Schwimmer v. Malinas

• Decision Date: 30 January 2013
• Docket Number: No. 6320/12.,6320/12.
• Citation: 967 N.Y.S.2d 870,2013 N.Y. Slip Op. 50158,38 Misc.3d 1220
• Parties: In the Matter of the Application of Isaac SCHWIMMER, Petitioner, For An Order Pursuant to CPLR Article 75 to Confirm the Arbitration Award, dated March 7, 2012, v. Jonathan MALINAS, Respondent.
• Court: New York Supreme Court

38 Misc.3d 1220
967 N.Y.S.2d 870
2013 N.Y. Slip Op. 50158

In the Matter of the Application of Isaac SCHWIMMER, Petitioner, For An Order Pursuant to CPLR Article 75 to Confirm the Arbitration Award, dated March 7, 2012,
v.
Jonathan MALINAS, Respondent.

No. 6320/12.

Supreme Court, Kings County, New York.

Jan. 30, 2013.

LEON RUCHELSMAN, J.

The Petitioner, Isaac Schwimmer, submitted a Verified Petition seeking a judgment, pursuant to CPLR 7510 and 7514, confirming the Award and Final Decision (the Award) of the Beth Din Bais Hora‘ah Etz Chaim (the “Beth Din” or the “Panel”), “dated as of March 7, 2012”. The arbitration award includes (i) a monetary award of $91,578.10 against Respondent, Jonathan Malinas, (ii) an order directing Respondent to turn over control and ownership interest in certain entities owning the Regency and Pond properties, and (iii) an order requiring Respondent to deposit sufficient capital so that the property owned and controlled by Valentine Associates, LLC can be remediated. Petitioner also requests interest, costs and disbursements of this proceeding provided in the Award. In response, Respondent submitted a “cross petition” seeking to vacate the Award pursuant to CPLR 7510¹ [sic] on various grounds. Papers were submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.

Finding of Facts

In 2008, the parties purchased three buildings in the Bronx, at: (i) 2155 Mohegan Avenue, held by Pond Realty, LLC, (ii) 2369 Valentine Avenue, held by Regency Associates, LLC and (iii) 265 East 182nd Street, held by Valentine Associates, LLC (the “Partnership Properties”). In addition to managing these three properties, Petitioner also managed three of Respondents properties. Initially, Petitioner was paid a management fee for the management of all six properties. In October 2009, the parties formed Affordable Management, Inc (“Affordable”), to manage the Partnership Properties, now free of charge, and Respondent's three properties at a discounted fee (Schwimmer Aff in Further Support of the Petition ¶¶ 7, 10, 12).

In March 2011, a dispute arose between the parties regarding management fees Petitioner believed Respondent owed him. On March 31, 2011, the parties agreed to go before a Beth Din to hear their dispute. Before presenting their dispute, the parties signed two arbitration agreements, one in English and one in Hebrew, confirming that they understood the terms of the agreement and that they agreed to the terms. The Beth Din found that Respondent owed Petitioner the sum of $40, 358.50 for managing the partnership properties (March Decision) and later found Petitioner was owed an additional $5,000 for managing a motel owned exclusively by Respondent (Id.¶¶ 13–21).

In May 2011, Respondent began removing money from the accounts used to pay the expenses incurred by the Partnership Properties, forcing Petitioner to pay the bills for the Partnership Properties at his own expense. Respondent also instructed Petitioner to close their office Petitioner had been using to manage the properties through Affordable. Petitioner complied with the request and removed Affordable's computers to an office in Petitioner's basement, the original location of the Affordable office. In response to the parties' deteriorating business relationship, Respondent retained a Rabbi Epstein as his rabbinical advisor and contacted the Beth Din for a second hearing (Id.¶¶ 24–32).

In June 2011, prior to presenting their cases before the Beth Din, the parties signed a second pair of arbitration agreements, one in English ² and one in Hebrew ³ and confirmed that they understood the terms of the agreement and that they agreed to the terms. At the second proceeding, Petitioner demanded he be paid the monies owed to him from the March Decision and that the properties be sold to the highest bidder as between himself and Respondent. Respondent countered that the Petitioner was mismanaging the buildings and should be removed from his position immediately (Id.¶¶ 33–40).

The Beth Din issued a partial decision, dated August 15, 2011 (the “August Decision”), that awarded petitioner the monies owed from the March Decision, found no evidence of Petitioner's mismanagement of the buildings and refused to grant Respondent's request to bar petitioner from continuing to manage the properties. The Beth Din also granted the parties two weeks to auction the properties between them. Before conducting the auction, Beth Din permitted Respondent to inspect the books and records of the Partnership Properties and directed that the parties were to return if the issues were not resolved (Id.¶¶ 41–42).

