Mosdos Chofetz Chaim Inc. v. Mosdos Chofetz Chaim Inc. (In re Mosdos Chofetz Chaim Inc.)
| Decision Date | 16 February 2021 |
| Docket Number | Case No. 12-23616 (RDD),Adv. Pro. No. 20-08949 |
| Parties | IN RE: MOSDOS CHOFETZ CHAIM INC., Debtor. Mosdos Chofetz Chaim Inc., Rabbi Mayer Zaks, derivatively on behalf of Mosdos Chofetz Chaim Inc., Daniel Rosenblum, derivatively on behalf of Mosdos Chofetz Chaim Inc., Joseph Grunwald, derivatively on behalf of Mosdos Chofetz Chaim Inc., and Yisroel Hochman, derivatively on behalf of Mosdos Chofetz Chaim Inc., Plaintiffs, v. Mosdos Chofetz Chaim Inc., Chofetz Chaim Inc., TBG Radin LLC, Shem Olam LLC, Congregation Radin Development Inc., Aryeh Zaks, Beatrice Waldman Zaks, Henoch Zaks, Mendel Zaks, Gittel Zaks Layosh, Samuel Markowitz, and Sterling National Bank, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
MODIFIED BENCH RULING ON MOTION IN LIMINE APPEARANCES: For the Reorganized Debtor/Defendant, Mosdos Chofetz Chaim Inc.: LEVINE & ASSOCIATES, P.C., by Michael Levine, Esq.
For Rabbi Aryeh Zaks: GOLDBERG WEPRIN FINKEL GOLDSTEIN, by Kevin J. Nash, Esq.
For Congregation Radin Development, Inc.: KLESTADT WINTERS JURELLER SOUTHARD & STEVENS, LLP, by Tracy Lee Klestadt, Esq. and Brendan Scott, Esq.
For Shem Olam LLC: KRISS FEUERSTEIN LLP, by Daniel N. Zinman, Esq.
For Rabbi Mayer Zaks: Otterbourg, P.C., by Stanley L. Lane, Jr., Esq.
Before the Court is a motion in limine by certain defendants seeking either to have a default judgment entered against the plaintiffs in this adversary proceeding or such other relief as the Court deems appropriate, including, for example, taking an adverse inference against the plaintiffs and/or the preclusion of the plaintiffs’ submission of evidence.
This matter has a fairly long history. The underlying dispute -- in which the plaintiffs seek relief based on the sale shortly after confirmation of the chapter 11 plan in this case (the "Plan") by the reorganized debtor herein (the "Debtor" or "Reorganized Debtor") of the Debtor's primary asset, the real property located at 50 Grandview Avenue, New Hempstead, New York (the "Property") and a related mortgage loan, which plaintiffs contend was unauthorized and improper under the Plan and confirmation order -- began in state court in October 2019 and was removed to this Court on February 11, 2020.
The Court entered an order resolving various procedural motions in this adversary proceeding on March 26, 2020, the second decretal paragraph of which directed that "The parties to this adversary proceeding shall employ their best efforts to engage in expedited discovery of all matters necessary and relevant to the disposition of the Evidentiary Hearing contemplated by this order to determine (1) whether the corporate governance of the Reorganized Debtor and the identity of the Reorganized Debtor's board of trustees on (a) the confirmation date, and (b) the post-confirmation date transfer of the Property by the Reorganized Debtor were in compliance with the Plan and Confirmation Order, and (2) subject to any right under New York's parol evidence rule, whether the Confirmation Order approved the Reorganized Debtor's post-confirmation date transfer of the Property without the requirement of any additional approval under applicable New York law, and if not, whether such approval was obtained (the "Contested Issues")." Those remain the underlying issues in the adversary proceeding.
The March 26, 2020 order specifically contemplated that discovery related to the Contested Issues, as well as any discovery under the terms of the order regarding the disposition of the proceeds of the post-confirmation Sterling Bank loan secured by the Property, would conclude no later than 60 days after the lifting of the shelter-in-place directives then in effect in New York and New Jersey, subject to the parties requesting additional time if such restrictions remained.
The plaintiffs professed that they wanted the underlying issues resolved promptly based on their allegation that the defendants improperly caused the transfer of the Property and had financed it in a way that channeled a large portion, if not all, of the loan proceeds to themselves.
