addition to proper instruments of title, plaintiff was to convey to defendant all books, records and data relating to the assets, properties, business, customers, and operations of the plaintiff pertaining to the leasehold interests. The purchase price to be paid to plaintiff was to be kept in a special account designated by defendant, such funds to be withdrawn only on the joint signature of an officer of the plaintiff and an officer of the defendant, and to be utilized solely to pay creditors of the plaintiff existing immediately following the contemplated closing. The closing of the sale was to take place in New York at a date to be established, after defendant received plaintiff's audited financial statements.

The plaintiff was required to warrant the following propositions: (1) that the transaction was authorized by the board of directors, unanimously approved by the shareholders, and was in compliance with applicable Iowa law, and that plaintiff has delivered to defendant documents certified by plaintiff's secretary attesting thereto; (2) that plaintiff had delivered an unaudited balance sheet and related unaudited statement of operations for the period ending December 27, 1970, and that plaintiff had had prepared by McGladrey, Hanson, Dunn & Company, certified public accountants, the Des Moines branch of this firm had been plaintiff's accountant at all times previously, a balance sheet relative to the leasehold interests to be transferred for the ten-month period prior to February 28, 1971; (3) that plaintiff shall pay all its creditors the amounts owed to them as they become due; (4) that plaintiff, after December 27, 1970, had made no transaction which would change its financial position, i. e., incurred no obligation or liability, fixed or contingent, except the obligations under the instant agreement and except trade or business obligations incurred in the ordinary course of business, none of which have had or would have an adverse effect upon the condition, financial or otherwise, of plaintiff's business; incurred no damage, destruction or loss, whether or not covered by insurance, adversely affecting its property or business; entered into no transactions other than in the ordinary course of business; mortgaged, pledged or subjected to lien, charge, security interest, or to any other encumbrance none of its assets or properties; and suffered no adverse change in its financial condition, properties or business; (5) that plaintiff had filed all tax returns and paid all taxes due to federal, state, and local governments; (6) that plaintiff owned or leased no other real property, except that listed in the agreement; (7) that plaintiff had delivered to defendant with respect to the leaseholds to be transferred all policies of insurance, all contracts and commitments to which plaintiff was a party, all employer-employee agreements, and the names and rates of pay of all employees; (8) that defendant has the right to cancel any open purchase orders for merchandise for the leaseholds, and in the event such orders cannot be cancelled, plaintiff must take shipment of such non-cancelled merchandise at its Des Moines store, and indemnify and hold defendant harmless against and from any liability for such merchandise; (9) that the plaintiff shall not and had not during the sixty days previous to the signing of the agreement transferred to the leaseholds any merchandise from its Des Moines departments; and, (10) that plaintiff had supplied to defendant (a) the aggregate gross sales figure of each leasehold proposed to be transferred since the commencement of operations thereof by plaintiff through December 27, 1970, (b) a complete and accurate itemization of all fixed assets and furniture and fixtures of plaintiff at said leaseholds and the depreciated amount of each such item as carried on the books of plaintiff at February 28, 1971.

Plaintiff further agreed to give defendant and to defendant's counsel, accountants and other representatives full access throughout the period prior to the closing date to all of its properties, books, contracts, commitments and records and to furnish defendant during such period with all such information concerning plaintiff as defendant reasonably should request. Plaintiff agreed to cause to be prepared by McGladrey, Hanson, Dunn 3 Company a Balance Sheet as of February 28, 1971, and a Profit and Loss Statement for the ten-month period ending February 28th, 1971, for the leasehold interests proposed to be transferred, which Balance Sheet and Profit and Loss Statement was to be audited and was to contain the opinion of the accountants that the financial statements had been prepared in accordance with generally accepted accounting principles and made on a basis consistent with that of prior years, and fairly present the financial position and results of operations of plaintiff for such leasehold interests at the date and for the period indicated.

Plaintiff further agreed to conduct its business in the following manner: (1) to operate its business only in the usual, regular and ordinary manner, and to the extent consistent with such operation, to use its best efforts to preserve its then existing business organization and to preserve its then existing relationships with persons having business dealings with it; (2) to deposit all cash received on and after March 1, 1971, and up to the closing date, in connection with the leasehold interests proposed to be transferred, in bank accounts mutually agreeable to the parties, with withdrawals made only on the joint signatures of plaintiff's president and defendant's president or other representative; (3) to forward to defendant on and after March 1, 1971, all proposed purchase orders prior to forwarding them to vendors, with defendant having the right to veto all such purchase orders; (4) that all cash receipts arising out of the operation of the leaseholds to be transferred, deposited in accordance with the provisions of the contract, are to be utilized solely for plaintiff's payroll, petty...