Stubbs v. Security Consumer Discount Co.

Decision Date23 November 1976
Citation146 N.J.Super. 160,369 A.2d 44
PartiesGussie Lee STUBBS et al., Plaintiffs, v. SECURITY CONSUMER DISCOUNT COMPANY, a Pennsylvania corporation, et al., Defendants.
CourtNew Jersey Superior Court

Kenneth E. Meiser, Camden, for plaintiffs (Stanley C. Van Ness, Public Advocate, attorney).

Steven G. Wolschina, Camden, for defendant Fidelity Bank (Brown, Connery, Kulp, Wille, Purnell & Greene, Camden, attorneys).

ROSSETTI, P.J.D.C., Temporarily Assigned.

This is a motion to dismiss for lack of In personam jurisdiction of this court made by defendant Fidelity Bank, a foreign bank chartered by the Commonwealth of Pennsylvania and which maintains no offices or branches in the State of New Jersey.

Plaintiffs instituted a class action which arises out of numerous secondary mortgages obtained from New Jersey homeowners by Security Consumer Discount Company, a now defunct New Jersey secondary mortgage company. Plaintiff class is seeking to set aside these mortgages, alleging that they are in violation of the New Jersey Secondary Mortgage Loan Act, N.J.S.A. 17:11A--34 Et seq., and is additionally seeking money damages under the Consumer Fraud Act, N.J.S.A. 56:8--1 Et seq.

The issue raised by this motion is whether Fidelity's relationship with Security in the State of New Jersey is of such a nature that it will offend 'traditional notions of fair play and substantial justice' to maintain jurisdictional authority over it. International Shoe Co. v. Washington, 326 U.S. 310, 311, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

Security commenced operations in the early 1960s with an initial capital of $150,000. It obtained loans from Fidelity beginning in the early 1960s in the Commonwealth of Pennsylvania where Security had its principal place of business. In January 1966 Fidelity acquired a collateral interest in Security's Pennsylvania assets.

Security commenced operations in the State of New Jersey in or about 1969. In 1972 Fidelity perfected a security interest to ensure its loans by filing financing statements in New Jersey and taking assignments of all the secondary mortgages Security had acquired on New Jersey realty. During the course of their relationship Fidelity was the primary and substantial source of Security's assets, I.e., outstanding mortgages and was the source of monies for the loans Security made. In the case of a foreclosure sale all monies obtained from that process went directly to Fidelity, which was characteristic of the degree of involvement between the two corporations. Security is no longer an operating concern. Defendant Kenbee Mortgage Company, a corporation which is conceded to be wholly controlled by Fidelity, is currently servicing all the New Jersey mortgages on behalf of Fidelity. The volume of outstanding loans from Fidelity to Security apparently exceeded $1,000,000, and the current balance is approximately $400,000.

It has been clearly established in New Jersey that our courts can maintain jurisdiction over foreign corporations subject only to the contraints of due process. E.g., Avdel Corp. v. Mecure, 58 N.J. 264, 268, 277 A.2d 207 (1971); Japan Gas Lighter Ass'n v. Ronson Corp., 257 F.Supp. 219, 231 (D.N.J1966); Egan v. Fieldhouse, 139 N.J.Super. 220, 223, 353 A.2d 148, 149 (Law Div.1976). It is equally clear that

* * * due process in this context is coextensive with fundamental notions of fairness and demands only that the extent and nature of defendant's contacts in or with this State or in respect of a cause of action arising in this State, or in respect of a matter of legitimate state concern, be sufficient, under the circumstances of the controversy and as a matter of substantial justice and fair play, to justify the exercise of extraterritorial judicial power by this State. (Egan v. Fieldhouse, supra at 223, 353 A.2d at 149)

Contrary to the position taken by Fidelity, the determination of its vulnerability to suit in this State does not revolve around whether or not it was 'doing business' in New Jersey in the traditional sense. See Amercoat Corp. v. Reagent Chemical Corp., 108 N.J.Super. 331, 340--41, 261 A.2d 380 (App.Div.1970). As most recently stated in Unicon Investments v. Fisco, 137 N.J.Super. 395, 349 A.2d 117 (Law Div.1975):

We do not require the physical purposeful doing of some act within New Jersey, nor do we require the transaction of business within our State in person or through an agent * * * In New Jersey there are special problems in commercial transactions since this State is situated in a commercial corridor between highly developed areas of New York and Pennsylvania, * * *

It is sufficient under Avdel Corp. v. Mecure, supra, that an out-of-state defendant enter into an agreement which he knew or Should have known would have substantial effects in New Jersey. (at 402--03, 349 A.2d at 121 emphasis supplied).

What is of controlling importance in determining the jurisdictional scope of this court is the 'quality and nature of the contracts' Fidelity maintained with this State. Feldman v. Bates Mfg. Co., 143 N.J.Super. 84, 89, 362 A.2d 1177 (App.Div.1976). In Feldman the Appellate Division discussed some of the more significant criteria to be considered by our courts in evaluating the 'fairness' of maintaining jurisdiction over a foreign corporate defendant. It should be pointed out that these factors are not dispositive in all cases and, in fact, 'the judicial power of the forum * * * depends in each case on the...

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2 cases
  • Atamian v. Supermarkets General Corp.
    • United States
    • New Jersey Superior Court
    • November 29, 1976
    ... ... measures to guard against such criminal activity by providing security measures such as adequate security guards, lights and fencing. Defendants ... ...
  • Stubbs v. Security Consumer Discount Co.
    • United States
    • New Jersey Superior Court
    • April 24, 1978
    ...wholly controlled by defendant Fidelity Bank. Fidelity was the primary source of monies for the loans Security made (see 146 N.J.Super. 160, 369 A.2d 44 (Law Div. 1976)). Security commenced operations in New Jersey in 1968 by renting office facilities from defendant Robert Huber. For an add......

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