Piracci v. NEW YORK CITY EMPLOYEES'RETIREMENT SYSTEM

Decision Date28 January 1971
Docket NumberCiv. No. 70-1123-T.
Citation321 F. Supp. 1067
PartiesDominic A. PIRACCI, Sr., Mary Violet Piracci, Piracci Construction Company v. NEW YORK CITY EMPLOYEES' RETIREMENT SYSTEM.
CourtU.S. District Court — District of Maryland

George Cochran Doub, Baltimore, Md. (John J. Ghingher, III, Baltimore, Md., on the brief), for plaintiffs.

John J. Loflin, Acting Corporation Counsel of City of New York (J. Lee Rankin, Corporation Counsel, New York City, on the brief), for defendant.

THOMSEN, District Judge.

This is an action seeking specific performance of a commitment agreement for a permanent mortgage loan or, in the alternative, damages for breach of that agreement. Defendant has moved (1) to dismiss the case for lack of personal jurisdiction over it, (2) to quash the return of service of process, and (3) for a change of venue to the Southern District of New York.

The Maryland long arm statute, Art. 75, §§ 94-100, Anno.Code of Maryland (1969 Repl.Vol.), contains the following pertinent provisions, upon which plaintiffs rely:

"§ 96. Personal jurisdiction over person as to cause of action arising from business, etc., in State.
"(a) A court may exercise jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's
"(1) Transacting any business in this State.
"(2)-(6) * * *1
"(b) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him.
"§ 97. Service made outside of State.
"When the exercise of personal jurisdiction is authorized by this subtitle, service may be made outside this State."

Each side has submitted affidavits setting forth the facts upon which it relies. There is no dispute about the material facts, which may be summarized as follows:

The individual plaintiffs are residents of Maryland and the only stockholders of the corporate plaintiff, a Maryland corporation engaged in the construction business.

Defendant is a New York corporation having its only office in New York City, where it conducts all its business. It provides pension benefits for employees of the City of New York, and maintains several funds, of which the Comptroller of the City of New York is the custodian and which he has the authority to invest. It has no agents, employees or representatives in Maryland and neither owns nor leases any property here. It does not actively solicit mortgage investments, but it holds some 100 mortgages, none of which is secured by property in Maryland. It also has outstanding eight mortgage commitments, one of which is the subject of this action; another covers a new post office under construction in Baltimore.

On July 3, 1968, by act of the Comptroller, defendant approved an application submitted to it by a New York broker2 on behalf of the corporate plaintiff for a first mortgage loan in the amount of $2,640,000, subject to the following conditions, inter alia, set out in the commitment letter: that the loan be evidenced by a note secured by a first mortgage on a Post Office and Vehicle Maintenance Facility to be constructed in Riverdale, Maryland; that the note and mortgage be delivered to defendant on or before November 23, 1969; that the buildings be leased to the United States for an initial term of not less than 30 years, at an annual rental of $250,000, and eight five year renewals at an annual rental of $249,000; that the buildings be constructed according to plans and specifications referred to in the commitment letter; that the construction be supervised by an architect or engineer satisfactory to the Comptroller, at borrower's expense; that an appraisal be furnished, at borrower's expense, by an appraiser designated by the Comptroller; that the borrower pay all costs of the transactions, including legal, appraisal, taxes, survey, recording, title certifications, title insurance premium and other title company charges; that evidence of payment of all taxes, water and sewer rates, assessments, and other prior lien charges be furnished; and that policies of fire and other hazard insurance be purchased from companies and in amounts satisfactory to the Comptroller.

The commitment letter also provided: "The Comptroller's Office will proceed to arrange for an application by the Borrower for a survey of the premises and title insurance with a title company to be designated by the Borrower and approved by the Comptroller. All title insurance commissions are to be paid to the Corporation Counsel of the City of New York."

The corporate plaintiff accepted the commitment and made the good faith payment required by the commitment letter. In July 1968 the individual plaintiffs purchased the property and obtained from a Maryland bank a commitment to provide interim financing for the buildings. In August 1968 defendant consented to an assignment of its commitment for the permanent financing from the corporate plaintiff to the individual plaintiffs.

