Faibish, S. v. The Lincoln on Locust

• Court: Superior Court of Pennsylvania
• Decided: February 13, 2015
• Docket: 840 EDA 2014
• Status: Unpublished

Opinion

J-A28025-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

SAMUEL FAIBISH AND YEHUDA OLEWSKI IN THE SUPERIOR COURT OF PENNSYLVANIA Appellants

v.

THE LINCOLN ON LOCUST, L.P. AND ADAR, LLC

Appellee No. 840 EDA 2014

Appeal from the Order Entered on February 10, 2014 In the Court of Common Pleas of Philadelphia County Civil Division at No.: 140100306

BEFORE: GANTMAN, J., WECHT, J., and JENKINS, J.

MEMORANDUM BY WECHT, J.: FILED FEBRUARY 13, 2015

Samuel Faibish and Yehuda Olewski appeal from the order entered

February 10, 2014 denying their petition to compel arbitration and the

enforcement of existing Bet Din1 orders. We affirm.

The history of this case involves extensive, overlapping, and often

contradictory litigation filled with the parties’ unremitting flurry of filings in

the Philadelphia Court of Common Pleas, the United States District Court for

the Eastern District, and a Bet Din (rabbinical court) selected by the parties.

We begin with a chronological recitation of the relevant facts and procedural

history. ____________________________________________

1 A Bet Din rabbinical court is “[r]eligious arbitration used by Orthodox Jewish communities.” Trial Court Opinion (“T.C.O.”), 5/21/2014, at 1 n.1 (citation omitted). J-A28025-14

Jacob Unger is the majority partner in Lincoln on Locust, LP (“LOL”), a

partnership formed to purchase and manage the property at 1222-26 Locust

Street in Philadelphia (“the Property”). Faibish and Olewski are limited

partners in LOL. On November 7, 2005, LOL bought the Property for

$7,000,000.

In 2006, the Property was damaged by a fire, which “destroyed some

of the interior walls, which are now supported by shoring[.]” Trial Court

Opinion (“T.C.O.”), 5/21/2014, at 9. The Property remained unrepaired and

in a dangerous condition; the City of Philadelphia apparently has filed

paperwork to demolish the property, pending the outcome of litigation. Id.

The Property was subsequently mortgaged on July 28, 2011 for

$3,600,000 by LOL and ADAR, LLC (“ADAR”)2 to East Mark International,

Ltd. (“East Mark”), which is solely owned by Gershon Engel. On September

5, 2011, Faibish, Olewski, LOL, and ADAR entered into an Agreement to

Submit to Arbitration “all disputes between the parties including but not

limited to Lincoln & Locust LP [sic] [and] ADAR LLP.” Agreement, 9/5/2011.

Thereafter, Faibish and Olewski initiated Bet Din proceedings, and a panel of

three rabbis convened to undertake review of the case.

On July 30, 2012, the Bet Din rabbinical court issued an “Interim

Rabbinical Ruling” holding that Unger and Engel “shall not alter any

____________________________________________

2 ADAR, LLC is solely owned by Jacob Unger.

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ownership of the asset or a portion thereof, or transfer any portion of the

shares to any third entity, and not to collateralize the asset . . . beyond any

existing mortgages of the asset, as well as not to take any action to

commence renovations or construction [sic] at the asset, until they obtain

written authorization by the Rabbinical Court or from the party of the

plaintiffs.” This ruling was filed with the Recorder of Deeds of Philadelphia

County.

On January 30, 2013, apparently unbeknownst to Faibish and Olewski,

LOL entered into an agreement of sale with an arms-length buyer, Pelican

Properties, LLC, for $2,220,000, subject to the removal of the lis pendens

caused by the July 30, 2012 interim rabbinical ruling. On March 3, 2013,

East Mark filed a complaint for confession of judgment against ADAR and

LOL in the United States District Court for the Eastern District, asserting that

LOL had defaulted on the mortgage. The next day, the clerk of court

entered judgment in favor of East Mark for $3,780,000, and East Mark filed

a praecipe for writ of execution on March 18, 2013. The clerk issued the

writ, and the United States Marshal scheduled the Property for sale on June

24, 2013. On June 6, 2013, Rabbi Moshe Shlomo Gobioff, on behalf of the

Bet Din, sent a letter to Unger, stating that his scheduled sale of the

Property would be “against the injunction that was issued by the empanelled

Rabbinical Court” and “advise[d] [Unger] to halt to [sic] sale proceedings

until we will convene to deliberate the matter and your case will see the light

of resolution.”

