The opinion of the court was delivered by: BAUMAN
This action was commenced in the Supreme Court, New York County, and removed to this court on September 12, 1972. Defendant then moved pursuant to F.R.Civ.P. 12(b)(2) and 12(b)(4) to dismiss the complaint on the ground that the court lacked personal jurisdiction over the defendant or alternatively, to transfer the action to the U.S. District Court for the Northern District of Texas, pursuant to 28 U.S.C. § 1404(a). At the time of argument of the motion, I concluded that a factual hearing was necessary to clarify the question of jurisdiction. The parties thereafter undertook to develop a factual record and in the ensuing months conducted depositions and obtained affidavits from individuals involved in the transactions that underlie this lawsuit. The affidavits and deposition transcripts were submitted to the court, as well as a brief "Statement of Agreed Facts". I am now satisfied that there is an adequate record upon which to base a decision, and therefore deem a hearing unnecessary.
Although this is in essence a simple breach of contract action, some background is in order. Plaintiff is a national bank with principal offices in New York State. Defendant (hereafter "Republic"), is a life insurance company with principal offices in Dallas, Texas, primarily engaged in the sale of life, accident, and health insurance. It does not sell or solicit insurance, has no offices, employees or agents and has neither a bank account nor a telephone listing in the state. New York is, indeed, the only state in the union in which Republic does not sell insurance.
Like most large insurance companies,
Republic is accustomed to making substantial investments in debt and equity securities and in mortgage financing. During the early months of 1971, Erwin W. Atkerson, then chairman of the executive committee of Republic, had frequent conversations in Dallas with Morris Karp, then president of Realty Equities Corp. of New York (hereafter "Realty"), regarding investments in and loans to Realty by Republic. In July, 1971, Atkerson and Karp met on at least four occasions, and one such meeting lasted nearly two days. During these meetings they discussed the purchase by Republic from the Royal National Bank
of a note of the Charlotte Venture Corporation
in the principal amount of $2,000,000. This note, which was secured by a mortgage on a hotel in Charlotte, North Carolina, is the subject of the instant action. On July 29, 1971, Atkerson agreed, on behalf of Republic, to purchase the note from Royal, and, at Karp's suggestion, agreed to attend a meeting in New York on August 2 at which a variety of other transactions would be discussed.
On August 2 the meeting took place for some four or five hours at Realty's offices at 375 Park Avenue, New York City. Atkerson agreed, on behalf of Republic, to purchase a $5,000,000 note from Realty and/or its affiliated company, Graycrat Corporation. (This will be referred to hereafter as "the Graycrat note" to distinguish it from the Charlotte note, supra.) Atkerson made part payment of $2,000,000 for the note on that day, and agreed to pay the balance on August 5.
There was also further discussion of the Charlotte note at this meeting, although no representative of Royal was present. Atkerson was told by representatives of Realty that "its financial circumstances required that prompt action be taken with respect to the Charlotte note and the additional payment of three million dollars and [was] asked that, for the convenience of Realty and others with whom it was dealing, Mr. Atkerson return to New York on August 5 at which time Realty would be consummating another transaction with another lender (The Royal National Bank.)"
Atkerson returned to Dallas that day and promptly drafted a letter setting forth the terms and conditions upon which Republic would purchase the Charlotte note.
He returned to New York on August 5, where, at Realty's offices, he gave to Realty's representatives a check for $3,000,000, which represented the balance due on the Graycrat note purchased on August 2.
At the same meeting he delivered to Irving Stolz, representing Royal, the draft letter pertaining to the Charlotte note which he had prepared in Dallas. Stolz insisted that defendant agree to purchase the note and mortgage even if there were interest arrears on the purchase date.
After the changes had been agreed upon, certain phrases reflecting these modifications were immediately typed into the letter, which had previously been prepared on Republic's letterhead. The revised agreement was then executed by Atkerson on behalf of Republic and delivered to Stolz. Atkerson returned to Dallas that same day.
The agreement thus consummated between Royal and Republic had significance for a series of transactions between Royal and Realty. According to the deposition testimony of Stolz, Realty, which had been borrowing from Royal since the early 1960's, had sought new loans from Royal to pay off certain obligations owing to Royal. Royal had been unwilling to extend them such loans unless it was assured that a responsible lender (i.e. a bank or insurance company) would undertake to purchase the Charlotte note and mortgage. Once Republic agreed to such an undertaking, Royal was willing to lend a Realty subsidiary, S.D. Associates, $3,350,139.70.
It is worth pointing out, therefore, that the contact between Royal and Republic was exceedingly limited. Royal had a business relationship with Realty of more than ten years' duration, and was involved with it in a series of complex transactions. Realty and Republic, in turn, had negotiated for some months over the two transactions already described (the $5 million Graycrat note and the $2 million Charlotte note). But there was no contact between Royal and Republic until August 5,
and on that date the contact was limited to the negotiations over interest arrears and the execution of the letter agreement.
In the letter agreement, prepared by Atkerson, Republic agreed to purchase the Charlotte note on August 1, 1972 or, at its option, on an earlier date. However, the complaint alleges that on said date Republic refused delivery of the note and its supporting documents and refused to make payment to the plaintiff as had been agreed in the Atkerson letter. The instant action was filed shortly thereafter.
Republic now moves to dismiss the action, pursuant to Rules 12(b)(2) and 12(b)(4) of the Federal Rules. These two provisions are, of course, intertwined, and the single question presented for resolution is whether Republic had sufficient contacts with New York to render it amenable to the service of process and thus to the jurisdiction of this court. Rule 4(e) of the Federal Rules provides that service may be effected in accordance with the rules prevailing in the state where the district court is situated. Reference must thus be made to § 313 of the C.P.L.R., which provides for the manner in which service may be effected on, inter alia, persons "subject to the jurisdiction of the courts of the state under section . . . 302." § 302(a)1 of the C.P.L.R.,
the so-called "long arm statute", provides that the courts of New York state may exercise jurisdiction over a nondomiciliary who "transacts any business within the state."
Although Republic's activities within New York can hardly be deemed substantial, I am satisfied that they are sufficient to confer upon the courts of this state jurisdiction in this action. In so holding I am bound, as I must be, by the construction placed upon § 302(a)1 by the state courts. Bearing that in mind, my analysis must begin and end with the dictum of the New York Court of Appeals in Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970). There Chief Judge Fuld, speaking for the court, noted that "[the] clearest sort of case in which our courts would have 302 jurisdiction" was "the situation where a defendant was physically present at the time the contract was made." 26 N.Y.2d at 17, 308 N.Y.S.2d at 340, 256 N.E.2d at 508. Judge Fuld cited Longines-Wittnauer Watch Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68 (1965) and Harry Winston, Inc. v. Waldfogel, 292 F. Supp. 473 (S.D.N.Y.1968). In Winston, Judge Motley of this court ...