SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS: PART 14
Index No.:
-----------------------------------------X
HAYA GABBAY,
Plaintiff, 21156/90
-against- DECISION AND ORDER
ABRAHAM GABBAY,
Defendant.
-----------------------------------------X
HON. DAVID GOLDSTEIN
ISSUE
May an individual refuse to disclose the disposition or whereabouts of substantial funds, which total hundreds of thousands of dollars, and thereafter rely upon a general, nonspecific claim that he lacks any assets to justify his failure or refusal to provide maintenance and child support over an extensive period of time? Further, may the Court consider defendant's collusive and blatant fraud in connection with the entry in this State, of a judgment which far exceeds the foreign debt upon which it was based, where the judgment was used to create a lien on foreign property and, as a result of which, acted to shield the asset from defendant's creditors, including his wife and children? In my view, to pose the question is to state the answer, sufficient to preclude this defendant from relying upon his own fraud, collusion and improper conduct in terms of the failure to discharge his obligations toward his family.
The matter was remitted to this Court by the Appellate Division, Second Department, pursuant to an April 5, 1999 order, which, on sua sponte review, reversed the order of December 23, 1997, which had continued defendant's incarceration for contempt, based upon his refusal to pay arrears in maintenance and child support. The Appellate Division directed that a hearing be held, at which plaintiff was to account for monies obtained during her receivership (plaintiff had been appointed as receiver by JHO Gartenstein, before whom the matrimonial action was pending and was tried). The hearing was to ascertain (1) whether there was any surplus to reduce defendant's arrears and, (2) the feasibility of a sale or transfer of sequestered property to reduce the arrears. In doing so, the appellate court was apparently not apprised of the facts that, (1) the matrimonial action had been concluded in October, 1998, prior to the appeal and, (2) the equitable distribution determination rendered after trial, awarded all marital property to the plaintiff, based upon defendant's Aegregious fault generated by * * * stonewalling, concealment and fraud * * *.@ Inasmuch as the Appellate Division directed that the hearing proceed Awith all convenient speed,@ the Court combined the hearing with the periodic 90-day review, which would have been scheduled for May 20, 1999, in any event. The hearing proceeded over nine days, May 12, 14, 17, 24 and 26, and June 2, 3, 4, 7 and 9, 1999.
Defendant has been incarcerated since June 7, 1996, for civil contempt as a result of his failure to make payments of maintenance and child support directed by court orders, which date as far back as 1991. As this Court observed in the past, he has demonstrated a stubborn, flagrant unwillingness to provide support to his children, one of whom is institutionalized, and an open hostility toward the judicial system in his battle to avoid his familial responsibilities. He has portrayed an attitude that he will outlast the system and, in the end, will teach us all a lesson. In stoic fashion, he has remained incarcerated over an extensive period, refusing to disclose either the disposition or whereabouts of substantial funds. In an earlier decision, Judge Gartenstein found that he had continued A* * * to operate his vast empire from accommodations in the Bronx House of Detention * * *@ (Gabbay v. Gabbay, NYLJ, January 30, 1998, p. 33 col 6 [Gartenstein, JHO].)
Over the past three years, this Court has religiously held de novo contempt hearings every six months, as well as periodic reviews every 90 days, at which defendant was represented by counsel and pursued a full and complete oral accounting of the receiver, which, it appears, was likewise not disclosed on the appeal.
PROCEDURAL BACKGROUND
Perhaps, to place the issue in its proper perspective, some review of the underlying procedural history is necessary.
Defendant was initially remanded on March 1, 1995, after a lengthy hearing, which resulted in an adjudication of contempt for his failure to pay $33,827, required by the order of Justice [now Surrogate] Nahman, issued February 1, 1991. The Appellate Division, Second Department, thereafter directed his release upon payment of the sum of $20,000, with the balance [$13,000], to be paid to plaintiff by certified check or money order, no later than March 31, 1995. Subsequently, in April 1995, defendant moved to punish plaintiff for contempt for her alleged failure to comply with prior orders as to visitation, whereupon plaintiff cross-moved to compel the sale of the apartment in Israel, jointly held by the parties. During the pendency of the motion, however, it was disclosed that defendant had never paid the $13,000 balance, in direct violation of this Court's and the Appellate Division orders. In light of the continuing contempt, defendant was remanded until he purged himself of his contempt by the payment in full of $13,000, which, it appears, was paid a few days later.