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On June 20, 2013, at docket no. 13-1204, Faibish and Olewski filed for

a temporary restraining order and preliminary injunction in the United States

District Court for the Eastern District of Pennsylvania to intervene and

prevent the scheduled sale of the Property on June 24, 2013. In that filing,

they stated that the Property had been destroyed in a fire after its purchase

and had never been developed, and alleged that Unger was fraudulently

affiliated with East Mark. The district court permitted Faibish and Olewski to

intervene and granted the temporary restraining order through July 17,

2013.

On August 13, 2013, the parties entered into a stipulation before the

eastern district court at no. 13-1204 in which they “agreed that the dispute

between [them] relating to the property located at and known as 1222-1226

Locust Street . . . shall be resolved through an agreed[-]upon Rabbinical

Court.” Further, “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.”

Stipulation, 8/13/2013, at 2 ¶¶ 4-5.

On September 17, 2013, East Mark filed an emergency petition in the

Philadelphia County Court of Common Pleas, arguing that the July 30, 2012

Bet Din rabbinical court’s “Interim Rabbinical Ruling” was a lis pendens on

the property and a cloud on the title. The court agreed, and on September

24, 2013, struck the “Interim Rabbinical Ruling.”

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The next day, on September 25, 2013, LOL entered into an escrow

agreement with ADAR and Twelve22 LP, a subsidiary of Pelican Properties, to

retain in escrow a release of mortgage, a $100,000 indemnity fund, and a

deed of correction on the Property. LOL and Pelican closed their earlier

agreement of sale on the same day, and a deed was recorded in the name of

Twelve22 LP.

On October 17, 2013, Faibish and Olewski filed a motion “to enforce

stipulated order and for mandatory injunctive relief” in the district court,

arguing that the sale to Pelican Properties was not authorized by the Bet Din

rabbinical court.

On October 21, 2013, the Bet Din rabbinical court issued a ruling

determining that Faibish and Olewski’s partnership interest in Lincoln on

Locust LP was 42.5%, and stating that the asset could not be sold without

Faibish and his partners’ consent and participation in negotiations. The

ruling further stated: “As to calculations between the parties, the Rabbinical

Court will consider and rule in the future.” Bet Din Ruling, 10/21/2013, at

¶ 4.

After two days of hearings, on October 28, 2013, the Honorable

Harvey Bartle of the United States District Court ruled upon Faibish and

Olewski’s emergency petition for a temporary restraining order at No. 13-

1204. Judge Bartle concluded that “[LOL] clearly violated the September 5,

2011 Agreement to Arbitrate and the July 30, 2012 Interim Rabbinical Ruling

when it entered into an Agreement of Sale with Pelican Properties, LLC and

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then sold the property to its related entity, Twelve22, LP.” District Court

Memorandum (“D.C.M.”), 10/28/2013, at 9-10. However, the court

determined that Faibish and Olewski had failed to establish that the $3.6

million East Mark mortgage was fraudulent and that the entire $2.22 million

purchase price therefore would go to East Mark to extinguish the mortgage,

leaving no proceeds for LOL. Thus, the district court concluded that “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.” Id. at 12. The court ordered LOL to pay fines and Faibish and

Olewski’s costs for its “flagrant violation” of the stipulated order, but did not

disturb the sale of the property. Id.

One week later, on October 29, 2013, the rabbinical court also

determined that LOL, ADAR, Unger, and Engel violated the July 30, 2012

order when they sold the property to Twelve22. The rabbinical court

ordered that “any proceeds related to that transfer under their control[] shall

not be disposed of[] or transferred to anyone including but not limited to

East Mark International, [Ltd.] or any of its officers, without the direct

written directive of our panel.” “Restraining Order,” 10/29/2013, at 1. The

Bet Din rabbinical court further ordered that the proceeds be escrowed

pending their distribution by the Bet Din.

