TALL BRIDGE ASSET BACKED FUND, L.P v. SHANE M. KENWORTHY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2470-09T3

TALL BRIDGE ASSET BACKED

FUND, L.P.,

Plaintiff-Appellant,

v.

SHANE M. KENWORTHY and

INTEGRITY APPRAISAL GROUP, INC.,

Defendants-Respondents.

_________________________________

 

Argued August 10, 2010 - Decided

Before Judges Sabatino and Ashrafi.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-4065-09.

Michael E. Holzapfel argued the cause for appellant (Becker Meisel, LLC, attorneys; Mr. Holzapfel, of counsel and on the brief).

Elliott Abrutyn argued the cause for respondents (Morgan Melhuish Abrutyn, attorneys; Mr. Abrutyn, of counsel and on the brief; James L. Melhuish, on the brief).

PER CURIAM

This appeal involves the trial court's dismissal of a civil action for lack of in personam jurisdiction over defendants. We affirm.

The record presents the following pertinent facts and procedural history. In August 2009, plaintiff Tall Bridge Asset Backed Fund, L.P., filed a complaint against defendants Shane M. Kenworthy and Integrity Appraisal Group, Inc., in the Law Division in Monmouth County. In essence, plaintiff contended that, in or about August 2007, defendants negligently performed an appraisal of certain residential property in Pennsylvania for plaintiff, ascribing to the premises a value in excess of its actual fair market value. Plaintiff, which extended a bridge loan to a customer in reliance upon the appraisal, claimed that it suffered economic harm after it had to foreclose on the loan and the borrower went bankrupt.

Plaintiff's complaint asserted causes of action for negligence, breach of contract, breach of implied covenant of good faith and fair dealing, and negligent misrepresentation. Defendants moved to dismiss the complaint for lack of in personam jurisdiction. The trial court granted that motion, and this appeal ensued.

Plaintiff is a financial institution that provides bridge loans for the acquisition and development of properties on a short-term basis. It is a limited partnership formed under Delaware law, with its principal place of business since 2006 located in Red Bank, New Jersey. As part of its business, plaintiff obtains appraisals for properties that it has been asked to finance in order to determine the correct loan amount and the risks of extending a loan. According to plaintiff, it relies heavily on the accuracy of the appraisals it obtains, for if the appraisals are inflated, that will impede plaintiff's ability to recover what it is owed in instances of foreclosure.

Defendant Shane Kenworthy ("Kenworthy") is a certified residential appraiser who is licensed to perform appraisals of real estate in Pennsylvania by the Commonwealth of Pennsylvania, Department of State, Bureau of Professional & Occupational Affairs. Kenworthy resides in Coatesville, Pennsylvania. He is the president and sole stockholder of Faithful Wellspring, Inc., a Pennsylvania corporation, which does business under the registered trade name of Integrity Appraisal Group, Inc. ("Integrity").

According to the unrefuted assertions in Kenworthy's certification filed in support of the motion to dismiss, neither Kenworthy nor Integrity have any offices or employees in New Jersey. Defendants do not perform, nor are they authorized to perform, appraisals on property situated in New Jersey. They do not have a registered agent in New Jersey, nor do they have a telephone listing in this State. They do not pay New Jersey taxes.

In or around August 2007, plaintiff retained defendants to appraise a certain residential property on Poplar Street in Philadelphia, Pennsylvania. The appraisal was sought after a borrower applied to plaintiff for a bridge loan to purchase and rehabilitate the premises. Plaintiff hired defendants through an agent, Equity Development Corporation ("Equity"). According to a certification filed by Jason Harkavy a managing member of Tall Bridge Capital Partners, LLC, which is the general partner in plaintiff's limited partnership Equity has an ongoing relationship with plaintiff and provides it with loan servicing and project management services.

As requested, defendants performed the appraisal, transmitting a written appraisal report to plaintiff's offices in Red Bank. The appraisal opined, based upon a review of comparable sales in Philadelphia, that the property was worth $480,000, a sum that plaintiff now contends was excessive. Plaintiff's Red Bank address appears on the first page of the appraisal report, and several times within it.

