Mellon Bank (East) PSFS, N.A. v. DiVeronica Bros., Inc., No. 92-1244

• Court: U.S. Court of Appeals — Third Circuit
• Writing for the Court: SLOVITER
• Citation: 983 F.2d 551
• Parties: MELLON BANK (EAST) PSFS, N.A., a federally chartered banking association v. DiVERONICA BROS., INC., Appellant.
• Docket Number: No. 92-1244
• Decision Date: 15 January 1993

Page 551

983 F.2d 551 MELLON BANK (EAST) PSFS, N.A., a federally chartered banking
association
v.
DiVERONICA BROS., INC., Appellant. No. 92-1244. United States Court of Appeals,
Third Circuit. Argued Nov. 3, 1992.
Decided Jan. 15, 1993.

Page 552

Frank J. Vavonese (argued), Syracuse, NY, for appellant.

Andrew D. Bershad (argued), Blank, Rome, Comisky & McCauley, Philadelphia, PA, for appellee.

Before: SLOVITER, Chief Judge, STAPLETON and LAY ^*, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Chief Judge.

Defendant DiVeronica Bros., Inc. appeals from an order of the district court entering judgment for $78,889.13 in favor of plaintiff Mellon Bank (East) PSFS, N.A. on its breach of contract claim. DiVeronica contends that the district court erred in denying its motion to dismiss the complaint for lack of personal jurisdiction; in finding that its obligation was unconditional; and in finding it was not entitled to an offset. Because we find that DiVeronica had insufficient contacts with Pennsylvania to warrant the exercise of personal jurisdiction over it, we do not reach the other issues posed.

I.

Facts and Procedural History

On June 29, 1982, Girard Bank entered into a loan agreement with Hubbell Holding Corp. and its affiliated companies: O.W. Hubbell & Sons, Inc.; Hubbell Highway Signs, Inc.; Hubbell Electric, Inc.; Cable Guide Railing Construction Co., Inc.; Triboro Neon & Service Corp.; and Bundy Concrete Products, Inc. (referred to jointly as the Hubbell Companies unless otherwise noted). As collateral, the Hubbell Companies granted, inter alia, a continuing lien and security interest in their accounts receivable. The loan was cross-collateralized so that collateral from any one of the Hubbell Companies could be used by Girard Bank to discharge the debt of the others. App. at 531, 539. In the mid-1980s, Girard Bank was acquired by Mellon Bank (East) PSFS, N.A., a federally chartered banking association with its principal place of business in Pennsylvania.

In February 1990, the Hubbell Companies defaulted on their loan obligations. Mellon Bank first demanded payment, and then on March 23, 1990 took peaceful possession of the collateral, including the accounts receivable. When one of the companies,

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O.W. Hubbell & Sons, was brought into involuntary bankruptcy, later converted into a voluntary chapter 11 proceeding, Mellon Bank obtained permission from the bankruptcy court of the Northern District of New York to lift the automatic stay to continue to collect the accounts receivable.

Because defendant DiVeronica Bros., Inc. had operated as both a subcontractor to and a general contractor of some of the individual Hubbell Companies, resulting in a series of credits and debits between them, in May 1990, the Hubbell Companies and DiVeronica met to settle their accounts. The oral agreement they reached fixing the amounts of their debts was later confirmed in a letter from Mellon Bank to the president of DiVeronica (the Letter Agreement). The Letter Agreement stated that in total, DiVeronica owed the Hubbell Companies $86,877.13; that O.W. Hubbell & Sons (the company in bankruptcy) owed DiVeronica $86,788.71 for work completed; and that DiVeronica had applied for payment of that amount from the Reliance Insurance Company, a New York corporation, which had insured payment and performance by O.W. Hubbell & Sons on the construction project for which DiVeronica as subcontractor was owed the $86,788.71. It further stated that "Hubbell and Diveronica have agreed that upon receipt of $86,788.71 from Reliance Insurance Co., Diveronica will pay [an outstanding lien].... After the lien has been removed, Diveronica will pay Hubbell $86,877.13." At the meeting leading to this agreement, Robert Obernesser, the manager of the construction division of O.W. Hubbell & Sons, agreed to assist DiVeronica in asserting its claim on the Reliance bond.

