EAST MARK INTERNATIONAL, LTD. v. ADAR, LLC

Filing 62

MEMORANDUM AND/OR OPINION SIGNED BY HONORABLE HARVEY BARTLE, III ON 10/28/13. 10/28/13 ENTERED AND COPIES E-MAILED.(ti, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
EAST MARK INTERNATIONAL, LTD.
v.
ADAR, LLC,
d/b/a THE LINCOLN ON LOCUST,
L.P.

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CIVIL ACTION

NO. 13-1204

MEMORANDUM
Bartle, J.

October 28, 2013
Before the court is the emergency motion of intervenors

Benzion "Sam" Faibish ("Faibish") and Yehuda Olewski ("Olewski")
"to enforce Stipulated Order and mandatory injunctive relief."
On March 3, 2013 plaintiff East Mark International,
LTD. ("East Mark") filed a complaint for confession of judgment
against defendant ADAR, LLC d/b/a The Lincoln on Locust, L.P.
("ADAR").

East Mark is corporation organized under the laws of

the Marshall Islands with its principal place of business in Hong
Kong.

Gershon Engel is the sole owner of East Mark.

In the

complaint, East Mark alleged that it held a valid first mortgage
in the amount of $3,600,000 on a property located at 1222-1226
Locust Street, Philadelphia, Pennsylvania ("the property"), which
consists of a building containing approximately 41,216 square
feet.

The property is owned by defendant Lincoln on Locust, LP

("Lincoln on Locust").

ADAR, whose sole member is Jacob Ungar

("Ungar"), is the general partner of Lincoln on Locust.1

East

Mark further averred that Lincoln on Locust defaulted on the
mortgage which resulted in the full amount of the mortgage
becoming due.
On March 4, 2013, the Clerk of the Court entered
judgment in favor of East Mark in the amount of $3,780,000, which
amount included interest due.
a

On March 18, 2013, East Mark filed

praecipe for writ of execution.

The Clerk thereupon issued

the writ and forwarded it to the United States Marshal.

The

Marshal scheduled the sale of the property for June 24, 2013.
On June 6, 2013, Faibish and Olewski filed in this
court an "emergency motion for temporary restraining order."
They also moved orally to intervene as defendants.

In the

emergency motion, intervenors claimed that they had a 42.5%
ownership interest in Lincoln on Locust and the property at
issue.

They further asserted that the mortgage held by East Mark

was a fraud intended to deprive them of their ownership interest
in the property.

Faibish and Olewski were also concerned that

any money obtained as a result of the Confession of Judgment
would swiftly be transferred out of the United States since East
Mark is an offshore entity.

1

The ownership of Lincoln on Locust is disputed. Lincoln on
Locust claims that Andre Engel is a limited partner with a 99%
interest and ADAR (that is, Jacob Ungar) has a 1% interest.
Andre Engel is the father of Gershon Engel, the owner of East
Mark. As will be discussed later, intervenors Faibish and
Olewski claim they and their partners own a 42.5% interest in
Lincoln on Locust.
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We granted the motion of Faibish and Olewski to
intervene as well as a temporary restraining order on June 21,
2013.

The temporary restraining order canceled the Marshal's

Sale of the property which was to take place on June 24, 2013.
On July 2, 2013, we extended the temporary restraining order
through July 17, 2013.

We scheduled a preliminary injunction

hearing for August 14, 2013.
On August 13, 2013, a day before the hearing was to
occur, Faibish, Olewski, East Mark, and Lincoln on Locust filed a
stipulation for court approval. We approved the stipulation the
same day, and the hearing was cancelled.

