Fantis Foods, Inc. v. Standard Importing Co., Inc.

• Decision Date: 14 February 1980
• Parties: , 402 N.E.2d 122 FANTIS FOODS, INC., Plaintiff, v. STANDARD IMPORTING CO., INC., et al., Defendants. STANDARD IMPORTING CO., INC., Respondent, v. SYNERGAL, LTD., Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 783

425 N.Y.S.2d 783

49 N.Y.2d 317, 402 N.E.2d 122

FANTIS FOODS, INC., Plaintiff, v. STANDARD IMPORTING CO., INC., et al., Defendants.

STANDARD IMPORTING CO., INC., Respondent, v. SYNERGAL, LTD., Appellant.

Court of Appeals of New York.

Feb. 14, 1980.

David P. Langlois and Leo G. Kailas, New York City, for appellant

Murray I. Sommer, New York City, for respondent.

OPINION OF THE COURT

MEYER, Judge.

Whether CPLR 302 (subd. (a), par. 3, cl. (ii)) permits the courts of New York to take jurisdiction of a Greek entity with respect to its claimed conversion of property in Greece or on the high seas, and whether a contract provision selecting Greece as the sole forum for disputes between the parties covers that conversion claim are the issues presented by this appeal. The Appellate Division, two Justices dissenting, held there was sufficient injury within the State upon which to base jurisdiction and that the forum selection clause was no bar. We disagree with the Appellate Division's conclusions on the jurisdiction issue and, therefore, do not reach the question concerning the effect of the forum selection clause.

The predicate for the appeal is a motion by third-party defendant Synergal, Ltd., to dismiss the third-party complaint served by defendant third-party plaintiff Standard Importing Co. The other actor in the events preceding the dispute is Fantis Foods, Inc., which is plaintiff in the original action against Standard Importing. Synergal is a co-operative association of Greek dairy producers organized under the laws of Greece, having offices in Athens, Greece, and which was served with process in Greece. No claim is made that Synergal is qualified in, has any assets in, or transacts business in New York. Standard is a New York corporation, with offices in New York, Chicago and Athens. Fantis is also a New York corporation with offices in New York City. Standard and Fantis are competitors in the wholesaling of Greek feta cheese.

By contract dated July 26, 1976 Synergal agreed to sell 1,200 barrels of feta cheese to Standard "FOB Piraeus", the weighing and delivery of the cheese to "take place in the offices of the Factory or the Refrigerated Warehouses of Ioannina" and the cheese to be "(f)rom the time it leaves the factory * * * the responsibility of the Buyer." The contract included as a separate paragraph a forum selection provision making Greek courts the exclusive forum to decide disputes between the parties.

Standard claims, and it is not disputed, that about three weeks after the contract was signed the 1,200 barrels of cheese were weighed and each barrel stamped with Standard's trade-mark and that Standard then acknowledged delivery by giving Synergal a certificate of weight and quality. Thereafter Standard directed Synergal to ship the cheese in four lots of 300 barrels each to Chicago. The first 300 barrels were shipped on a bill of lading to the order of a New York bank, which named Standard as the "notify" party and showed Chicago as the destination, the cheese to be forwarded from New York to Chicago in bond.

Though Standard had established the letter of credit required by the contract, Synergal never sought to draw upon it for the 300 barrels shipped, nor has it ever delivered the other 900 barrels to Standard. Instead, for a reason unexplained by the record, Synergal sold the same 1,200 barrels of cheese to Fantis and while the first shipment was on the high seas substituted Fantis on the original bill of lading as the ultimate consignee. While Fantis and not Standard received the last 900 barrels, Standard was able, notwithstanding the bill of lading change, to obtain delivery of the first 300 barrel shipment, for which it has never paid.

