Opinion
10204/2007.
Decided August 6, 2008.
J. MICHAEL GOTTESMAN, ESQ., NEW YORK, NEW YORK, ATTORNEYS FOR PETITIONERS.
GARY J. MENNIUTT, ESQ., JOSHUA S. KRAKOWSKY, ESQ., DECHERT LLP, NEW YORK, NEW YORK, ATTORNEY FOR RESPONDENTS.
In this proceeding the petitioners, Chaim Waldman and Merkos Bnos, move the court for an order pursuant to CPLR § 7510 confirming the award of the arbitrators and pursuant to CPLR § 7514 for the entry of judgment thereon in the amount of $534,000, in favor of petitioners and against respondents. Respondent, Bobover Yeshiva Bnei Zion ("BYBZ"), cross-petitions the court for an order pursuant to CPLR § 7511 vacating the arbitration award.
Facts and Procedural History
This action arises out of a the handwritten contract dated May 18, 1993. The parties to the contract were petitioner, Chaim A. Waldman, ("Waldman") and a parochial school, the Academy for Creative Learning for Adults ("ACLA"). The contract provided that Waldman would receive, for students recruited by Waldman, a commission based on the Federal Pell grants that ACLA received annually for each student. The contract provided for "$500. . . . .annually per student. This figure is based upon a Pell grant of $2400, per year." The contract also provided for increases and decreases in the amount of the commissions that were linked to possible increases or decreases in the amount of the Pell Grants. On October 21, 1993, the United States Government disqualified ACLA, along with 20 other schools, from receiving any Pell grant monies because of "widespread fraud in their grant applications."
On September 20, 1993 Waldman allegedly received the only payment under the contract which was a $25,000 check drawn on the "B.Y.B.Z General Account" and made payable to Merkas Bnos, a New York State religious corporation in which Waldman was an officer and director. B.Y.B.Z. allegedly refers to defendant BYBZ, a not-for-profit religious corporation organized on March 19, 1947 under the laws of the State of New York.
The contract provided that, "If there shall be any conflicts between ACLA and [Waldman], [they] shall be resolved by [Zabla v Zabla], a procedure for arbitration under Jewish Law. On March 9, 2000, more than six years after the school had been disqualified, an agreement was entered into to arbitrate before the Rabbinical Court of Yeshiva Beth Joseph (the "Beth Din"). The agreement was signed by "Chaim Avrohom Waldman and for Mekaz Bnos" and "Shlomo Geiger", "Shlomo Geiger representing Mosdos Bobov, (Bobov Institutions) and Leibish Landau." Mosdos Bov, Inc. is a not-for-profit religious corporation organized under the laws of the State of New York. The arbitration agreement provided that "if the defendants sign an arbitration agreement in another rabbinical court acceptable to the plaintiff within a week, this document becomes null and void." BYZB asserts that the parties then agreed to arbitrate the case in the Monsey Rabbinical Court.
On June 5, 2000 Waldman procured from the Beth Din a
"Writ of Recalcitrance" which declared that, "Rabbi Chaim Waldman, representing Merkaz Bnos, appeared before us to sue Messrs. Shlomo Geiger, Fishel Wishlitzky, and Leibish Landau, Director of Bobov Institutions to appear at a torah hearing regarding claims he has against them." The Writ absolved the Beth Din of its authority to resolve the dispute and permitted Waldman to seek relief elsewhere, including the Civil Courts.
On July 28, 2000 Waldman commenced an action in this court against BYBZ, (Chaim A. Waldman et al v Bobover Yeshiva Bnei Zion, Index No. 25976/00), in which he asserted a cause of action for breach of contract against BYBZ, alleging in his complaint that, "under the Agreement, BYBZ was obligated to pay [Waldman] certain moneys." BYBZ cross-moved to dismiss the complaint, This motion was granted by the court on August 21, 2000. The court also denied Waldman's motion to renew and reargue on December 5, 2000.
The Appellate Division affirmed the court's orders dismissing the complaint on December 17, 2001, stating: "The Supreme Court properly granted the defendant's cross-motion to dismiss the complaint because it failed to state a cause of action ( see, CPLR 3211 (a)(7))" Waldman v Bobover Yeshiva Bnei Zion, 289 AD2d 399. Leave to appeal was denied by the Court of Appeals. ( Waldman v Zion, 99 NY2d 532).
On January 12, 2004 Waldman commenced a second action in this court against BYBZ for breach of contract. (Waldman v Bobover Yeshiva Bnei Zion et al, Index No. 3659/04). BYBZ'S answer of March 22, 2004 denied the allegations contained in the complaint. Waldman has not prosecuted this action further, although it remains pending.
Waldman then returned to the Beth Din to arbitrate his claim.
After receiving many letters from the Beth Din urging him to attend an arbitration proceeding, Fishel Wislicki, a member of the Board of BYBZ, went to the Beth Din on October 9, 2005 accompanied by Rabbi Asher Landau. Waldman, accompanied by Rabbi Eliezer Savitsky, also attended the October 9, 2005 Beth Din proceeding.
