Propulsora Ixtapa Sur, S.A. De C.V.(Omni Hotels Franchising Corp.), Matter of

• Decision Date: 24 January 1995
• Parties: In the MATTER of the Arbitration between PROPULSORA IXTAPA SUR, S.A. DE C.V., Petitioner-Respondent, and OMNI HOTELS FRANCHISING CORPORATION, Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 569

621 N.Y.S.2d 569

211 A.D.2d 546

In the MATTER of the Arbitration between PROPULSORA IXTAPA SUR, S.A. DE C.V., Petitioner-Respondent and OMNI HOTELS FRANCHISING CORPORATION, Respondent-Appellant.

Supreme Court, Appellate Division First Department.

Jan. 24, 1995.

L.G. Golde, New York City, for respondent.

G.J. Grumbach, Jr., New York City, for appellant.

Before ROSS, J.P., and ASCH, RUBIN, NARDELLI and TOM, JJ.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Robert D. Lippmann, J.), entered on or about May 18, 1994, which denied respondent's motion to dismiss the petition and conditionally granted petitioner's cross-motion to stay arbitration, unanimously reversed, on the law, with costs, the cross-motion is denied, respondent's motion is granted, the petition is dismissed and the parties are directed to proceed to arbitration.

On or about October 1, 1988, respondent Omni Hotels Franchising Corporation ("Omni"), a Delaware corporation, and petitioner Propulsora Ixtapa Sur, S.A. De C.V. ("Propulsora"), a Mexican corporation, entered into a "Marketing and Reservation Services Agreement" (the "Agreement") pursuant to which Omni agreed to provide certain services "outside of Mexico".

Paragraph 10 of the Agreement provides that the "validity, construction and performance" of the Agreement would be governed by the law of New York State and that any controversy or dispute arising between the parties "concerning the interpretation, performance or enforcement" of the Agreement would be resolved by arbitration in New York County.

In 1993, a dispute arose concerning petitioner's failure to pay respondent certain fees for services rendered over a period of time. On November 5, 1993, petitioner commenced an action against Omni in the Superior Court of Justice for the Federal District of Mexico asserting, inter alia, that the Agreement was illegal, invalid and void under Mexican law because it had not been notarized and because Omni did not have a license to engage in commercial activity in Mexico.

On January 21, 1994, Omni served Propulsora with a notice of intention to arbitrate in New York, which notice was in compliance with CPLR 7503(c) and specifically advised petitioner that it had twenty days after service of the notice to apply for a stay of arbitration. On March 7, 1994, Omni commenced an arbitration proceeding before the American Arbitration Association in New York.

On March 16, 1994, fifty-four days after the service of Omni's notice of intention to arbitrate, petitioner filed a Notice of Petition and Petition commencing the underlying action seeking to stay the arbitration proceeding. Omni subsequently moved to dismiss the petition, pursuant to CPLR 404(a), as it had been filed more than thirty days after the expiration of the twenty day limitations period. Petitioner cross-moved to stay arbitration pending the determination of the action in Mexico and to deem the petition filed nunc pro tunc.

The IAS court denied respondent's motion to dismiss the petition and granted petitioner's cross-motion to the extent of staying the arbitration pending the outcome of the action in Mexico. The court held that: "[a]s a matter of comity, the determination of the alleged illegality of the contract should be left with the Mexican court in the pending lawsuit." Omni appeals and we now reverse.

The IAS court erred when it permitted petitioner to commence the underlying proceeding fifty-four days after being served with Omni's notice of intention to arbitrate. The twenty-day limitations period set forth in CPLR 7503(c) is to be strictly enforced and the court has no jurisdiction, unless there was never an agreement to arbitrate, to entertain an untimely application (Matter of Worldwide Ins. Group v. Wing, 202 A.D.2d 682, 683, 609 N.Y.S.2d 331; Matter of Metropolitan Prop. & Liab. Ins. Co. v. Hancock, 183 A.D.2d 831, 832, 584 N.Y.S.2d 74; Matter of Metropolitan Prop. & Cas. Ins. Co. [Coping], 179 A.D.2d 499, 500, 579 N.Y.S.2d 32; Matter of Allcity Ins. Co. [Vitucci], 151 A.D.2d 430, 543 N.Y.S.2d 86, affd. 74 N.Y.2d 879, 547 N.Y.S.2d 841, 547 N.E.2d 96).

The petitioner herein invokes two grounds for a stay of arbitration: that the Agreement was unlawful because Omni was not licensed to do business in Mexico; and that the Agreement was unenforceable because it was not notarized as required by Mexican law. Initially we note that the IAS court correctly...