The Stipulated Order,

which is the subject of the pending motion, states:
It is hereby stipulated agreed [sic] by and
between East Mark International, Ltd. ("East
Mark"), plaintiff herein, and Adar, LLC d/b/a
The Lincoln on Locust, L.P. (collectively
"Adar"), defendants herein, and Benzion
("Sam") Faibish and Yehuda Olewski
(collectively "Intervenors"), as follows:
1. Intervenors' Petition to Strike/Open
Confessed Judgment shall be deemed and marked
as withdrawn.
2. The Subpoena sent by Intervenors, through
their counsel, addressed to The Hong Kong and
Shanghai Banking Corporation Limited, a/k/a
and/or d/b/a HSBC Bank USA, N.A. ("HSBC")
shall be deemed and marked as withdrawn.
3. East Mark's Motion to Quash the HSBC
Subpoena shall be deemed and marked as
withdrawn as moot.
4. Defendants and intervenors have agreed
that the dispute between the parties relating
to the property located at and known as 12221226 Locust Street, Philadelphia,
Pennsylvania 19107 (the "Property"), shall be
resolved through an agreed upon Rabbinical
Court, in a Bet Din proceeding (the "Bet Din
proceeding").
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5. East Mark shall not take any further
action on the judgment by confession obtained
in this case on or about March 6, 2013,
except as specifically permitted or required
by the Bet Din proceeding.
6. The hearing scheduled for August 14-15,
2013, shall be canceled as moot.
7. Intervenors' bond posted in this matter
shall be released to Intervenors.
The court retained jurisdiction to enforce the terms of the
stipulation.
On October 17, 2013, Faibish and Olewski, along with IM
Rottenburg and Kalman Farkas, filed the pending motion "to
enforce stipulated order and for mandatory injunctive relief."
Rottenburg and Farkas are not parties to this action and have not
moved to intervene.

In their motion, intervenors maintain that

ADAR as well as East Mark violated the Stipulated Order when East
Mark filed on September 17, 2013 an "emergency petition to strike
the lis pendens filed against the property located at 1222-1226
Locust Street, Philadelphia, Pennsylvania, and to complete
specific performance under agreement of sale" in the Court of
Common Pleas of Philadelphia County.

See East Mark

International, LTD. v. Lincoln on Locust, L.P. et al., Phila.
C.P. Ct., September Term, 2013, No. 01879.
The defendants in that state court action are Lincoln
on Locust, ADAR, and the Bet Din Rabbinical Court c/o Rabbi Moshe
Gobioff.

In the petition, East Mark claimed that a July 30, 2012

order of a Bet Din, that is, a Rabbinical Court, which had been
filed with Philadelphia County Recorder of Deeds, was a lis
pendens on the property and operated as a cloud on the title.
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That Rabbinical Court Order, as will be discussed later, limited
the right of Lincoln on Locust to sell the property.
Furthermore, East Mark averred that in a related code enforcement
proceeding, the Court of Common Pleas of Philadelphia County had
granted the City of Philadelphia's request for a self-executing
order that requires the property owner to fix the structural
problems existing at the property and allows the city to demolish
the property within 30 days of the court's September 10, 2013
order.
The Common Pleas Court granted the petition a few days
later on September 24, 2013 and struck the July 30, 2012 order of
the Bet Din filed with the Recorder of Deeds of Philadelphia
County.

According to Faibish and Olewski, they were not notified

of the petition filed by East Mark, and Rabbi Gobioff was served
during the Jewish holiday of Sukkot when he was not allowed to
read the papers and respond in a timely fashion to the petition.2
With the lien removed, there was now no impediment
recorded on the title to prevent Lincoln on Locust from selling
the property to a third party.

As it turned out, Lincoln on

Locust had entered into an agreement of sale with Pelican
Properties, LLC, an arms-length buyer, back on January 30, 2013,
subject to the removal of the lis pendens.
to be $2,220,000.

The consideration was

The property had been independently appraised

2

We have been advised that an appeal was filed on October
24, 2013 to the September 24, 2013 Order of the Common Pleas
Court striking the July 30, 2012 Order of the Bet Din from the
record of the Recorder of Deeds.
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at a value of $2,300,000.

Closing took place on September 25,

2013, a day after the lis pendens was removed.

