Lenchyshyn and Micro Furnace v. Pelko Elect.

• Decision Date: 21 March 2001
• Docket Number: PLAINTIFFS-RESPONDENT,DEFENDANTS-APPELLANTS,V
• Citation: 281 A.D.2d 42,723 N.Y.S.2d 285
• Parties: (A.D. 4 Dept. 2001) MICHAEL LENCHYSHYN AND MICRO FURNACE, LTD.,PELKO ELECTRIC, INC., AND KOSTA PELONIS,(APPEAL NO. 1.) CA 00-01362. (Erie Co.) : FOURTH JUDICIAL DEPARTMENT
• Court: New York Supreme Court — Appellate Division

Page 285

723 N.Y.S.2d 285 (A.D. 4 Dept. 2001)

MICHAEL LENCHYSHYN AND MICRO FURNACE, LTD., PLAINTIFFS-RESPONDENTS,

V

PELKO ELECTRIC, INC., AND KOSTA PELONIS, DEFENDANTS-APPELLANTS (APPEAL NO. 1.)

CA 00-01362. (Erie Co.)

SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION: FOURTH JUDICIAL DEPARTMENT

March 21, 2001

Larry Kerman, Buffalo for defedants-appellants.

Alan R. Fuerstein, Buffalo for plaintiffs-respondent.

PRESENT: PIGOTT, JR., P. J., PINE, HURLBUTT, KEHOE AND LAWTON, JJ.

Kehoe, J.:

Plaintiffs obtained a money judgment against defendants in Ontario, Canada. Thereafter, plaintiffs sought recognition and enforcement of the Ontario judgment in New York, where defendants allegedly have assets. The issue before us is whether a judgment creditor must show a basis for the exercise of personal jurisdiction over a judgment debtor by a New York court before obtaining recognition and enforcement of a foreign country money judgment. We hold that the judgment debtor need not be subject to personal jurisdiction in New York before the judgment creditor may obtain recognition and enforcement of the foreign country money judgment, as neither the Due Process Clause of the United States Constitution nor New York law requires that the New York court have a jurisdictional basis for proceeding against a judgment debtor.

I

All of the parties are Canadian. Plaintiff Michael Lenchyshyn is a resident of Ontario, Canada, and plaintiff Micro Furnace, Ltd. is chartered under the laws of Ontario. Defendant Kosta Pelonis is a citizen of Canada and resident of Taiwan, and defendant Pelko Electric, Inc. (Pelko Electric), of which Pelonis is president, director and sole shareholder, is an Ontario corporation, although apparently now defunct.

In the Ontario action, plaintiffs interposed counterclaims seeking to recover damages for defendants' alleged infringement of plaintiffs' trademark and patent rights in a certain ceramic disc furnace. Plaintiffs also alleged that defendants breached an agreement to pay royalties to plaintiffs in connection with defendants' distribution of the furnace pursuant to a license granted by plaintiffs. Defendants participated in the Ontario action fully and to its conclusion, and in fact prosecuted the action as plaintiffs. On March 6, 1990, following a trial, the Supreme Court of Ontario awarded plaintiffs judgment on their counterclaims against defendants for $2,729,056.49 CDN, plus costs in the amount of $339,221.11 CDN, plus post-judgment interest at the rate of 14% per year. Defendants unsuccessfully appealed the judgment to the Court of Appeal of Ontario, and then unsuccessfully moved for leave to appeal to the Supreme Court of Canada. By February 1999 the outstanding judgment, including interest, amounted to $7,361,004 CDN or about $4.7 million US.

Plaintiffs then commenced this action in Erie County, seeking recognition of the Ontario judgment pursuant to CPLR article 53. The action was brought on by notice of motion for summary judgment in lieu of complaint, pursuant to CPLR 3213 and 5303. The motion was supported by the affidavits of plaintiffs' attorney and Lenchyshyn and copies of the Canadian judgment and appellate orders. Plaintiffs asserted that the Canadian court had jurisdiction over defendants and that its judgment was "final and conclusive" and remained unsatisfied. Plaintiffs alleged that they had made "unsuccessful attempts to execute on Defendant[s'] Canadian bank accounts" but that defendants had "transferred their funds" into foreign banks.

Upon commencing the action, plaintiffs were unable to serve defendants pursuant to CPLR 308 (1), (2), or (4). Plaintiffs moved for an order fashioning a method of service pursuant to CPLR 308 (5). By order granted April 21, 1999, Supreme Court allowed plaintiffs to effect service upon defendants by publication and by serving a Buffalo law firm that had represented defendants in certain litigation in the Western District of New York during the mid-1990's.

Following service, defendants moved to dismiss the action for lack of personal jurisdiction. Defendants did not contest the manner of service, but contended that Pelonis was not a resident or domiciliary of New York, that Pelko Electric had ceased operations in 1990, that neither defendant was present in or doing or transacting business in New York, and that New York thus had no basis for assuming personal jurisdiction over defendants.

