COLONIAL MORTG. SERVICE CO. v. Aerenson

• Decision Date: 21 February 1985
• Docket Number: Civ. A. No. 82-474 MMS.
• Parties: COLONIAL MORTGAGE SERVICE COMPANY, Plaintiff, v. Norman N. AERENSON and William R. Hitchens, Jr., Defendants. Norman N. AERENSON, Esquire, Third-Party Plaintiff, v. CONTINENTAL BANK, Third-Party Defendant.
• Court: U.S. District Court — District of Delaware

603 F. Supp. 323

COLONIAL MORTGAGE SERVICE COMPANY, Plaintiff, v. Norman N. AERENSON and William R. Hitchens, Jr., Defendants.

Norman N. AERENSON, Esquire, Third-Party Plaintiff, v. CONTINENTAL BANK, Third-Party Defendant.

Civ. A. No. 82-474 MMS.

United States District Court, D. Delaware.

February 21, 1985.

COPYRIGHT MATERIAL OMITTED

Thomas S. Neuberger, Walter W. Rabin, and Jay S. Ruder, Philadelphia, Pa., for plaintiff; Meltzer & Schiffrin, Philadelphia, Pa., of counsel.

John T. Owens, and James S. Reichert, John T. Owens, P.A., Wilmington, Del., for defendant and third-party plaintiff N.N. Aerenson.

Edward M. McNally, Morris, James, Hitchens & Williams, Wilmington, Del., for defendant W.R. Hitchens.

William J. Wade, and Thomas A. Beck, Richards, Layton & Finger, Wilmington, Del., for third-party defendant.

OPINION

MURRAY M. SCHWARTZ, District Judge.

This diversity action is presently before the Court on a Motion to Dismiss the third party complaint on the grounds of improper service of process, lack of in personam jurisdiction, and expiration of the statute of limitations. The third party complaint was brought by Norman N. Aerenson against John W. Benson, Jr. and Continental Bank of Pennsylvania. Only the claim between Aerenson and Continental Bank are involved in this motion. Recitation of the facts will be confined to those details relevant to the issues now before the Court. An exposition of the facts underlying the main proceeding in this lawsuit is contained in this Court's earlier opinion on the matter. See Colonial Mortgage Service Co. v. Aerenson, No. 82-474 (D.Del. Feb. 3, 1984).

Background

Continental Bank ("Continental") is a Pennsylvania bank with its principal place of business in Philadelphia, Pennsylvania. Although Continental purportedly solicits no business in Delaware, it has recorded some 200 mortgages with the Recorder of Deeds for New Castle County, Delaware, on realty located within the County. The mortgages secure loans totalling approximately $130 million. Affidavit of Reichert, Dkt. Item 79. These loans were made in connection with construction loan mortgages arising from Continental's dealings with Pennsylvania residents, particularly John W. Benson, Jr., a defendant in the third party action. Apparently, Benson has financed the construction of residential development projects in Delaware through loans from Continental. When market conditions were unfavorable to sale of the property, Continental made permanent loans to individual purchasers in Delaware, secured by mortgages on Delaware real estate, thereby facilitating sale of the units and protecting its loans to Benson. See Affidavit of Karnbach, Dkt. Item 84. Over the years, Continental has continued to service its loans to Delaware residents. Moreover, on at least six occasions, Continental has instituted action in the Delaware Superior Court related to its interests within the State of Delaware.

This action began after Aerenson, an attorney, was named as a co-agent for an escrow account with partial proceeds from one of Benson's real estate sales. A sum of $42,206.03 was to be held in escrow to pay a potential realty transfer tax incident to the sale of the property. If no tax was assessed by the expiration of a three-year statute of limitations period, the money was to be paid to Benson's assignee, Colonial Mortgage Service Company ("Colonial"). According to the third party complaint, however, Continental wrongfully induced Benson to cause the funds to be transferred to it. That transfer took place on April 20, 1980.

On July 26, 1982, Colonial filed suit against Aerenson and his co-agent for the escrow account, William R. Hitchens, Jr. Aerenson's answer and third party complaint were filed with the Court on November 26, 1982. The third party complaint erroneously named "Continental Bank of Pennsylvania" as third party defendant, although Continental has never used that name. It was not until July 19, 1984, that Aerenson moved to amend the third party complaint to show "Continental Bank" as third party defendant rather than "Continental Bank of Pennsylvania." The amendment was ordered by the Court on July 20, 1984. Dkt. Item 81.

