Mellon Bank (East) PSFS, Nat. Ass'n v. Farino

• Decision Date: 07 April 1992
• Docket Number: 91-1091,Nos. 91-1089,91-1090,s. 91-1089
• Citation: 960 F.2d 1217
• Parties: MELLON BANK (EAST) PSFS, NATIONAL ASSOCIATION v. Kenneth V. FARINO; Leslie Trinin; Robert Levitas; Eileen Michaels, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 1217

960 F.2d 1217

MELLON BANK (EAST) PSFS, NATIONAL ASSOCIATION v. Kenneth V. FARINO; Leslie Trinin; Robert Levitas; Eileen Michaels, Appellants.

Nos. 91-1089, 91-1090, 91-1091.

United States Court of Appeals Third Circuit.

Argued July 8, 1991.

Decided April 7, 1992.

Mary Ellen Krober (Argued), Walter Weir, Jr., Patterson & Weir, Philadelphia, Pa., for appellees.

Howard J. Kaufman, Peter J. Weidman (Argued), Kaufman, Coren & Ress, Philadelphia, Pa., for appellants.

Before: STAPLETON, HUTCHINSON and ROSENN, Circuit Judges.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

These cases require us to consider the borders of personal jurisdiction and the permissible exercise of judicial power. Finding that the district court remained within the boundaries established by the Supreme Court, we will affirm.

I.

Mellon Bank (East) PSFS ("Mellon"), a Pennsylvania based financial institution, filed complaints in these three, consolidated diversity actions in the United States District Court for the Eastern District of Pennsylvania alleging the breach of three guaranty and suretyship agreements. The defendants filed motions to dismiss the complaints for lack of personal jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil Procedure. The district court denied the motions to dismiss and later granted Mellon's motions for summary judgment. The defendants' only argument on appeal is that the district court lacked personal jurisdiction over them.

The defendants are limited partners in three Virginia limited partnerships. Defendants Robert A. Levitas, Leslie Trinin, and Eileen Michaels are residents of the State of New York. Defendant Kenneth V. Farino is a resident of the Commonwealth of Virginia and is also the president of three, related Virginia corporations that serve as the general partners of the limited partnerships.

The partnerships were created to purchase and develop real estate in Richmond, Virginia. In connection with this development, the partnerships, through a mortgage broker, approached Mellon for financing. In preliminary correspondence with Mellon's Washington, D.C. branch, the mortgage broker explained the nature of the real estate transactions that the partnerships hoped to finance and represented that the limited partners would personally guaranty any loans made to the partnerships. ¹

In addition to the personal liability of the limited partners, the partnerships represented to Mellon that the talent and experience that each partner brought to the partnerships was fundamental to their success. According to the affidavit of Frederick Felter, a Mellon vice-president, Mellon was favorably disposed to make the loans because:

[T]he Bank was told that each of the defendants had particular skills and abilities which they would contribute toward the success of the projects. Farino, an attorney, was represented as having ability in the area of real estate development and property management. Levitas, a lawyer also, was to contribute expertise in real estate law and development. Trinin, senior vice president of Glick Construction Co., was expected to provide construction experience which would be helpful during the renovation and rehabilitation stages. Michaels, a vice president of Prudential Bache, was to provide investment advice and assistance.

App. at 193. Relying on these representations and the limited partners' personal financial information, which was sent to the bank in Pennsylvania, Mellon agreed to make three loans to the partnerships totalling over $4.2 million. Each of the loan documents, which were essentially identical, provided that the partnerships would make monthly interest payments over the term of the loan to Mellon in Pennsylvania and a balloon payment of principal at the same location when the term of the loan expired. The first two loans were due 18 months from their respective closing dates; the third, 12 months from its closing date. The closings on each of the loans took place in Richmond, Virginia with Mr. Farino executing the loan documents on behalf of the general partners. The limited partners executed the guaranty and suretyship agreements for these debts in each of their states of residence.

