Gager v. White 53 N.Y.2d 475

OPINION OF THE COURT

Fuchsberg, J.

These five appeals are part of the aftermath of the Supreme Court’s recent decision in Rush v Savchuk (444 US 320), the effect of which was to vitiate the predicate for quasi in rem jurisdiction pioneered in 1966 by Seider v Roth (17 NY2d 111). In essence, Seider held that a liability insurance contract issued by a carrier authorized to do business in this State, contingent as its obligations may be, partakes of the character of a “debt” which by its attachment may be made to serve as the foundation for jurisdiction over its nonresident insured defendants. After this holding had survived 14 years of doctrinal dispute, Rush was to declare it violative of due process. The issue now is whether this ruling is to be applied prospectively alone or retrospectively as well.

The cases on which we are to act present typical Seider fact patterns. In each, a New York domiciliary seeks damages for injuries or death sustained in an automobile accident outside the State as a result of the alleged negligence of a nonresident operator or owner of a motor vehicle. Save for the plaintiff’s residence, in all, for all practical purposes, the sole connection with this State was the policy’s availability for attachment.

Because in every instance the cases before us were pendente lite when the Supreme Court administered its coup de grace, they all became the subject of motions to dismiss. *483These initially were all denied, "nisi prius declining to apply Rush to ongoing cases whose plaintiffs, in choosing this forum and foregoing others, had, as these courts saw it, placed justifiable reliance on New York’s previously consistent, if vigorously contested, course of decisional support for Seider’s jurisdictional analysis (see Baden v Staples, 45 NY2d 889; Donawitz v Danek, 42 NY2d 138; Neuman v Dunham, 39 NY2d 999; Simpson v Loehmann, 21 NY2d 305, mot for rearg den 21 NY2d 990; see, also, O’Connor v Lee-Hy Paving Corp., 579 F2d 194, cert den 439 US 1034 ; Minichiello v Rosenberg, 410 F2d 106, affd en banc 410 F2d 117, cert den 396 US 844, reh den 396 US 949).

The story in the intermediate appellate courts, however, was different. In Cachat v Guertin Co., there was an affirmance, but only because no jurisdictional defense had been interposed. On the other hand, because some type of jurisdictional objection had been raised in the other four, each brought a reversal and dismissal. For the reasons that follow, we now hold that Rush must be applied only when a specific objection to the assertion of jurisdiction founded on the attachment of the out-of-State defendant’s liability insurance policy was preserved by appropriate motion or affirmative defense (CPLR 3211, subd [e]).

Especially since almost every party touches on the matter, our discussion may well start with the reminder that, consonant with the common law’s policy-laden assumptions, a change in decisional law usually will be applied retrospectively to all cases still in the normal litigating process (People v Pepper, 53 NY2d 213, citing People v Morales, 37 NY2d 262, 267-268; Kelly v Long Is. Light. Co., 31 NY2d 25, 29, n 3). By way of departure from this generality, however, where there has been such a sharp break in the continuity of law that its impact will “wreak more havoc in society than society’s interest in stability will tolerate” (Fairchild, Limitation of New Judge-Made Law to Prospective Effect Only: “Prospective Overruling” or “Sun-bursting”, 51 Marq L Rev 254), it is now recognized that, when adherence to the traditional course is strongly contraindicated by powerful factors, including strong elements *484of reliance on law superseded by the new pronouncement, a court may direct that it operate prospectively alone (Chevron Oil Co. v Huson, 404 US 97; Great Northern Ry. v Sunburst Co., 287 US 358).1

All the plaintiffs, stressing that the Statute of Limitations now may have foreclosed an action in a forum where jurisdiction would be constitutionally unassailable, argue that theirs are precisely the kind of cases in which retroactive application should be eschewed. But this is by no means a one-sided argument. As the defendants contend, that Seider might turn out to have not been the only possible “true rule” was not without forewarning (see, e.g., Siegel, New York Practice [1978], § 105, p 127; Stein, Jurisdiction by Attachment of Liability Insurance, 43 NYU L Rev 1075; Reese, Expanding Scope of Jurisdiction Over Non-Residents — New York Goes Wild, 35 Ins Counsel J 118). Moreover, even if the balance on the issue of prejudice had to be struck in favor of those who preferred to rely on the authoritative pronouncements of the New York courts rather than those of its now clairvoyant critics, the fundamental nature of the jurisdictional determinations in Rush renders conventional criteria for fixing an appropriate line of demarcation for overruling academic. For, a constitutional due process limitation on the power of a State’s exercise of its jurisdiction under our Federal system of government, as distinguished, for instance, from one founded in due process considerations bearing on less fundamental substantive and procedural concerns, is an absolute abnegation of the offending State’s ability to continue to act beyond the boundaries the determination defines.