Aerenson attempted to effect service of process on Continental pursuant to the Delaware long-arm statute, 10 Del.C. § 3104. Accordingly, on December 3, 1982, the United States Marshal served a copy of the Summons and Complaint upon the Delaware Secretary of State. On December 8, 1982, Aerenson's attorney sent a registered letter containing notice of the pendency of the action to Continental Bank of Pennsylvania, Centre Square, 1500 Market Street, Philadelphia, PA 19102. Although the letter was sent to Continental at its correct address, albeit with an inaccurate name, it failed to arrive at Continental's Centre Square office. Instead, the return receipt was signed by one Joan Michaels and postmarked in Newtown Square, Pennsylvania. See Affidavit Supporting Proof of Registered Mail, Dkt. Item 19. Continental alleges it has never employed a Joan Michaels and has no branch or office in Newtown Square. Furthermore, the parties have uncovered no evidence that a Continental Bank of Pennsylvania exists in Newtown Square or elsewhere.

Unfortunately, Aerenson was never aware that the registered letter had been misdirected. Having received no answer to the third party complaint, Aerenson obtained a default judgment against "Continental Bank of Pennsylvania." See Dkt. Item 23. It was not until March, 1984, when Aerenson filed a praecipe in Pennsylvania to execute the judgment, that Continental learned, allegedly for the first time, of the suit against it. Upon Continental's motion, this Court ordered the opening of the default judgment. Dkt. Item 70. Continental subsequently filed its motion to dismiss, precipitating Aerenson's amendment of the third party complaint to name the correct party. To date, neither Continental nor the Delaware Secretary of State have been properly served in connection with this action.¹

Personal Jurisdiction

As a threshold matter, the Court must first consider the question of in personam jurisdiction over this nonresident defendant. The Court may only extend its jurisdictional reach within the limits provided by the Delaware long-arm statute, 10 Del.C. § 3104, and the due process clause of the United States Constitution. Section 3104 confers personal jurisdiction over any nonresident when the cause of action arises from that person's commission of any of the acts specified therein. The third party plaintiff has invoked several of the statute's provisions in support of his jurisdictional claim. A finding that jurisdiction exists under any one of these provisions is sufficient to establish a statutory basis for jurisdiction. In particular, § 3104(c)(4) provides:

(c) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or his personal representative, who in person or through an agent:

....

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State.

Continental does not dispute that the third party complaint alleges tortious injury as that term is used in § 3104(c)(4). See Altech Industries v. Al Tech Specialty Steel Corp., 528 F.Supp. 521, 523 (D.Del. 1981); Magid v. Marcal Paper Mills, Inc., 517 F.Supp. 1125, 1130 (D.Del.1981). The bank takes issue, however, with Aerenson's contention that the second component of § 3104(c)(4) is satisfied, i.e., that Continental "regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services or things used or consumed in the State." In support of its argument, Continental has attempted to minimize the import of its extensive dealings with Delaware residents, businesses, and property by emphasizing that its contacts with Delaware only arise when necessary to protect its paramount interests with Pennsylvania residents. While this may well be so, Continental's motive for dealing in Delaware is irrelevant to the question of in personam jurisdiction. The fact of the matter is that at least since 1970, Continental has done substantial business in the State and has undoubtedly profited from its services here. It cannot escape process in Delaware under the guise that its real concern is with its clients in Pennsylvania, notwithstanding that it has entered into some 200 loan agreements with Delaware mortgagors, placed millions of dollars at risk in Delaware property, and repeatedly invoked the benefits of the Delaware state courts to protect its interests. Certainly Continental's activities fall within the literal language of § 3104(c)(4) in that the bank regularly does business or engages in a persistent course of conduct or derives substantial revenue from services in the state.

The exercise of jurisdiction over this nonresident defendant is plainly consistent with the cases decided under section (c)(4) of Delaware's long-arm provision. See Hill v. Equitable Trust Co., 562 F.Supp. 1324, 1331 (D.Del.1983) (section 3104(c)(4) extends personal jurisdiction to out of state bank which had Delaware mortgages totalling $500,000, had likely made loans to Delaware residents, had interests in Delaware property, and had engaged in litigation in the state); Magid v. Marcal Paper Mills, Inc., 517 F.Supp. at 1130 (company's regular shipment of goods to even a single wholesaler satisfies requirement of § 3104(c)(4)); see also Waters v. Deutz Corp., 479 A.2d 273, 275 (Del.1984). Accordingly, since the Court finds that the criteria of § 3104(c)(4) are established, it need not address whether jurisdiction could also be predicated on other provisions...