The deed was

immediately recorded in the name of Twelve22 LP,3 which deposited
$513,675.59 of the purchase price in escrow with First Platinum
Abstract Title Company and was scheduled to pay the balance,
$1,785,509.18, on October 25, 2013.4

Since East Mark, the

mortgagee, was due more than the sale price, all moneys would end
up with East Mark and none with the seller, Lincoln on Locust.
All parties concede that the building at 1222-1226
Locust Street is in a dangerous condition.

A fire in 2006

destroyed some of the interior walls, which are now supported
with shoring.

The exterior masonry is unstable in places and may

become a danger to the public.

As noted above, the Court of

Common Pleas of Philadelphia County granted an order which
requires the property owner to fix the structural problems
existing at the property and allows the city to demolish the
property within 30 days of the court's September 10, 2013 order.
Faibish and Olewski argue in their pending motion here
that ADAR and East Mark violated the August 13, 2013 Stipulated
3

Twelve22 LP is a subsidiary of Pelican Properties, LLC.
The owner of Twelve22 LP and Pelican Properties, LLC is David
Perlman, a Philadelphia real estate developer.
4

The agreement of sale contains a clause which permits the
buyer to terminate the agreement and have all deposits returned
in the event that a lawsuit against the buyer or a lis pendens
against the property is filed at any time between the settlement
date and the payment date. If buyer chooses to exercise that
option, it must notify the seller in writing of its intention to
terminate the transaction within 72 hours of receipt of notice of
the filing of a lawsuit or lien.
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Order approved by this court because the sale of the property was
not authorized by a Bet Din, that is, a Rabbinical Court.

They

seek relief in the form of an injunction requiring any funds
obtained by East Mark, Lincoln on Locust or ADAR, or any person
in privity with those entities, deriving from the sale of the
property to be paid immediately into the registry of the court.
They also request a finding that ADAR and Lincoln on Locust
violated the Stipulated Order by selling the property without
permission of a Bet Din.

Intervenors finally ask the court to

enforce the Stipulated Order and require the parties to follow
the ruling of the Bet Din which prohibits the sale of the
property to a third party without permission.

We held a hearing

on the emergency motion on October 24 and 25, 2013.
The first issue we must resolve is what is meant by "an
agreed upon Bet Din" as described in paragraph 4 of the
Stipulated Order.

On September 5, 2011, Faibish, Olewski, Unger,

and Andre Engel signed an Agreement to Submit to Arbitration
before a Bet Din (the "first Bet Din") "all disputes between the
parties including but not limited to, Lincoln on Locust LP and
ADAR LLP."
proceeding.

East Mark was not a party to this arbitration
The arbitrators in this Bet Din are: Rabbi Yekusiel

Zelman Graus, selected by Faibish and Olewski; Rabbi Yitzchak
Chaim Seltenreich, selected by Ungar and Andre Engel; and a
third, neutral arbitrator, Rabbi Moshe Shlomo Gobioff, who was
agreed upon by the parties.

The Agreement to Arbitrate requires

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that any award of the arbitrators shall be in writing and signed
by at least two of the Rabbis.
On July 30, 2012, the first Bet Din issued an "Interim
Rabbinical Court Ruling" which states that the defendants, Ungar
and Andre Engel, "shall not alter any ownership of the asset or
portion thereof, or transfer any portion of the shares to any
third entity, and not to collateralize the asset through a
mortgage or any other manner beyond currently existing mortgages
against the asset..." [emphasis added].

The asset was identified

as the property located at 1222-1226 Locust Street.
was signed by Rabbis Gobioff and Graus.

The ruling

Shortly after the ruling

was handed down, it was recorded with the Philadelphia County
Recorder of Deeds.

Thus, Lincoln on Locust was prohibited from

selling the property without authorization from the first Bet
Din.

East Mark, as noted above, was not a party to the Agreement

to Arbitrate, and its mortgage, which preexisted the July 30,
2012 ruling of the first Bet Din, was not affected.
In August, 2013, while the Confession of Judgment filed
by East Mark and related motions filed by intervenors were
pending before this court, Faibish made a complaint within the
Belz community of Rabbis and requested that a second Bet Din be
convened (hereinafter the "second Bet Din").