Fantis then brought action against Standard, the bank and the shipping company for the diversion of the 300 barrels, claiming as to Standard that it had wrongfully taken possession of them. By its answer Standard stated as a counterclaim against Fantis and a third-party claim against Synergal a cause of action for conversion of the entire 1,200 barrels, which it contends became its property under the terms of its contract upon the weighing of the cheese and its acknowledgment of delivery, Synergal, thereafter, holding the cheese only in a custodial and not in an ownership capacity. It also stated, in what it labeled a fourth "counterclaim", a cause of action for Synergal's breach of contract in interfering with the initial 300-barrel shipment and refusing to ship the additional 900 barrels.

Synergal moved to dismiss the claims against it both because of the absence of personal jurisdiction over it and because of the contract provision making Greek courts the exclusive forum for disputes between the parties. Special Term denied the motion and the Appellate Division majority affirmed. Agreeing that the claimed conversion of the final 900 barrels ¹ occurred in Greece, it reasoned that Synergal's virtual monopoly of feta cheese made it foreseeable that favoring one New York based competitor over another would cause injury in New York to the latter. No distinction was drawn either by Special Term or by the Appellate Division between the conversion claim and the breach of contract claim against Synergal. The Appellate Division majority held the forum selection clause inapplicable because the claimed conversion was not an act arising from the contract and because the contract was one of adhesion. The dissenting Judges reasoned that the claim was essentially one for breach of contract, but that, assuming, arguendo, a conversion, any damage in New York was consequential rather than direct and, therefore, an insufficient basis for jurisdiction. The Appellate Division thereafter granted leave to appeal on the certified question: "Was the order of the Supreme Court, as affirmed by this Court, properly made?" The Appellate Division's order should be reversed, the third-party complaint should be dismissed and the certified question should be answered in the negative.

The answer clearly pleads two distinct third-party claims, the first for conversion and the second for breach of contract. Both have been sustained, the contract claim notwithstanding the total absence from the papers of any suggestion of a basis that would support jurisdiction of such a claim, on the apparent theory that because the same acts gave rise to both claims jurisdiction over both could be supported by CPLR 302 (subd. (a), par. 3). However, the Judicial Conference Report to the Legislature, which preceded enactment of chapter 590 of the Laws of 1966 adding present paragraph 3 to the section, ² shows that premise to be false, for it expressly noted that the jurisdiction to be conferred by the new provision would be "limited to a cause of action arising out of such tortious act" (Twelfth Ann. Report of N.Y. Judicial Conference, 1967, p. 343). While a breach of contract may give rise to a separate tort liability (North Shore Bottling Co. v. Schmidt & Sons, 22 N.Y.2d 171, 179, 292 N.Y.S.2d 86, 92, 239 N.E.2d 189, 193; Albemarle Theatre v. Bayberry Realty, 27 A.D.2d 172, 176, 277 N.Y.S.2d 505, 510), the two are conceptually distinct liabilities, and the cause of action for breach of contract is conceptually unrelated to the tortious nature of the act which constitutes the breach (Amigo Foods Corp. v. Marine Midland Bank-New York, 39 N.Y.2d 391, 396, 384 N.Y.S.2d 124, 127, 348 N.E.2d 581, 584, on second app. 46 N.Y.2d 855, 414 N.Y.S.2d 515, 387 N.E.2d 226). It was, therefore, clearly erroneous not to dismiss Standard's contract claim (fourth "counterclaim") against Synergal.

It was likewise error not to dismiss the tort claim, because there was neither an injury in New York nor foreseeability of New York consequences within the meaning of CPLR 302 (subd. (a), par. 3). That provision authorizes our courts to exercise personal jurisdiction over a nondomiciliary who

"commits a tortious act without the state causing injury to person or property within the state * * * if he

"(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce."

Since the complaint pleads that Synergal is a Greek entity Standard must, in order to establish jurisdiction, show (1) Synergal's commission of a tort outside New York, (2) injury to Standard in New York, (3) that Synergal should reasonably have foreseen New York consequences, and (4) that Synergal derives substantial revenue from international commerce.

Standard's first "counterclaim" alleges, and Synergal has not denied, that Synergal exports each...