However, at a subsequent hearing held on August 21, 1995, relating to a series of motions, it was disclosed that, in reference to the contempt, defendant's friend had issued checks in the sum of $13,000, which were payable to the Bronx House of Detention and which were never delivered to the wife. Thus, the contempt continued, since the prior orders, including that by the Appellate Division, directed that payment be made to the wife. As a result, defendant was remanded until full payment was made. It appears that, within a matter of days, the arrears were paid and he was released.
In January 1996, plaintiff again moved to punish defendant for contempt for his failure to pay support and maintenance in the sum of $45,500, representing, for the most part, support arrears. Defendant did not appear at the hearing, which proceeded in his absence and following which, he was adjudged in contempt and an arrest warrant issued. Eventually, he was apprehended on June 7, 1996 and was remanded.
As noted, this Court has studiously conducted six month and 90 day reviews as to defendant's contempt and has found a repeated, continued and persistent refusal to make required support payments, notwithstanding either an ability to do so, or a finding that defendant had affirmatively acted to improperly shield his assets from his creditors. On July 17, 1997, JHO Gartenstein, before whom the marital action was pending, appointed plaintiff as receiver of defendant's real property and authorized the wife to collect all rents from the tenants of those properties. The order directed defendant Ato turn over all books, records, checkbooks, leases, mortgage documents, all Corporate papers and all Bank Accounts in the name of Abraham Gabbay and/or the aforesaid Corporations * * *@ The order further directed plaintiff to use any surpluses, after payment of the mortgages, carrying charges and the pendente lite awards, to reduce the $45,550 arrears.
During his continued incarceration for civil contempt, defendant was also adjudged guilty of criminal contempt on March 16, 1998, for his active interference with the receivership. After a hearing held for that purpose, it was determined that he had retained others, many of whom he enlisted in the Bronx House of Detention, to act on his behalf in derogation of the authority, jurisdiction and duties of the receiver. Specifically, it was found that he acted to divert books and records to impede the receiver's attempt to locate assets which allegedly had been diverted or secreted.
Following the trial of the matrimonial action, Judge Gartenstein rendered a decision on October 8, 1998, which distributed all marital assets to the wife, including the marital residence and all real property which defendant had acquired during the marriage. The equitable distribution award was based upon defendant's secretion of assets, which was found to amount to Aegregious fault,@ sufficient to shock the court's conscience. Although the judgment of divorce was entered December 30, 1998, it is palpably clear that the Second Department was not apprised that a judgment had been entered or that the wife had been awarded all of the marital assets in terms of equitable distribution. Had this information been imparted, why would the appellate court direct a hearing as to whether any property could be sold to satisfy the contempt arrears, especially where, as here, all marital assets were awarded to the wife? In such a situation, why would plaintiff use her property or assets to satisfy defendant's obligation? Nor could the court direct her to do so, in the absence of some change in terms of equitable distribution. In this connection, not without significance is the fact that, notwithstanding the equitable distribution award, Judge Gartenstein left an open door for the future, with what appears to be a rather wide opening:
A* * * Mr. Gabbay still holds the key to the jail door as he has throughout this action. Should he demonstrate a real desire to make open, frank and complete disclosure of his financial empire so that an accurate award may be made upon the true economic realities, the Court will entertain his application to reopen the trial to the extent of any new information he will supply.@ (Gabbay v. Gabbay, October 8, 1998, Gartenstein, JHO)
THE 90 DAY REVIEW
As observed, over the past three years, this Court has studiously conducted both six month contempt hearings and 90-day reviews, as is mandated by ' 774 of the Judiciary Law. Since the most recent 90-day review was scheduled to occur at or about the time of the hearing directed by the Appellate Division, over defendant's objection, the Court elected to conduct both hearings simultaneously.
The Initial $640,000 Loan From Greenpoint Bank
Through several close corporations (Note1), defendant owns property consisting of buildings in Kings County, located at 857 Flatbush Avenue, 793 Flatbush Avenue, 2705 Mermaid Avenue, 2711 Mermaid Avenue and 2801 Mermaid Avenue. He owns an apartment, jointly with the plaintiff, in Tel Aviv, Israel, which is allegedly valued at approximately $500,000. He also formerly owned property at 793 Flatbush Avenue, 864A Flatbush Avenue and 43 Sheffield Avenue. Throughout the periodic reviews, he has repeatedly asserted his financial inability to satisfy the arrears, a claim which is refuted by the facts and defendant's admissions.
