STACEY L. SHERBURNE d/b/a G&S LAMBS, Plaintiff-Appellant,
ASHTON STATE BANK, a Nebraska Corporation, Defendant-Appellee.
from the Iowa District Court for Butler County, Rustin T.
Sherburne appeals the district court's dismissal of his
action against Ashton State Bank for lack of jurisdiction.
J. Pepples, Parkersburg, for appellant.
Seda of Clark, Butler, Walsh & Hamann, Waterloo, for
Considered by Bower, C.J., and Vaitheswaran and Doyle, JJ.
resident Stacey Sherburne, doing business as G&S Lambs,
purchased $33, 222.20 worth of lambs from a Nebraska
resident. Ashton State Bank, located in Nebraska, held a
security interest in the lambs. Sherburne filed a petition
for declaratory judgment against the bank seeking a
determination that its security interest was "not
enforceable in the State of Iowa," "was never
perfected" in Iowa, and was "junior to" his
State Bank moved to dismiss the action for lack of personal
jurisdiction. The district court granted the motion after
concluding the bank did not have sufficient minimum contacts
with Iowa. The court also rejected Sherburne's contention
that the court could exercise in rem jurisdiction, reasoning
Sherburne's claim was not "against $33, 222.20 worth
of lambs" because the lambs were "sold and no
appeal, Sherburne argues, "The trial court missed the
nature and application of in rem jurisdiction under the facts
of this case." Our review is for errors of law. See
Book v. Doublestar Dongfeng Tyre Co. Ltd., 860 N.W.2d
576, 582 (Iowa 2015).
over two decades ago, the Iowa Supreme Court stated
jurisdiction based on the physical presence of a person's
property in the forum-otherwise known as in rem or quasi in
rem jurisdiction-was "swept away in Shaffer v.
Heitner, 433 U.S. 186');">433 U.S. 186 [(1977)]." In re Marriage
of Kimura, 471 N.W.2d 869, 873 (Iowa 1991). According to
the court, Shaffer effectively "equated in
personam jurisdiction with in rem and quasi in rem
jurisdiction," meaning "a plaintiff [in Iowa] who
is unable to obtain personal jurisdiction over a defendant
will be unable to obtain quasi in rem jurisdiction by virtue
of the presence of defendant's property in the
state." Id. at 873-74; see also Percival v.
Bankers Tr Co., 450 N.W.2d 860, 863 (Iowa 1990)
("We think the considerations articulated by the Court
in Shaffer are dispositive of the controversy before
us."). Although the supreme court exempted
dissolution-of-marriage proceedings from
Shaffer's holding, the court did not otherwise
distance itself from the minimum-contacts test reaffirmed in
Shaffer. Kimura, 471 N.W.2d at 875; see
Shaffer, 433 U.S. at 207 ("[I]n order to justify an
exercise of jurisdiction in rem, the basis for jurisdiction
must be sufficient to justify exercising 'jurisdiction
over the interests of persons in a thing.' The standard
for determining whether an exercise of jurisdiction over the
interests of persons is consistent with the Due Process
Clause is the minimum-contacts standard elucidated in
International Shoe [v. Washington, 326 U.S. 310,
316-17 (1945)]." (internal citation and footnote
omitted)). In fact, the supreme court continued to recognize
the minim um-contacts test, albeit in a more abbreviated
form. See Ostrem v. Prideco Secure Loan Fund, LP,
841 N.W.2d 882, 891-93 (Iowa 2014) (stating "[t]he
touchstone of the due-process analysis remains whether the
defendant has sufficient minimum contacts with [the forum
state] such that the maintenance of the suit does not offend
traditional notions of fair play and substantial
justice" but moving away from the traditional
"five-factor test" to "the modern framework,
which evaluates . . . whether the defendant has purposefully
directed his activities at residents of the forum and whether
the litigation results from alleged injuries that arise out
of or relate to those activities" (internal quotations
and citations omitted)); see also Addison Ins. Co. v.
Knight, Hoppe, Kurnik & Knight, LLC, 734 N.W.2d 473,
476 (Iowa 2007) ("The minimum contacts test is meant to
insure the fairness and reasonableness of requiring a
nonresident to defend a lawsuit in the forum state."
(quoting Taylor v. Trans-Action Assocs.,
Inc., 509 N.W.2d 501, 504 (Iowa Ct. App. 1993));
Ross v. First Savings Bank of Arlington,
675 N.W.2d 812, 816 (Iowa 2004) (considering five factors to
determine whether nonresident bank had sufficient minimum
contacts with Iowa).
noted, the district court found insufficient minimum contacts
between Ashton State Bank and Iowa. The court provided the
Ashton State Bank did not have any direct contact with Iowa.
It did not deal directly with Stacey Sherburne or G&S
Lambs. It does not do business in Iowa, and it does not
conduct any activity in Iowa. Its one and only connection
with the state of Iowa is the fact that one of its customers
sold lambs to an Iowa resident and the bank had a security
interest in those lambs.
The Court concludes that under any test, the bank does not
have sufficient minimum contacts with Iowa. The bank did
nothing to purposely direct its activities to residents of
the state of Iowa. The bank's only involvement in the
state of Iowa was through its security of the property in the
possession of its customer . . . . There is not any basis to
conclude that the bank is in any way bound by the acts of
[its customer] when the bank did not have any possessory
interest in the lambs.
The fact that the lambs were sold to an Iowa purchaser is
certainly a random or attenuated contact with Iowa. Rather
than expecting the lambs to be sold to someone else, let
alone someone in another state, the nature of the bank's
security interest suggests that the bank expected the lambs
to remain with [its customer] unless the bank otherwise
consented to the sale of the lambs. Even if it can be argued
that it was foreseeable that [the customer] would have defied
the bank's security interest and gone ahead and sold the
lambs, there was no way for the bank to know that those lambs
in question would have been sold to someone in Iowa as