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TRACHTMAN v. T. M. S. REALTY & FIN. SERVS.

May 13, 1975

Louis B. TRACHTMAN
v.
T. M. S. REALTY AND FINANCIAL SERVICES and Lawrence Drosnes a/k/a Larry Daniels


Broderick, District Judge.


The opinion of the court was delivered by: BRODERICK

BRODERICK, District Judge.

 Motion to Dismiss

 The plaintiff filed his complaint on February 14, 1974 alleging that this Court has diversity jurisdiction. The plaintiff avers that he is a resident of Pennsylvania, is a real estate broker registered to do business in Pennsylvania, and the defendant is a New Jersey corporation, not qualified to do business in Pennsylvania, but subject to service on the basis of the Pennsylvania "Long Arm" statute, Pa.Stat.Ann. tit. 42, § 8301 et seq. (Supp.1973-74), in that T.M.S. is a foreign corporation "doing business" in Pennsylvania. *fn1" The plaintiff's complaint, when read in conjunction with his affidavits filed in opposition to the defendant's motion, sets forth the following facts as a basis for the application of the Pennsylvania "Long Arm" statute. Defendant Lawrence Drosnes, as President and agent for T.M.S., met with the plaintiff in the law offices of T.M.S.'s counsel, Stein and Silverman here in Philadelphia. At that meeting the plaintiff was requested to obtain a mortgage to enable T.M.S. to finance the purchase by T.M.S. of real estate in New Jersey. In the event the plaintiff was successful in obtaining such a mortgage, the defendant T.M.S. was to pay the plaintiff a fee equivalent to one percent of the mortgage and retain the plaintiff as the manager of the real estate which T.M.S. desired to purchase in New Jersey for a period of five years for which he was to receive a commission of not less than three percent of the gross rentals collected. On several subsequent occasions, the plaintiff met here in Philadelphia with the President of T.M.S. and its attorneys. Pursuant to their request, the plaintiff prepared an appraisal of the New Jersey real estate and assembled information necessary to process a mortgage application for T.M.S. After compilation of all the necessary material, the plaintiff and the President of T.M.S. attended meetings at the office of Centennial Mortgage Company at the IVB Building in Philadelphia. As a result of these negotiations, a mortgage in the amount of $270,000.00 was obtained from Farmbanc Mortgage Company (a division of Farmer's National Bank of Wilmington, Delaware) enabling T.M.S. to purchase the New Jersey real estate. Settlement was completed and T.M.S. paid a commission to the Centennial Mortgage Company in Philadelphia. For the breach of the agreement to pay the mortgage placement fee, the rental commission and the appraisal fee, the plaintiff seeks judgment against T.M.S. in the amount of $12,496.50. *fn2"

 It is the plaintiff's position that these facts clearly demonstrate that T.M.S. is amenable to service pursuant to the Pennsylvania "Long Arm" statute and that this Court has in personam jurisdiction over the defendant. The plaintiff argues that T.M.S. was "doing business" in Pennsylvania within the meaning of § 8309 of the "Long Arm" statute. *fn3" On the other hand, the defendant contends that it has never done business in Pennsylvania; that it is registered to do business only in New Jersey; and that its sole purpose and function is to hold certain real property located in New Jersey. The defendant further argues that the plaintiff has not demonstrated that T.M.S., as a foreign corporation, had sufficient minimum contacts with Pennsylvania "to make it apparent that maintenance of suit in the state will not offend traditional notions of fair play and substantial justice. Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958)." For these reasons, T.M.S. claims that it is not and cannot be subject to the in personam jurisdiction of this Court and, thus, asserts its motion to dismiss.

 In 1972, the Pennsylvania "Long Arm" statute was amended by adding thereto a new section 8309(b) which reads as follows:

 
(b) Exercise of full constitutional power over foreign corporations. -- In addition to the provisions of subsection (a) of this section the jurisdiction and venue of courts of the Commonwealth shall extend to all foreign corporations and the powers exercised by them to the fullest extent allowed under the Constitution of the United States.

