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STERLING NATL. BANK & TRUST CO. v. SOUTHERN SCRAP

March 30, 1979

STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK, Plaintiff,
v.
SOUTHERN SCRAP EXPORT CO., Southern Scrap Material Co., Commercial Metals Co., and the Kunsul Co., Defendants



The opinion of the court was delivered by: PIERCE

OPINION AND ORDER

This is an action for conversion in which two defendants now move to dismiss the complaint for lack of personal jurisdiction.

 Most of the facts are not controverted. Plaintiff Sterling National Bank and Trust Company ("Sterling") is a New York bank. Defendant Southern Scrap Material and its wholly owned subsidiary defendant Southern Scrap Export (hereinafter collectively referred to as "Southern Scrap") are Louisiana corporations with their principal places of business in New Orleans. On September 7, 1977, Sterling entered into loan agreements with Metric Metals International Inc. ("Metric"), a corporation located in New York. *fn1" The agreements granted Sterling a security interest in all of Metric's then existing and thereafter acquired inventory and accounts receivable.

 On or about May 2, 1978, Metric contracted to buy certain copper goods from Southern Scrap Export at a price in excess of $ 200,000. The contract contained a printed arbitration clause providing that:

 
"Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association in the City of New York, and the judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof."

 The goods were then delivered by Southern Scrap and accepted by Metric. Plaintiff alleges that, with full knowledge of Sterling's interest in the goods as after-acquired inventory and at a time when Metric was in default of its obligations to Sterling, Southern Scrap wrongfully repossessed and converted the goods. Southern Scrap apparently sold the goods to defendant Commercial Metal Co., a Delaware corporation with its principal place of business in Texas, and defendant Kunsul Co., a Korean corporation with its principal place of business in that country.

 Sterling has made demand upon each defendant for the return and possession of the goods, without success. Plaintiff Sterling claims that Metric is still indebted to Sterling in an amount in excess of the contract price of the goods. Thus, Sterling brings this action for conversion, alleging that it has been damaged in the amount of the contract price of the goods by having been deprived of its security interest therein.

 Discussion

 Both Southern Scrap defendants move for an order pursuant to Fed.R.Civ.P. 12(b)(2) dismissing this action against them on the ground that this Court lacks personal jurisdiction over them. In support of this position, the president and vice president of Southern Scrap have submitted affidavits stating that neither moving defendant has any officers, employees, bank account, telephone listing, warehouse or property in New York, and neither solicits business in this state. They also state that the contract with Metric was initiated by a telephone call from Metric, that no Southern Scrap personnel ever came into New York State in connection with the contract, and that Southern Scrap's only connection with New York regarding the contract was an exchange of telephone calls, mail and telexes with Metric. Finally, the affidavits state that neither the goods nor any bills of lading with respect to them ever came into New York State, nor has Southern Scrap ever received any payment from Metric for the goods.

 In response, Sterling advances three separate grounds upon which it argues that this Court has jurisdiction over Southern Scrap:

 1. By executing a contract providing for arbitration in New York, the moving defendants have consented to personal jurisdiction in this Court.

 2. Defendants' acts of conversion constituted tortious acts committed without the state which cause injury to persons or property within the state as contemplated by CPLR 302(a)(3)(ii).

 3. Defendants' contacts with New York through their business relationship with Metric constituted transacting business in New York ...


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