What transpired at the Beth Din proceeding of October 9, 2005 is in dispute. Both parties agree that Wislicki objected on the grounds that the arbitration should proceed in Monsey and that Waldman had already lost in Civil Court. Wislicki maintains that he remained at the proceeding only because the Beth Din and Waldman requested that he listen to Waldman's complaint and relay what transpired to the decision makers at BYBZ. Wislicki asserts that he never participated in an arbitration. Waldman states that an arbitration was commenced and adjourned to allow Wislicki to review documents.
On February 26, 2006, the adjourned date of the alleged arbitration, neither Wislicki nor any other representative of BYZB appeared. On March 27, 2006, the Beth Din issued a default award to Waldman in the sum of $534,000. The award stated:
"B. The Defendants — the above Mosdos Bobov (BobovInstitutions) directed by Mr. Leibish Landau, Mr. Shlomo Geiger, and Mr. Fishel Wislicki — are obligated to pay the Plaintiff the sum of $534,000 (five hundred and thirty-four Thousand dollars)", (Exhibit B annexed to the Petition).
Petitioners commenced this proceeding to confirm the award. BYBZ, cross moves to vacate the award.
Discussion
The Beth Din award of $534,000 to petitioners on the breach of contract claim is a determination by the Beth Din that Waldman, between the period of May 18, 1993 and October 21, 1993, (the date that the Federal Government ceased the Pell grants to ACLA) had recruited 1068 students,($500 x 1068=$534,000). Thus, Waldman had allegedly recruited 1068 students in just 5 months. The Beth Din does not explain its rationale for the determination.
A court may vacate an arbitration award where "strong and well-defined policy considerations embodied in constitutional, statutory or common law prohibit . . . certain relief from being granted by an arbitrator" ( Matter of New York State Correctional Officers Police Benevolent Assn. v State of New York, 94 NY2d 321, 327). When doing so, the court "must be able to examine [the] arbitration . . . award on its face, without engaging in extended factfinding or legal analysis, and conclude that public policy precludes its enforcement" ( Matter of Sprinzen [Nomberg], 46 NY2d 623, 631). Thus, "an agreement to arbitrate, when sought to be enforced by a lender, cannot divest the courts of their responsibility to determine whether a purported sales agreement is in fact a usurious loan, and thus illegal" ( id at 630). Applying these rules to this case, the Court finds that the underlying contract was illegal and against public policy. Accordingly, BYZB's motion to vacate the award on the grounds of illegality is granted.
In addition, the Court finds that BYZB was not a party to the contract or arbitration agreement. The contract states that it is an "AGREEMENT BETWEEN ACADEMY FOR CREATIVE LEARNING FOR ADULTS (ACLA) AND CHAIM A. WALDMAN (C.W)."
BYBZ is not a party to the contract and its name does not appear anywhere in the agreement. A written agreement to arbitrate is prerequisite to this court's jurisdiction to confirm an arbitration award (CPLR § 7501). [I]t is for the courts to determine, in the first instance, whether the parties have entered into a binding agreement to arbitrate" ( Liberty Mgmt. Constr. v. Fifth Ave. Sixty-Sixth St. Corp., 208 AD2d 73, 80). ACLA and the BYBZ corporation were two separate and distinct entities. The BYBZ corporation is not a signatory to the Arbitration Agreement and its name appears no where in the agreement. Mosdos Bov, Inc. Is the only corporate entity named in the Arbitration Agreement. Clearly the Arbitration Agreement was never intended to bind BYBZ. Furthermore, the decretal paragraph of the arbitration decision states that an award of $534,000 is granted against the corporation, "Mosdos Bobov ("Bobov Institutions")". Petitioners claim that this is only a "clerical mistake" and that the court should rectify it by confirming the arbitration against BYBZ. If this is, in fact, a "clerical mistake" then the proper procedure was for petitioners to move within 90 days to modify the award either pursuant to CPLR § 7509 or CPLR § 7511. This was never done and petitioners are now time-barred from doing so. The Beth Din decision's decretal paragraph appears to the court clear and unambiguous. Thus, BYZB's motion to vacate the arbitration award is also granted on the grounds that BYBZ was not a party to the arbitration and is not bound by its decision.
Conclusion
Based on the foregoing the court finds that the Beth Din Award violates strong public policy, is irrational and clearly exceeds the arbitrators' power (CPLR § 7511(b)(1), Spear, Leeds Kellogg v Bullseye Securities, Inc., 291 AD2d 255; United Federation of Teachers Local 2, AFT, AFL-CIO v Board of Education of City School Dist. Of the City of New York, 298 AD2d 60). Accordingly, the Petition for an order confirming the award of the Rabbinical Court, (Beth Din) is denied and the Cross-Petition of respondent, Bover Yeshiva Bnei Zion, for an order vacating the award of the Rabbinical Court, (Beth Din) is granted.
This constitutes the Decision and Order of the Court.