Lumbermens Mutual Casualty Co. v. Borden Co.

• Decision Date: 07 April 1967
• Docket Number: No. 64 Civ. 1580.,64 Civ. 1580.
• Parties: LUMBERMENS MUTUAL CASUALTY COMPANY, Plaintiff, v. The BORDEN COMPANY, Inc., Blackstone Mutual Insurance Company, Affiliated F. M. Insurance Company, United Engineers and Contractors, Inc., the Wickes Corporation, Vulcan-Cincinnati Corporation, and Monochem, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

268 F. Supp. 303

LUMBERMENS MUTUAL CASUALTY COMPANY, Plaintiff, v. The BORDEN COMPANY, Inc., Blackstone Mutual Insurance Company, Affiliated F. M. Insurance Company, United Engineers and Contractors, Inc., the Wickes Corporation, Vulcan-Cincinnati Corporation, and Monochem, Inc., Defendants.

No. 64 Civ. 1580.

United States District Court S. D. New York.

April 7, 1967.

COPYRIGHT MATERIAL OMITTED

Townley, Updike, Carter & Rodgers, Philip D. Pakula, New York City, for plaintiff, W. Wright Danenbarger, Joseph P. Fazio, Miles F. McDonald, Jr., New York City, of counsel.

Burke & Burke, New York City, for defendants, J. Frederic Taylor, George I. Harris, Marc J. Loost, New York City, of counsel.

MEMORANDUM

TENNEY, District Judge.

Defendant Vulcan-Cincinnati Corporation (hereinafter referred to as "Vulcan") seeks an order (a) dismissing plaintiff's complaint against it for lack of jurisdiction; (b) staying the action as against Vulcan pending arbitration; and (c) granting summary judgment in favor of defendant Vulcan. Plaintiff Lumbermens Mutual Casualty Company (hereinafter referred to as "Lumbermens") has cross-moved for an order that defendant Vulcan's motions be held in abeyance pending further discovery by plaintiff as to the issues raised thereby.

MOTION TO DISMISS FOR LACK OF JURISDICTION

Vulcan claims that jurisdiction was never obtained over it by reason of three different services made by plaintiff on June 11, 1964, July 8, 1964 and May 6, 1966, respectively. The Court will consider each service separately.

June 11, 1964 service—It is conceded by Vulcan that this service conformed with the mechanical requirements of Section 307(a) of the New York Business Corporation Law (hereinafter referred to as the "BCL"), McKinney's Consol.Laws, c. 4. This section, at the time of the June 11, 1964 service, read as follows:

(a) Every foreign corporation not authorized to do business in this state which itself or through an agent does any business in this state submits itself to the jurisdiction of the courts of this state and is deemed to have designated the secretary of state as its agent upon whom process against it may be served, in any action or special proceeding arising out of or in connection with the doing of such business. Such process may issue in any court in this state having jurisdiction of the subject matter.

However, Vulcan contends that said service was invalid for two reasons: (a) the BCL is inapplicable to any claims or liabilities accruing prior to its effective date; (b) assuming that the BCL can be applied retroactively, Vulcan is not "doing business" in New York in the traditional sense as is required by BCL § 307.

In support of its first contention, Vulcan relies on BCL § 103(d) which reads as follows:

(d) This chapter shall not affect any cause of action, liability, penalty or action or special proceeding, which on the effective date of this chapter, is accrued, existing, incurred or pending but the same may be asserted, enforced, prosecuted or defended as if this chapter had not been enacted.

Vulcan argues that since the incidents upon which plaintiff's suit is based occurred in 1962 and since the BCL did not become effective until September 1, 1963, BCL § 307(a) was unavailable to plaintiff in this instance. However, Vulcan's interpretation of BCL § 103(d) ignores the plain meaning of the statute and is logically unsound.

Section 103(d) of the BCL does not state that this chapter shall not apply to any cause of action or liability accrued or existing on its effective date, but rather states that this chapter shall not affect any such cause of action or liability. A cause of action is not "affected" if substantive rights or obligations are not enlarged or impaired. See Simonson v. International Bank, 14 N.Y. 2d 281, 251 N.Y.S.2d 433, 200 N.E.2d 427 (1964).

That BCL § 307(a) is a service statute is clear from the fact that the section is entitled "Service of process on unauthorized foreign corporation" and is contained in Article 3 of the BCL which is titled "Corporate Name and Service of Process". If all BCL § 307(a) does is provide for a new type of service on an unauthorized foreign corporation, it cannot be held to affect the substantive rights of the parties to the law suit.

