Summit Constr. Servs. Grp., Inc. v. Act Abatement, LLC

• Decision Date: 16 December 2011
• Citation: 935 N.Y.S.2d 499,2011 N.Y. Slip Op. 21451,34 Misc.3d 823
• Parties: SUMMIT CONSTRUCTION SERVICES GROUP, INC., Plaintiff, v. ACT ABATEMENT, LLC, Darlene Jeter, and Eric Jeter, Defendants.
• Court: New York Supreme Court

2011 N.Y. Slip Op. 21451

34 Misc.3d 823

935 N.Y.S.2d 499

SUMMIT CONSTRUCTION SERVICES GROUP, INC., Plaintiff,

v.ACT ABATEMENT, LLC, Darlene Jeter, and Eric Jeter, Defendants.

Supreme Court, Westchester County, New York.

Dec. 16, 2011.

Nathan Shook, Esq., White Plains, for plaintiff.

Scott A. Ziluck, Esq., Halperin Battaglia Raicht, LLP, New York, for defendants.

ALAN D. SCHEINKMAN, J.

Defendant Darlene Jeter (“Defendant” or “Jeter”) moves to dismiss this action as against her, pursuant to CPLR 3211(a)(8), claiming that the Court lacks jurisdiction over her person. The motion is opposed by Plaintiff Summit Construction Services Group., Inc. (“Summit” or “Plaintiff”). The issue presented is whether a contract guaranty to be performed in New York qualifies as a contract to perform services within New York sufficient to allow the invocation of long-arm jurisdiction, pursuant to CPLR 302(a)(1), over a non-resident, non-domiciliary in an action to enforce the guaranty. This Court concludes that, at least under the circumstances presented here, it does.

RELEVANT FACTS

This action, commenced by the electronic filing of a Summons and Complaint, on August 9, 2011, alleges breach by Defendant ACT Abatement, LLC (“ACT”) of a subcontract with Summit. Plaintiff interposed an Amended Complaint on September 22, 2011.

It is alleged that ACT was to provide labor and materials for the completion of demolition and asbestos abatement work at the Riverside Health Center, 160 West 100th Street, New York, New York. Summit presents four causes of action against ACT: (a) First Cause of Action, claiming that ACT failed to pay its suppliers and vendors; (b) Second Cause of Action, alleging that ACT failed to pay fringe benefits for union workers; (c) Third Cause of Action, claiming that Summit has and will incur costs to complete ACT's work above the value of the subcontract; and (d) Fourth Cause of Action, asserting that ACT failed to maintain workers compensation and general liability insurance.

Summit seeks to hold Jeter liable for each of the claimed breaches by ACT, asserting that, in order to induce Summit to enter into the subcontract with ACT, Jeter entered into a Personal Guaranty and Indemnity Agreement in which she personally and unconditionally guaranteed the obligations of ACT under the subcontract. According to the Amended Complaint, Jeter is, and always was, a resident of Massachusetts.

The claims against Jeter are presented in the Fifth through Ninth Causes of Action. The Fifth Cause of Action is based on Jeter's personal guaranty of payments to ACT's suppliers and vendors; the Sixth Cause of Action is predicated upon Jeter's personal guaranty of payments for fringe benefits to labor unions or laborers; the Seventh Cause of Action is based on Jeter's personal guaranty to pay for costs of completing ACT's work; and the Eighth Cause of Action is based on her personal guaranty to pay insurance premiums and related costs. The Ninth Cause of Action, which was first interposed in the Amended Complaint, alleges that Jeter guaranteed the completion of the work and failed to do so.

In addition, Summit presents claims against Defendant Eric B. Jeter, alleging that he too entered into a Personal Guaranty and Indemnity Agreement.

Jeter has moved to dismiss, submitting an attorney affirmation, appending a copy of the Summons and Complaint, and a memorandum of law. In the memorandum of law, it is argued that, unless a guaranty contains a provision explicitly consenting to jurisdiction in New York, the mere act of signing a guaranty that relates to matters inside New York is insufficient to support personal jurisdiction over the guarantor. Jeter cites for this proposition Ferrante Equip. Co. v. Lasker–Goldman Corp, 26 N.Y.2d 280, 309 N.Y.S.2d 913, 258 N.E.2d 202 [1970]; Carvel Corp. v. Ross Distrib., Inc., 137 A.D.2d 578, 524 N.Y.S.2d 469 [2d Dept. 1988]; CK's Supermarket Ltd. v. Peak Enter. Holdings, Inc., 37 A.D.3d 348, 831 N.Y.S.2d 138 [1st Dept. 2007]; and First Natl. Bank and Trust Co. v. Wilson, 171 A.D.2d 616, 567 N.Y.S.2d 468 [1st Dept. 1991].