The terms of the notes provided that the partnerships were to make payments to Mellon Bank Center in Philadelphia, Pennsylvania. Each note also stated that, "[t]his note has been delivered in Pennsylvania," but also that "[t]his note is to be construed and enforced in all respects in accordance with the laws of the Commonwealth of Virginia." The guaranty and suretyship agreements also stated that Philadelphia was the mailing address of the bank and that any correspondence between the guarantors and Mellon, including payments if the partnerships defaulted, must be sent to the bank at that address in Pennsylvania.

On May 19, 1989, when the balloon payment on the first of the three loans was three months past due, Mellon granted an extension. On that same date, the balloon payment on the second loan was due. This due date was apparently also missed as Mellon granted an extension on the second loan in August, 1989. Mr. Farino and Mr. Levitas negotiated these extensions on behalf of the partnerships and the limited partners with Mellon personnel in Pennsylvania.

Despite Mellon's forbearance, the partnerships were again unable to make payment when the new due dates arrived. Mellon granted two additional extensions of the due date on the first loan and one additional extension on the second. The partners continued to forward updated personal financial information to Mellon in Pennsylvania to induce the bank to grant the extensions. The limited partners also attempted to restructure the debt through phone and mail contacts with Mellon in Pennsylvania. Despite these efforts, the partnerships defaulted on the first two loans when the balloon payments finally came due. The third loan was subject to a cross default provision, so Mellon called for payment from the guarantors on all three obligations. When the defendants failed to remit payment, Mellon brought these suits to collect.

To the extent that the district court made factual findings, a clearly erroneous standard of review applies. North Penn Gas Co. v. Corning Natural Gas Corp., 897 F.2d 687, 688 (3d Cir.) (per curiam), cert. denied, --- U.S. ----, 111 S.Ct. 133, 112 L.Ed.2d 101 (1990). However, the district court's decision that it possessed personal jurisdiction over the defendants is an issue of law of which our review is plenary. Mesalic v. Fiberfloat Corp., 897 F.2d 696, 698 (3d Cir.1990).

II.

A.

Rule 4(e) of the Federal Rules of Civil Procedure ² is the starting point of our analysis. The rule authorizes personal jurisdiction over non-resident defendants to the extent permissible under the law of the state where the district court sits. Mesalic, 897 F.2d at 698. The applicable Pennsylvania provision is 42 Pa.Cons.Stat.Ann. § 5322(b) (1981). ³ The Pennsylvania statute permits the courts of that state to exercise personal jurisdiction over nonresident defendants to the constitutional limits of the due process clause of the fourteenth amendment. North Penn Gas, 897 F.2d at 689-90; Nissley v. JLG Indus., Inc., 306 Pa.Super. 557, 452 A.2d 865, 866 (1982). Therefore, the district court's exercise of personal jurisdiction over these defendants was proper as long as it did not violate due process.

The next logical step in the jurisdictional inquiry is to determine whether a defendant's contacts with the state are sufficient to support general personal jurisdiction. If a party is subject to the general jurisdiction of a state, that party can be called to answer any claim against her, regardless of whether the subject matter of the cause of action has any connection to the forum. In the current case, however, the parties agree and the facts bear out that the defendants do not have sufficient contacts with Pennsylvania to be subject to the general jurisdiction of the courts of the Commonwealth.

B.

In the absence of general jurisdiction, permissible in personam jurisdiction is dependent upon the concept of specific personal jurisdiction. Specific jurisdiction arises when the plaintiff's "claim is related to or arises out of the defendant's contacts with the forum." Dollar Sav. Bank v. First Sec. Bank, 746 F.2d 208, 211 (3d Cir.1984). In such a case, the court may go forward if it is satisfied that the relationship among the defendant, the cause of action, and the forum falls within the "minimum contacts" framework first announced in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and later refined by the abundant progeny of that landmark case.

These offspring have solidified and refined the due process inquiry such that we now know that, "it is essential in each case that there be some act by which the defendant purposely avails itself of the privilege of conducting business within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). We also are to take into account "the relationship among the forum, the defendant and the litigation," Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (1977), in order to determine whether "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Because this case involved contracts among interstate parties, we are primarily directed in our analysis by the Court's opinion in Burger King Corporation v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Burger King involved a franchise agreement between two partners who were residents of Michigan and the Florida-based Burger King Corporation. The contracts provided that Florida law...