Plaintiff extended a loan to the borrower based on defendants' appraisal, but the borrower eventually defaulted. Plaintiff brought a foreclosure action against the borrower, who in turn sought bankruptcy protection. Plaintiff alleges that it suffered economic loss as a result of defendants' inaccurate appraisal, because, according to Harkavy, the subject property's value was "significantly lower than the defendant[s'] appraisal."

After defendants asserted a lack of in personam jurisdiction over them in New Jersey, the parties engaged in limited jurisdictional discovery, which we were advised at oral argument consisted of document production but no depositions. The documents in the record include copies of numerous other appraisals of Pennsylvania property that defendants performed for plaintiff from June 2007 through May 2008. Plaintiff's business address in New Jersey is included on each appraisal. According to Harkavy's certification, defendants appraised or accepted appraisal requests for twenty-four properties for plaintiff during that time frame.

Plaintiff argued to the trial court that defendants are subject to the jurisdiction of the courts of our state because they purposely availed themselves of business opportunities in New Jersey by performing the subject appraisal and the other appraisals for plaintiff, a known New Jersey customer, over a short period of time. Defendants denied such jurisdictional minimum contacts, stressing that all of their work was performed in Pennsylvania and that they never actively solicited business from plaintiff or from any other New Jersey clientele.

After hearing oral argument, the motion judge granted defendants' application. In his oral opinion, the judge observed that "[t]he most striking fact here is that this concerns real estate in Philadelphia, and appraisal of real estate in Philadelphia . . . by a licensed . . . Pennsylvania appraiser." He further noted:

I don't see any evidence or allegation that [Kenworthy] traveled to New Jersey, met in New Jersey with the plaintiff. In other words, that he purposefully availed himself of the privilege of conducting activities within this forum state, and thereby invoking the benefit and protection of its laws[.]

The judge further emphasized the lack of proof of defendants soliciting business from plaintiff or from any other New Jersey customers. On the whole, he concluded that defendants did not have enough contacts in New Jersey to justify the court's exercise of jurisdiction over them.

The applicable law is well established. Our State courts may exercise jurisdiction over a non-resident defendant to the maximum extent permitted by the United States Constitution. Nicastro v. McIntyre Mach. Am., Ltd., 201 N.J. 48, 72 (2010); Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971); see also R. 4:4-4. Under the federal Due Process Clause, "in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he [must] have certain minimum contacts with it[.]" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95, 102 (1945). In addition, the minimum contacts must be of a nature and extent "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Ibid. (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343, 85 L. Ed. 278, 283 (1940)); see also Hanson v. Denckla, 357 U.S. 235, 251, 78 S. Ct. 1228, 1238, 2 L. Ed. 2d 1283, 1296 (1958); McGee v. Int'l Life Ins. Co., 355 U.S. 220, 222, 78 S. Ct. 199, 200-01, 2 L. Ed. 2d 223, 225-26 (1957).

In the present case, plaintiff invokes a "specific" jurisdictional nexus arising out of the subject matter of the litigation, rather than asserting that this State has "general" jurisdiction over defendants by virtue of any "'continuous and substantial' contacts with the forum." Jacobs v. Walt Disney World Co., 309 N.J. Super. 443, 452 (App. Div. 1998) (quoting Accura Zeisel Mach. Corp. v. Timco, Inc., 305 N.J. Super. 559, 565 (App. Div. 1997)); see also Helicopteros Nacionales de Colom., S.A. v. Hall, 466 U.S. 408, 414 n.9, 104 S. Ct. 1868, 1872 n.9, 80 L. Ed. 2d 404, 411 n.9 (1984) (concerning general jurisdiction). We therefore need not concern ourselves with whether Kenworthy travels to New Jersey for personal reasons, or whether he has regular interactions with persons in this State on matters unrelated to his appraisal profession.

