Kalman v. Neuman

• Decision Date: 13 April 1981
• Parties: Loretta KALMAN et al., Respondents, v. Henry A. NEUMAN et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 109

438 N.Y.S.2d 109

80 A.D.2d 116

Loretta KALMAN et al., Respondents, v. Henry A. NEUMAN et al., Appellants.

Supreme Court, Appellate Division,

Second Department.

April 13, 1981.

McCarthy, Marshall & Director, New York City (Gerald Director and Herbert Minster, New York City, of counsel), for appellants.

Nathaniel M. Swergold, Cedarhurst, for respondents.

Before LAZER, J. P., and MANGANO, GIBBONS and GULOTTA, JJ.

LAZER, Justice Presiding.

This appeal is another in the continuous series deriving from the Supreme Court decision in Rush v. Savchuk, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516, which overthrew Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 with consequences as yet not fully fathomed. Felicitously, the instant circumstances permit us the discretion of arriving at a just result without the destruction of plaintiffs' lawsuit and without doing violence to the single precedential signal from the Court of Appeals as to the direction to be taken on Rush-Savchuk dismissal motions.

The case involves an accident which occurred in Bear Creek, Pennsylvania, on August 2, 1974 when an automobile occupied by the Queens County residents who are the current plaintiffs collided with a car owned by one Pennsylvania resident and driven by another. On October 3, 1975 plaintiffs began the process of instituting suit against the Pennsylvania defendants by obtaining an ex parte order of attachment from Special Term in Queens County commanding the Sheriff to levy upon the contractual obligation of defendants' insurer, Nationwide Mutual Insurance Company, to defend and indemnify defendants within the State of New York. The Sheriff then levied by serving the order on Nationwide and subsequently making the initial return to the Clerk of Queens County on October 16, 1975, reporting that no certificate had been received as to any assets. On October 29, 1975 the Sheriff filed a supplemental return in which he referred to a "certificate" received from Nationwide's attorneys. The "certificate" consisted of a letter addressed to the Sheriff on the stationery of the Law Offices of Simone and Brant, signed by B. Daniel Winn as regional claims attorney for Nationwide. The pertinent portion of the letter declared:

"This is to certify that we insure Henry A. Newman and afforded coverage to his vehicle involved in this accident, with bodily injury limits of * * * each person and * * * each accident and * * * property damage.

"I understand this is the information you require for your records in connection with the attachment served on Nationwide.

"I am sending a copy of this letter to attorney * * * who represents the plaintiff."

The order of attachment was never extended beyond the 90-day expiration time set forth in CPLR 6214 (subd. and defendants subsequently interposed an answer in which they asserted the following affirmative defense relating to jurisdiction:

"AS AND FOR A SEPARATE, COMPLETE & DISTINCT AFFIRMATIVE DEFENSE, THE DEFTS, HENRY A. NEUMAN & MARCELLE N. FERRAR, ALLEGE :

"1) That the Court lacks jurisdiction over the person of the answering defendants.

"2) That the damages, if any, which the plaintiffs are limited to, notwithstanding and ad damnum clause of the complaint herein, are no greater than the value of any contractual obligation of the liability carrier of the defendants herein.

"3) That any appearances made by the defendants in connection with the defense of this lawsuit by them shall not be deemed a waiver on their part of lack of personal jurisdiction over them by the Court herein."

Almost two and one-half years later, on March 15, 1978, the defendants moved to dismiss the complaint on the grounds of lack of personal jurisdiction and forum non conveniens. The motion was granted and upon reargument the court adhered to its original decision in an order dated June 7, 1978. The plaintiffs appealed from the latter order and in Kalman v. Neuman, 71 A.D.2d 996, 420 N.Y.S.2d 287, we reversed Special Term, holding that the constitutionality of Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312, supra, as a jurisdictional predicate had been sustained by the Court of Appeals in Baden v. Staples, 45 N.Y.2d 889, 410 N.Y.S.2d 808, 383 N.E.2d 110. We also found that plaintiffs' possible failure to perfect or procure an extension of the levy within the 90 days provided in CPLR 6214 (subd. might constitute a jurisdictional defect, but since the record before us was insufficient to make such a factual determination, we remanded to Special Term for further proceedings to determine whether there were adequate grounds present to grant an extension of time to perfect nunc pro tunc and whether, therefore, defendants' motion to dismiss should have been denied. We also granted plaintiffs leave to apply for such extension if they were so advised.