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Undeterred by these consonant rulings, Faibish, Olewski, Kalman

Farkis, and I.M. Rottenberg3 filed a second complaint against LOL and ADAR

to enjoin the sale of the property in the district court at no. 13-6376. On

November 5, 2013, the district court dismissed the complaint due to lack of

subject matter jurisdiction based on diversity of citizenship under 28

U.S.C.A. § 1332(a).

At docket no. 189 of 2013, on November 7, 2013, after oral argument,

the court of common pleas denied a petition by Faibish, Olewski, Kalman

Farkis, and I.M. Rottenberg for injunctive relief, holding that they had not

“shown that they will suffer irreparable harm if the petition is not granted

[and they] have an adequate remedy at law in damages.” Order,

11/7/2013. Thereafter, the court denied their motion for reconsideration on

December 13, 2013. In an accompanying opinion, the court observed that

not all of the parties in the litigation were parties to the arbitration

agreement, and that if money damages are due, “[t]here is no indication

that judgment could not be collected from [Appellees] domestically . . . .”

Opinion, 12/13/2013, at 3. This order was not appealed.

On January 6, 2014, Faibish and Olewski filed the instant, second

Petition to Compel Arbitration and Enforcement of Existing Bet Din Orders in

3 Kalman Farkis, and I.M. Rottenberg are identified by the trial court only as “two other individuals who are not parties to the instant case.” T.C.O. at 5 n.6.

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the court of common pleas at Docket No. 840 of 2014, contending that they,

LOL, and ADAR “are subject to a valid arbitration agreement,” and that LOL

and ADAR “have violated the Bet Din orders by entering into the Pelican Sale

Agreement.” Petition to Compel Arbitration, 1/06/2014, at 1, 3.

On February 10, 2014, the court of common pleas denied Faibish and

Olewski’s motion to stay the sale of 1222-26 Locust Street and compel the

parties to return to arbitration, finding that the parties were bound by the

prior court proceedings in state and federal court under the principles of res

judicata.4 On February 20, 2014, Faibish and Olewski filed a motion for

reconsideration and requested an evidentiary hearing. On March 12, 2014,

Faibish and Olewski timely filed an appeal to the Superior Court. On March

14, 2014, the trial court dismissed the motion for reconsideration as moot,

but did not order Faibish and Olewski to file a statement of errors

complained of on appeal pursuant to Pa.R.A.P. 1925(b). The trial court

entered a Pa.R.A.P. 1925(a) opinion on May 21, 2014.5 ____________________________________________

4 The same day, the trial court denied Faibish and Olewski’s petition to intervene in the mortgage foreclosure action involving East Mark and LOL. See Order No. 131100251. However, although the orders were discussed in a single trial court opinion, they were entered in two separate cases. Appellants’ instant appeal lies only from the denial of the petition to stay the sale and compel the parties to return to Bet Din arbitration at Order No. 140100306. 5 On April 1, 2014, during the pendency of the instant appeal, the Locust Street property apparently was sold to a third party. Appellants filed another complaint at docket no. 4041 of 2014 in the court of common pleas. The court granted ADAR and LOL’s preliminary objections and dismissed (Footnote Continued Next Page)

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Faibish and Olewski present two questions for our review:

a. Did the [trial] court err when it denied Faibish and Olewski’s Petition to Compel Arbitration and Enforcement of Bet Din Orders, as the parties had a valid arbitration agreement and the dispute was within the scope of the arbitration agreement?

b. Should Faibish, Olewski, LOL, and ADAR be compelled to arbitrate pursuant to their Arbitration Agreement?

Faibish and Olewski’s Brief at 4.

