Rubashkin v. Rubashkin
| Decision Date | 27 September 2010 |
| Docket Number | No. 32372/08.,32372/08. |
| Citation | 28 Misc.3d 1240,2010 N.Y. Slip Op. 51654,958 N.Y.S.2d 310 |
| Parties | Joseph RUBASHKIN, Gutol Leiter and Rosie Sandman, Plaintiffs, v. Aaron RUBASHKIN, a/k/a Abraham Aaron Rubashkin, Defendant. |
| Court | New York Supreme Court |
OPINION TEXT STARTS HERE
Day Pitney LLP, Jonathan Borg, Esq., New York, Non Party Bancorp.
Sherman Citron and Karasik P.C., New York, Attorney for defendant.
No Appearances for Defendant.
Nonparty U.S. BANCORP EQUIPMENT FINANCE, INC. (U.S BANCORP) moves, by order to show cause, to: vacate a judgment by confession (the Judgment), dated December 2, 2008, in favor of plaintiffs JOSEPH RUBASHKIN (JOSEPH), GUTOL LEITER (GUTOL) and ROSIE SANDMAN (ROSIE) and against defendant AARON RUBASHKIN, a/k/a ABRAHAM AARON RUBASHKIN (RUBASHKIN); avoid any liens or executions of plaintiffs pursuant to same, including any with respect to RUBASHKIN'S interests in 452–53rd Realty Corp. (53SRC), A.A. Rubashkin & Sons, Inc. (AARS), 410 East 17th Street LLC (E17LLC) and 404 Realty Associates LLC (404 LLC); and, restrain plaintiffs from conveying their interests in, or permitting the transfer or encumbrance of any of the assets, except in the ordinary course of business, of the entities known as 53SRC, AARS, E17LLC and 404 LLC, or causing such entities to encumber or transfer any assets thereof.
Briefly, U.S. BANCORP, a judgment creditor of RUBASHKIN, seeks to vacate the Judgment because it is statutorily defective and fraudulent. The Judgment, for $2,255,000.00, is based upon RUBASHKIN's affidavit of confession, dated November 26, 2008, and entered by RUBASHKIN's attorney, not an attorney for plaintiffs. The three plaintiffs are respectively RUBASHKIN's son, daughter and granddaughter. RUBASHKIN, five days subsequent to the December 2, 2008 entry of the Judgment, on December 7, 2008, executed an assignment transferring all of his interests in 53SRC, AARS, E17LLC and 404 LLC to plaintiffs JOSEPH, GUTOL, and ROSIE. The Court, without addressing whether RUBASHKIN colluded with plaintiffs to defraud U.S. BANCORP, finds the Judgment invalid for its failure to comply with CPLR § 3218. Therefore, the Court grants nonparty U.S. BANCORP's order to show cause in its entirety.
Defendant RUBASHKIN was the sole shareholder of a corporation called AGRIPROCESSORS, INC. (AGRIPROCESSORS), which had a meat processing plant in Postville, Iowa. AGRIPROCESSORS, (Spencer S. Hsu, Immigration Raid Jars a Small Town: Critics Say Employers Should Be Targeted, Washington Post, May 18, 2008).
AGRIPROCESSORS, between April 2004 and December 2004, entered into a series of lease agreements and schedules (the Lease) with U.S. BANCORP for various meat processing equipment. RUBASHKIN, on or about May 20, 2004, executed and delivered to U.S. BANCORP a personal guaranty (the Guaranty), to provide U.S. BANCORP with security for the repayment of the Lease, by which RUBASHKIN absolutely, unconditionally and irrevocably guaranteed U.S. BANCORP all payment and performance obligations of AGRIPROCESSORS under the Lease.
Federal Immigration and Customs Enforcement (ICE) agents, on or about May 12, 2008, raided AGRIPROCESSORS Postville facility because of alleged employment of numerous undocumented workers. This led to the filing of criminal charges against SHOLOM RUBASHKIN (SHOLOM), RUBASHKIN's son and Chief Executive Officer of AGRIPROCESSORS, as well as other officials connected with the plant. Then, the Iowa Attorney General, on or about September 9, 2008, charged AGRIPROCESSORS, RUBASHKIN, SHOLOM and other plant officials with 9,311 violations of child labor law and more than 1,500 violations relating to wages and hours worked. Subsequently, on or about October 29, 2008, the State of Iowa civilly fined AGRIPROCESSORS nearly $10,000,000.00 for labor law violations. SHOLOM, in November 2008, was arrested on federal bank fraud charges related to the diversion of millions of dollars to increase the apparent value of AGRIPROCESSORS's accounts receivable. He was subsequently convicted, in November 2009, in U.S. District Court on 86 counts, including bank fraud, making false statements to a bank, wire fraud, mail fraud and money laundering
On or about November 4, 2008, six days after the State of Iowa civilly fined AGRIPROCESSORS for labor law violations, AGRIPROCESSORS filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of New York for relief, pursuant to Title 11, Chapter 11 of the United States Code. Venue was transferred, on December 12, 2008, to the United States Bankruptcy Court for the Northern District of Iowa.
