First Majestic Silver Corp. v. Heitz

• Decision Date: 12 November 2021
• Docket Number: Index 158792/2018
• Citation: First Majestic Silver Corp. v. Heitz, 2021 NY Slip Op 32314(U), Index 158792/2018 (N.Y. Sup. Ct. Nov 12, 2021)
• Parties: FIRST MAJESTIC SILVER CORPORATION, Plaintiff, v. JUAN MANUAL DAVILA HEITZ and ELIZABETH HEITZ Defendants. Motion Seq. No. 005
• Court: New York Supreme Court

2021 NY Slip Op 32314(U)

FIRST MAJESTIC SILVER CORPORATION, Plaintiff, v. JUAN MANUAL DAVILA HEITZ and ELIZABETH HEITZ Defendants.

Motion Seq. No. 005

Index No. 158792/2018

Supreme Court, New York County

November 12, 2021

Unpublished Opinion

DECISION + ORDER ON MOTION

HON FRANCIS KAHN, III ACTING JUSTICE

The following e-filed documents, listed by NYSCEF document number (Motion 005) 35-50 were read on this motion and cross-motion to DISMISS/AMEND PLEADINGS.

Upon the foregoing documents, the motion and cross-motion are decided as follows:

Plaintiff First Majestic Silver Corporation ("First Majestic") is an entity incorporated and with its principal place of business in Canada. Plaintiff secured a judgment after trial in the Supreme Court of British Columbia against non-parties Hector Davila Santos ("Santos") and Minerales Y Minas Mexicanas, SA de CV ("Minerales") in the amount of CDN $81, 030 360.60. Plaintiff commenced a proceeding in New York State Supreme Court, New York County titled First Majestic v Santos et al, Index No. 652471/2015 seeking summary judgment in lieu of complaint on the Canadian judgment. The motion was denied without prejudice and Plaintiff filed a complaint containing a single cause of action to enforce the judgment pursuant to Article 53 of the Civil Practice Law and Rules. By order dated September 28, 2018, Plaintiffs motion for summary judgment was granted and on October 17, 2017 a judgment was entered with the New York County Clerk against the Defendants, jointly and severally, in the amount of U.S $64, 918, 410.07.

As part of its efforts to enforce this judgment, Plaintiff enlisted the New York City Sheriff to auction Defendant Santos' one-third [1/3] interest in a condominium located at 20 Clinton Street, Unit 6F, New York, New York. Santos Defendant Elizabeth Heitz ("EH"), his wife, and Defendant Juan Manual Davila Heitz ("JH"), his son, acquired the unit on April 4, 2012 and took title as joint tenants with rights of survivorship. Plaintiff was the winning bidder at the sale and took a Sheriffs deed on May 18, 2018 upon payment of $200, 000.00.

Plaintiff commenced the within action pleading causes of action for partition as well as for an accounting of the rents, profits and sale proceeds. Defendant JH answered and raised fourteen [14] affirmative defenses. Defendant EH answered separately and pled thirteen [13] affirmative defenses, including an affirmative defenses of lack of personal jurisdiction and that Plaintiff lacked the legal capacity to sue pursuant to Business Corporation Law (BCL) §1312. Defendant EH also asserted three counterclaims: [1] for a declaratory judgment that Plaintiff is not entitled to maintain this action, that Plaintiff is not entitled to a partition by sale and that EH is entitled to recover from Plaintiff its pro rata share of the expenses for the premises; [2] that Plaintiff engaged in abuse of process by intentionally and improperly commencing this action against EH and seeks compensatory and punitive damages; and [3] that Plaintiff owes its pro rata share of the property's expenses to EH.

Now, Defendants move collectively to dismiss the complaint pursuant to CPLR §321 l[a][3] based on Defendant EH's affirmative defense of lack of capacity pursuant to BCL § 1312. In the alternative, Defendants move pursuant to CPLR §3211 [a] [7] to dismiss Plaintiffs second cause of action for an accounting and for leave to permit Defendant JH to amend his answer to duplicate the affirmative defenses and counterclaims raised by Defendant EH. Plaintiff opposes the motion and cross-moves pursuant to CPLR §§3211 [a][l] and [a][7] to dismiss Defendant EH's counterclaims and to dismiss her personal jurisdictional defense.

As to the branch of Defendants' motion to dismiss the complaint based upon Plaintiffs supposed lack of capacity to sue, Business Corporation Law §1312[a] reads:

"A foreign corporation doing business in this state without authority shall not maintain any action or special proceeding in this state unless and until such corporation has been authorized to do business in this state and it has paid to the state all fees and taxes imposed under the tax law or any related statute, as defined in section eighteen hundred of such law, as well as penalties and interest charges related thereto, accrued against the corporation. This prohibition shall apply to any successor in interest of such foreign corporation."