Both of Faibish and Olewski’s issues challenge the denial of their

motion to compel arbitration. Although the trial court determined that their

claims were barred by res judicata, Faibish and Olewski contend that,

“[w]hile there have been several related matters to the instant appeal, no

Court has ruled upon the parties’ right to arbitrate pursuant to their valid

Agreement to Arbitrate.” Id. at 13. We conclude that no relief is due.

We review a trial court’s denial of a motion to compel arbitration for an abuse of discretion and to determine whether the trial court’s findings are supported by substantial evidence. In doing so, we employ a two-part test to determine whether the trial court should have compelled arbitration. The first determination is whether a valid agreement to arbitrate exists. The second determination is whether the dispute is within the scope of the agreement. _______________________ (Footnote Continued)

Appellants’ complaint with prejudice on June 24, 2014, stating that “[Appellants], Jacob Ungar, ADAR, LLC d/b/a The Lincoln on Locust, [LP,] ADAR LLC and Lincoln, and Andre Engel are parties to an agreement signed on September 5, 2011 to Arbitrate before a Bet Din Rabbinical Court ‘all disputes between the parties including but not limited to Lincoln on Locust LP and ADAR, LLP.’” Order, 6/24/2014. Appellants filed exceptions to the sale, and the Office of the Sheriff of Philadelphia County currently holds the proceeds of the sale.

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Whether a claim is within the scope of an arbitration provision is a matter of contract, and as with all questions of law, our review of the trial court’s conclusion is plenary. The scope of arbitration is determined by the intention of the parties as ascertained in accordance with the rules governing contracts generally. These are questions of law and our review is plenary.

Arbitration is a matter of contract, and parties to a contract cannot be compelled to arbitrate a given issue absent an agreement between them to arbitrate that issue. Even though it is now the policy of the law to favor settlement of disputes by arbitration and to promote the swift and orderly disposition of claims, arbitration agreements are to be strictly construed and such agreements should not be extended by implication.

In general, only parties to an arbitration agreement are subject to arbitration. However, a nonparty, such as a third-party beneficiary, may fall within the scope of an arbitration agreement if that is the parties’ intent.

Elwyn v. DeLuca, 48 A.3d 457, 461 (Pa. Super. 2012) (citations and

internal quotation marks omitted).

Faibish and Olewski state:

The fundamental dispute between the parties to the Arbitration Agreement is the ownership of LOL. The Bet Din Arbitration determined by way of the Bet Din LOL Ownership Finding that Faibish and Olewski held a 42.5% interest in LOL. Still to be determined by the Bet Din Arbitration [is] the disposition of LOL’s assets.

Faibish and Olewski’s Brief at 8 (emphasis added). Here, it is undisputed

that the Property was the only asset of LOL; having been sold, its proceeds

are now LOL’s only possible asset. See T.C.O. at 2. Thus, by their own

admission, Faibish and Olewski seek to compel LOL and ADAR to return to

arbitration specifically for the purpose of distributing the proceeds from the

closed and recorded sale of the Property owned by LOL. However, it is clear

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that the relief sought by Faibish and Olewski cannot be accomplished by any

further arbitration.

We conclude that the trial court did not abuse its discretion in denying

the petition based upon res judicata.

The doctrine of res judicata holds that a final valid judgment upon the merits by a court of competent jurisdiction bars any future suit between the same parties or their privies on the same cause of action. . . . Where parties have been afforded an opportunity to litigate a claim before a court of competent jurisdiction, and where the court has finally decided the controversy, the interests of the state and of the parties require that the validity of the claim and any issue actually litigated in the action not be litigated again.

* * *

Application of the doctrine of res judicata requires that the two actions possess the following common elements: (1) identity of the thing sued upon; (2) identity of the cause of action; (3) identity of the parties; (4) identity of the capacity of the parties.