When assessing the presence or absence of minimum contacts, the court's inquiry "'must focus on the relationship among the defendant, the forum, and the litigation.'" Bayway Ref. Co. v. State Utils., Inc., 333 N.J. Super. 420, 429 (App. Div.) (quoting Lebel v. Everglades Marina, Inc., 115 N.J. 317, 323 (1989)), certif. denied, 165 N.J. 605 (2000). "In determining whether the defendant's contacts are purposeful, a court must examine the defendant's 'conduct and connection' with the forum state and determine whether the defendant should 'reasonably anticipate being haled into court [in the forum state].'" Ibid. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490, 501 (1980)). Furthermore, "the existence of minimum contacts turns on the presence or absence of intentional acts of the defendant to avail itself of some benefit of a forum state." Waste Management Inc. v. The Admiral Ins. Co., 138 N.J. 106, 126 (1994), cert. denied sub nom. WMX Techs. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995).

"[I]t is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson, supra, 357 U.S. at 253, 78 S. Ct. at 1240, 2 L. Ed. 2d at 1298. The "'purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts.'" Lebel, supra, 115 N.J. at 323 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528, 542 (1985)). The ultimate question is whether "'the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.'" Id. at 324 (quoting World-Wide Volkswagen Corp., supra, 444 U.S. at 297, 100 S. Ct. at 567, 62 L. Ed. 2d at 501).

Assessing the record by these well known jurisdictional standards, we concur with the motion judge that plaintiff has not demonstrated that defendants "purposely availed" themselves of any business presence in this State. The core business of defendants is the appraisal of residential real estate in the state of Pennsylvania. Kenworthy is not licensed to perform appraisals on New Jersey real estate. There is no evidence that defendants advertised their services in New Jersey, actively solicited New Jersey customers, or urged plaintiff in particular to send them appraisal requests. The record bespeaks a passive relationship, one in which defendants simply performed a service in Pennsylvania whenever plaintiff, through Equity, chose to reach out to them.

We recognize that the appraisal for the subject property was not an isolated transaction. Plaintiff stresses that defendants performed approximately two dozen appraisals for it within a year, and argues that the frequency of those transactions bespeaks the sort of purposeful availment supportive of a finding of minimum contacts. Plaintiff also draws significance from the fact that its New Jersey address must have been known to defendants, as the address appears multiple times on each appraisal report.

Nevertheless, the number of transactions and the inclusion of plaintiff's New Jersey address in the transactional documents does not alter the inescapable fact that defendants did not actively promote their services to customers in this State. The record is barren of any advertising, marketing, targeted mailings, or promotional efforts by defendants in New Jersey. Defendants simply responded when plaintiff called upon them to perform a discrete task in Pennsylvania. The headquarters address of plaintiff as defendants' customer was insignificant to the appraisal transaction. The appraisal presumably would have been performed in the same manner whether the customer requesting it was from New Jersey or New Hampshire or New Mexico. Moreover, the real property that is at the heart of the dispute was in Pennsylvania, not New Jersey.

In sum, the purposeful nexus required under the minimum contacts test is woefully lacking here. Were we to stray from established principles and subject defendants to jurisdiction on this meager record, we would not only offend defendants' constitutional rights; we also would send an improvident message to persons and businesses outside of our State's borders discouraging them from accepting work from New Jersey customers, lest they be haled into court here against their will if a dispute over that work arises.

 
The trial court's finding that it lacked in personam jurisdiction over defendants, and its order consequently dismissing plaintiff's complaint, are therefore affirmed.

The complaint also named fictitious corporate and individual defendants, none of whom were ever identified.

Prior to 2006, plaintiff's headquarters were in Tinton Falls, New Jersey.

At oral argument, we were informed that Equity is a Delaware corporation with its principal place of business in Virginia. Although Equity's residency is not crucial to our analysis, it does not strengthen plaintiff's assertion of jurisdiction over defendants in New Jersey.

The record does not indicate how much defendants were paid for this appraisal.

We need not consider whether this court could have properly exercised jurisdiction over defendants in this State had the parties mutually executed an agreement with a forum selection clause calling for future disputes to be litigated in New Jersey. See, e.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-95, 111 S. Ct. 1522, 1527-28, 113 L. Ed. 2d 622, 632-33 (1991), superseded on other grounds by 46 U.S.C.A. 30509.

(continued)

(continued)

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A-2470-09T3

 

August 31, 2010