All parties to this

lawsuit, including East Mark through Gershon Engel, bound
themselves to appear before that Rabbinical Court.

The Belz

community used a different procedure for selecting Rabbis than
was used in connection with the first Bet Din.
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A panel of 10 to

15 Rabbis selected, without input from the parties, Rabbis Moshe
Gobioff, Meir Hacohen Mayes, and Asher Anshil Ekstein to preside.
The purpose of the second Bet Din, however, was quite limited.
Its charge was to help bring about a stipulation of the parties
to have their dispute resolved outside of the federal court.
On August 8, 2013, the second Bet Din convened and
issued an oral ruling which urged the parties to enter into a
stipulation to avoid further federal court litigation.

It

recognized that a "major dispute" was being arbitrated before a
Rabbinical Court consisting of Rabbis Gobioff, Seltenreich, and
Graus.

It was also agreed by the second Bet Din and the parties

thereto that any decision of this Bet Din "shall not contradict
any decision of [the first Bet Din], and that the jurisdiction
over the main dispute will continue to be pending with [the first
Bet Din]."

Any evidence to the contrary that the second Bet Din

had broader jurisdiction is not credible.
Lincoln on Locust at all times was obligated to abide
by the July 30, 2012 ruling of the first Bet Din prohibiting it
from selling or altering the ownership of the property at 12221226 Locust Street without written authorization from the first
Ben Din or Faibish and his partners.

There is no credible

evidence that any such authorization was ever forthcoming from
the first Bet Din or Faibish and his partners or any other Bet
Din having jurisdiction.

Lincoln on Locust clearly violated the

September 5, 2011 Agreement to Arbitrate and the July 30, 2012
Interim Rabbinical Ruling when it entered into an agreement of

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Sale with Pelican Properties, LLC and then sold the property to
its related entity, Twelve22 LP.

By selling the property,

Lincoln on Locust also clearly violated paragraph 4 of the
Stipulated Order of this Court, which provides:
Defendants and intervenors have agreed that
the dispute between the parties relating to
the property located at and known as 12221226 Locust Street, Philadelphia,
Pennsylvania 19107 ("the property") shall be
resolved through an agreed upon Rabbinical
Court, in a Bet Din proceeding.
Paragraph 4 of this court's Stipulated Order only
required ADAR, Lincoln on Locust, and the intervenors to submit
their dispute to a Bet Din.

This provision of the Stipulated

Order did not apply to East Mark.

For its part, East Mark was

simply obligated in paragraph 5 "not [to] take any further action
on the judgment by confession obtained in this case on or about
March 6, 2013, except as specifically required by the Bet Din
proceeding."

Whatever the legality of East Mark's actions in

state court to remove the lis pendens, that is, the July 30, 2012
ruling of the first Bet Din recorded with the Recorder of Deeds,
its actions there did not involve "further action on the judgment
by confession" entered in this Court and did not violate the
Stipulated Order.

While East Mark also voluntarily withdrew its

confession of judgment in this court, that withdrawal, in our
view, did not disregard the Stipulated Order since it
accomplished one of the goals of the parties before the Bet Din.
We next turn to the issue of harm to the intervenors,
Faibish and Olewski and their partners, who claim they have a

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42.5% ownership interest in Lincoln on Locust.5

Even if they are

correct as to their ownership interest, they will suffer no harm
in this respect from the sale of the property.

As part of the

August 13, 2013 Stipulated Order, Faibish and Olewski withdrew
their petition to Strike/Open Confession of Judgment in which
they claimed that East Mark's underlying mortgage was a fraud.
Thus, the intervenors are no longer challenging the validity of
East Mark's mortgage here.

That mortgage, as noted above, is in

the amount of $3,600,000, far greater than the price of
$2,220,000 Twelve22 LP is paying for the property.