In opposition, Summit submits an affidavit from its Executive Vice President, Frank Giattino. Giattino avers that, on or about November 1, 2010, Summit entered into a subcontract with ACT for the performance of asbestos abatement and demolition at the Riverside project and he submits a copy of the subcontract. Giattino states that ACT is a Nevada corporation with an office address on Staten Island, New York. Giattino describes Defendant Eric B. Jeter as being the President of ACT and, upon information and belief, a New York resident.

The ACT subcontract with Summit required ACT to obtain a performance bond and a payment bond. However, according to Giattino, ACT could not obtain a performance bond so, instead, he submitted a personal guaranty from Darlene Jeter, his mother. Giattino avers, on information and belief, that Darlene Jeter is a very successful businesswoman who established and controlled a thriving waste management company. On or about December 17, 2010, Darlene Jeter signed and delivered to Summit a Personal Guaranty and Indemnity Agreement (the “Guaranty Agreement”), dated November 1, 2010, a copy which is submitted with Giattino's affidavit.

According to the recitals in the Guaranty Agreement, Eric B. Jeter holds a majority of the membership interest in ACT and is its managing member. Darlene Jeter is Eric's mother and based on her personal and pecuniary interests in wanting Eric and his business, ACT, to succeed, she lent substantial sums to ACT.

The Guaranty Agreement contains a personal guaranty by Darlene Jeter that ACT “will fully and faithfully perform its obligations” under the subcontract with Summit, including the completion of all work provided for, any required repairs or replacement of defective parts, and, further, that Jeter will indemnify, reimburse and repay Summit for all outlay and expense which Summit may incur in making good any default by ACT. In addition, Jeter personally guaranteed that ACT will pay all of its obligations relating to the project, including wages and compensation for labor performed and services rendered and materials and supplies. She further guaranteed the full payment of all wages and benefits to all workers performing work under the subcontract. Darlene Jeter's liability under the Guaranty Agreement was capped at $300,000. Darlene Jeter's signature on the Guaranty Agreement was taken before a Massachusetts' notary public and the caption on the acknowledgment clause places the venue as the State of Massachusetts, County of Plymouth. There being no other information on the point, the Court infers, and assumes for purposes of this Decision and Order, that Darlene Jeter signed the Guaranty Agreement in Massachusetts.

The subcontract contains a provision selecting Supreme Court, Westchester County, as the forum for any disputes under the subcontract and selecting New York law as to the law to be applied.

According to Giattino, ACT breached the subcontract and Summit terminated the subcontract for cause. On or about July 22, 2011, Summit issued a demand to Darlene Jeter to make good on the Guaranty Agreement. However, she is alleged to have refused to do so.

The demand letter of July 22, 2011 was addressed to Jeter at an address in Chestnut Hill, Massachusetts. The affidavit of service on file with this Court avers that service was made upon Darlene Jeter by delivering the process to her at the address in Abington, Massachusetts, on August 11, 2011.

Summit submits a memorandum of law in which it argues that a guaranty to make payments to a New York entity constitutes a contract to provide services in New York sufficient to invoke long arm jurisdiction, pursuant to CPLR 302(a)(1), over a non-resident, non-domiciliary.

Darlene Jeter has not interposed any reply papers.

LEGAL DISCUSSION

As originally enacted, CPLR 302(a)(1) conferred jurisdiction over a nondomiciliary who transacts any business in the State, provided that the cause of action related to the transaction. In 1970, the Court of Appeals, in Ferrante Equip. Co., supra, held that the statute, as it existed, did not support the exercise of jurisdiction over a nondomiciliary on a cause of action to enforce an agreement by the nondomiciliary to provide indemnification on a construction contract. The Court concluded that the fact that the nondomiciliary may have received benefits from the performance of the contract in New York by others was not sufficient to confer long arm jurisdiction ( Ferrante Equip. Corp., supra, 26 N.Y.2d at 285, 309 N.Y.S.2d 913, 258 N.E.2d 202). However, the decision was predicated upon the existing language of the statute and the Court specifically pointed in the direction of the Legislature as the proper forum to consider whether long arm jurisdiction should be expanded.

In 1979, the Legislature amended CPLR 302(a)(1) by expanding the availability of long-arm jurisdiction to where the nondomiciliary “contracts anywhere to supply goods or services in the state” (CPLR 302[a][1], as amended by L. 1979, ch. 252). The state courts in New York have divided on whether the revised statute supports the exercise of personal jurisdiction over an out-of-state guarantor based solely on a guarantee of an obligation that was to be performed in New York.

One of the first cases to consider the question is Culp & Evans v. White, 106 Misc.2d 755, 435 N.Y.S.2d 248 [Sup. Ct. Erie County 1981]. The court determined that Ferrante is limited to the portion of the statute that permits long arm jurisdiction to be invoked based on the transaction of business. Relying on the practice commentary of Joseph T. McLaughlin and the Law Revision Commission's memorandum in support of the revised legislation, the court held that the new statutory language supported the exercise of jurisdiction and that it was not oppressive to require a nonresident, who had agreed to...