This observation almost inevitably flows from a review of the conceptual building blocks on which Rush stands. They reflect deviation from what for long had come to be the *485accepted standards for identifying the bounds of State court basis jurisdiction.2

Epitomized by Pennoyer v Neff (95 US 714), these were readily divisible into in personam, in which the fulcrum was the person; in rem, which, applicable to designated property, was designed to affect the interests of all persons; or quasi in rem which bore on the interests of particular persons in designated property. The last was of two types. One, like actions to partition land or foreclose a mortgage, was invocable to establish or extinguish claims to or in particular property. The second, the kind involved in the present cases, provided a basis for obtaining a judgment to the satisfaction of which the property on which the jurisdiction was based could be applied though it was not related to the controversy between the parties. (See Restatement, Judgments, §§5-9; Silberman, Shaffer v Heitner: The End of an Era, 53 NYU L Rev 33, 39.)

Background too was the requirement for “minimum contacts”, integral to “fair play and substantial justice” (see International Shoe Co. v Washington, 326 US 310, 316), which, at the time Seider came on the legal horizon, had been established as essential to in personam jurisdiction, yet was not requisite for quasi in rem jurisdiction, for which the presence of property alone sufficed (Harris v Balk, 198 US 215; Pennoyer v Neff, supra).

But Shaffer v Heitner (433 US 186) was to eliminate this dichotomy. Noting that “the law of state-court jurisdiction no longer stands securely on the foundation established in Pennoyer” and that “ ‘ “judicial jurisdiction over a thing,” is a customary elliptical way of referring to jurisdiction over the interests of persons in a thing’ Restatement (Second) of Conflict of Laws § 56, Introductory Note (1971)”, it held that “although the presence of the defendant’s property in a State might suggest the existence of other ties among the defendant, the State, and the litigation, the presence of the property alone would not support the State’s jurisdiction” (Shaffer v Heitner, supra, pp 206-*486207, 209). This, of course, still left open the question as to whether the presence in the forum of the defendant’s policy and the fact that its carrier was doing business there were enough in the Seider-type case to meet these concerns (see Lowenfeld, In Search of the Intangible: A Comment on Shaffer v Heitner, 53 NYU L Rev 102).3

In Rush, however, the Supreme Court was to dissipate any differences on this subject. It specifically held that cognizable legal fictions, first that, as a form of property, a debt partakes of 'the situs of the debtor, and, second, that a corporation is to be found wherever it does business, both of which Seider entertained, fell short when no more was present in the forum than the liability insurer and its obligation to defend and indemnify. Furthermore, in defining a forum relationship that would meet The required standards, the court made clear that it is not the relation of the plaintiff who seeks the advantage of its forum of choice that carries weight, but rather that of the defendant against whom.the litigation is targeted.4 From there it proceeded to arrive at the evaluation that, in a Seider factual framework, “the defendant has no contacts with the forum” (emphasis in original). It was on these foundations, which whatever otherwise has been or can be said on the subject,5 we have no choice but to accept for the nonce that the Supreme Court concluded that the forum State could impose no binding judgment against a Seider defendant (Rush v Savchuk, 444 US 320, 328-333, supra).6

*487The searching nature of Rush’s reach for the roots of State judicial jurisdictional power is but a reiteration of the basic principle that “[a] court must have jurisdiction in rem or in personam in order to enter a valid judgment of any kind” (4 Carmody-Wait 2d, NY Prac, § 25:3, p 4; accord Hanson v Denckla, 357 US 235, 250). So, with significant contemporaneousness, in World-Wide Volkswagen Corp. v Woodson (444 US 286, 291), a companion case to Rush itself, the court took the occasion to remind us, once again, that “[a] judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and credit elsewhere” (emphasis added). Thus, as Dean McLaughlin has noted, “if it violates due process to commence an action with jurisdiction resting on the attachment of the defendant’s insurance policy, it is difficult to comprehend why it does not also violate due process to continue such an action” (1980 Supplementary Practice Commentary, McKinney’s Cons Laws of NY, Book 7B, C314:4, 1980-1981 Supp, pp 137, 138-139; emphasis in text) 7

And, since as we have seen, basis jurisdiction now focuses on a defendant’s rights (World-Wide Volkswagen Corp. v Woodson, supra; Kulko v California Superior Ct., 436 US 84, 91), any reliance by plaintiffs is irrelevant. Indeed, inasmuch as lack of such jurisdiction can be asserted even after a defense on the merits has been presented (see Fourth Prelim Rep of Adv Comm on Practice & Procedure, p 187 [1960] ; Harkness v Hyde, 98 US 476), it surely must be given effect here.8