 Judge Jacobs of the Pennsylvania Superior Court in Proctor & Schwartz, Inc. v. Cleveland Lumber Co., 228 Pa.Super. 12, 323 A.2d 11 (1974), appeal denied, in holding that in an action to recover the purchase price, a Georgia corporation, which entered into the contract of purchase in Pennsylvania, was subject to in personam jurisdiction, pursuant to § 8309 of the Pennsylvania "Long Arm" statute, said:

 
The 1972 amendments to the Pennsylvania "long-arm" statute seek to remove all Pennsylvania statutory and, therefore, decisional impediments to the exercise of in personam jurisdiction over foreign corporations. The statute reinforced through express language the judicially stated public policy of Pennsylvania to extend in personam jurisdiction "to the full measure consistent with due process standards." Aquarium Pharmaceuticals, Inc. v. Industrial Pressing & Packaging, Inc., supra, [(D.C.) 358 F. Supp. 441] at 444; Scafati v. Bayerische Motoren Werke Ag, 53 F.R.D. 256 (W.D.Pa.1971); cf. Wenzel v. Morris Distrib. Co., [439 Pa. 364, 266 A.2d 662] supra. Although the statute retains the requirement of "doing business" as a jurisdictional trigger, the addition of the new section 8309(b), quoted supra, is clearly intended to liberalize Pennsylvania's position. Under this section those contacts sufficient to satisfy the constitutional requirements of due process are also sufficient to satisfy the "doing business" requirement of Pennsylvania law. Thus, for purposes of in personam jurisdiction over unregistered foreign corporations the evolution of the Pennsylvania "long-arm" statute has now become coexistent with the evolution of substantive jurisdictional due process as expressed by the United States Supreme Court.

 Judge Jacobs, in Proctor, noted that International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95, (1945), McGee v. International Life Ins. Co., 355 U.S. 220, 78 S. Ct. 199, 2 L. Ed. 2d 223 (1957) and Hanson v. Denckla, 357 U.S. 235, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958), the landmark decisions of the Supreme Court of the United States relating to in personam jurisdiction, provide "only a framework under the broad formula of 'fair play and substantial justice' and a determination of whether or not the 'minimum contacts' of a foreign corporation with a particular state are sufficient to make the corporation constitutionally amenable to process in that state must inevitably be made on an ad hoc case-by-case basis and not by the application of a mechanical rule. Campbell v. Triangle Corp., 336 F. Supp. 1002 (E.D.Pa.1972)." The Proctor case sets forth the following guidelines to aid in the factual analysis in determining whether the requisite "minimum contacts" are present in a given case:

 
First, the defendant must have purposefully availed itself of the privilege of acting within the forum state thus invoking the benefits and protections of its laws. Hanson v. Denckla, supra. Secondly, the cause of action must arise from defendant's activities within the forum state. See Southern Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374 (6th Cir. 1968); Electric Regulator Corp. v. Sterling Extruder Corp., 280 F. Supp. 550 (D.Conn.1968). Lastly, the acts of the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over it reasonable. International Shoe Co. v. Washington, supra; see Southern Mach. Co. v. Mohasco Indus., Inc., supra; see also In- Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220 (6th Cir. 1972); Kourkene v. American BBR, Inc., 313 F.2d 769 (9th Cir. 1963).

 This Court has no difficulty in finding that the first element relating to the purposeful doing of an act within the Commonwealth has been satisfied. The defendant corporation voluntarily came into Pennsylvania and entered into a contract in Pennsylvania with a Pennsylvania resident. The defendant fully participated in the Pennsylvania transactions which arose out of the contract. The obligations entered into by the defendant had a realistic economic impact on the commerce of Pennsylvania and the defendant should reasonably have foreseen that the transaction would have such consequences and, thus, purposefully availed itself of the privilege of acting within the Commonwealth.

 The second prerequisite is that the cause of action arises from the defendant's activities within the forum state. We find that the plaintiff's cause of action arose directly from the defendant's acts within Pennsylvania. The instant cause of action arises from the breach of ...


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