Citibank, N.A. v. Estate of Simpson

• Decision Date: 23 May 1996
• Citation: 676 A.2d 172,290 N.J.Super. 519
• Parties: CITIBANK, N.A., Plaintiff, v. ESTATE OF John A. SIMPSON, Sandra B. Simpson, as Executrix, Defendant/Third-Party Plaintiff/Respondent, v. CIRCLE CONSULTING GROUP, INC., Circle Properties, Ltd., Manhattan West Owner Group, George L. Cady, Jr., Ernest E. Craumer, Campbell T. Gerrish, Thomas B. Martin, Bruce H. Scharf, David F. West, Thomas N. Keltner, Jr., and Wien, Malkin & Bettex, Third-Party Defendants/Appellants.
• Court: New Jersey Superior Court — Appellate Division

Page 519

290 N.J.Super. 519

676 A.2d 172

CITIBANK, N.A., Plaintiff, v. ESTATE OF John A. SIMPSON, Sandra B. Simpson, as Executrix,

Defendant/Third-Party Plaintiff/Respondent,

v.

CIRCLE CONSULTING GROUP, INC., Circle Properties, Ltd.,

Manhattan West Owner Group, George L. Cady, Jr., Ernest E.

Craumer, Campbell T. Gerrish, Thomas B. Martin, Bruce H.

Scharf, David F. West, Thomas N. Keltner, Jr., and Wien,

Malkin & Bettex, Third-Party Defendants/Appellants.

Superior Court of New Jersey Appellate Division.

Argued April 23, 1996.

Decided May 23, 1996.

Phylis D. Sherman, New York City, for appellants Circle Consulting Group, Inc.; Circle Properties, Ltd.; Manhattan West Owner Group; George L. Cady, Jr.; Ernest E. Craumer; Campbell T. Gerrish; Thomas B. Martin; Bruce H. Scharf; and David F. West (Schekter Rishty Goldstein & Blumenthal, attorneys; Ms. Sherman, of counsel; David Blumenthal, on the brief).

John M. Newman, Morristown, for appellants Wien, Malkin & Bettex and Thomas N. Keltner, Jr. (Porzio, Bromberg & Newman, attorneys; Mr. Newman, of counsel; Mitchell I. Weitz, Morristown and Robert C. Buff, New York City, on the brief).

Richard L. Plotkin, Morristown, for respondent (Pitney, Hardin, Kipp & Szuch, attorneys; Mr. Plotkin, on the brief).

Before Judges PRESSLER, KEEFE and RODRIGUEZ.

The opinion of the court was delivered by

PRESSLER, P.J.A.D.

Third-party defendants, a group of New York entities and individuals, including a law partnership, appeal on leave granted from an order of the trial court denying their motion pursuant to R. 4:6-2(b) to dismiss the third-party complaint on grounds of lack of jurisdiction over the person. Since we are satisfied that the motion record raises an unresolved factual issue respecting the assertion of long-arm jurisdiction over these parties, we reverse and remand.

Because the motion to dismiss was made prior to discovery, the record before us is sparse. This much, however, appears to be undisputed. In 1986 defendant's decedent, John A. Simpson, a New Jersey resident who died in October 1991, made a highly speculative investment in New York real estate pursuant to terms set forth in a private placement memorandum (PPM). Insofar as we can determine, the form of the investment was the purchase of one of twenty-four offered "units" in a New York general partnership, third-party defendant Manhattan West Owner Group, which was formed for the purpose of acquiring thirty occupied cooperative apartments in two buildings in Manhattan. While each investor obtained title to a specific apartment or apartments, the terms of the partnership agreement allocated to each partner a pro rata interest in all "partnership" property so acquired. The investors constituted the designated owner group. There were also six managing partners of Manhattan West, third-party defendants Cady, Craumer, Gerrish, Martin, Scharf, and West, four of whom reside in New York, one in Connecticut, and one in Florida. The investment had been recommended to Simpson by his financial adviser, third-party defendant Circle Consulting Group, Inc., a Delaware corporation whose only place of business is New York. Five of the managing partners of Manhattan West are alleged to be principals of Circle Consulting. A related New York corporation, Circle Properties, Ltd., provided brokerage services for Manhattan West's acquisition of the apartments.

Simpson's investment required him to purchase two apartments in his name but for the benefit of the partnership. He financed the purchase by two loans from plaintiff Citibank, N.A., totalling $134,460. Simpson himself was neither at the closing of title nor at the closing of the Citibank loan in New York. He had designated the six managing partners as his designated joint and several attorneys-in-fact, and two of them appeared at the closing and executed the documents in his name. Also present at the closing was Manhattan West's attorney, Thomas N. Keltner, Jr., a partner in the New York law firm of Wien, Malkin & Bettex. Keltner executed the closing documents as the borrower's attorney. The law firm and Keltner were also joined as third-party defendants.