Reliance apparently disclaimed on the surety bond, and there remain accounts outstanding to and from DiVeronica and several of the Hubbell Companies. As assignee of the receivables of the Hubbell Companies, Mellon Bank filed this diversity action in the Eastern District of Pennsylvania to recover the debts DiVeronica owed three of the Hubbell Companies. ¹ The district court denied DiVeronica's motion to dismiss for lack of personal jurisdiction.

At the bench trial that followed, DiVeronica contended that because O.W. Hubbell & Sons owed it some $8,000 more than DiVeronica owed the Hubbell Companies together, it was entitled to set off the debts and had no duty to pay. It further argued that receipt of the payment on the surety bond was a condition precedent to its obligation to pay the accounts due to the Hubbell Companies, and that therefore Mellon Bank could not collect as assignee. The district court rejected these contentions and entered judgment in the amount of $78,889.13 in favor of plaintiff Mellon Bank. DiVeronica filed a timely appeal, asserting lack of personal jurisdiction or, in the alternative, entry of judgment in favor of the defendant or a new trial based on errors of law and fact committed in the district court.

II.

Jurisdictional Facts

Because resolution of this appeal turns on the jurisdictional question, we proceed to consider separately those facts relevant to the exercise of personal jurisdiction over DiVeronica which were developed at the evidentiary hearing on this issue.

DiVeronica is a New York corporation with a single office in Canastota, New York. Its business is construction, primarily roads, bridges, and buildings. The highway construction contracts between the Hubbell Companies and DiVeronica were solicited, contracted, and completed within the State of New York, and were governed by the laws of that state.

DiVeronica has never performed a construction project outside the State of New York; it has never solicited any business or advertised outside the State of New York. It has no office, mailing address, or property in Pennsylvania; it is not authorized

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or licensed to do business in Pennsylvania; it has no agents in Pennsylvania; it has not paid any taxes in Pennsylvania; it has never shipped merchandise directly into or through Pennsylvania nor has it supplied services or items here. Finally, the work that DiVeronica performed for the Hubbell Companies that is the subject of its claim on the Reliance bond was performed in New York.

On appeal Mellon Bank seeks to sustain the district court's ruling denying the motion to dismiss by arguing that jurisdiction is appropriate over DiVeronica because it attempted to realize pecuniary benefit in Pennsylvania by depositing checks from O.W. Hubbell & Sons drawn on Hubbell's Mellon Bank account which is located in Philadelphia, by submitting a claim to Reliance in Pennsylvania in an effort to collect on the surety bond, and by executing a contract with Mellon Bank knowing that it is located in Philadelphia, Pennsylvania. We will consider the relevance of these facts in the context of the applicable law.

III.

Discussion

Whether personal jurisdiction may be exercised over an out-of-state defendant is a question of law, and this court's review is therefore plenary. Mesalic v. Fiberfloat Corp., 897 F.2d 696, 698 (3d Cir.1990).

A federal court may exercise personal jurisdiction over a non-resident defendant to the extent permitted by the law of the state in which it sits. Fed.R.Civ.P. 4(e). The Pennsylvania long-arm statute provides that jurisdiction may be exercised "to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contact with this Commonwealth allowed under the Constitution of the United States." 42 Pa.Cons.Stat.Ann. § 5322(b) (Purdon 1981).

Where the defendant has raised a jurisdictional defense, the plaintiff bears the burden of establishing either that the cause of action arose from the defendant's forum-related activities (specific jurisdiction) or that the defendant has "continuous and systematic" contacts with the forum state (general jurisdiction). Bane v. Netlink, Inc., 925 F.2d 637, 639 (3d Cir.1991) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 416, 104 S.Ct. 1868, 1872, 1873, 80 L.Ed.2d 404 (1984)). Inasmuch as DiVeronica...