In opposition, plaintiffs submitted the affidavit of their attorney, who argued that the Canadian judgment met all requirements for recognition in New York. Plaintiffs disputed defendants' assertions of lack of jurisdiction and alleged a jurisdictional nexus between defendants and New York based on the following: that defendants had transferred funds from Canadian banks into various bank accounts in Buffalo in order to avoid execution on the funds in Ontario; that defendants had used those funds in order to conduct business activities in New York, or business activities elsewhere that had substantial commercial effects in New York; that defendants were distributing a certain product nationwide, including to Wal-Mart stores in New York; that Pelonis had participated in various lawsuits in New York concerning such business matters and had various New York debtors; and that Pelonis was a principal in a newly formed New York corporation, Pelonis USA, Ltd., to which he had purported to license the same patent that had been the subject of the Ontario litigation and, incidentally, of a Federal action brought against defendants by another licensee in the Western District of New York. Plaintiffs submitted various exhibits in an attempt to establish such connections between defendants and New York. Those exhibits included bank records, papers generated in the Federal litigation, and a December 1990 letter addressed to defendants at the office of the corporate defendant in Niagara Falls, New York.

II

Supreme Court granted an order and judgment (appeal No. 1) and an order (appeal No. 2). The order and judgment denied defendants' motion to dismiss the action for lack of any jurisdictional basis over defendants in New York; granted plaintiffs' motion for summary judgment; ordered that the Ontario judgment be recognized in New York pursuant to CPLR article 53; and authorized plaintiffs to take appropriate steps to enforce the judgment in New York. The order denied defendants' motion to renew their motion to dismiss for lack of jurisdiction. On appeal, defendants raise five contentions, all of which proceed from the premise that a valid basis for the exercise of personal jurisdiction over defendants in New York is a prerequisite to recognition and enforcement of the Ontario money judgment in New York under CPLR article 53.

III

CPLR article 53 is New York's version of the "Uniform Foreign Country Money-Judgments Recognition Act" (see, CPLR 5308, 5309). It codifies common-law principles applicable to recognition of foreign country judgments (see, Overseas Dev. Bank in Liquidation v Nothmann, 103 A.D.2d 534, 538, revd on other grounds 64 N.Y.2d 927; Porisini v Petricca, 90 A.D.2d 949, 949-950) and is a companion to CPLR article 54, which is New York's version of the "Uniform Enforcement of Foreign Judgments Act" (see, CPLR 5408). The reference to "foreign judgments" in CPLR article 54 is to those of sister states or other jurisdictions in the United States (see, CPLR 5301 [a]; 5401). Article 54 provides a procedure for registering out-of-state judgments that New York is compelled to recognize pursuant to the Full Faith and Credit Clause of the United States Constitution (see, CPLR 5401, 5402). CPLR article 53, in contrast, accords recognition to certain foreign country judgments -- those directing the payment of money only -- as a matter of international comity (see, CPLR 5301, 5303). Unlike article 54, article 53 sets forth substantive requirements that must be met before a foreign country money judgment will be recognized in New York (see, CPLR 5303, 5304, 5305). Those primarily concern whether the foreign country's court had personal jurisdiction over the judgment debtor and subject matter jurisdiction over the case (see, CPLR 5304 [a] [2]; [b] [1]; CPLR 5305); whether it was an impartial tribunal utilizing procedures compatible with due process of law (see, CPLR 5304 [a] [1]); and whether enforcing the foreign country money judgment would be unfair, work a fraud, or violate New York's public policy (see, CPLR 5304 [b] [2] - [7]; see generally, Islamic Republic of Iran v Pahlavi, 94 A.D.2d 374, 378, affd 62 N.Y.2d 474, cert denied 469 U.S. 1108; Dunstan v Higgins, 138 N.Y. 70, 75-76; Harris S.A. de C.V. v Grupo Sistemas Integrales de Telecomunicacion, 279 A.D.2d 263 [decided Jan. 4, 2001]; Constandinou v Constandinou [appeal No. 1], 265 A.D.2d 890; Aspinall's Club v Aryeh, 86 A.D.2d 428, 434). Generally speaking, if the foreign country money judgment meets those conditions, it is "conclusive" and entitled to recognition (CPLR 5302, 5303; see, 5305 [a]; Overseas Dev. Bank in Liquidation v Nothmann, supra, at 538-539; see also, Porisini v Petricca, supra, at 950; Citadel Mgt. v Hertzog, 182 Misc.2d 902, 903-904; Bridgeway Corp. v Citibank, 45 F.Supp. 2d 276, 285-286 [SD N.Y.]; see generally, Greschler v Greschler, 51 N.Y.2d 368, 376).

IV

Defendants have not challenged their amenability to the jurisdiction of the Ontario court or the fundamental fairness of Ontario's system of justice and court procedures, and thus we have no need to address the strict requirements for recognition set forth in CPLR 5304 (a) (1) or (2). Nor have defendants raised any issue with respect to Supreme Court's discretionary power to refuse recognition of the Ontario money judgment under any of the conditions listed in CPLR 5304 (b). We would conclude, in any event, that the judicial procedures and substantive laws of Ontario, a common-law jurisdiction, comport with due process...