Universal Cooperatives, Inc. v. Tasco, Inc.

• Decision Date: 14 January 1981
• Docket Number: No. 63957,63957
• Citation: 300 N.W.2d 139
• Parties: UNIVERSAL COOPERATIVES, INC., Plaintiff, v. TASCO, INC., Defendant. TASCO, INC., Appellee, v. UNIVERSAL COOPERATIVES, INC.; and Bangor Punta Operations, Inc., Appellant.
• Court: Iowa Supreme Court

Page 139

300 N.W.2d 139

UNIVERSAL COOPERATIVES, INC., Plaintiff, v. TASCO, INC., Defendant.

TASCO, INC., Appellee, v. UNIVERSAL COOPERATIVES, INC.; and Bangor Punta Operations, Inc., Appellant.

No. 63957.

Supreme Court of Iowa.

Jan. 14, 1981.

Gene Yagla of Lindeman & Yagla, Waterloo, for appellant, Bangor Punta Operations, Inc. Max E. Kirk of Ball & Nagle, P. C., Waterloo, for appellee, Tasco, inc.

Considered by REYNOLDSON, C. J., and UHLENHOPP, HARRIS, ALLBEE and McGIVERIN, JJ.

McGIVERIN, Justice.

This interlocutory appeal arises out of the efforts of Tasco, Inc., to obtain personal jurisdiction in Iowa over Bangor Punta Operations, Inc., (BPO), a foreign corporation. The trial court overruled BPO's special appearance and BPO has appealed that ruling to us. We affirm.

Tasco is an Iowa corporation located in Shell Rock, Iowa. It manufactures and sells portable livestock confinement units. In 1974 Tasco entered into a contract with one of BPO's wholly owned subsidiaries, Agri-Products Division of Starcraft Company. Starcraft was to manufacture some confinement units for Tasco. BPO is a New York corporation, and Starcraft was located at Goshen, Indiana.

After Starcraft and Tasco made their contract, BPO sold Starcraft to Universal Cooperatives, Inc. Universal sued Tasco in Iowa for a debt that Tasco allegedly owed to Starcraft. Universal is not involved in this appeal. Tasco sought to bring BPO into this action by alleging breach of contract and several business torts arising out of the agreement of BPO's subsidiary, Starcraft, to manufacture the confinement units. Tasco denominated its claim against BPO as a counterclaim. While the only issue before us today is whether an Iowa court has in personam jurisdiction over BPO, we note that Tasco's pleading is not a counterclaim but rather a cross-petition against a third-party defendant, BPO. Iowa R.Civ.P. 34. Since BPO has specially appeared for the sole purpose of attacking the jurisdiction of the Iowa court, Iowa R.Civ.P. 66, 104(a), we need not decide whether BPO may properly be brought in as a third-party defendant under rule 34.

Tasco first attempted to serve BPO under Iowa's long-arm statute, section 617.3, The Code 1975. Section 617.3 gives Iowa courts in personam jurisdiction over a foreign corporation if it "makes a contract with a resident of Iowa to be performed in whole or in part by either party in Iowa, or if such foreign corporation commits a tort in whole or in part in Iowa against a resident of Iowa."

On March 12, 1976, BPO filed a special appearance claiming that service under section 617.3 was improper because the contract with Tasco was not to be performed in Iowa and no torts were committed in Iowa. This special appearance was sustained. The district court ruled that Tasco had failed to meet its burden of proving that the court had jurisdiction under the statutory language of section 617.3. Tasco appealed that ruling. We transferred the case to the court of appeals. On April 28, 1978, the court of appeals affirmed the trial court's sustention of BPO's first special appearance. Universal Cooperatives, Inc. v. Tasco, Inc., 268 N.W.2d 652 (Iowa Ct.App.1978). It expressly declined to decide "the constitutional minimum contacts question."

While the first appeal was pending, Tasco obtained an order from the district court allowing Tasco to serve BPO under Iowa R.Civ.P. 56.1(n) and 56.2. These rules allow service of process, after court order, in any manner "consistent with due process of law."

After service under these rules, BPO specially appeared again. It alleged that the issue of personal jurisdiction had already been litigated and therefore the doctrine of issue preclusion prevented another service of process. BPO also denied that it had the necessary minimum contacts with Iowa to allow service that was consistent with due process. There is no claim by BPO that notice was inadequate. The trial court overruled this special appearance. We granted BPO's application for interlocutory appeal.

The following issues have been preserved for our consideration:

(1) Did the district court have jurisdiction to order service of process under Iowa R.Civ.P. 56.1(n) and 56.2 while Tasco was appealing the quashing of its attempted service under section 617.3, The Code?