In 1991, during the pendency of the matrimonial action, defendant obtained a $640,000 mortgage loan from Greenpoint Bank by mortgaging the Flatbush Avenue properties, which were income producing properties. He testified that he used the proceeds as follows: (a) $80,000 to purchase an empty warehouse and a vacant lot (both non-income producing) in Jessup, Georgia, although he did testify at one point that his brother Jack actually owned the property; (b) $47,000 to invest in a restaurant; (c) $75,000 to purchase a vacant lot (non-income producing) at 459 East Tremont Avenue, in the Bronx; (d) $20,000 to invest in a coffee shop; (e) $50,000 to invest in a music business; (f) $100,000 to renovate the marital residence; and (g) $300,000 to invest in 43 Sheffield Avenue, a 12 unit apartment building in Brooklyn. Although he kept a ledger as to the loan proceeds, this was never produced and he concedes that his only records from his real estate enterprises were canceled checks, which were likewise never produced in terms of substantiating proof. Of critical significance is defendant's disclosure on his loan application to Greenpoint Bank that he had assets of $4 million dollars.
The property in Jessup, Georgia, which was later foreclosed, was allegedly purchased to manufacture metal housing studs, another grand plan which never materialized. Defendant loaned $47,000 to an individual named ABellin Naim,@ for a restaurant, without any written agreement, and without having received a deed, notes, or any shares of stock in return. This is incomprehensible. It is incredible that one in the position of this defendant, a self-proclaimed, sophisticated businessman, would lend money in this manner. Obviously, the transfer had some other motive and, in the absence of full disclosure, the conclusion is inescapable, that this was to secrete or dispose of assets. He also loaned $20,000 to an individual named AShaffic,@ for a coffee shop, but this time, it appears defendant did receive notes. However, he testified that AShaffic@ paid the notes for only a few months, whereupon he disappeared, not to be seen again. Nor did Gabbay make any attempt to locate him. Little detail has been provided as to the $50,000 investment in the music business, other than that his partner in this venture was one Manny Morad. Presumably, this investment was likewise never recouped, since the venture apparently failed as well.
According to defendant, he expended $100,000 to renovate the marital residence, primarily involving the attic and the basement, but he could not state who performed the work, other than Aone of the men@ who Awent out@ with his wife. Nor could he say what work was done. He testified that the renovations began in 1989 and ended in 1991 but, apparently, were paid from the proceeds of an earlier loan. Even if accurate, monies other than the $100,000 proceeds from the 1991 Greenpoint loan had to have been used to pay for the renovations, leaving $100,000 unaccounted for. In terms of the East Tremont property (also a vacant lot), according to defendant, he paid a purchase price of $75,000. However, a written agreement (plaintiff's Exhibit 16) reflects that, in 1991, he paid Esra Pariseid the sum of $5,555 for 50% of the corporation which owned the property, and assumed an existing mortgage from the City of New York in the sum of $17,152. Gabbay testified that he paid the mortgage every month (almost $750), but that the property later went in rem, although he did not know when. Thus, defendant has failed to account for at least approximately $53,000 (depending on how much he actually paid to reduce the mortgage) from this transaction.
He also claims that he invested $300,000 in a 12-unit apartment building at 43 Sheffield Avenue. Of that sum, $170,000 was allegedly given directly to an attorney named Goldman (it is unclear for what), and $130,000 was invested in the building with Pariseid. Defendant, however, never produced any of these checks, instead, asserting without any support at all, that plaintiff's attorney has the checks. Nor has any other proof been submitted to substantiate that these sums were actually invested in the building.
In light of defendant's evasive answers and incredible testimony as to the disposition of the $640,000 mortgage loan, it is palpably clear that a substantial portion of the proceeds have never been accounted for. Plainly, the arrears could be satisfied out of a small portion of the proceeds. In terms of his appearance as a witness, defendant was unbelievable, both in terms of his demeanor on the stand and the substantive worth of his answers. He was evasive, to the point of being deceptive, never giving a direct answer, and with no consistency at all in terms of his responses. In fact, in terms of demeanor, defendant's most consistent response was to proclaim, in arrogant fashion B ask Kurtz (plaintiff's attorney) B he knows, or he has it. In any event, defendant should not have been mortgaging marital property during the pendency of the matrimonial action. It is clear that this was done to secrete assets from the wife and to prejudice her rights and those of the children in terms of the arrears.