As a result of AGRIPROCESSORS's failure to make payments to U.S. BANCORP under the Lease, from September 2008, and its subsequent bankruptcy filing, AGRIPROCESSORS defaulted under the terms of the Lease and RUBASHKIN defaulted under the terms of the Guaranty. Therefore, on December 1, 2008, U.S. BANCORP's counsel sent a written demand (the Demand Letter) to RUBASHKIN for payment of the monies due as a result of AGRIPROCESSORS' defaults under the Lease. RUBASHKIN failed to make payment in response to the Demand Letter. Then, U.S. BANCORP, on December 12, 2008, filed a complaint in the United States District Court for the Eastern District of New York (EDNY). (U.S. Bancorp Equipment Finance, Inc. v. Abraham A. Rubashkin, No. 08–CV–5021). United States District Court Judge Jack Weinstein, on August 12, 2009, granted summary judgment to U.S. BANCORP against RUBASHKIN. Judge Weinstein awarded U.S. BANCORP $902,334.44, plus interest from August 3, 2009. U.S. BANCORP entered the judgment on August 14, 2009 with the EDNY Clerk.
Then, U.S. BANCORP, on August 29, 2009, filed an abstract of the EDNY judgment in the Office of the County Clerk of Kings County, and, on September 18, 2009, served RUBASHKIN with a restraining notice, a subpoena duces tecum, and an information subpoena. Moreover, U.S. BANCORP claims that RUBASHKIN failed to comply with his obligations to produce documents and appear for examination. Thus, U.S. BANCORP has no way of determining if RUBASHKIN was in compliance with the restraining notice served upon him. Thereafter, pursuant to property executions dated December 4, 2009, U.S. BANCORP had New York City Marshal Martin A. Bienstock (Bienstock) levy upon RUBASHKIN's interests in and to his personal and real property, including his shares of stock in 53SRC and AARS, and his membership interests in E17LLC and 404LLC.
Subsequent to Marshal Bienstock's levy, counsel for RUBSHAKIN contacted counsel for U.S. BANCORP and Marshal Bienstock. He claimed that RUBASHKIN had no assets and RUBASHKIN did not intend to make payment or take any other action in response to the executions. According to U.S. BANCORP, no payment has been made to Marshal Bienstock in response to the levy of executions, the EDNY Judgment remains unsatisfied and U.S. BANCORP still is the owner of the EDNY judgment and a judgment creditor of RUBASHKIN.
RUBASHKIN's counsel eventually provided documents to counsel for U.S. BANCORP, including the subject Judgment by Confession, filed in the Office of the Kings County Clerk on December 2, 2008, based upon an affidavit for judgment by confession, dated November 26, 2008, in which RUBASHKIN confessed judgement in favor of plaintiffs and against himself, “for the sum of $2,255,000.” RUBASHKIN stated, in his confession affidavit, only the following regarding the alleged $2,255,000.00 debt:
This confession of judgment is to assure the plaintiffs against my liability arising upon the following facts: JOSEPH RUBASHKIN made a loan to me in the sum of $1,000,000 payable on demand, and GUTOL LEITER and ROSIE SANDMAN made loans to me in the sum of $1,255,000 payable on demand. I acknowledge that each have them have made demand upon me for payment of the loans given to me and that the loans have not been repaid and are in default [sic]. The sum confessed does not exceed the amount of my liability to plaintiffs.
U.S. BANCORP claims that the confession affidavit and the Judgment were entered on the same day, December 2, 2008, that RUBASHKIN received the Demand Letter from U.S. BANCORP. On December 7, 2008, the day prior to the day on which U.S. BANCORP demanded payment to be made, RUBASHKIN executed an assignment (the Assignment), by which he purported to transfer and assign to plaintiffs all of his right, title and interest in and to certain stock certificates and membership interests, in partial satisfaction of the Judgment. These ownership interests are: 200 shares of stock in 53SRC; 79 shares of stock in AARS; 100% of the membership interest in E17LLC; and, 100% of the membership interest in 404LLC.
Contentions of the parties
U.S. BANCORP contends that the Judgment must be vacated because RUBASHKIN's November 26, 2008–confession affidavit fails to comply with the requirements of CPLR § 3218 and the Judgment was entered through RUBASHKIN's collusion with plaintiffs to defraud U.S. BANCORP and RUBASHKIN's other creditors. U.S. BANCORP contends that RUBASHKIN's confession affidavit contains no substantive information regarding his purported debts to his relatives and cites the absence of: any indicia of the nature of the debt; any information regarding any written loan agreements or promissory notes; the date when the funds were purportedly lent or the manner in which they were advanced; a statement of the rate of interest; and, when the demands for payment were purportedly made by plaintiffs. Also, U.S. BANCORP asserts that it...
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