Returning to BCL § 103(d), its whole intendment seems to be that a party may utilize the BCL to pursue a cause of action that arose before its effective date, but that no provision in the BCL can affect the substantive rights and obligations of the parties that arose out of such cause of action. In the context of this case BCL § 307 neither enlarges nor impairs plaintiff's substantive rights against Vulcan. At most, the section merely makes another forum available to plaintiff for rights that are already enforceable. Hence, Vulcan's contention that BCL § 307(a) should not be applied retroactively is unsound.

Additionally, and for reasons to be discussed infra, BCL § 307(a) provides for a method of service on foreign corporations when jurisdiction is obtainable under the "transacting business" standards of the New York long-arm statute, CPLR § 302. Since CPLR § 302 has clearly been held to apply retroactively, Simonson v. International Bank, supra, BCL § 307 which merely provides an additional method of service when long-arm jurisdiction is attainable, should also be held to apply retroactively.

Secondly, Vulcan argues that even if BCL § 307(a) is held to apply retroactively, Vulcan is not "doing business" in New York in the traditional sense as is required by BCL § 307(a). However, after careful consideration of the language and purposes behind BCL § 307(a), it is this Court's conclusion that this section embodies the "transacting business" test of CPLR § 302.¹

To begin with, as it read in 1963, BCL § 307(a) provided for service on an unauthorized foreign corporation that "does any business" in New York. The fact that the legislature used the word "any" is significant. If it had been intended merely to codify the traditional "doing business" test, there would have been no reason to include the word "any" in the statute. In addition, BCL § 307 (a) authorized service on the Secretary of State "in any action * * * arising out of or in connection with the doing of such business." If Vulcan's argument is correct, the Court would be asked to hold that when the legislature enacted BCL § 307, it further limited the amenability of a foreign corporation to suit in New York by stating that not only must such corporation be doing business in New York, but that the cause of action must arise out of the doing of such business. That the legislature would have desired to limit a foreign corporation's amenability to suit in New York seems highly unlikely. In fact, in Professor Hornstein's analysis of the BCL (McKinney's BCL, Appendix 1, at 476 (1963)), it is pointed out that the effect of provisions such as BCL § 307 was to extend potential jurisdiction over foreign corporations in line with the United States Supreme Court's decision in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

When one looks at the language of BCL § 307(a) as it read in 1964 ("does any business" and "arising out of or in connection with the doing of such business"), it bears a striking resemblance to the language of CPLR § 302 ("transacts any business" and "arising from any of the acts enumerated"). Indeed, both statutes became effective on the same date. Furthermore, when both statutes are read together, the legislative intent appears obvious.² Section 302 of the CPLR provides a basis for obtaining personal jurisdiction over a foreign corporation within New York. CPLR § 313 provides the normal method for serving foreign corporations that are amenable to suit under CPLR § 302. As has been discussed previously, BCL § 307(a) is solely a service statute. What it really does is provide for another method of service on a foreign corporation that is amenable to jurisdiction under CPLR § 302. The differences in the language of the two statutes is slight. Whatever differences there are may be accounted for by the fact that the BCL and the CPLR were prepared by two distinct bodies (Joint Legislative Committee to Study Revision of Corporation Laws and New York State Law Revision Commission), were conceived for different purposes, and were drafted at different times.

Nothing shows the relationship between CPLR § 302 and BCL § 307(a) more clearly than the 1965 amendment to BCL § 307(a) which reads as follows:

(a) In any case in which a non-domiciliary would be subject to the personal or other jurisdiction of the courts of this state under article three of the civil practice law and rules, a foreign corporation not authorized to do business in this state is subject to a like jurisdiction. In any such case, process against such foreign corporation may be served upon the secretary of state as its agent. Such process may issue in any court in this state having jurisdiction of the subject matter.

Doubtless, this amendment was enacted to overcome the difference in language between BCL § 307(a) and CPLR § 302 and to clarify the fact that BCL § 307(a) is a service statute that may be resorted to when jurisdiction over a foreign corporation is attainable under CPLR § 302. Nowhere is the purpose of the clarifying amendment to BCL § 307(a) stated more succinctly than in Professor Hornstein's commentary (McKinney's BCL, Appendix 1 at 43 (Supp.1966)).

"Section 307 authorizing service upon the Secretary of State as agent for an unauthorized foreign corporation which `does any business in this state' * * * did not conform to the language of CPLR § 302 on the same subject. The former provision has therefore been replaced by a tie-in to the latter."

Hence it is clear that notwithstanding two cases to the contrary,³ BCL § 307(a) permits the Secretary of State to receive process on behalf of an unauthorized foreign...