Consequently,

East Mark will receive all the proceeds of any sale and nothing
will remain to be paid to Lincoln on Locust or its partners, no
matter what their ownership interest.
Faibish and Olewski also claim that there were
negotiations with Lincoln on Locust for them to buy the property
and that the parties had orally agreed to many of the terms of a
sale.

Nowhere however have Faibish and Olewski maintained or

shown that an agreement had been reached on all the material
terms to a complex transaction such as this.
has been produced.

No executed writing

We find that no Bet Din has been asked by the

parties to rule on this subject and none has done so.

Further,

under Jewish law, without an agreement between the parties, a Bet

5

We note that under the Lincoln on Locust partnership
agreement, the sale of any property requires the approval of 51%
of the ownership interests. Faibish and Olewski, as limited
partners with a 42.5% stake, cannot prevent the sale based on the
terms of the partnership agreement.
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Din cannot compel a majority owner of a property to sell its
interest to a minority owner such as Faibish and Olewski claim to
be.

In sum, Faibish and Olewski have established no evidence of

a recognized harm from any failure to become the purchasers of
the property at 1222-1226 Locust Street.
We also keep in mind the poor condition of the building
at 1222-1226 Locust Street.

It suffered from a devastating fire

in 2006 which caused serious structural damage. There are safety
concerns related to its walls.
facade.

Bricks have fallen from its

The current owners of Lincoln on Locust have done little

to rectify the situation.

The Court of Common Pleas of

Philadelphia County has granted a self-executing order filed by
the City of Philadelphia requiring the property owner to fix the
structural problems existing at the property.

The order allows

the city to have the building demolished if prompt action is not
taken to make significant repairs.

We are advised that a hearing

is scheduled for October 29, 2013 with respect to the potential
demolition. Twelve22 LP has agreed to invest a sizeable sum of
money for the restoration of the building.
this kind is in the public interest.

Any investment of

Time also appears to be of

the essence.
There is one final matter.

We cannot overlook the

flagrant violation by Lincoln on Locust of the court's August 13,
2013 Stipulated Order by proceeding with the voluntary sale of
the property without the approval of the first Bet Din and in
contravention of its July 30, 2012 Interim Rabbinical Court

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Ruling.

Counsel for Lincoln on Locust virtually admitted as much

at the hearing before this court.

If a party thought there was a

valid basis for modifying or vacating the Stipulated Order, it
could have filed a motion to this effect.

Instead Lincoln on

Locust decided to plow ahead to sell the property in late
September, 2013, in total disregard of what this court had
decreed.

There was no rational ground at that time to believe

that any Bet Din with jurisdiction had authorized the sale of
1222-1226 Locust Street.

While East Mark was free to file a new

confession of judgment and force a sale, it had not done so.

In

short, there was no justification for disregarding the Stipulated
Order, particularly since Lincoln on Locust had agreed to it and
its counsel, who participated in representing Lincoln on Locust
at the sale, had signed the Stipulation.
In fairness to the intervenors, Faibish and Olewski, we
will order Lincoln on Locust and its counsel, jointly and
severally, to compensate them for their reasonable counsel fees
and costs in connection with their emergency motion to enforce
Stipulated Order and for mandatory injunctive relief.

We impose

the sanctions pursuant to Rule 16(f)(1)(C) of the Federal Rules
of Civil Procedure for failure to obey a pretrial order.

Poulis

v. State Farm Fire and Cas. Co., 747 F.2d 863, 869 (3d Cir.
1984).

See also Marshak v. Treadwell, 595 F.3d 478, 493-94 (3d

Cir. 2009); Ranco Indus. Prods. Corp. v. Dunlap, 776 F.2d 1135,
1139 (3d Cir. 1985).

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The emergency motion of intervenors Benzion "Sam"
Faibish and Yehuda Olewski to enforce Stipulated Order and for
mandatory injunctive relief will be denied but reasonable counsel
fees and costs will be imposed on Lincoln on Locust and its
counsel, O'Connor Kimball LLP, jointly and severally, as
described above.

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