ABKCO Industries, Inc. v. Apple Films, Inc.

• Decision Date: 11 May 1976
• Citation: 350 N.E.2d 899,39 N.Y.2d 670,385 N.Y.S.2d 511
• Parties: , 350 N.E.2d 899 ABKCO INDUSTRIES, INC., Respondent, v. APPLE FILMS, INC., Appellant. ABKCO INDUSTRIES, INC., Respondent, v. APPLE FILMS, LTD., Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 511

385 N.Y.S.2d 511

39 N.Y.2d 670, 350 N.E.2d 899

ABKCO INDUSTRIES, INC., Respondent, v. APPLE FILMS, INC., Appellant.

ABKCO INDUSTRIES, INC., Respondent, v. APPLE FILMS, LTD., Appellant.

Court of Appeals of New York.

May 11, 1976.

John M. Schwartz and Henry J. Tashman, New York City, for appellant in the first above-entitled case.

Robert W. Gottlieb, Peter F. Nadel and Stephen L. Ratner, New York City, for respondents.

Robert T. Greig, New York City, for appellant in the second above-entitled case.

JONES, Judge.

We hold that the property interest of this absent debtor in its contract with a resident corporation was subject to levy by order of attachment and that jurisdiction of the New York courts quasi-in-rem may properly be predicated on that attachment.

ABKCO Industries (ABKCO) seeks repayment of a loan allegedly made to Apple Films, Ltd., (LTD), an English corporation. Unable to obtain personal jurisdiction over its English debtor, the creditor seeks by way of attachment to obtain jurisdiction quasi-in-rem in New York for the prosecution of its claim.

LTD entered into a licensing agreement (Licensing Agreemen with Apple Films, Inc., a New York corporation (INC), whereby LTD granted a general license to INC to promote a motion picture film owned by LTD, 'Let It Be', featuring the 'Beatles'. Under the terms of this Licensing Agreement, INC agreed to pay to LTD 80% Of the net profits received by INC from the promotion of the film. Exercising the authority granted it under the Licensing Agreement, INC contemporaneously entered into a distribution agreement (Distribution Agreement) with United Artists under which INC transferred its rights and control over distribution of the film to United Artists and United Artists agreed to pay INC 50% Of the adjusted gross receipts from distribution of the film. The critical question is whether in these circumstances there was a debt or property of LTD in New York which could be attached by LTD's creditor, ABKCO. The lower courts have held that LTD had an attachable interest, and we agree.

In our analysis the Distribution Agreement between INC and United Artists is irrelevant to our present inquiry, however significant it unquestionably is from an economic point of view. Our attention must be focused on the Licensing Agreement between LTD and INC, for it is that contract and the rights and obligations of the parties under it which must furnish the predicate for the attachment if any is to be found.

By virtue of CPLR 6202, an attachment under CPLR 6214 (subd. (b)) is effective only if there is within the jurisdiction of our courts a Debt or Property of the debtor, here LTD, within the meanings of subdivisions (a) or (b) of CPLR 5201, which provide:

'(a) Debt against which a money judgment may be enforced. A money judgment may be enforced against any debt, which is past due or which is yet to become due, certainly or upon demand of the judgment debtor, whether it was incurred within or without the state, to or from a resident or non-resident, unless it is exempt from application to the satisfaction of the judgment. A debt may consist of a cause of action which could be assigned or transferred accruing within or without the state.

'(b) Property against which a money judgment may be enforced. A money judgment may be enforced against any property which could be assigned or transferred, whether it consists of a present or future right or interest and whether or not it is vested, unless it is exempt from application to the satisfaction of the judgment. A money judgment entered upon a joint liability of two or more persons may be enforced against individual property of those persons summoned and joint property of such persons with any other persons against whom the judgment is entered.'

Here the issue turns on the proper analysis and classification of LTD's rights under the Licensing Agreement with INC, the New York corporation.

Appellants argue that LTD's right can only be classified as a Debt within the meaning of CPLR 5201 (subd. (a)). If this be the case, the argument continues, it is not an attachable debt because it is neither 'past due' nor 'to become due, certainly or upon demand'. At the time of the purported attachment nothing was past due. In consequence of INC's having advanced expenses as to which INC was entitled to reimbursement from LTD and the fact that, since the film was still in the early stages of promotion, INC had not yet received any substantial sums from United Artists to which the 80% Pay-over provision might apply, the net balance between LTD and INC was in INC's favor; thus there was at the time no indebtedness owing from INC to LTD. Nor, appellants...