Waldorf Associates, Inc. v. Neville

• Citation: 141 Misc.2d 150,533 N.Y.S.2d 182
• Parties: WALDORF ASSOCIATES, INC., Plaintiff, v. Gary J. NEVILLE, Defendants.
• Decision Date: 29 July 1988
• Court: United States State Supreme Court (New York)

Page 182

533 N.Y.S.2d 182

141 Misc.2d 150

WALDORF ASSOCIATES, INC., Plaintiff, v. Gary J. NEVILLE, Defendants.

Supreme Court, New York County IAS Part 4.

July 29, 1988.

Gordon, Jackson & Simon, New York City for plaintiff; James Alleva, Ardsley, of counsel.

Kirschenbaum & Kirschenbaum, P.C., Garden City, for defendant; Burton Aronson, New York City, of counsel.

EDWARD J. GREENFIELD, Justice.

This case raises a question of significance to the New York financial and business community, and those elsewhere in the country or abroad who deal with them. The problem posed is whether the giving of a financial guaranty of a loan payable in New York by a non-New York domiciliary constitutes the supplying of goods and services within the state, creating in personam jurisdiction here under our long-arm statute (CPLR 302).

The facts are uncomplicated. When a corporation named Jazzles, Inc. of Columbus, Ohio (what it does or what it makes is unspecified) sought to obtain financing in New York, defendant Gary Neville, a real estate developer in Santa Monica, California who asserts he is neither an officer or a shareholder of Jazzles, agreed to help them out by signing an individual guaranty of payment, which was mailed to him for execution in California. The lender, Waldorf Associates, Inc., is a New York corporation, headquartered in New York City. Admittedly, defendant was never present in New York for negotiations concerning either the underlying loan or the guaranty.

After paying the notes due for the first few months, Jazzles defaulted, leaving an unpaid balance of $366,115.40. It then moved from Ohio to Florida. Plaintiff lender then sought to recover on the guaranty by an action in this court, serving the summons and complaint on defendant in California, purportedly in accordance with CPLR 313, which permits personal service outside the state on a person subject to state court jurisdiction under the long-arm provisions of CPLR 302(a).

Defendant has moved for an order dismissing the complaint on the grounds that the court lacks personal jurisdiction over the defendant. The plaintiff has cross-moved for summary judgment.

Plaintiff asserts two strings to its bow to substantiate its claim of jurisdiction--(a) plaintiff agreed to New York jurisdiction by contract, and (b) plaintiff is subject to New York jurisdiction by operation of law.

The alleged contractual basis for the assertion that there has been consent to in personam jurisdiction in New York is predicated on the following language in the guaranty:

"This guaranty, is and shall be deemed to be, a contract entered into under and pursuant to the laws of the State of New York and shall be in all respects governed, construed applied and enforced in accordance with the laws of said State, and no defense given or allowed by the laws of any other State or Country shall be interposed in any action hereon unless such defense is also given or allowed by the laws of the State of New York."

The quoted paragraph clearly is a choice of law provision, specifying the governing law which is to control in the event of litigation. It has nothing to do with choice of forum or consent to submit to jurisdiction. McShan v. Omega, 536 F.2d 516, 519; Galgay v. Bulletin Co., 504 F.2d 1062, 1066. The parties have merely agreed that New York substantive law shall govern with respect to the formation, interpretation, and enforcement of the contract, wherever those question may be litigated, in Ohio, California, New York, Florida, or elsewhere, nothing more. The subject of the sentence is the contract, and how it shall be dealt with. No consent can be found in that provision that the guarantor will accede to jurisdiction over him by the New York courts no matter where he may be served, nor has he designated an agent to receive process in New York on his behalf. Cf. National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 84 S.Ct. 411, 11 L.Ed.2d 354.

Presence in New York for purposes of jurisdiction is premised on a defendant either doing business here generally with a fair measure of permanence and continuity (Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915; McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 312 Laufer v. Ostrow, 55 N.Y.2d 305, 310, 449 N.Y.S.2d 456, 434 N.E.2d 692), or with a lesser degree of contact if liability is claimed to arise from a particular transaction within the state. There must be some articulable nexus between the transaction and the cause of action sued on. McGowan v. Smith, supra, 52 N.Y.2d at p. 272, 437 N.Y.S.2d 643, 419 N.E.2d 312.

The basis for long-arm jurisdiction pursuant to CPLR 302(a) is a transaction giving rise to a breach of contract, or the commission of a tort having impact within the state. In 1970, the Court of Appeals held, in Ferrante Equipment Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280, 309 N.Y.S.2d 913, 258 N.E.2d 202 that one who executed an indemnity agreement and guaranty out of state covering a construction contract to be performed in New York did not "transact any business within the state" or commit a wrong therein, the nonperformance being the acts or omissions of others. Any change, the Court of Appeals said, would have to come from the legislature.

In 1979 the legislature did change the law, by adding to CPLR 302(a)(1) an amendment conferring personal jurisdiction as to a cause of action arising not only from transacting business within the state, but also where the person "contracts anywhere to supply goods or services in the state". L.1979, c. 252, Sec. 1.

Can the furnishing of a guaranty now be construed as contracting to furnish goods and services in the state? That turns on whether the giving of a financial guaranty is considered...