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Stubbs v. Security Consumer Discount Co.

Decided: November 23, 1976.

GUSSIE LEE STUBBS, FLORENCE STEVENSON AND FANNIE M. DOSS, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
SECURITY CONSUMER DISCOUNT COMPANY, A PENNSYLVANIA CORPORATION, KENBEE MORTGAGE COMPANY, A NEW JERSEY CORPORATION, LEONARD MOONBLATT, ROBERT HUBER, ANTHONY CAVUTO, ROBERT L. MALATESTA, ADMINISTRATOR OF THE STATE OF LOUIS J. MALATESTA, DECEASED, AND FIDELITY BANK, A PENNSYLVANIA CORPORATION, DEFENDANTS



Rossetti, P.J.D.C., Temporarily Assigned.

Rossetti

This is a motion to dismiss for lack of in personam jurisdiction of this court made by defendant Fidelity Bank, a foreign bank chartered by the Commonwealth of Pennsylvania and which maintains no offices or branches in the State of New Jersey.

Plaintiffs instituted a class action which arises out of numerous secondary mortgages obtained from New Jersey homeowners by Security Consumer Discount Company, a now defunct New Jersey secondary mortgage company. Plaintiff class is seeking to set aside these mortgages, alleging that they are in violation of the New Jersey Secondary Mortgage Loan Act, N.J.S.A. 17:11A-34 et seq. , and is additionally seeking money damages under the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq.

The issue raised by this motion is whether Fidelity's relationship with Security in the State of New Jersey is of such a nature that it will offend "traditional notions of fair play and substantial justice" to maintain jurisdictional authority over it. International Shoe Co. v. Washington , 326 U.S. 310, 311, 66 S. Ct. 154, 90 L. Ed. 95 (1945).

Security commenced operations in the early 1960s with an initial capital of $150,000. It obtained loans from Fidelity beginning in the early 1960s in the Commonwealth of Pennsylvania where Security had its principal place of business. In January 1966 Fidelity acquired a collateral interest in Security's Pennsylvania assets.

Security commenced operations in the State of New Jersey in or about 1969. In 1972 Fidelity perfected a security interest to ensure its loans by filing financing statements in New Jersey and taking assignments of all the secondary mortgages Security had acquired on New Jersey realty. During the course of their relationship Fidelity was the primary and substantial source of Security's assets, i.e. , outstanding mortgages,

and was the source of monies for the loans Security made. In the case of a foreclosure sale all monies obtained from that process went directly to Fidelity, which was characteristic of the degree of involvement between the two corporations. Security is no longer an operating concern. Defendant Kenbee Mortgage Company, a corporation which is conceded to be wholly controlled by Fidelity, is currently servicing all the New Jersey mortgages on behalf of Fidelity. The volume of outstanding loans from Fidelity to Security apparently exceeded $1,000,000, and the current balance is approximately $400,000.

It has been clearly established in New Jersey that our courts can maintain jurisdiction over foreign corporations subject only to the constraints of due process. E.g., Avdel Corp. v. Mecure , 58 N.J. 264, 268 (1971); Japan Gas Lighter Ass'n v. Ronson Corp. , 257 F. Supp. 219, 231 (D.N.J. 1966); Egan v. Fieldhouse , 139 N.J. Super. 220, 223 (Law Div. 1976). It is equally clear that

Contrary to the position taken by Fidelity, the determination of its vulnerability to suit in this State does not revolve around whether or not it was "doing business" in New Jersey in the traditional sense. See Amercoat Corp. v. Reagent Chemical Corp. , 108 N.J. Super. 331, 340-41 (App. Div. 1970). As most recently stated in Unicon Investments v. Fisco , 137 N.J. Super. 395 (Law Div. 1975):

We do not require the physical purposeful doing of some act within New Jersey, nor do we require the transaction of business within our State in person or through an agent * * *

In New Jersey there are special problems in commercial transactions since this State is situated in a commercial corridor between highly developed ...


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