Stewart v. Volkswagen of America, Inc.

• Decision Date: 29 April 1993
• Citation: 81 N.Y.2d 203,613 N.E.2d 518,597 N.Y.S.2d 612
• Parties: , 613 N.E.2d 518 Geca STEWART et al., Respondents, v. VOLKSWAGEN OF AMERICA, INC., et al., Defendants, and Volkswagen Werk Aktien-Gesellschaft, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 612

597 N.Y.S.2d 612

81 N.Y.2d 203, 613 N.E.2d 518

Geca STEWART et al., Respondents, v. VOLKSWAGEN OF AMERICA, INC., et al., Defendants, and Volkswagen Werk Aktien-Gesellschaft, Appellant.

Court of Appeals of New York.

April 29, 1993.

[81 N.Y.2d 204] [613 N.E.2d 520] Herzfeld & Rubin, P.C., New York City (Herbert Rubin, David B. Hamm and Linda M. Brown, of counsel), for appellant.

[81 N.Y.2d 205] Montfort, Healy, McGuire & Salley, Garden City (E. Richard Rimmels, Jr., of counsel), for respondents.

OPINION OF THE COURT

BELLACOSA, Judge.

Appellant-defendant Volkswagen A.G. (VWAG) appeals by leave of the Appellate Division from an order of that Court which affirmed Supreme Court's denial of its motion to dismiss the action. VWAG claimed respondents-plaintiffs failed to acquire personal jurisdiction over it in accordance with Business Corporation Law § 307(b)(2). We conclude that plaintiffs have not satisfied the statute's strictly specified service of process prescriptions necessary to acquire jurisdiction over a foreign corporation not authorized to do business in New York. We therefore reverse, answer the certified question in the negative, and grant the motion to dismiss the action.

Plaintiffs sued for damages for personal injuries arising out of automobile accidents, allegedly caused by the "unintended acceleration" of Audi 5000 vehicles manufactured by VWAG, a German corporation. The vehicles were exported to the United States, title was transferred to Volkswagen of America, Inc. (VOA), and they were then sold to World Wide Volkswagen Corp., which distributed them to Audi dealers, who sold them to consumers.

Plaintiffs sought to secure jurisdiction over VWAG by serving the summons and complaint on the New York Secretary of State pursuant to Business Corporation Law § 307. That jurisdiction/service of process section allows for service on the Secretary of State as the "agent" of a foreign corporation not authorized to do business in New York. The statute is precise as to the sequence of service and notice actions necessary to initiate and complete acquisition of jurisdiction. A party must first serve the Secretary of State, and then either deliver personally a copy of the process to the foreign corporation or send a copy of the process to:

. "such foreign corporation by registered mail with return receipt requested, at the post office address specified for the purpose of mailing process, on file in the department of state, or with any official or body performing the equivalent function, in the jurisdiction of its incorporation,"

. "or if no such address is there specified, to its registered or other office there specified,"

. "or if no such office is there specified, to the last address of such foreign corporation known to the plaintiff." (Business Corporation Law § 307[b][2] [emphasis added].)

In this case, plaintiffs served the Secretary of State but did not deliver a copy personally to the foreign corporation, or send a copy to the foreign corporation in accordance with the order or specification of the statutory delineation. Instead, they mailed a summons and complaint to: "Volkswagen of America on behalf of Volkswagenwerk-Aktien Gesellschaft, 600 Sylvan Avenue, Englewood Cliffs, N.J. 07632". The complaint indicated that VWAG "was and is a corporation organized and existing under the laws of the Federal Republic of West Germany," and an attached rider gave the post office address of VWAG as "Rechtswesen Ausland, Wolfsburg 3180 West Germany". Plaintiffs urge that their choice for notification to VWAG complied with Business Corporation Law § 307(b)(2) and the courts below have sustained their jurisdiction claim.

The dispositive issues are: (1) whether plaintiffs may properly rely on and drop down to the last service completion specification in Business Corporation Law § 307(b)(2), i.e., mailing to "the last address of such foreign corporation known to the plaintiff[s]," without attempted satisfaction or explanation of the preceding service prescriptions; and (2) whether such mailing option, if authorized, complied with the direction that it be effected to the "address of such foreign corporation".

VWAG moved pursuant to CPLR 3211(a)(8) to dismiss the complaint against it, on the ground that plaintiffs did not secure personal jurisdiction over it because plaintiffs' attempted service of process on it did not comply with Business Corporation Law § 307(b)(2). VWAG further maintained that as a foreign corporation incorporated in West Germany not authorized to do business in New York, it must be served in accordance with the Hague Service Convention. Concededly this was not done, but we need not address that issue since we conclude that Business Corporation Law § 307(b)(2) was not otherwise satisfied and the action should be dismissed.

Supreme Court denied VWAG's motion to dismiss, stating that VOA was a proper agent for completion of service on and notice to VWAG. The Appellate Division affirmed the order, stating that personal jurisdiction is acquired over a foreign corporation pursuant to Business Corporation Law § 307(b)(2) by service made on a local corporation so controlled by the foreign corporation that the local corporation can be deemed a mere department of the foreign corporation. The local corporation in such instance is deemed the involuntary agent of the foreign corporation, "[t]hus, if VOA is a mere department of VWAG, VWAG was properly served under Business Corporation Law § 307" (Stewart v. Volkswagen of Am., 181 A.D.2d 4, 7, 584 N.Y.S.2d 886). That Court then cited a number of non-New York cases, as well as Luciano v. Garvey Volkswagen, 131 A.D.2d 253, 521 N.Y.S.2d 119, for the proposition that VOA is a mere department of VWAG. Other cases (Brandt v. Volkswagen AG., 161 A.D.2d 1149, 555 N.Y.S.2d 957; Derso v. Volkswagen of Am., 159 A.D.2d 937, 552 N.Y.S.2d 1001) which support a contrary proposition were distinguished because "in each of those cases, unlike the case at bar, VWAG raised a factual question, and presented evidence, as to whether VOA was a mere department of VWAG" (Stewart v. Volkswagen of Am., 181 A.D.2d, at 8, 584 N.Y.S.2d 886, supra ).

The incontestable starting proposition in cases of this kind is that once jurisdiction and service of process are questioned, plaintiffs have the burden of proving satisfaction of statutory and due process prerequisites (see, Lamarr v. Klein, 35 A.D.2d 248, 315 N.Y.S.2d 695, affd 30 N.Y.2d 757, 333 N.Y.S.2d 421, 284 N.E.2d 576). Business Corporation Law § 307 establishes a mandatory sequence and progression of service completion options to acquire jurisdiction over a foreign corporation not authorized to do business in New York. We have made plain that these steps are "requirements of a jurisdictional nature which must be strictly satisfied" (Flick v. Stewart-Warner Corp., 76 N.Y.2d 50, 54, 556 N.Y.S.2d 510, 555 N.E.2d 907). Thus, when VWAG contested plaintiffs' effort to obtain New York jurisdiction over it by service on the New York Secretary of State, plaintiffs had to demonstrate not only that notice had in some manner been mailed to VWAG or some agent, but also that the specified steps for gaining jurisdiction by service and notice were precisely followed in the delineated sequence set forth in the statute.

Plaintiffs were obligated in the first instance to ascertain that there was no post office address specified for VWAG to receive process or other registered or office address for VWAG on file with the German equivalent of the Secretary of State before descending to the next level of...