Simonson v. International Bank

• Decision Date: 04 June 1964
• Citation: 200 N.E.2d 427,251 N.Y.S.2d 433,14 N.Y.2d 281
• Parties: , 200 N.E.2d 427 Albert C. SIMONSON, Appellant, v. INTERNATIONAL BANK, Also Known as International Bank of Washington, Respondent, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 433

251 N.Y.S.2d 433

14 N.Y.2d 281, 200 N.E.2d 427

Albert C. SIMONSON, Appellant, v. INTERNATIONAL BANK, Also Known as International Bank of Washington, Respondent, et al., Defendants.

Court of Appeals of New York.

June 4, 1964.

Barry Golomb, New York City, for appellant.

Emanuel Becker, New York City, for respondent.

FULD, Judge.

The primary question presented by this appeal is whether the provisions of the new CPLR (§ 302), effective September 1, 1963, and the principles embodied therein, enlarging the bases for acquiring personal jurisdiction over foreign corporations and nonresident persons, have retroactive application to previously instituted actions.

This action, to recover damages for breach of a joint venture agreement, alleged in the complaint to have been made in New York in 1955, was instituted in the Supreme Court in 1960. The plaintiff is a Connecticut resident who formerly resided in New York, the defendant International Bank, an Arizona corporation with its principal offices in Washington, D. C. Service of the summons and complaint was made on a director of the defendant in New York. Asserting that it has no office or other facilities in this State, and that it does no business now and has never engaged in any business activity of any kind here, the defendant moved for an order setting aside service of the summons and complaint and dismissing the complaint on the ground that it is not subject to the jurisdiction of our State courts. Special Term granted the motion in August, 1960, the Appellate Division unanimously affirmed the resulting order in March of 1962 and we granted leave to appeal in May, 1963 all prior to the effective date of the CPLR.

Beyond the bare allegation in the complaint that the contract in suit was 'made' in New York, ¹ the record is devoid of any factual showing in support of that allegation or of the plaintiff's submission that there is sufficient nexus between this State and the defendant foreign corporation, or the transaction in suit, to render such defendant amenable to the process of our State courts.

We may briefly dispose of the plaintiff's reliance on former section 225 of the General Corporation Law (now Business Corporation Law, Consol.Laws, c. 4, § 1314, subd. (b)), delineating the classes of cases including an 'action * * * brought to recover damages for the breach of a contract made within the state' (subd. 1) in which our courts may entertain an action by a nonresident against a foreign corporation. That section, reflecting this State's policy against lending its courts to the resolution of disputes between nonresident parties (cf. Matter of Banque de France v. Supreme Ct., 287 N.Y. 483, 486, 41 N.E.2d 65, 66; Murnan v. Wabash Ry. Co., 246 N.Y. 244, 158 N.E. 508, 54 A.L.R. 1522), was designed solely to block out an area of subject-matter jurisdiction in which our courts are made available for suits, otherwise properly brought, against a foreign corporation. (See, e. g., Swift & Co. v. Obcanska Zalozna v. Karline, 245 N.Y. 570, 157 N.E. 861; Robinson v. Oceanic Steam Nav. Co., 112 N.Y. 315, 322-323, 19 N.E. 625, 626-627, 2 L.R.A. 636; Cala v. Luis De Ridder Ltda., 17 A.D.2d 729, 232 N.Y.S.2d 284.) That section 225 was never intended to measure the permissible reach of the courts' in personam jurisdiction over foreign corporations is plainly evidenced by the Legislature's juxtaposition of that section with its companion section 224 (now Business Corporation Law, § 1314, subd. (a)), which sanctions the maintenance of any action by a resident against a foreign corporation. In short, both sections presuppose that the particular foreign corporation is otherwise subject to the jurisdiction of our State courts. (See Gregonis v. Philadelphia & Reading Coal & Iron Co., 235 N.Y. 152, 158, 139 N.E. 223, 225, 32 A.L.R. 1.)

Under our decisional law prior to the adoption of the CPLR, a foreign corporation, not authorized to do business in this State, was held amenable to local suit only if it was engaged in such a continuous and systematic course of 'doing business' here as to warrant a finding of its 'presence' in this jurisdiction. (See, e. g., Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 176 N.Y.S.2d 318, 151 N.E.2d 874; Elish v. St. Louis Southwestern Ry. Co., 305 N.Y. 267, 112 N.E.2d 842; Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915.) It is clear that, at the time this action was brought, the defendant bank was not so engaged. The 'doing business' test was initially dictated by the due process requirements of the Federal Constitution as formerly interpreted by the United States Supreme Court. (See Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S. 516, 43 S.Ct. 170, 67 L.Ed. 372; Philadelphia & Reading Ry. Co. v. McKibbin, 243 U.S. 264, 268, 37 S.Ct. 280, 61 L.Ed. 710; International Harvester Co. v. Kentucky, 234 U.S. 579, 586, 587, 34 S.Ct. 944, 58 L.Ed. 1479.)

