Opinion
No. 2-053 / 00-1694
Filed August 28, 2002
Appeal from the Iowa District Court for Polk County, George W. Bergeson, Judge.
Defendants appeal from the trial court's interlocutory ruling denying their motion to dismiss for lack of personal jurisdiction.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Stephen D. Hardy of Grefe Sidney, P.L.C., Des Moines, for appellants.
Jeffrey L. Goodman of Jeffrey L. Goodman, P.C., West Des Moines, for appellee.
Considered by Mahan, P.J., and Miller and Hecht, JJ.
Goforth Tractor, Inc. (hereinafter "Goforth Tractor"), Lynn Goforth, and Ethel Goforth appeal, following grant of interlocutory appeal, from the trial court's ruling denying their motion to dismiss for lack of personal jurisdiction. They contend (1) the evidence fails to establish sufficient minimum contacts between them and the State of Iowa, (2) Ethel was not timely served and has no connection to the agreements being sued upon, and (3) pursuant to the fiduciary-shield doctrine, no contacts between Goforth Tractor and plaintiff Agricredit Acceptance Company, L.L.P., can be weighed against Lynn or Ethel. We affirm in part, reverse in part, and remand to the trial court for further proceedings.
I. BACKGROUND FACTS.
Agricredit Acceptance Company, L.L.C., d/b/a Agricredit Acceptance Company (hereinafter "Agricredit"), is a Delaware limited liability company that provides financing for sales of farm equipment. Its North American headquarters are located in Des Moines, Iowa. Agricredit has more than 300 agricultural equipment dealers in forty-eight states that seek financing of equipment sales from Agricredit at its Des Moines headquarters.
Gorforth Tractor is a Virginia corporation located in Max Meadows, Virginia, where its president, Lynn Goforth, resides. On July 8, 1986, Lynn Goforth, as president of Goforth Tractor, signed a retail financing agreement establishing terms and conditions regarding assignment by Goforth Tractor, and acceptance by Agricredit, of retail installment contracts relating to the sale or lease by Goforth Tractor of agricultural and industrial equipment to Goforth Tractor's retail customers. To induce Agricredit to extend retail financing facilities to Goforth Tractor, on July 8, 1986, Lynn Goforth also signed a personal guarantee regarding Goforth Tractor's liabilities to Agricredit. On August 21, 1986, Ethel Goforth, of Olin, North Carolina, Lynn's mother, who was then apparently the secretary and treasurer of Goforth Tractor, signed a personal guarantee regarding the liabilities of Goforth Supply, Inc. (hereinafter "Goforth Supply"), a North Carolina corporation, to Agricredit.
Lynn and Ethel have never resided in Iowa, nor do they own any property in this state. They have never been physically present in this state except for a personal trip in 1957.
On September 2, 1986, Agricredit accepted in Des Moines the retail financing agreement that was signed by Lynn for Goforth Tractor on July 8, 1986. On December 22, 1992, Lynn Goforth, as president of Goforth Tractor, signed a recourse supplement to the 1986 retail financing agreement. It was accepted by Agricredit in Des Moines on January 7, 1993.
In November 1992 Wyle Maloyed entered into a lease agreement and a lease agreement purchase option supplement with Goforth Tractor. Goforth Tractor then assigned the lease agreement to Agricredit at its office in Des Moines. In August 1996, Maloyed entered into a retail installment contract and security agreement with Goforth Tractor. Goforth Tractor again assigned the retail installment contract and security agreement to Agricredit at its head office in Des Moines. In February 1998, Agricredit renewed and refinanced Maloyed's retail installment contract and lease. Agricredit has terminated Goforth Tractor as an authorized Agricredit dealer.