Sale of 864A Flatbush Avenue and
the Additional $250,000 Mortgage
In 1992, again during the pendency of the action, as sole principal of Dearot Realty, Inc., defendant sold 864A Flatbush Avenue, which consisted of a store and two apartments, to Nissim and David Halabieh and to Edmon and Isaac Haber. The sale was allegedly for the sum of $275,000. The credible testimony reflects that neither defendant nor the purchasers notified Greenpoint Bank, the holder of the first mortgage, with an outstanding balance of $206,140, that the property was to be sold, although the purchasers thereby risked that Greenpoint could have called in the entire loan at any time. A survival agreement (plaintiff's Exhibit 30, also annexed to plaintiff's Exhibit 26) executed by the parties, states that the purchasers received credit toward the purchase price in the amount of the outstanding Greenpoint mortgage, and that this mortgage would not be assigned until certain taxes and judgments were satisfied. The purchasers apparently paid the first mortgage by paying the Bank directly. At the closing, defendant took a purchase money second mortgage in the sum of $50,000, which was later paid in full, evidenced by defendant providing Zaki (Isaac) Haber with a satisfaction of the mortgage on May 1, 1996. Defendant, however, has never offered any explanation in terms of any disposition or expenditure of that sum.
A closing statement (plaintiff's Exhibit 31), dated December 8, 1992, which was given to Haber by defendant's attorney, Joseph H. Berliner, who did not testify, memorializes this transaction. The statement, at page 2, refers to Amortgages and notes.@ While Haber testified that Amortgages@ refers to both the first and second mortgages, he admitted that, at the closing, he never signed a first mortgage, only the second mortgage. The purchasers merely assumed the first mortgage, without the Bank's permission or, apparently, without its knowledge. On the other hand, plaintiff argues that Amortgages@ refers to the purchase money second mortgage, as well as a $250,000 unrecorded mortgage given at the closing by the purchasers to the defendant, which was to be payable, without interest, in semi-annual installments of $50,000. This mortgage is referred to in a separate page annexed between the closing statement and the survival agreement (collectively, plaintiff's Exhibit 26).
Charles Goldfarb, who was defendant's attorney in connection with the sale, testified that he did not specifically recollect the transaction, was not sure if his office had prepared the closing statement and no longer had any record of it, since defendant had taken all of his files, including this one. It is noted that the first page of the closing statement has the numerical address of the property, as well as the seller's full name and the purchasers= names Awhited out.@ There is no testimony as to who altered the document, although each side attributes it to the other. This claim, however, was made by counsel, defendant never having resumed the witness stand to challenge or rebut the proof presented in Exhibit 26 as to the additional $250,000 mortgage. Additionally, Haber testified that no money was ever paid to defendant pursuant to any mortgage other than the $50,000 purchase money mortgage.
However, it appears that defendant had previously testified at his deposition in the matrimonial action that his attorney, Mr. Goldfarb, gave him the closing statement. Plaintiff testified that she found this statement (and the entire document, plaintiff's Exhibit 26) with defendant's papers, which she reviewed after she was appointed receiver. In light of (1) plaintiff's testimony, which was credible; (2) Haber's testimony, essentially, that he did not remember payments to defendant under any additional mortgage, which the Court finds to be nonspecific and evasive in material respects; and (3) the argumentative and evasive testimony by Goldfarb, which was most incredible, the Court concludes that Exhibit 26 (the closing statement, survival agreement and one page memorialization of the unrecorded $250,000 mortgage), had been prepared by Goldfarb to reflect all transactions which occurred at the closing, notwithstanding Goldfarb's testimony to the contrary that he had no recollection of the closing. This transaction included a substantial mortgage, which the parties agreed would not be recorded, as well as the assumption by the purchasers of a first mortgage, without notifying the mortgagee bank. Goldfarb's account that this was not uncommon is unworthy of belief. His testimony as to his memory loss, in terms of this most novel and unique, but unorthodox transaction, is unbelievable.
Accordingly, the Court finds that the credible evidence in the record authorizes and, in fact, impels the inference that defendant actually received two mortgages at the closing of 864A Flatbush Avenue, one of which was in the sum of $250,000, which the parties agreed was not to be recorded, in addition to the $50,000 purchase money mortgage. Needless to say, the proceeds of these latter mortgages have never been accounted for. Plainly, the arrears could have been satisfied from these sums which, it is found, have somehow been secreted by defendant, who failed to account for any of these monies, a total of $300,000.
Defendant's Fraud and
Collusion in
Relation to Kings County Judgment
In 1984, defendant guaranteed a debt which his brother Jack had owed to his other brother Shlomo, allegedly resulting from a housing construction partnership in Israel, a debt which arose seven years earlier, in 1977. According to defendant, he agreed to act as guarantor of Jack's debt because Jack was suicidal and needed help. However, defendant has never produced the guarantee, claiming, in most general fashion, that it is somewhere in Israel. He stated that when he signed the guarantee, the debt was $200,000-$300,000. Surprisingly, defendant does not know if Shlomo ever sued Jack on the debt, nor whether there was ever a demand upon Jack to pay. Most conveniently, according to defendant, Shlomo has not spoken to him in over four years.
