The opinion of the court was delivered by: POLLACK
The defendant Ormand Industries, Inc., a Delaware corporation, seeks to dismiss the complaint on the ground that the Court has no personal jurisdiction over it in this diversity action.
The plaintiff is the holder of legended and restricted stock issued by Ormand. Seeking an exchange of his shares for a like amount of unlegended and unrestricted shares, plaintiff presented his certificates accompanied by a "no-action" letter issued by the Securities and Exchange Commission in respect to plaintiff's shares, to the New York transfer agent for Ormand stock, the defendant Morgan Guaranty Company. Morgan, on instruction from Ormand, refused to exchange plaintiff's stock for unlegended shares on Ormand's agreement to indemnify Morgan for any loss sustained by reason of this refusal.
Plaintiff seeks in this suit to obtain injunctive relief and damages against Morgan and Ormand. The defendant Ormand contends on this motion that it does not do business in New York and consequently may not be sued here. The defendant Morgan has not pleaded as yet to the complaint.
The complaint states a sufficient claim for relief under New York law against the defendant Morgan for wrongful failure to transfer plaintiff's shares. It has been hold in New York that submission by a shareholder of an SEC "no-action" letter along with the restricted shares covered by that letter, requires the corporation and its transfer agent to transfer those shares absent a valid reason not to do so. Riskin v. National Computer Analysts, Inc., 37 A.D. 2d 952, 326 N.Y.S. 2d 419 (1st Dept. 1971), aff'g 62 Misc. 2d 605, 308 N.Y.S. 2d 985 (N.Y. Co. 1970) (Gold, J.); Donlon Ventures, Inc. v. Aven, Inc., (N.Y. Co. 1967) (Spector, J.) in 158 N.Y.L.J. July 10, 1967 at 10, Col. 4; Friedman v. Chemical Bank, (N.Y. Co. 1965) (Carney, J.) in 153 N.Y.L.J., April 13, 1965 at 14, Col. 7. Accord: Kanton v. United States Plastics, Inc., 248 F. Supp. 353 (D.N.J. 1965); Rothberg v. National Banner Corp., 259 F. Supp. 414 (E.D. Pa. 1966). No reason other than the restriction endorsed on the shares has been furnished to warrant refusal of the requested transfer.
A breach of the duty to transfer entitles the shareholder to an order requiring performance and to damages measured by the difference, if any, between the price of the shares at the time of the breach and the price prevailing at the time of trial. Id.
In the Kanton case, which involved remarkably similar facts to those at Bar, the Court determined that a wrongful refusal to transfer stock is in essence a conversion and that the right of action therefor arises in the locale where the instructions to refuse transfer, given by a non-domiciliary to a local agent, were intended to be, and are in fact, carried out. 248 F. Supp. at 356, 360.
CPLR § 302 provides that a Court may exercise personal jurisdiction over any non-domiciliary who through an agent commits a tortious act within the state.
No state or federal case construing CPLR § 302 has been found dealing with the precise issue of imputing a wrongful refusal of a transfer agent to its non-domiciliary principal. But it has been held that where a foreign corporation requests purposeful acts by a person in New York for the benefit of the foreign corporation, then the foreign corporation is amenable under CPLR § 302 to suit by a third party injured by those acts, even where the local agent is not the exclusive agent of a foreign principal. Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y. 2d 13, 308 N.Y.S. 2d 337, 256 N.E. 2d 506 (1970); R.F.D. Group Limited v. Rubber Fabricators Inc., 323 F. Supp. 521 (S.D.N.Y. 1971) (Lasker, J.); cf. Orient Mid-East Lines, Inc. v. Albert E. Bowen, Inc., 297 F. Supp. 1149 (S.D.N.Y. 1969) (Tyler, J.).
Whether or not Ormand personally entered New York to confer with Morgan is not material to the issue to be decided here. In Parke-Bernet Galleries the Court "emphasized" that "one need not be physically present in order to be subject to the jurisdiction of our courts under CPLR 302 for, particularly in this day of instant long-range communications, one can engage in extensive purposeful activity here without ever actually setting foot in the State." 26 N.Y. 2d at 17, 308 N.Y.S. 2d at 340, 256 N.E. 2d at 508.
Section 1301 of the New York Business Corporation Law, McKinney's Consol. Laws, c. 4, provides in pertinent part:
(a) A foreign corporation shall not do business in this state until it has been authorized to do so as provided in this article. . . .
(b) Without excluding other activities which may not constitute doing business in this state, a foreign corporation shall not be considered to be doing business in this state, for the purposes of this chapter, by reason of carrying on in this state any one or more of the following activities: . .
(4) Maintaining offices or agencies only for the transfer, exchange and registration of its securities, or appointing and maintaining trustees or ...