Agricredit filed suit against Goforth Tractor, Lynn, and Ethel (collectively "defendants") in June 2000 seeking the balance due under the financing agreements issued to Goforth Tractor and Maloyed. The defendants filed a motion to dismiss for lack of personal jurisdiction. The district court denied the motion, concluding that the defendants had sufficient minimum contacts with the State of Iowa. It also determined that Lynn's acceptance of service on behalf of Ethel, together with Agricredit's act of re-serving her personally, cured any defect in the service of process on her. It found the defendants were not immunized from personal jurisdiction under the fiduciary shield doctrine. The defendants appeal.
II. SCOPE AND STANDARDS OF REVIEW.
When reviewing a ruling on a motion to dismiss for lack of personal jurisdiction, the district court's factual findings have the effect of a jury verdict, and they are subject to challenge only if not supported by substantial evidence. All Tech Inc. v. Power Prod. Co., 581 N.W.2d 202, 203 (Iowa Ct.App. 1998). We are not bound by the court's application of legal principles or its conclusions of law. Id. Allegations of a petition other than those that go to the merits of a claim may be contradicted by affidavits, testimony, and other evidence. Martin v. Ju-Li Corp., 332 N.W.2d 871, 873 (Iowa 1983). Allegations that go to the merits of a claim, however, are taken as true and are not subject to contradiction in a proceeding on a motion to dismiss for lack of personal jurisdiction. Id. The plaintiff has the burden to sustain the requisite jurisdiction, but when the plaintiff has established a prima facie case for jurisdiction the defendant has the burden to produce evidence to rebut or overcome it. Bankers Trust Co. v. Fidata Trust Co., 452 N.W.2d 411, 414 (Iowa 1990).
III. MINIMUM CONTACTS.
Under the Due Process Clause of the Fourteenth Amendment to the United States Constitution, personal jurisdiction exists over a nonresident defendant only when that defendant has "certain minimum contacts with [the forum state] such that the maintenance of the suit [in Iowa] does not offend `traditional notions of fair play and substantial justice.'" Universal Coops., Inc. v. Tasco, Inc., 300 N.W.2d 139, 143 (Iowa 1981) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945)). These minimum contacts must be such that there is a sufficient connection between the defendant and forum state so as to make it fair to force the defendant to defend the action in that state. In re Marriage of Wallick, 524 N.W.2d 153, 157 (Iowa 1994). The critical focus is on the relationship between the defendant, the forum, and the litigation. Meyers v. Kallestead, 476 N.W.2d 65, 67 (Iowa 1991) (citing Rush v. Savchuk, 444 U.S. 320, 327, 100 S.Ct. 571, 576, 62 L.Ed.2d 516, 524 (1980)). In analyzing due process principles, we ordinarily consider five factors:
(1) the quantity of the contacts;
(2) the nature and quality of the contacts;
(3) the source and connection of the cause of action with those contacts;
(4) the interest of the forum state; and
(5) the convenience of the parties.
Hodges v. Hodges, 572 N.W.2d 549, 552 (Iowa 1997).
The defendants would have us focus on the creation of the contract between the parties in 1986 to analyze whether they have had sufficient minimum contacts with Iowa. We note that a contract alone cannot automatically establish sufficient contacts. Cascade Lumber Co. v. Edward Rose Bldg. Co., 596 N.W.2d 90, 92 (Iowa 1999) (citation omitted). However, in this case, as in Cascade, the initial contract developed into a contractual relationship which lasted several years and involved continuing contacts. See id. at 92-93. Therefore, we look at the ongoing relationship between the defendants, Iowa, and the litigation to determine whether the defendants had sufficient minimum contacts with this state.
A. Goforth Tractor. We first consider whether the assertion of personal jurisdiction over Goforth Tractor offends the dictates of the Due Process Clause. Goforth Tractor has had multiple contacts with Iowa. Agricredit accepted the parties' 1986 agreement in Des Moines, and accepted the 1992 recourse supplement in Des Moines. Goforth Tractor communicated with Agricredit via phone calls, mailings, and faxes numerous times during the years of its relationship with Agricredit. The contracts being sued upon were submitted by Goforth Tractor to Agricredit in Des Moines for the approval of financing. In fact, Goforth Tractor submitted numerous applications to Agricredit in Des Moines. From 1993 to the termination of the parties' relationship, Goforth Tractor submitted more than fifty retail installment contracts and/or leases to Agricredit in Des Moines for financing. The total amount financed by Agricredit on behalf of Goforth Tractor during that time period was approximately $744,611. Although records for the period from 1986 to 1993 were not readily available, Agricredit indicated it financed numerous other retail installment contracts and/or leases for Goforth Tractor's customers during that period.