It appears that, several years later, Shlomo sued defendant on the guarantee, in Israel. The matter came before an arbitrator in 1989, who found that Shlomo was entitled to receive from Jack, the sum of 204.51 shekels and further, that defendant was responsible for the payment of that sum as guarantor. In 1992, the award was confirmed by the District Court of Tel Aviv, defendant having failed to object to the arbitrator's award within 45 days after its issuance, whereupon it became final.
At some point in 1992, during the pendency of the marital action, Shlomo called defendant to question why he (defendant) was going to permit the plaintiff wife to get all the property, and he suggested that an action be brought to enter the Israeli judgment as a judgment in this country, to thereby shield the Israeli apartment from the wife. Previously, in 1990, also while the matrimonial action was pending, defendant consented to Shlomo's having filed a lien on the apartment, based upon the earlier, 1989 arbitration award. Defendant's former attorney, David Perlman, had conceded that the apartment could not be sold unless the lien was removed.
To carry out the plan, in 1993, Shlomo commenced an action in the Supreme Court, Kings County, to enter a judgment pursuant to CPLR 3213, for summary judgment in lieu of complaint, based upon the Israeli arbitration award. (Plaintiff's Exhibit 12, collectively, the Supreme Court, Kings County Clerk's file, Shlomo Gavey v. Abraham Gabbay, Index No. 11055/93). In his affidavit in support of the application, Shlomo asserted that $975,412 was due and owing by defendant, based upon an August 1992 rate of exchange between the Israeli shekel and the U.S. dollar of 2.40, and that a demand for payment had not been honored. On September 6, 1992, an Israeli accounting firm, Werker & Co., purportedly calculated the amount awarded by the arbitrator as equaling 2,167,585 NS shekels. However, the statement, attached as Exhibit C to the 1993 Kings County summary judgment motion, is neither certified nor authenticated in any way. It is not even signed and could not be admitted in evidence, nor even considered as having any probative value on any motion, especially one for summary judgment, the functional equivalent of a trial. It is merely an unsigned, typed statement, which could have been issued or prepared by anyone and may not be considered in terms of probative worth or value.
The Werker calculation, it is argued, was based upon the original amount owed (204.51 shekels), with Aindexation@ and interest at the rate of 4% from November 1977 until April 1989 (presumably the date that the underlying debt was incurred until the arbitration award was issued), and 8% until September, 1992. Although, defendant testified that Aindexing@ referred to a cost of living adjustment, he could not explain it sufficient to accept his opinion as either authoritative or credible. It is interesting to note that the Aofficial@ English translation of the arbitrator's award, which is in Hebrew, was by Yael Gavey, Shlomo's daughter, whose qualifications as a translator have not been set forth, and whose impartiality, in terms of this entire scheme, must be questioned under any standard of evaluation.
In opposition to the motion, defendant stated in his affidavit that he had Abeen advised that there is no defense to this present motion for summary judgment.@ (Plaintiff's Exhibit 12). Although defendant's affidavit in opposition alleged that he Afought this action in Israel,@ (referring to the arbitration) it is undisputed that he did not do so. He further stated that, notwithstanding that the Israeli judgment was not entitled to full faith and credit, in terms of constitutional recognition, it nevertheless should be recognized under principles of comity. Essentially, this had the same effect and meaning, resulting in the absence of any real, substantive opposition by defendant to the application for summary judgment in lieu of complaint and the request for judgment in the sum of $975,412. Thus, the Kings County Supreme Court granted summary judgment, with an award of interest from September 8, 1992. As a result, on May 12, 1993, judgment was entered against defendant in the total sum of $1,033,936.
Plaintiff's Exhibit 39, a letter from the Chief Economist in the Israeli Government's Ministry of Finance, states that, in April 1989, $100 in U.S. currency was equivalent to 182 NS Israeli shekels. The Court may take appropriate judicial notice of the accuracy of the rate of exchange, since it is a standard valuation stated by a foreign government (see, Matter of Shefsick, 50 Misc 2d 293, 295-296; CPLR 4511[d]; Richardson, Evidence ' 2-204[b][Farrell 11th ed]). Therefore, in April 1989, 204.51 shekels would have been equivalent to approximately $112 in U.S. currency. It is incredible that over $975,000 in interest could have accumulated on an initial arbitration award of 204.51 shekels ($112), even taking into account the high to excessive interest rate which allegedly prevailed in Israel.