In December of 1979, plaintiffs moved for an order pursuant to CPLR 6214 to obtain an extension of time within which to file a special proceeding to compel payment, delivery or transfer of property in the hands of defendants' insurer. By order dated February 13, 1980, the first of the two orders involved on these appeals, Special Term determined that the Sheriff had made due levy upon, and therefore properly had custody of, the "asset", i. e., defendants' insurer's obligation to defend and indemnify, and that no extension of time to commence a special proceeding to compel payment, delivery or transfer was necessary. However, Special Term did hold, in the alternative, that if plaintiffs deemed it necessary, their time to commence a special proceeding against the garnishee would be extended nunc pro tunc, as would the order of attachment, subject to the rights of any intervening lienors. Finally, Special Term refused to dismiss the complaint for lack of "in-rem" jurisdiction "as a matter of judicial policy and so as to prevent unfairness or undue hardship to plaintiffs".

Meanwhile, on January 21, 1980, the Supreme Court handed down its Seider-shattering opinion in Rush v. Savchuk, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516, supra, and on January 28, 1980 defendants moved to dismiss the complaint on the grounds the court lacked "in rem" jurisdiction relating to them. The motion was denied on constraint of the February 13, 1980 order which had decided that defendants' insurer was obligated to defend and indemnify.

On this appeal, the defendants urge that they are entitled to reversal and dismissal of the action because the affirmative defense of lack of jurisdiction was specifically raised in their answer and they have maintained its applicability throughout the litigation. They also contend that the plaintiffs have been aware of the jurisdictional defense at all times, that they cannot now assert surprise, and that they could not have justifiably relied on the validity of Seider-based jurisdiction. The conclusion posited is that the Rush v. Savchuk ruling that Seider-based jurisdiction is a nullity should be applied retroactively to this action. Plaintiffs, whose injury claims may be fatally affected by retroactive application of Rush v. Savchuk, supra, because the Pennsylvania Statute of Limitations for negligence actions has long since expired, argue in response that retroactive application should be determined on a case-by-case basis and that their reliance on the jurisdictional basis provided by Seider v. Roth, supra, was justifiable.

Resolution of these conflicting contentions requires a brief review of the developments which have led to the current controversy over the status of actions based on Seider-Roth quasi in rem jurisdiction. In Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312, supra, in 1966, the Court of Appeals held that, in a personal injury action brought in New York against a nonresident defendant, the defendant's liability insurer's contractual obligation to defend and indemnify the defendant constituted a debt subject to attachment. Such attachment, which could be accomplished where the insurer was present or doing business in New York, could then form the basis for quasi in rem, but not personal jurisdiction over the nonresident defendant, his liability being limited to the face value of the policy (see Simpson v. Loehmann, 21 N.Y.2d 305, 310, 287 N.Y.S.2d 633, 234 N.E.2d 669, mot. for rearg. den. 21 N.Y.2d 990). In Simpson (supra, p. 311, 287 N.Y.S.2d 633, 234 N.E.2d 669), the Court of Appeals explicitly declared that Seider-based jurisdiction does not offend the due process guarantees of the United States or New York Constitutions. By 1976, however, in Neuman v. Dunham, 39 N.Y.2d 999, 1000, 387 N.Y.S.2d 240, 355 N.E.2d 294, the court's reaffirmance of Seider was "on the ground of stare decisis alone," and only a year later, in Donawitz v. Danek, 42 N.Y.2d 138, 397 N.Y.S.2d 592, 366 N.E.2d 253 it restricted Seider by holding it unavailable for use by nonresident plaintiffs. The Donawitz court indicated that it was aware of the criticism of the Seider doctrine and the grave constitutional doubts which had been expressed about it. Nevertheless, it refused to overrule the case because of considerations of institutional stability and stare decisis, commenting that "it would be scandalous for us to abandon it" in view of continued recent adherence to it (42 N.Y.2d at p. 142, 397 N.Y.S.2d 592, 366 N.E.2d 253).

Ten days after the Donawitz decision the Supreme Court decided Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683, holding that the requirements of "fair play and substantial justice" for the validity of in personam jurisdiction apply to jurisdiction in rem as well and are measured by the minimum contacts test of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. The court noted (pp. 208-209) that its holding might have some further reverberations:

"It appears, therefore, that jurisdiction over many types of actions which now are or might be brought in rem would not...