Holz v. Holz, 850 A.2d 751, 757 (Pa. Super. 2004) (citation omitted); id. at

758 (applying determination that “[f]oreign judgments are entitled to full

faith and credit so long as the foreign court had jurisdiction and the

defendant had the opportunity to appear and defend” to res judicata

between federal and state courts). Moreover, it is well-settled that:

The [doctrine of res judicata] should not be defeated by minor differences of form, parties, or allegations, when these are contrived only to obscure the real purpose—a second trial on the same cause between the same parties. The thing [that] the court will consider is whether the ultimate and controlling issues have been decided in a prior proceeding in which the present parties actually had an opportunity to appear and assert their rights. If this be the fact, then the matter ought not to be

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litigated again, nor should the parties, by a shuffling of plaintiffs on the record, or by change in the character of the relief sought, be permitted to nullify the rul[ing].

Buyfigure.com, Inc. v. Autotrader.com, Inc., 76 A.3d 554, 561 (Pa.

Super. 2013) (citations and internal quotation marks omitted; emphasis in

original).

Here, Faibish and Olewski intervened in the district court action for

confession of judgment by East Mark, the mortgagor, against LOL and ADAR.

There, the parties sought a judgment for the mortgage upon which LOL had

defaulted. Faibish and Olewski were permitted to intervene upon the

grounds that the mortgage “was a fraud intended to deprive them of their

ownership interest in the property.” D.C.M. at 2. Thus, the district court

proceeding possessed the same common elements as the current

proceeding: the thing sued upon (LOL’s assets), the same cause of action

(compulsion of arbitration before the Bet Din), identity of the parties, and,

because Faibish and Olewski were permitted to intervene and participate in

the underlying hearings, the capacity of the parties. See Holz, 850 A.2d at

757. Accordingly, this Court and the trial court properly are bound by the

doctrine of res judicata not to permit Faibish and Olewski to relitigate a claim

already decided by the district court.

After determining that the East Mark mortgage on the property was a

valid first mortgage on the property, and that LOL and ADAR had submitted

their disputes with Faibish and Olewski to a Bet Din, the district court

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concluded that LOL indeed had violated the Bet Din orders by selling the

property after the Bet Din had told them not to do so.

Nonetheless, the district court determined as follows:

We next turn to the issue of harm to the intervenors, Faibish and Olewski and their partners, who claim they have a 42.5% ownership interest in [LOL].5 Even if they are correct as to their ownership interest, they will suffer no harm in this respect from the sale of the [P]roperty. 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 LOL or its partners, no matter what their ownership interest. 5 We note that under the LOL 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.

D.C.M. at 11. Thus, the district court concluded that, given Faibish and

Olewski’s 42.5% stake in LOL as determined by the Bet Din, Faibish and

Olewski had no power to prevent the sale of LOL’s sole asset. In light of

East Mark’s valid mortgage on the property, LOL has no assets.

Any further discussion by this Court would be ineffective and violate

our prohibition upon entering advisory opinions.

As a general rule, an actual case or controversy must exist at all stages of the judicial process, or a case will be dismissed as moot. An issue can become moot during the pendency of an appeal due to an intervening change in the facts of the case or

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due to an intervening change in the applicable law. In that case, an opinion of this Court is rendered advisory in nature. An issue before a court is moot if in ruling upon the issue the court cannot enter an order that has any legal force or effect.

In re D.A., 801 A.2d 614, 616 (Pa. Super. 2002) (en banc) (internal

citations and quotations omitted).

Here, the record supports the trial court’s conclusion that no purpose

would be served by compelling the parties to return to the Bet Din to

arbitrate “the disposition of LOL’s assets.” Faibish and Olewski’s Brief at 8.

Faibish and Olewski repeatedly have asserted their rights before courts of

competent jurisdiction. Repeatedly, they have failed to establish any right

to recovery. The parties have taken so many bites from this apple that only

the bitter core remains. By now, their continued efforts to establish that

which has been rejected can only be vexatious and burdensome upon the

courts, the Bet Din, and their counterparties, something Faibish and Olewski

surely recognize regardless of their intentions in drawing out this dispute.

It is clear to us that the trial court did not abuse its discretion or err as

a matter of law in declining to grant Faibish and Olewski’s petition to compel

arbitration where such an action would only be an attempt to nullify prior

determinations against their favor and to recover assets that quite simply no

longer exist in any sense that is useful to Faibish and Olewski.

Order affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 2/13/2015

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