"A defendant relying upon Business Corporation Law §1312[a] as a statutory barrier to Plaintiffs lawsuit 'bears the burden of proving that the [plaintiff-corporation's] business activities in New York 'were not just casual or occasional,' but 'so systematic and regular as to manifest continuity of activity in the jurisdiction'" (Highfill, Inc., v Bruce and Iris, Inc., 50 A.D.3d 742, 743 [2d Dept 2008] quoting S&T v Spectrum Cabinet Sales, 247 A.D.2d 373 [2d Dept 1998] quoting Peter Matthews, Ltd., v Robert Mabey, Inc., 117 A.D.2d 943, 944 [3d Dept 1986]). As part of their burden, Movants must overcome a presumption that Plaintiff "are doing business where they were incorporated and not in New York" (Nick v Greenfield, 299 A.D.2d 172, 173 [1st Dept 2002]).

In support of this branch of the motion, other than Plaintiffs activity to enforce the judgment, Defendants merely point to Plaintiffs part ownership of the condominium as proof of Plaintiff s activity in the jurisdiction. Such isolated activity is not "systematic and regular" so to constitute "doing business" under BCL §1312 since it fails to establish that the activity is "essential to its corporate business" (S&T v Spectrum Cabinet Sales, 247 A.D.2d at 374; see Guangzhou Sanhua Plastic Co., Ltd., v Fine Line Products Corp., 165 A.D.3d 899, 901 [2d Dept 2018]; Gemstar Canada, Inc., v George A. Fuller Co., Inc., 127 A.D.3d 689 [2d Dept 2015]; see also Airtran New York, LLC v Midwest Air Group, Inc., 46 A.D.3d 208, 212 [1st Dept 2007]). As such, Defendants have failed to rebut the presumption that Plaintiff did not do business in New York (Gemstar Canada, Inc., v George A. Fuller Co., Inc., supra at 691; see also Engineering and Technical Resources, Inc., v Xcel Development Corp., 139A.D.3d661, 662 [2d Dept 2016]).

Accordingly, this branch of Defendants' motion is denied irrespective of the sufficiency of Plaintiffs opposing papers (see Deutsche Bank National Trust Company v Benson, 179 A.D.3d 767, 768 [2d Dept 2020]).

As for the branch of Defendants' motion to dismiss Plaintiffs second cause of action for an accounting, on a motion pursuant to CPLR §3211 [a][7] the allegations contained in the complaint must be presumed to be true, liberally construed and a plaintiff must be accorded every possible favorable inference (see e.g. Chanko v American Broadcasting Cos. Inc., 27 N.Y.3d 46 [2016]; M& E 73-75, LLC v 57 Fusion LLC, 189 A.D.3d 1, 5 [1 st Dept 2020]). In determining such a motion, "the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law" (298 Humboldt, LLC, v Torres, 197 A.D.3d 1081, 1083 [2d Dept 2021], quoting Guggenheimer v Ginzburg, 43 N.Y.2d 268, 275 [1977]).

In certain situations, however, the presumption falls away when bare legal conclusions and factual claims contained in the complaint are flatly contradicted by evidence submitted by the Defendant (see Guggenheimer, supra; Kantrowitz & Goldhamer, P.C. v Geller, 265 A.D.2d 529 [2d Dept 1999]). When in the uncommon circumstance the evidence reaches this threshold (see Lawrence v Miller, 11 N.Y.3d 588, 595 [2008]), the court "must determine whether the proponent of the pleading has a cause of action, not whether she has stated one" (Kantrowitz & Goldhamer, P. C. v Geller, supra; see also Rovello v Orofino Realty Co., 40 N.Y.2d 633, 635-636 [1976]).

In its complaint, First Majestic asserts it is a one-third fee owner of the subject condominium and has a right to possess the property. Because the condominium is incapable of being physically partitioned, Plaintiff claims it should be sold at the direction of the Court and the net proceeds of the sale should be equally distributed to the now three tenants-in-common (see RPAPL §901 [1]; Manganiello v Lipman, 74 A.D.3d 667, 668 [1st Dept 2010]). Unless the parties waive same, an accounting is customarily part and parcel of a partition proceeding (see Worthing v Cossar, 93 A.D.2d 515 [2d Dept 1983]["A partition action, although statutory (see RPAPL Article 9), is equitable in nature and an accounting of the income and expenses of the property sought to be partitioned is a necessary incident thereof']; see also Khotylev v Spektor, 165 A.D.3d 1088, 1090 [2d Dept 2018]). In its opposition, Plaintiff provides factual details, including that Defendant JH solely resides in this two-bedroom condominium to the exclusion of Plaintiff, requiring an accounting for payment of rent and taxes (see Quinones v Schaap, 91 A.D.3d 739, 740 [2d Dept 2012]["a Court may consider any factual submissions made in opposition to a motion to dismiss in order to remedy pleading defects"]). Here, since Defendants do not expressly seek dismissal the partition cause of action, the branch of the motion to dismiss the accounting cause of action is inapposite. If Plaintiff prevails on its partition by sale cause of action, an accounting is required. In any event, Defendants also seek an accounting in their counterclaims as part of their claim to recover from Plaintiff a pro rata share of the property's expenses.

Accordingly, the branch of Defendants' motion to dismiss the accounting cause of action is denied (see Holley v Hinson-Holley, 1010 A.D.3d 1084 [2d Dept 2012]).

As for the...