Agricredit maintained a dealer reserve account for Goforth Tractor's benefit in Des Moines. This account was comprised of one percent of the total scheduled payments due under each retail installment contract and/or lease issued to Goforth Tractor's customers. Agricredit maintained for and forwarded to Goforth Tractor a retail finance ledger statement, which included information regarding the current balance of the reserve account. Agricredit also prepared and provided periodic reports for Goforth at its headquarters in Des Moines. These reports provided information regarding the current status of the retail contracts and/or leases, including the original amount financed, the total owing, the payoff amount, the account balance as of a particular date, and any past due indebtedness. In evaluating these contacts, we conclude the first three factors weigh heavily in favor of finding that Goforth Tractor had sufficient minimum contacts with Iowa such that it could expect to be haled into an Iowa courtroom.
We also conclude the last two factors weigh at least minimally in favor of personal jurisdiction over Goforth Tractor in Iowa. The State of Iowa has a strong interest in protecting its residents from damage as a result of breaches of contractual duties by nonresident defendants. Berkley Int'l Co. v. Devine, 289 N.W.2d 600, 605 (Iowa 1980). Furthermore, the convenience of the parties weighs in favor of jurisdiction in Iowa as well. Agricredit expects to call numerous witnesses from its headquarters in Des Moines and it appears reasonably possible that following dismissal of this lawsuit as against Ethel Goforth as ordered below Lynn Goforth may be the only material witness for the two remaining defendants. We conclude the trial court did not err in overruling the defendants' motion to dismiss as to Goforth Tractor for lack of personal jurisdiction.
B. Lynn Goforth. We next consider whether Iowa may exercise personal jurisdiction over Lynn. He signed a personal guarantee in which he
absolutely and unconditionally personally [guaranteed] the due and punctual payment to Agricredit Acceptance Corporation . . . of the liabilities which [Goforth Tractor] has incurred or is under or may incur or be under to [Agricredit], whether arising from dealings between [Agricredit] and [Goforth Tractor] or from other dealings by which [Agricredit] may become in any manner whatever a creditor of [Goforth Tractor] . . . .
In an absolute guaranty, liability is imposed upon the guarantor immediately upon default of the principal debtor regardless of whether the guarantor has received notice of the default. Williams v. Clark, 417 N.W.2d 247, 251 (Iowa Ct.App. 1987). A guaranty is absolute unless its terms contain a condition precedent to the guarantor's liability. Id. There is no condition precedent in the guarantee here. Furthermore, according to the allegations in the petition, allegations which go to the merits and must for present purposes be accepted as true, Goforth Tractor owes Agricredit $26,529.22 which Agricredit has demanded from Goforth Tractor to no avail. Thus, liability was imposed upon Lynn immediately upon Goforth Tractor's default.