After becoming unavailable for further Beth Din hearings and failing to comply with the August Decision, in November 2011, the Beth Din informed Respondent that if he continued his delay it would issue a decision in his absence. At this time, Respondent retained the services of Rabbi Savitsky to serve as his new rabbinical counsel. Rabbi Savitsky requested Beth Din provide him with copies of the second set of arbitration agreements signed by the parties, to which the Beth Din refused in accord with its internal policies. However, the Beth Din offered Rabbi Savitsky the option to come down to the Beth Din itself to view copies of the agreements, to which Rabbi Savitsky declined. Later, Rabbi Savitsky was provided with a copy of the Hebrew but not the English version of the agreement. As per Respondent's request, Petitioner provided him with income and expenses and the rent roll information for the Partnership Properties (Id.¶¶ 45–56).

In addition to these, Respondent requested he be provided with a copy of the hard drive of the computer used by Petitioner to manage the Partnership Properties (the “Hard Drive”). Petitioner refused this request, fearing that Respondent could use this information to redirect the rent payments from the LLCs to his own private accounts and otherwise frustrate Petitioner's ability to manage the properties. The Beth Din credited Petitioner's concern as valid and instead permitted Respondent unlimited access to view these files at Petitioner's home office, which on four separate occasions he or an employee of his took advantage of this offer. In addition, Beth Din offered to hold a copy of the Hard Drive in escrow and provide Respondent with copies of any specific files he could name were of relevance to his case. Yet, Respondent declined to take advantage of this offer (Id.¶¶ 57–62).

By a decision dated March 7, 2012 (the “Final Decision”) of his twelve claims, the Beth Din awarded Petitioner judgment on four, found in his favor on two others, but under Jewish law could not compel Respondent to pay for them and denied Petitioner's remaining six claims (the “Award”). In total, the Final Decision awarded Petitioner $91,578.10 and further provided that the three Partnership Properties were to be divided evenly with Regency and Pond awarded to Petitioner and Valentine to Respondent. Because the properties awarded to Petitioner were worth more than the one awarded to Respondent, Petitioner was obligated to pay Respondent the difference, less the amount of money Respondent was required to pay Petitioner as a result of the Final Decision and contribute 50% of the costs required to repair the Valentine property. To date, Respondent has not paid Petitioner the money owed from the March Award, which Petitioner is now seeking to enforce (Id.¶¶ 76–79).

Respondent argues that the Award should be vacated on several grounds. First, Respondent argues that since one of the principal allegations against Petitioner, is that Petitioner looted their partnership venture of hundreds of thousands of dollars by diverting money collected from the buildings for Petitioner's own personal purposes, it was essential that he have the opportunity to copy the actual computer records contained on the computer Hard Drive used by Petitioner in his management of the Partnership Properties in order to search for deleted files. Respondent argued that it was especially essential to receive a full copy of the hard drive as Rabbi Savitsky related that he had witnessed Petitioner deleting and attempting to delete partnership records. Respondent further argues that Beth Din's decision to prevent him from reviewing the documents was based on illegitimate considerations, such as maintaining “leverage” over respondent to induce him to pay Petitioner the money owed from the March Decision and the Award. Respondent also claims that the Beth Din denied his request to have the Hard Drive copied because it contained evidence of Petitioner's illegal activities, which if ultimately turned over to law enforcement agents could lead to his arrest (Notice of Cross Motion and Cross Petition ¶¶ 14–30).

Second, Respondent argues that he was denied an opportunity to have Petitioner cross-examined with regard to his alleged misuse and conversion of the monies generated from the Partnership Properties (Id.¶¶ 33–35). Third, Respondent argues that he was prejudiced by the discrepancies in the Hebrew and English versions of the arbitration agreements ( see, footnotes 2, 3 supra ). Although the Beth Din provided Rabbi Savitsky with a copy of the Hebrew agreement, it refused to furnish him with a copy of the English agreement. This discrepancy prejudiced Respondent in that it prevented his rabbinical counsel from according more emphasis to Respondents rights under the strict applicable Halachic principles, the exclusive choice of law set forth in the English version of the agreement (Id.¶¶ 36–40). Finally, Respondent argues that the award itself was irrational as it did not provide an equal distribution of the properties. Further, it gives Respondent a property which had fallen into disrepair under Petitioner's management. Respondent also voices his concern that an appraisal will not sufficiently take into account the problems created...