In 1945, however, the Supreme Court in its landmark decision in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, relaxing the demands of due process, squarely rejected the requirements of 'presence' and 'doing business' and held that 'due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice" (326 U.S., at p. 316, 66 S.Ct., at p. 158). And, thereafter, in McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223, the court upheld the power of a state to subject a foreign corporation to suit in its courts on an isolated insurance contract 'which had substantial connection with that State'. ²

While those decisions broadly expanded the power of this State to subject foreign corporations and nonresident individuals, not 'present' in the forum, to the personal jurisdiction of its courts, the Legislature took no steps to exercise that power until the enactment of the CPLR. The courts likewise continued to apply the traditional 'doing business' test (see, e. g., Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 176 N.Y.S.2d 318, 151 N.E.2d 874, supra; Elish v. St. Louis Southwestern Ry. Co., 305 N.Y. 267, 112 N.E.2d 842, supra; Sterling Novelty Corp. v. Frank & Hirsch Distr. Co., 299 N.Y. 208, 86 N.E.2d 564; Fremay, Inc. v. Modern Plastic Machinery Corp., 15 A.D.2d 235, 222 N.Y.S.2d 694), though there were occasional suggestions that that standard might be relaxed in accordance with the later Supreme Court decisions. (See Matter of La Belle Creole Int. v. Attorney-General, 10 N.Y.2d 192, 197, 219 N.Y.S2d 1, 5, 176 N.E.2d 705, 707; Elish v. St. Louis Southwestern Ry. Co., 305 N.Y. 267, 269, 112 N.E.2d 842, 843, supra; Pine & Co. v. McConnell, 298 N.Y. 27, 30, 80 N.E.2d 137.)

The plaintiff now seeks to have this court modify the prior decisional law, without regard to the legislative changes effected by the CPLR by declaring retroactively that the new jurisdictional standards set forth in International Shoe Co., 326 U.S. 310, 66 S.Ct. 154, supra, and McGee, 355 U.S. 220, 78 S.Ct. 199, supra, were automatically rendered applicable in this action against defendant corporation at the date of its commencement in July, 1960. His position seems to be that the 'doing business' restriction was the product not of legislative action but of judicial decision predicated on prevailing Supreme Court interpretations of the due process clause, and that such erstwhile restriction should correspondingly be judicially relaxed to conform to the more recent Supreme Court pronouncements. And, indeed, this has been the approach taken in several states. (See, e. g., Jahn & Son v. Superior Ct., 49 Cal.2d 855, 858, 859, 323 P.2d 437; Huck v. Chicago, St. P., M. & O. Ry. Co., 4 Wis.2d 132, 90 N.W.2d 154.)

Although this court has not hesitated to discard prior precedent where adherence thereto 'offers not justice but unfairness, not certainty but doubt and confusion' (Bing v. Thuning, 2 N.Y.2d 656, 667 163 N.Y.S.2d 3, 11, 143 N.E.2d 3, 9; see, also, Woods v. Lancet, 303 N.Y. 349, 355, 102 N.E.2d 691, 694), it is preferable to defer to legislative action where the fashioning of a new rule would require 'consideration of a variety of possible remedies' or, perhaps, result in unfairness to persons who have justifiably relied on a prior rule of long standing. (See, e. g., Woods v. Lancet, 303 N.Y. 349, 355-356, 102 N.E.2d 691, 694, supra; Coyne v. Campbell, 11 N.Y.2d 372, 376, 230 N.Y.S.2d 1, 4, 183 N.E.2d 891, 893.)

There can be no doubt that International Shoe Co., 326 U.S. 310, 66 S.Ct. 154, supra and McGee, 355 U.S. 220, 78 S.Ct. 199, supra, opened a borad, largely undefined area for state exercise of jurisdiction over foreign corporations. (See Hoffman, The Plastic Frontiers of State Judicial Power Over Non-Residents, 24 Brooklyn L.Rev. 291, 297; Note, 73 Harv.L.Rev. 909, 998-1008.) The standard declared in those cases, of 'traditional notions of fair play and substantial justice', is itself, at best, rather vague and nebulous. The formulation of specific rules to implement such a standard seems more appropriately the function of the Legislature than of the courts. There is the added consideration that legislation, as distinguished from judicial revision, is the more suitable vehicle for fixing precise jurisdictional guidelines for the future; only through such legislation may foreign corporations be put on notice that they run the risk of being exposed to suit here, even though they may not be 'doing business' in New York, if they 'have occasion to enter the state for the purpose of making contracts here'. (Ames v. Senco Prods., 1 A.D.2d 658, 146 N.Y.S.2d 298; see, also, Restatement, Conflict of Laws 2d, Tent.Draft No. 3 (April, 1956), § 84, Comment e, 'Necessity for statute'; id. § 85,...