The question remains whether Iowa has personal jurisdiction over Lynn as the guarantor of Goforth Tractor. We note that Lynn was the president of Goforth Tractor. He signed the guarantee agreement with the purpose of inducing Agricredit to extend retail financing facilities to Goforth Tractor. The guarantee was ongoing. He became personally obligated to pay Goforth Tractor's liabilities to Agricredit. Therefore, he created substantial, ongoing connections between himself and the State of Iowa. We conclude that Lynn had sufficient contacts with the State of Iowa such that he would reasonably expect to be haled into the courts of this state. See Hager v. Doubletree, 440 N.W.2d 603, 606-09 (Iowa 1989) (holding that nonresident personal guarantors of nonresident incorporated insurance agencies, who were principal officers in their companies and signed guaranty agreements to induce a resident corporation to do business with them, created substantial, ongoing connections between themselves and the State of Iowa, and were therefore subject to the jurisdiction of the State of Iowa). But cf. Bankers Leasing Co. v. Eagle Valley Environmentalists, Inc., 387 N.W.2d 380, 383 (Iowa Ct.App. 1986) (finding personal guaranty alone was not sufficient to vest Iowa with personal jurisdiction over nonresident guarantor where he was not guarantor of Iowa corporation nor did he engage in tortious wrongdoing, and his guaranty was for a corporate purpose as opposed to a personal purpose).
C. Ethel Goforth. Last, we consider whether Ethel had sufficient minimum contacts such that Iowa may exercise personal jurisdiction over her. Agricredit's petition alleged Ethel executed a personal guarantee in favor Agricredit on or about August 21, 1986, and incorporated by reference an attached guarantee. Agricredit relies on that guarantee, and "numerous contacts between and among Goforth Tractor, Inc. and Lynn and Ethel Goforth and representatives of Agricredit at its North American headquarters in Polk County, Iowa," as the contacts justifying personal jurisdiction of Ethel in this case. Ethel did execute a personal guarantee in favor of Agricredit. However, as shown by the plaintiff's own petition as well as Ethel's affidavit, it guaranteed payment of the liabilities of Gorforth Supply, a North Carolina corporation, not Goforth Tractor, the Virginia corporation involved in this lawsuit. Further, Agricredit's allegation of "numerous contacts" between Ethel and the other defendants on the one hand and Agricredit on the other does not claim that any contacts by Ethel were in her individual capacity rather than a corporate capacity, and no substantial evidence indicates that any such contacts were in her individual capacity. We conclude Agricredit has not met its burden of making a prima facie showing that Ethel had personal, individual contacts with the State of Iowa sufficient to establish jurisdiction of her person. We reverse the trial court as to her.
IV. FIDUCIARY SHIELD DOCTRINE.
The defendants argue that pursuant to the fiduciary shield doctrine, no contacts between Goforth Tractor and Agricredit can be weighed against Ethel or Lynn. Because we have already determined Iowa does not have personal jurisdiction over Ethel, we analyze only whether the fiduciary shield doctrine applies to Lynn.
We conclude that Lynn is subject to the jurisdiction of the State of Iowa by virtue of his acts as guarantor, and not as a corporate officer of Goforth Tractor. Pursuant to the fiduciary shield doctrine, a nonresident corporate agent is not individually subject to the forum state's in personam jurisdiction if that individual's only contact with the state is by virtue of his acts as a fiduciary of the corporation. State ex rel. Miller v. Internal Energy Mgmt. Corp., 324 N.W.2d 707, 711-12 (Iowa 1982). Status as a corporate employee does not insulate from personal jurisdiction, however. Whalen v. Connelly, 545 N.W.2d 284, 295 (Iowa 1996) (citing Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 1487, 79 L.Ed.2d 804, 813 (1984)). Each defendant's contacts with the forum state are assessed individually. Id. (citing Calder v. Jones, 465 U.S. at 790, 104 S.Ct. at 1487, 79 L.Ed.2d at 813 ). Because we find Lynn is subject to the jurisdiction of Iowa based on his personal guarantee and not on any action as a fiduciary of Goforth Tractor, his status as an employee of Goforth Tractor does not insulate him from the jurisdiction of the courts of this state.
V. CONCLUSION.
We conclude the State of Iowa has personal jurisdiction over Goforth Tractor and Lynn Goforth. We determine Ethel Goforth has not been shown to have sufficient minimum contacts such that Iowa may exercise personal jurisdiction over her. Accordingly, we affirm the trial court's ruling in part, reverse in part, and remand for dismissal of Agricredit's claim as against Ethel Goforth and for further proceedings.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.