For reversal and remandment -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall and Schettino. For affirmance -- None. The opinion of the court was delivered by Jacobs, J.
The plaintiff, a limited partnership of the State of New York, is a stock brokerage firm having its principal offices in the City of New York and a branch office in Morristown, New Jersey. As a result of a telephone call from the Morristown office, the defendant, a resident of Roselle, Union County, New Jersey, ordered 1,000 shares of Econo-Car International stock on the New York over-the-counter market. Pursuant to this direction, the plaintiff made over-the-counter purchases in New York aggregating 1,000 shares on the defendant's account and sent confirmation slips directly from its New York offices to the defendant at his Roselle address. A dispute arose as to the purchase price and the defendant refused to pay for the shares. After giving notice, the plaintiff sold the shares on the New York over-the-counter market with a resulting net loss of $840.64.
In due course, the plaintiff brought an action against the defendant in the New York City Civil Court seeking recovery of the $840.64. Service of the summons and complaint was made personally on the defendant at his residence in Roselle by the Union County Sheriff's office. This was done pursuant to section 404 of the New York City Civil Court Act which provides that the court may exercise personal jurisdiction over a nonresident as to a cause of action arising from any of the acts enumerated in the section, where the nonresident, in person or through an agent, "transacts any business within the city of New York." Apart from its territorial restrictions, section 404 is identical with New York State's "long arm" statute (CPLR § 302). See Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y. 2 d 443, 261 N.Y.S. 2 d 8, 209 N.E. 2 d 68 (1965), certiorari denied Estwing Mfg. Co. v. Singer, 382 U.S. 905, 86 S. Ct. 241, 15 L. Ed. 2 d 158.
The defendant failed to answer the New York action and judgment by default was entered against him in the New York City Civil Court. Thereafter the plaintiff brought a New Jersey action in the Union County District Court founded on the New York judgment. The defendant's answer
denied the jurisdiction of the New York court over him and cross motions for summary judgment were then made by the parties. The District Court denied the plaintiff's motion, granted the defendant's motion, and entered judgment in the defendant's favor. The plaintiff filed its notice of appeal to the Appellate Division and the parties entered into an agreed statement in lieu of record under R.R. 1:6-2. We certified before argument was heard in the Appellate Division. R.R. 1:10-1(a).
In granting summary judgment, the District Court took the position that under Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed. 565 (1878), New York could not constitutionally exercise jurisdiction over the defendant without serving him with process within its territorial limits. It expressed awareness of the holdings in cases such as International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), and McGee v. International Life Ins. Co., 355 U.S. 220, 78 S. Ct. 199, 2 L. Ed. 2 d 223 (1957), which displaced the rigid requirements of Pennoyer with a more flexible standard resting largely on minimal contacts and notions of fair play and substantial justice. But it concluded that those holdings apply only to nonresident corporations and are "inapplicable to individuals, per se, where personal liability is sought." Compare Gibson and Freeman, "Business Associations," 50 Va. L. Rev. 1265, 1271-1276 (1964), with Smithers, "Virginia's 'Long Arm' Statute: An Argument for Constitutionality of Jurisdiction Over Nonresident Individuals," 51 Va. L. Rev. 712 (1965). In meeting the ground advanced for the decision below, the plaintiff urges that the District Court was mistaken in determining "that different constitutional rules apply to a State's power to have process served upon out-of-state corporations and upon out-of-state individuals." See Owens v. Superior Court of Los Angeles County, 52 Cal. 2 d 822, 831, 345 P. 2 d 921, 924-925 (1959); Kurland, "The Supreme Court, The Due Process Clause and The In Personam Jurisdiction of State Courts -- From Pennoyer to Denckla: A Review," 25 U. Chi. L. Rev. 569, 609
(1958); Currie, "The Growth of the 'Long Arm'," 1963 U. Ill. L.F. 533, 560-561; Note, "The Virginia "Long Arm' Statute," 51 Va. L. Rev. 719, 729 (1965).
In Pennoyer the court held that a state's power to render a personal judgment against a nonresident defendant must be rested on his presence within the state when served or upon his consent to the exercise of its jurisdiction. In later years fictive terminology such as constructive presence and implied consent was invoked in aid of the state's power; thus foreign corporations which did business within the state were said to be constructively present or to have impliedly consented (cf. Kurland, supra, at pp. 577-586); and individuals who used the state's highways or engaged in certain business therein were said to have subjected themselves in similar manner to the state's jurisdiction. See Hess v. Pawloski, 274 U.S. 352, 47 S. Ct. 632, 71 L. Ed. 1091 (1927); Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S. Ct. 553, 79 L. Ed. 1097 (1935). In International Shoe Co. v. State of Washington, supra, the Supreme Court discarded all of the earlier talk of constructive presence and implied consent and expressed the modern test of jurisdiction which openly rests on considerations of fairness and reasonableness in the light of the defendant's contacts with the forum state. 326 U.S., at p. 316, 66 S. Ct., at p. 154, 90 L. Ed., at p. 102.
In International Shoe the defendant was a Delaware corporation which had no office or property in the State of Washington but did employ salesmen to solicit orders there. The State of Washington sought unemployment insurance contributions from the defendant which unsuccessfully contended that it was not amenable to its jurisdiction. Although Chief Justice Stone's opinion dealt specifically with a defendant corporation, it left no reason to doubt that the constitutional test being expounded was applicable to nonresident individuals as well as to foreign corporations:
"Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person. Hence his presence within the ...