690 N.Y.S.2d 57 | N.Y. App. Div. | 1999
OPINION OF THE COURT
Defendant, a Texas resident, purchased an interest in a Texas limited partnership known as Virgin Isle Hotel Limited Partnership (Partnership). She paid $2,750 in cash and executed and delivered to the Partnership a promissory note for $47,250, which provided for six annual payments of principal and interest.
Thereafter, plaintiff issued a bond. The notes, through a number of endorsements, were sold to MONY Legacy Life Insurance Company and Mony Pension Corporation. Defendant failed to make payments that came due on the note and thereafter, as a result of her default, plaintiff made payments to the Bank of New York (as agent for MONY) in the aggregate amount of $21,143.25. Plaintiff then commenced this action seeking recovery of the amounts due and owing on the notes.
The IAS Court denied National Union’s motion for summary judgment and granted defendant’s motion for summary judgment dismissing the action upon the ground that General Obligations Law § 5-1402 precludes enforcement of forum selection clauses where the amount in issue is less than $1 million and further, that the action was a species of imported litigation and New York an inconvenient forum.
The IAS Court erred in its interpretation of General Obligations Law § 5-1402. This section is not a limitation on the use and effectiveness of forum selection clauses. Rather, it contains a statutory mandate that a clause designating New York as the forum “shall” be enforceable, in cases involving $1 million or more, regardless of any inconvenience to the parties. Thus, General Obligations Law § 5-1402 would preclude a New York court from declining jurisdiction even where the only nexus is the contractual agreement (see, Credit Francais Intl. v Sociedad Financiera de Comercio, 128 Misc 2d 564). In fact, CPLR 327 (b) was amended to provide that a court shall not dismiss any action on the ground of inconvenient forum when
Further, by agreeing to the forum selection clause in the indemnity agreement, defendant specifically consented to personal jurisdiction over her in the courts of New York and thereby waived any basis to dispute New York’s jurisdiction (see, National Union Fire Ins. Co. v Frasch, 751 F Supp 1075, 1078; National Union Fire Ins. Co. v Weir, 131 AD2d 380). As noted, the indemnity agreement provides, inter alia, that “any action or proceeding of any kind against the undersigned arising out of or by reason of this Indemnification and Pledge Agreement may be brought in any state or federal court of competent jurisdiction in and of the County and State of New York, in addition to any other court in which such action might properly be brought.” Defendant contends that the term “court of competent jurisdiction” must be taken to mean a court that has both subject matter and personal jurisdiction over defendant, on some other independent basis. However, if a New York court had such an independent basis, the consent to jurisdiction in the indemnification agreement would be unnecessary and superfluous. Therefore, the term “competent jurisdiction” refers to the subject matter jurisdiction of the court in question. The Supreme Court obviously falls within that category. Since the forum selection clause in the indemnity agreement is not unenforceable by the terms of General Obligations Law § 5-1402 and defendant’s consent to jurisdiction in the indemnity agreement is valid, defendant is subject to personal jurisdiction in New York.
The further ground cited by the IAS Court of forum non conveniens as a basis for its dismissal is also without merit. Defendant asserts that she presently resides in Texas with limited financial resources. However, while we sympathize with defendant’s plight, these stated reasons are insufficient to excuse her from her contractual undertaking in an investment made in a limited partnership for tax reasons, among others.
Finally, the court erred in denying plaintiffs motion for summary judgment. Defendant admitted executing the note and the indemnity agreement. She also admitted her failure to make the last two payments due under the note. Further, it is uncontested that National Union made two payments to the Bank of New York to cure the defaults and the record shows that following its last payment, the note was transferred to
Initially, National Union did not become a holder of the note when it issued its bond. National Union issued the bond in favor of the Bank of New York, as agent for Contitrade Services Corporation (Contitrade). The limited partner notes, including defendant’s, were thereupon negotiated to Contitrade. Contitrade subsequently sold its interest in the loan to MONY and the notes were endorsed by Contitrade to Bank of New York as agent for MONY. It was the regular course of Contitrade’s business to transfer notes. UCC 3-302 (3) (c), which governs bulk transfers “not in regular course of business of the transferor”, would therefore not apply to the ultimate transfer of the note to National Union.
While defendant asserts that a representative of a brokerage induced her to invest in the partnership, defendant has failed to plead, and has not made any showing of, fraud in the inducement with respect to the indemnity agreement she signed in favor of plaintiff. Thus, defendant has not specified any material misrepresentations contained in the partnership offering materials or otherwise made to her for which plaintiff was responsible. The elements of fraudulent inducement are: a false representation of a material fact with scienter; reliance thereon by defendant to its detriment (Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403). Further, the person making the representations must be, or acting on behalf of, the other party to the contract. Fraud by a third party is not effective to vitiate contractual obligations (Federal Ins. Co. v Mallardi, 696 F Supp 875, 884). Defendant herein did not set forth any showing of fraud that would undermine plaintiffs rights. Thus, defendant’s only fraud allegations were that she was induced to invest in the partnership by misrepresentations made to her by the representative of the brokerage, who said an investment in the partnership would result in future tax writeoffs and money for retirement. However, there were no allegations that this representative or the brokerage were parties to either the note or indemnity agreement. Moreover, she does not show that the representative’s statements were false. She does not assert she failed to realize any tax benefits from the investment or that the broker knew when he made the alleged misrepresentations that defendant would not realize any tax benefits or save any money.
“While the respective agreements are unquestionably part of the same overall transaction, each involves different parties and serves a distinct purpose * * *
“It bears emphasis that plaintiffs involvement in the subject transaction is peripheral, even with respect to the related financing obtained from the lender pursuant to the notes. Plaintiff is merely the guarantor of payment on the notes, an obligation that runs only nominally to the limited partnership, which procured the bond, and ultimately to the holder in due course (which at this juncture, is neither the limited partnership nor its lender) * * *
“Defendants do not allege that their assent to indemnify plaintiff was obtained by fraud. Defendants obviously derived a benefit from the guarantee of their credit and, given plaintiffs peripheral involvement in the transaction, they will not be heard to belatedly complain that the indemnification agreements are tainted by illegality [citation omitted]” (National Union Fire Ins. Co. v Williams, 223 AD2d 395, 396-397; see also, National Union Fire Ins. Co. v Clairmont, 231 AD2d 239, lv dismissed 92 NY2d 868; National Union Fire Ins. Co. v Allen, 232 AD2d 80).
Absent allegations that National Union was party to a fraud which affected the indemnity agreement, the allegations of fraudulent inducement with respect to the execution of the note would not affect plaintiffs rights under the separately executed indemnity agreement.
Accordingly, the order of the Supreme Court, New York County (Emily Goodman, J.), entered on August 11, 1997, which denied the motion by plaintiff for summary judgment and granted defendant’s motion to dismiss the complaint, should be reversed, on the law, without costs or disbursements, the motion by plaintiff for summary judgment granted and the motion by defendant denied. The matter is remanded for further proceedings in the Supreme Court to calculate the amounts due under the notes.
Rubin, Tom and Andrias, JJ., concur.
Order, Supreme Court, New York County, entered August 11, 1997, reversed, on the law, without costs or disbursements,