The defendants also wanted a prompt resolution of the Contested Issues, because the March 26, 2020 order also provided that thus continuing a status quo injunction that the defendants have sought to be relieved of on the merits since December 2019.
Notwithstanding the foregoing, over a year later we are here only on the present motion. The parties’ discovery under the March 26 order was delayed though eventually completed, and the parties scheduled a trial on the Contested Issues, which was, however, adjourned twice. The defendants/movants then filed the present motion on September 2, 2020 based on the assertion that the plaintiffs destroyed evidence critical to their case in late 2019 or early 2020 and then again in May of 2020.
The motion in limine was at first only briefly responded to, but it became clear at the first hearing on it that the parties’ disputed factual contentions required separate discovery and probably an evidentiary hearing. That discovery having been completed, an evidentiary hearing was scheduled for mid-October 2020 but then was adjourned because of the illness of a close relative of one of the plaintiffs. In adjourning the hearing, the parties agreed, however, that there would be no further discovery related to the motion in limine or, relatedly, the identification of further witnesses than those who had previously been identified. The parties thereafter agreed that rather than hold an evidentiary hearing on the motion, the Court would consider the depositions of the identified witnesses, which not only were transcribed, but also videotaped, and that this evidence, in addition to any evidence whose admissibility was agreed, including the witnesses’ previously submitted direct testimony declarations, would constitute the record on the motion.
In advance of last week's oral argument on the motion in limine , the Court therefore reviewed the depositions -- both the transcripts and the video recordings -- and the other items agreed to be in evidence.
Notwithstanding their agreement, the plaintiffs nevertheless submitted various other declarations and identified other possible witnesses on the eve of oral argument. The Court clarified, however, as accepted by both sides, that those declarations would not be considered, those additional people would not be permitted to testify, and the evidence would be limited as stated on the record to the witness declarations, the deposition transcripts and videos, and the agreed admissible exhibits submitted before the adjourned evidentiary hearing in October, with one additional pair of declarations, namely the two declarations of Ron Henig, who was previously identified as a witness by the plaintiffs but was not deposed.
I have frequently stated on the record, including directly to the parties' principals, Rabbi Mayer Zaks and Rabbi Aryeh Zaks, that the underlying dispute should be settled amicably. There have been efforts to settle it, including efforts in which I have been directly involved with the consent of both sides. I reiterated that view at the close of oral argument and stated that if there was not a settlement, I would give the parties my ruling during the following week.
Shortly before the scheduled date of that bench ruling, however, purported new counsel for the plaintiffs -- or at least for Rabbi Mayer Zaks -- stated that based on his one-and-a-half days involvement with this matter he saw "certain things" apparently pertaining to the merits that should be brought to my attention and, therefore, that my ruling should be delayed. Noting that I had previously expressly denied the request of the Otterbourg firm to be relieved as counsel for Rabbi Mayer Zaks at least through the date of a determination of the motion in limine and thus still viewed that firm as counsel of record, I stated that it appeared that the adjournment request was another attempt either through raising new issues with discovery or seeking to augment the record when it had been closed, to keep the status quo in place, and I denied it.
This modified bench ruling therefore states my reasons for granting in part the motion in limine . It is regrettable that we have reached this point, because my ruling inevitably involves an evaluation of the parties’ primary witnesses' credibility at the most telling level, i.e., whether they are lying under oath, as their testimony directly contradicts each other's, and the two primary witnesses are the children of the two rabbi principals: Henoch Zaks, a son of Rabbi Aryeh Zaks, and Yosef Tzvi Zaks, the now 16-year-old son of Rabbi Mayer Zaks. Henoch is an adult, but not an elderly person by any means. Thus in a dispute fundamentally between two experienced, elderly rabbis, who are brothers, their sons bear the brunt of credibility findings, although, as will be clear from my ruling, I conclude that each is and has been acting at the direction of his father. And so ultimately the rabbis bear some responsibility, indeed more than some, for their son's involvement here.
The motion in limine is premised upon the following assertions:
Toward the end of 2019 or the beginning of 2020, the movants allege that Tzvi Zaks, at that time 15 years old, on behalf of and at the instruction of Rabbi Mayer Zaks not only cut video cables outside the buildings on the Property that enabled a CCTV camera system to monitor the Property, but also, after the system ceased to record him, broke into the basement of one of the buildings on the...
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