Aero-Bocker Knitting Mills, Inc. v. Allied Fabrics Corp.

• Citation: 387 N.Y.S.2d 635,54 A.D.2d 647
• Decision Date: 21 October 1976
• Docket Number: AERO-BOCKER
• Parties: KNITTING MILLS, INC., Plaintiff-Respondent-Appellant, v. ALLIED FABRICS CORPORATION, Defendant-Appellant-Respondent.
• Court: New York Supreme Court Appellate Division

Page 635

387 N.Y.S.2d 635

54 A.D.2d 647

AERO-BOCKER KNITTING MILLS, INC., Plaintiff-Respondent-Appellant, v. ALLIED FABRICS CORPORATION, Defendant-Appellant-Respondent.

Supreme Court, Appellate Division, First Department.

Oct. 21, 1976.

H. M. Jasper, New York City, for plaintiff-respondent-appellant.

F. B. Bernstein, New York City, for defendant-appellant-respondent.

Before KUPFERMAN, J.P., and MURPHY, LUPIANO, LANE and NUNEZ, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County, entered March 11, 1976 granting plaintiff's motion for summary judgment and denying defendant's cross-motion for summary judgment, and the judgment entered thereon on March 15, 1976, unanimously reversed on the law, plaintiff's motion denied and defendant's cross-motion granted and the complaint dismissed, without costs and without disbursements. In view of said disposition, the appeal from the order entered November 13, 1975, is unanimously dismissed as academic, without costs and without disbursements.

Defendant, a foreign corporation, advertised in Woman's Wear Daily inviting offers to supply it with material. Plaintiff, a New York corporation, responded, agreement was reached by telephone, contracts entered into, and the goods shipped from New York to California. When defendant failed to make payment, plaintiff filed, in New York, a demand for arbitration pursuant to the arbitration clause contained in the contract. Defendant commenced proceedings in Federal District Court in California seeking to prevent arbitration. The federal court granted a preliminary injunction in a decision dated June 25, 1975, holding that a question of fact existed as to whether or not the parties entered into an agreement to arbitrate. Plaintiff commenced legal action in New York, in effect abandoning its right to arbitration, by serving defendant with a summons and complaint in California. In November, 1975, the California federal court entered a judgment, with plaintiff in default, stating defendant 'is not a party to any agreement with plaintiff to arbitrate' and permanently enjoining the arbitration. Plaintiff moved for summary judgment in the New York action, the grant of which is the subject of this appeal.

While it appears that defendant has no meritorious defense against plaintiff's claim, the initial issue to be decided and in light of our negative findings therein the pivotal issue, is whether defendant is subject to New York jurisdiction. Plaintiff contends that, by clauses 10 and 11 of the contract, defendant consented to New York jurisdiction. Clause 10, entitled 'ARBITRATION,' provides, in pertinent part, for arbitration of any dispute or controversy to be conducted in New York City and the parties consent to the jurisdiction of the Supreme Court of the State of New York and to the Federal District Court for the Southern District of New York. The only fair reading of the clause is that the jurisdictional designation applies only to arbitration proceedings.

Clause 11 reads: 'CONTROLLING LAW: This contract shall be deemed to have been made in New York and shall be governed and construed in accordance with the laws of the State of New York.' Clause 11 governs the applicable law and the place where the contract arises, not jurisdiction. While place of contract may be a factor to be considered in determining whether the claim arose from a transaction of business within New York State, it is insufficient to confer jurisdiction, Longines-Wittnauer Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 457, 261 N.Y.S.2d 8, 18, 209 N.E.2d 68,...