(2) In a suit by a resident of Iowa against a foreign corporation, does quashing service for failure to meet the statutory requirements of section 617.3 preclude the issue of whether service is constitutional and therefore available under rules 56.1(n) and 56.2?

(3) Did BPO have the necessary minimum contacts with Iowa so that service was consistent with due process?

I. Jurisdiction to enter order. The district court ordered service on BPO under rules 56.1(n) and 56.2 while Tasco's appeal from a ruling quashing service under section 617.3 was pending. BPO says the court was without jurisdiction to enter the order allowing service under the rules while the appeal was pending. We conclude that the appeal did not divest the district court of jurisdiction to order service under the rules.

The appeal from the quashing of the service under section 617.3 was from a final order. Tasco's appeal, decided by the court of appeals, was of right. Boye v. Mellerup, 229 N.W.2d 719, 720 (Iowa 1975); Saxton v. State, 206 N.W.2d 85, 86 (Iowa 1973). Therefore, the provisions of Iowa R.App.P. 2(b) staying proceedings in the district court after an order granting an interlocutory appeal are inapplicable.

Ordinarily, the filing of a notice of appeal from a final decision divests a district court of jurisdiction until some part of the case is remanded. In re Marriage of Novak, 220 N.W.2d 592, 596 (Iowa 1974); McCauley v. Municipal Court, 254 Iowa 1345, 1346, 121 N.W.2d 96, 96 (1963). We have, however, recognized exceptions to the general rule. A trial court, after a party appeals, retains jurisdiction to proceed on "issues collateral to and not affecting the subject matter of the appeal." In re Estate of Tollefsrud, 275 N.W.2d 412, 417-18 (Iowa 1979).

This case calls for an application of the exception to the general rule. The issue in the first appeal was whether service was proper under the terms of the long-arm statute, section 617.3. As explained in division II, the question of whether service is permissible under the language of section 617.3 is not the same as whether service is constitutional and therefore available under rules 56.1(n) and 56.2. The appeal from quashing service under section 617.3 did not divest the district court of jurisdiction to order service by another collateral method.

A party attempting to serve process on another should be able to appeal an unsuccessful attempt at service and retain the ability to serve the defendant by another method. A party may make more than one attempt at service. Patten v. City of Waterloo, 260 N.W.2d 840, 842 (Iowa 1977). When one attempt is quashed for failure to meet statutory requirements and an appeal is taken, we hold that the trial court retains jurisdiction to enter an order for service under rules 56.1(n) and 56.2. If service under 56.1(n) and 56.2 is successful, the appeal from an unsuccessful attempt at service by another method would be moot.

II. Issue preclusion. In ruling on BPO's first special appearance following an attempt at service under the long-arm statute, section 617.3, the district court decided that Tasco had failed to show that the contract was to be performed in Iowa or that the tort was committed in Iowa. BPO claims the decision on this issue precludes a finding that due process minimum contacts were present to allow later service under rules 56.1(n) and 56.2. We disagree because whether the service of process in this case is consistent with due process is not the same issue as whether the statutory requirements of section 617.3 have been met.

The first step in determining whether the doctrine of issue preclusion applies is to decide whether there is an identity of issues in the successive proceedings. Hunter v. City of Des Moines, 300 N.W.2d 121, 123 (Iowa 1981). The issue determined by the district court and the court of appeals in quashing the first service was only that Tasco had failed to show that service met the statutory requirements of section 617.3. Both courts decided that Tasco failed to prove that a contract was to be performed in Iowa or that a tort was committed in Iowa. Neither court decided whether an Iowa court could constitutionally exercise in personam jurisdiction over BPO because Tasco failed to make the initial showing that BPO came within the terms of the long-arm statute, section 617.3. In short, both courts only decided whether a statute authorized service and concluded it did not. See Larsen v. Scholl, 296 N.W.2d 785, 787 (Iowa 1980).

In contrast, the issue determined by the district court in ruling on BPO's latest special appearance following service under rules 56.1(n) and 56.2 was whether service could be made "consistent with due process of law." ¹ If service is constitutional, these rules authorize Iowa courts to exercise jurisdiction. The rules allow Iowa courts to exercise jurisdiction that "is coextensive with the outer limitations of constitutional due process." Larsen, 296 N.W.2d at 789. We conclude that quashing service for failure to meet the statutory requirements of section 617.3, where the court does not decide whether service would be constitutional, does not preclude the issue of whether the constitution allows Iowa to exercise in personam jurisdiction.

Whether a state court may exercise jurisdiction consistent with the due process clause depends on whether the defendant has "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 Co. v. Washington, 326 U.S. 310, 316-17, 66 S.Ct. 154, 158-59, 90 L.Ed. 95, 102-03, 161 A.L.R. 1057, 1061 (1945). In applying...