*488That, however, is not the end of the matter. Unlike subject matter jurisdiction, which limits the power of a particular court rather than the judicial jurisdiction of the State en gros, a defect in basis jurisdiction is waivable (CPLR 3211, subd [e]). Under the CPLR, the objection may be raised either by a preanswer motion or by pleading it as an affirmative defense, whichever comes first (see Siegel, New York Practice, § 111, p 137; 4 Weinstein-KornMiller, NY Civ Prac, pars 3211.03-3211.05).9 Absent the pursuit of either course, a defendant’s voluntary participation in litigation in which the point can be raised, in and of itself, constitutes a submission to the jurisdiction of the courts of our State and, as such, acts as a predicate for basis jurisdiction (see Restatement, Conflict of Laws 2d, § 33; Siegel, op. cit., § 111, p 139; cf. York v Texas, 137 US 15; Henderson v Henderson, 247 NY 428).10

Examining the cases before us to determine whether quasi in rem jurisdiction has been appropriately controverted, we note that specific objections on that score were made in the answers filed in Gager v White and Hill v Elliott. In these cases, the Appellate Division’s dismissal of the complaints being mandatory, there should be an affirmance.

*489In contrast, no jurisdictional protest having been lodged in Cachat v Guertin Co., the Appellate Division also was correct when it there found that dismissal was not in order (CPLR 3211, subd [e]).11

Lastly, in Mei Yuet Chin v Cray and Carbone v Ericson, the answers raised objection to in personam jurisdiction only.12 Since, as explained earlier, a defect in the categorically distinct concept of quasi in rem jurisdiction requires a sufficiently particularized pleading to apprise the plaintiff of its nature with sufficient clarity to avoid prejudice by inducing quiescence (compare CPLR 3211, subd [a], par 8, with par 9; see 4 Weinstein-Korn-Miller, NY Civ Prac, par 3211.15, p 32-66), it follows that the in rem issue must be deemed waived and the Appellate Division orders, which held to the contrary, reversed.

In sum, the orders in Gager v White, Cachat v Guertin Co., and Hill v Elliott should be affirmed, while those in Chin v Cray, and Carbone v Ericson should be reversed and the orders at Special Term in these cases should be reinstated.13

*490Gabrielli, Jones and Wachtler, JJ.

(concurring). We concur in result in each of these cases, but cannot accept what appears to us to be the overbreadth of the majority opinion, addressing matters which are not necessary for the resolution of these appeals.

In Erneta v Princeton Hosp. (49 NY2d 829) our court acknowledged the mandate of the Supreme Court of the United States in Rush v Savchuk (444 US 320). In there according retroactivity to the new rule of Rush, the court eschewed the opportunity to indulge in an “institutional reassessment of Seider v Roth” (49 NY2d, p 830). It suffices for present purposes to cite Erneta, and to emphasize that in as much as the decision in Rush is predicated on the nonexistence of jurisdiction, that inhibition extends to judicial action of any sort thereby precluding any of the ameliorative remedies which are pressed on us by plaintiffs who may now be foreclosed from all judicial relief. As the Supreme Court, through Justice Marshall, wrote with respect to an absence of subject matter jurisdiction: “A court lacks discretion to consider the merits of a case over which it is without jurisdiction, and thus, by definition, a jurisdictional ruling may never be made prospective only” (Firestone Tire & Rubber Co. v Risjord, 449 US 368, 379).

The only new issue presented in these cases relates to questions of waiver of the right to challenge jurisdiction predicated on a Seider attachment under the Rush decision. We understand the majority to be holding that Rush is to be applied retroactively unless in the individual case, there has been such a waiver by the defendant (in whatever form or by whatever means effectually manifested). We agree with that principle and concur in its application to the five cases now before us. We are in accord as well that in preserving the Rush claim, the defendant must be explicit, by a “sufficiently particularized pleading” or otherwise, to leave no doubt that it is the jurisdictional challenge under what is now the Rush doctrine which is being raised. It will not *491do to raise challenges to personal jurisdiction over the defendant. Accordingly, as the majority correctly concludes, the defendants in Gager and Hill did not waive their challenges to Seider jurisdiction; the defendants in Mei Yuet Chin, Cachat and Carbone must be held, in consequence of failure to raise the Rush defense, now to have waived it.

Chief Judge Cooke and Judges Jasen and Meyer concur with Judge Fuchsberg; Judges Gabrielli, Jones and Wachtler concur in result in a concurring opinion.

In Gager v White: Order affirmed, with costs.

In Mei Yuet Chin v Cray: Order reversed, with costs, and the order of Supreme Court, Bronx County, reinstated.

In Cachat v Guertin Co.: Order affirmed, with costs. Question certified answered in the affirmative.

In Carbone v Ericson: Order reversed, with costs, and the order of Supreme Court, New York County, reinstated.

In Hill v Elliott: Order affirmed, with costs.