Plainly, the conclusion is inescapable that there was a conspiracy here, which has persisted, between Shlomo and/or Jack and defendant, calculated to and which did impair, defeat and impede the right of the parties in the matrimonial action. This is supported by defendant's failure to seek vacatur of either the Kings County judgment or the Israeli arbitration award, inaction which has further impaired, defeated and prejudiced plaintiff's rights in terms of payment of arrears required by prior court orders. In this connection, there is no dispute that, in the absence of the Shlomo lien on the Israeli apartment, defendant would have been in a position to sell the apartment and thereby satisfy the arrears. Thus, by his own fraud and collusion, he has foreclosed himself from this avenue in terms of available relief.
Upon due consideration of the credible testimony and upon reviewing all the exhibits, this Court is convinced beyond any doubt that defendant remains in contempt in terms of the failure to pay the arrears in the sum of $45,550. Defendant shall continue in his present confinement until he purges himself of such contempt by payment in full of the arrears.
In my view, plaintiff has demonstrated, by a reasonable certainty (see, Matter of McCormick v. Axelrod, 59 NY 2d 574, 583, amended 60 NY 2d 652; Matter of Hynes v. Hartman, 63 AD 2d 1, 4; Odimgbe v. Dockery, 153 Misc 2d 584, 589), that this Court's orders have been disobeyed, that defendant has had knowledge of the orders, and that prejudice to plaintiff's rights has been demonstrated (see, Judiciary Law ' 753[A]). This was established most clearly in extensive hearings over the past several years. The standard of proof is not a Aclear and convincing evidence@ standard, as is argued by defense counsel. Instead, a Areasonable certainty@ standard is applicable here, a burden which plaintiff has plainly satisfied in this case. Powers v. Powers, 86 NY 2d 63, relied upon by defense counsel, is neither controlling nor instructive, since that case dealt with contempt under the specific mandates provided in Article 4 of the Family Court Act, a statutory provision which is inapplicable here.
Plaintiff has satisfied her burden as follows. First, defendant has failed to account for a substantial amount of the proceeds from the $640,000 mortgage. Second, the credible evidence reflects that defendant received a $250,000 mortgage loan as part of the sale of the property at 864A Flatbush Avenue, but has failed to account for these proceeds. Third, defendant conspired with his brothers, Shlomo and Jack, to have an Israeli arbitration award for 204.51 shekels converted to a Kings County judgment in the sum of $1,033,936, all resulting from defendant's guarantee of his brother's seven year old debt to Shlomo, and his failure to defend both the Israeli litigation brought against him as guarantor, and the Kings County action to convert the arbitration award to a New York judgment. Furthermore, defendant consented to the placement of the lien on the Israeli apartment based upon the arbitration award, as a result of which, the apartment cannot be sold unless and until the lien is removed.
The foregoing amounted to a fraud perpetrated by this defendant upon his wife and family, the Court and society as a whole. Although defendant's actions and those of his brothers constitute criminal acts, and the District Attorney's office has been notified accordingly, as far as appears, thus far, no action has been taken in terms of any criminal prosecution, which, in this Court's view, should be pursued forthwith by either the Kings or Queens County District Attorney, or both.
In my view, defendant's failure to account for the above referenced monies, coupled with his failure to take any action to vacate either the Israeli arbitration award or the Kings County judgment, or to affirmatively seek to remove the lien on the apartment in Israel, raises an inference, which defendant has failed to rebut, that he has the ability to satisfy the arrears, or that he has knowingly and voluntarily placed himself in a position in which he is unable to do so, a position he not only enjoys, but gravitates toward. In either case, he has acted to defeat, impair and impede plaintiff's rights and those of the children.
THE RECEIVERSHIP
As noted, on July 17, 1997, plaintiff was appointed receiver as to all of defendant's real property interests. She acted as such until the judgment of divorce was entered December 30, 1998, at which time the receivership terminated by operation of law (see, CPLR 6401[c]), in that all of the marital property (including the real property which was the subject of the receivership) was awarded to the wife pursuant to the judgment of divorce. It is palpably clear that the Appellate Division was never apprised of the termination of the marriage and the equitable distribution award, as a result of which, plaintiff had no obligation, legally or rationally, to sell or transfer what had become her own property as of the date of the divorce judgment (December 30, 1998), to either satisfy or reduce defendant's arrears.