In October 1968 the individual plaintiffs, the interim lender (the Maryland bank), and defendant entered into a "Buy-and-Sell Agreement", sometimes referred to as "the tripartite agreement". By that agreement defendant agreed to purchase from the bank a promissory note of the individual plaintiffs, secured by a first deed of trust on the property referred to in defendant's commitment letter. The tripartite agreement contained numerous conditions, including compliance by the individual plaintiffs with the conditions set forth in the commitment letter. Thereafter the individual plaintiffs obtained construction loans from the Maryland bank on their promissory note secured by a first deed of trust on the property.

Defendant's only contacts in this matter with the State of Maryland were inspections on three occasions of the premises to be security for the loan: the first, by a New York appraiser, on or about August 7, 1968; the second, by a New York architect-engineer, on April 24, 1969; and the third, by the same architect-engineer, accompanied by a construction inspector from the Comptroller's office, on March 2, 1970. None of these persons resides or maintains an office in Maryland. In each instance they spent one day or part of a day in Maryland and returned to New York.

Before December 1, 1969, plaintiffs had completed construction of the buildings and surrendered possession thereof to the United States on the terms required by the commitment and the tripartite agreements. Neither agreement specified a time or place for the closing. Plaintiffs claim that they satisfied all material conditions precedent to the closing, and that they and the Maryland bank were ready, willing and able to close; that defendant first requested a postponement and then refused to close, advising plaintiffs on July 1, 1970, that it had revoked the commitment because of unspecified failures of the corporate plaintiff to comply with the conditions.

As the Fourth Circuit pointed out in Haynes v. James H. Carr, Inc., 427 F. 2d 700 (4 Cir. 1970), cert. denied, 400 U.S. 942, 91 S.Ct. 238, 27 L.Ed.2d 245 (Dec. 7, 1970):

"Generally, the application of long arm statutes involves two steps. It is necessary to determine first whether the statute permits service of process on the nonresident defendant, and second, whether service under the statute violates the Due Process Clause of the federal constitution. * * *" 427 F.2d at 703.

This court is bound by authoritative interpretations of the Maryland long arm statute by the Court of Appeals of Maryland. Shealy v. Challenger Mfg. Co., 304 F.2d 102, 104 (4 Cir. 1962). On the constitutional issue, this court must follow decisions of the Supreme Court and, where the Supreme Court has not spoken, the Fourth Circuit.

In decisions construing the Maryland long arm statute, the Maryland Court has reiterated the following statements, first made as dictum in Gilliam v. Moog Industries, Inc., 239 Md. 107, 210 A.2d 390 (1965):

"It seems clear that the purpose of the Legislature in enacting these new provisions was to give the courts of the State personal jurisdiction over all out of state persons and corporations which constitutionally could be reached as having had sufficient Maryland contacts, under the jurisdictional yardstick established by the Supreme Court in cases such as International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283." 239 Md. at 111, 210 A.2d at 392.

See Novack v. National Hot Rod Ass'n, 247 Md. 350, 353-354, 231 A.2d 22 (1967); Vitro Electronics, etc., v. Milgray, 255 Md. 498, 504-505, 258 A.2d 749 (1969); Groom v. Margulies, 257 Md. 691, 700-701, 265 A.2d 249 (1970).

The Fourth Circuit noted in Beaty v. M. S. Steel Co., 401 F.2d 157, 160 (1968), cert. denied, 393 U.S. 1049, 89 S.Ct. 686, 21 L.Ed.2d 691 (1969), that the quoted statement is not strictly accurate with respect to subsection 96(a) (2); the same may be said of subsections 96(a) (3) and (4), dealing with tortious injury. However, there is no reason to question the accuracy of the statement of the Maryland Court of Appeals with respect to subsections 96(a) (1) and (b), which govern the instant case. This court must accept the conclusion that the Maryland Legislature intended to and did go to the full extent permitted by the Due Process Clause in enacting subsections 96(a) (1) and (b), quoted above.3 So, in this case, the two questions specified by the Fourth Circuit in Haynes tend to merge and become essentially the same.

The leading case in the field is International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), where the Court sustained the exercise of jurisdiction because defendant had "certain minimal contacts" with the state of the forum, "such that the maintenance of the suit does not offend `traditional notions...

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