When the real estate market, and particularly its tax shelter component, precipitously declined in the late 1980's, Manhattan West was no longer able to meet its obligations. Apparently, Simpson continued to make payments to Citibank on the two notes until his death. His estate thereafter defaulted, and this action by Citibank against the estate to recover the balance due ensued. The estate, claiming fraud, misrepresentation, breach of contract, breach of the attorney-in-fact agreement, breach of fiduciary obligation, legal malpractice and other wrongful acts, filed this third-party complaint against all third-party defendants.

As we have noted, none of the third-party defendants resides or does business or has an ascertainable presence in New Jersey. Defendant, therefore, served process on the corporate and partnership entities by certified mail sent to their respective principal place of business, registered agent, or managing partner at their New York addresses. Defendant served the managing partners of Manhattan West by certified mail addressed to their respective residences, either in New York, Connecticut or Florida. The law firm was also served by personal service pursuant to R. 4:4-4(a)(1) upon one of its partners, John L. Loehr, at his New Jersey residence. Loehr, however, had nothing to do with the Manhattan West representation. All defendants, claiming that they are not subject to an exercise of long-arm jurisdiction by this State in respect of this transaction, unsuccessfully moved for dismissal.

Before addressing the specific jurisdictional issues involved in this appeal, there are several procedural issues we must consider. We do so in light of the general rule that territorial presence in the forum is the basic prerequisite for subjecting a defendant to its in personam judgment. In lieu, however, of actual territorial presence, in personam jurisdiction may be predicated upon the defendant's contacts with the forum provided they meet the standard of minimum contacts, that is, contacts of sufficient moment such that maintenance of the suit in the forum does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945). See also Waste Management, Inc. v. Admiral Ins. Co., 138 N.J. 106, 119-120, 649 A.2d 379 (1994), cert. denied, --- U.S. ----, 115 S.Ct. 1175, 130 L.Ed.2d 1128 (1995); Lebel v. Everglades Marina, Inc., 115 N.J. 317, 322, 558 A.2d 1252 (1989). That extraterritorial reach is what is known as long-arm jurisdiction. It is also well settled that the requisite quality and quantum of contacts is dependent on whether general or specific jurisdiction is asserted, that is, whether the defendant is subject to any claim that may be brought against him in the forum state whether or not related to or arising out of the contacts themselves, i.e., general jurisdiction, or whether the claim is related to or arises out of the contacts in the forum, i.e., specific jurisdiction. Clearly, a lesser standard is required to sustain the exercise of specific jurisdiction, see, e.g., Lebel, supra, 115 N.J. at 323, 558 A.2d 1252, and the test to be met is whether the defendant has "purposely avail[ed] itself of the privilege of conducting activities within the forum state...." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-475, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528, 542 (1985). It is specific jurisdiction that is asserted here, and thus the ultimate question is whether the claim against each of the third-party defendants asserted by the third-party complaint arose out of that party's purposeful conduct in New Jersey in circumstances in which this State's exercise of personal jurisdiction comports with traditional notions of fair play and substantial justice. See Lebel, op. cit., supra; Charles Gendler & Co. v. Telecom Equipment Corp., 102 N.J. 460, 472, 508 A.2d 1127 (1986).

In moving for dismissal pursuant to R. 4:6-2(b), third-party defendants each argued that its respective contacts with New Jersey in respect of Simpson's investment failed to meet the minimum contact test as prescribed for the exercise of specific jurisdiction. The trial judge was satisfied from the moving papers that defendant had made sufficient allegations of minimum contacts to warrant its continued prosecution of the third-party complaint. Thus, for example, it was asserted that Simpson had been solicited in New Jersey, that the investment documents had been sent to him in New Jersey for his signature, that he was represented by the law firm at the New York mortgage closing, and that solicitation of New Jersey residents was within the contemplation of Manhattan West, since the PPM contained specific caveats for New Jersey residents as well as for residents of Connecticut, Florida, and Pennsylvania. Third-party defendants deny that Simpson had been solicited at all, claiming that the PPM was sent only to potential investors who requested it and contending further that the only contact with New Jersey, that is, use of the mails, did not constitute a sufficient contact. The law firm denies that it was ever acting as Simpson's attorney and asserts that it had no attorney-client relationship with him or, indeed, any other relationship with him. Simpson's executrix apparently had no personal knowledge of the 1986 transaction. Nor was there any discovery by way of interrogatories or depositions by which she could seek to ascertain Simpson's relationship with any of the third-party defendants, how those relationships came about, what the circumstances were surrounding Simpson's decision to become a Manhattan West investor, or what the actual mechanics for implementing that decision were.

As we understand the record, defendant's...