Moreover, prior to the judgment, she had no obligation or authority to sell or even mortgage the properties, since the order which appointed her as receiver did not authorize the sale or mortgage of any property to reduce the arrears. In any event, any sale prior to final judgment would have jeopardized defendant's equitable distribution rights (see, Domestic Relations Law ' 236, Part B[5][a]; Kayden v. Kayden, 234 AD 2d 345; Berk v. Berk, 170 AD 2d 564). Thus, as receiver, plaintiff could not have sold the sequestered properties to reduce the arrears. In this connection, not without significance is that, throughout the three year period of incarceration, defendant has never moved to compel or require the wife to sell or mortgage any of the properties.
During the hearing, plaintiff provided a receiver's report, which covered the period from September 2, 1997 to January 31, 1999. She collected $168,018.41 in rent and paid out $163,990.95 in expenses, leaving a cash balance of $4,027.46. The expenses which were paid out included the mortgages, utilities, real estate taxes, repairs (including the installation of a new boiler at one property for $4,000), as well as tutors for the children and school transportation, but not the mortgage or real estate taxes on the marital residence. She paid $34,500 to herself, which sum represented maintenance ($275 per week), telephone expenses ($150 per month) and tuition, all in accordance with Justice Nahman's 1991 order. To supplement payment of additional family expenses, she borrowed $30,000 from members of the community. Most of these funds were spent on her institutionalized daughter, who resides in a facility in upstate New York. Traveling expenses to visit the daughter were included in this sum. Despite the kindness of her neighbors, whose donations rescued the marital residence from foreclosure, plaintiff is unable to afford medical insurance, nor is there any fire, theft or liability insurance on the marital home. Outstanding unpaid bills include $30,000 for tuition, $12,000 in real estate taxes and $23,000 in water bills (the water bills having been billed to an unknown Bronx address, 85 Willis Avenue, presumably at defendant's direction). There is also an outstanding Environmental Control Board (ECB) violation regarding a hazardous sidewalk at 793 Flatbush Avenue, which, according to an estimate, would cost $2,000 to repair, and $7,000 worth of outstanding ECB violations against 857 Flatbush Avenue, which were issued on May 19, 1997, prior to the receivership. The credible evidence reflects that defendant allowed these violations to accumulate and failed to promptly turn them over to plaintiff, as was required by the receivership order.
In terms of her duties as receiver, plaintiff permitted two apartments to remain vacant -- one at 793 Flatbush Avenue, which she claims required considerable work, but is habitable, and the other, at 857 Flatbush Avenue, which needs new floors and cabinets, in addition to painting. It must be noted that these apartments were vacant prior to plaintiff's appointment as receiver, an indication that defendant was failing to do all that he could to maximize the income from his properties in order to reduce the arrears, a claim he now seeks to make in terms of plaintiff's actions as receiver. Plaintiff never received any written estimates as to the cost of repairs, and only went to one broker, Collucci Realty, in an attempt to rent the apartment, without any real success. Notwithstanding their condition, it appears that she could have received about $650 for each apartment, this according to plaintiff's own testimony.
It also appears that there is a pending summary proceeding instituted by Maortal Realty, Inc. against a tenant at 2711 Mermaid Avenue, one Albert Gabbay (no relation to the parties), for outstanding rent in the sum of $50,000. It was commenced by defendant's former attorney in 1998, but plaintiff's attorney did not pick up the litigation file until May, 1999. Curiously, defendant never directed that his attorney for that landlord-tenant matter, David Singer, promptly turn over the file to plaintiff's counsel, in accordance with and as required by the receivership order. Plaintiff's counsel has argued that he cannot proceed with the summary proceeding because, during prior proceedings in this matter, defendant did not identified any of the leases in question as the lease he had with Albert Gabbay. This is relevant in light of the affirmative defense in the summary proceeding that no contractual relationship, lease or sublease existed between either defendant or Maortal Realty, Inc. and Albert Gabbay.
There are also pending foreclosure actions by Maortal Realty, Inc. against the properties at 2711 and 2801 Mermaid Avenue. Plaintiff's counsel stated that these properties may be worth $200,000. However, even if the properties have a value which approximates $200,000, which has never been substantiated, in terms of any proof, defendant's prior counsel has never been able to collect any amount in the foreclosure proceedings, whether or not defendant encouraged him to use his best efforts to do so. Additionally, in terms of the East Tremont property, which is in rem for failure to pay taxes, plaintiff's counsel indicated that the sheriff will not sign a deed to her because the property must be redeemed from the City first, and the receiver has no money to do so. Thus, she has been effectively prevented from continuing this action.
In sum, even assuming that rentals totaling $15,600 could have been collected for the two vacant apartments, plaintiff would have been obligated to apply this amount toward the outstanding balance for the real estate taxes ($12,000), water bills ($23,000) and tuition for the children ($30,000). This would also apply to a check in the sum of $2,814.54, representing defendant's portion of foreclosure proceeds given to plaintiff's counsel by Mr. Singer, when the litigation file concerning 43 Sheffield Avenue (which defendant asserts he does not own, since the property was foreclosed) was turned over. This separate action against New York Property Insurance Indemnity Association for property damage and fire loss was never vigorously prosecuted by defendant. In fact, it appears that, since April 8, 1997, defendant has failed to appear for a court ordered deposition in that action and no attempt has been made by any of defendant's several attorneys to make or finalize arrangements for his deposition at the Bronx House of Detention.
Therefore, in light of the above, an accounting as to the assets, income and expenses of the receivership properties, together with the receiver's credible testimony, clearly indicates that no surpluses have been realized that would satisfy or reduce defendant's arrears. Nor could the receiver have sold any of the sequestered properties to satisfy or reduce the arrears.
CONCLUSION
Defendant has displayed an almost stubborn unwillingness and refusal to provide required child support over a lengthy period. While he claims to be without assets or funds necessary to make such payments, he admitted to a substantial net worth and assets of over $4 million dollars, when he secured a mortgage loan and then converted his real estate holdings from income producing to non-income producing parking lots in the South Bronx, Georgia, and elsewhere. His active collusion with his brothers has resulted in the entry in this country of what plainly appears to be a fraudulent judgment, in an amount which bears no relationship to the underlying foreign debt, and which has been used to insulate a substantial foreign asset from his creditors, in this case, his wife and children. The credible proof adduced at the hearing also reflects an improper transfer of, perhaps, the most valuable marital asset, which operated to impair the wife's rights and interests in terms of equitable distribution, and the improper payment to defendant of a substantial sum, under the table, by an unrecorded mortgage.
The end result is the secretion or dissipation of substantial assets, in direct and deliberate avoidance of his marital and familial obligations. At best, one may conclude that this defendant, through connivance, collusion and fraud, acted to conceal or shield his assets from the compass of the marital action and, in doing so, apparently snared himself when relations soured with brother Shlomo, that is, assuming the truth of that claim. However, under the circumstances and bearing in mind the extended period of time involved here, this is somewhat incredible, not to mention the unexplained failure of Jack, whom defendant was helping, to offer some explanation or support.
In my view, this defendant ought not to be rewarded for having stayed the course of the past three years. Adjudications of contempt ought not to be measured in such fashion, with a defendant in effect absolved as a result of the length of the sentence which he completed. Such an approach wholly ignores the affront to the parties and the court which emanates from the contemptuous conduct, as well as the continuous nature of the conduct and the contempt. This is especially so in a case like this, involving support obligations to children, one of whom is apparently institutionalized.
Thus, to the extent one might suggest that this defendant has been held too long, punishment for a continuing contempt has never been considered an endurance contest. No decision, appellate or otherwise, has ever suggested this, nor that one may avoid a continuing obligation by serving a sentence of a definite term. To suggest such is to obliterate the clear distinction between civil and criminal contempt. While the latter imposes a sentence as punishment, the former imposes punishment to induce compliance, which is the situation in our case.
In my view, on this record, which is replete with fraud and deceit, defendant may not be released. To do so would send a clear message to similarly situated deadbeats as to what will suffice to avoid their marital and parental obligations in terms of support. In good conscience, this Court may not properly and will not do so. Neither justice, nor the letter or spirit of the law, will permit any other disposition.
Accordingly, after a 90-day review mandated by the Judiciary Law, defendant's confinement for civil contempt shall continue until such time as he purges himself of such contempt, in accordance with the prior orders of this Court. For the reasons stated, there are no surplus funds from the receivership to pay any arrears and no property available for that purpose, the receivership having ended upon completion of the marital action and the equitable distribution award therein.
Submit order and warrant for commitment. The next 90-day review and contempt hearing shall be held on September 9, 1999. Exhibits shall be retrieved from Chambers, forthwith.
Dated: July 9, 1999
_______________________
J.S.C.
Note
1. Defendant is the sole shareholder and officer of Ashdod Realty, Inc., Maortal Realty,
Inc., Dearot Realty, Inc. and 857 Flatbush Realty, Inc.