ADDITIONAL CASES Ruth Shomron, Plaintiff v. Dayra Fuks, Defendant; 102882/2002 The following e-filed documents, listed by NYSCEF document number (Motion 028, Index No. 122768/1996) 4, 5, 6, 20, 21, 22, 23, 24, 25, 31, 32, 33, 34, 35, 98, 99, 103, 107, 111 were read on this motion to/for CONFIRM/DISAPPROVE AWARD/REPORT. DECISION + ORDER ON MOTION This case rivals the long running dispute in Charles Dickens’ novel, Bleak House, and will end no better. This case, Fuks v. Rakia Assocs. (Action No. 1) and its companion action, Shomron v. Fuks (Index No. 102882/2002) (Action No. 2), have been pending since 1996. On September 25, 2006, Judge Stackhouse, presumably as a JHO, presided over a trial in Action No. 2 in which he ruled in Ruth Shomron’s (Shomron) favor on her claim for recission of four apartment sales. Judge Stackhouse found that Mali Fuks (Fuks) had duped Shomron into selling the apartments (see 13 Misc3d 1228 [A]). He ordered the sales rescinded and the purchase price refunded. He also ordered the partnership, R&L Realty Associates (R&L), dissolved and the assets distributed “equitably.” Finally, Judge Stackhouse imposed a constructive trust upon defendants for the rent and profits from the rental of the four apartments and named “R&L Realty Associates” as the recipient of that constructive trust (13 Misc3d 1228 at *4). This decision set off all sorts of motion practice to vacate and renew in front of Judge Friedman. Ultimately, the Appellate Division, First Department affirmed (see 147 AD3d 685 [2017]). Subsequently, a Special Referee conducted a trial that resulted in the Report underlying this motion (EDOC 9 [Special Referee's Report]). The Special Referee’s trial was held to determine all issues in Action No. 1 and was an effort to distribute the assets of R&L “equitably” per Judge Stackhouse’s order in Action No. 2. The court already decided Motions 26 and 27 to confirm parts and disapprove parts of the special referee’s 84-page report, after a 7-YEAR inquest. However, the parties previously failed to provide the court with the record from that inquest. Instead of finding waiver, the Appellate Division reversed this court’s decision on those motions (see 211 AD3d 467 [2022]). The court now renders a decision having taken into consideration the hearing transcripts and other evidence before the Referee, including all prior decisions, exhibits, memoranda of law, affidavits, charts, calculations, and emails. Although the parties asked for and agreed to a Special Referee for trial, this was not the sort of case that was appropriate for a Special Referee, largely due to its complexity, deliberately confusing advocacy, and the lack of authority to enforce deadlines. Both sides have unduly complicated and prolonged these proceedings for reasons unknown. Indeed, this court feels the same way Judge Friedman did when she remarked way back on February 24, 2010, “I have never seen a case like this that has proved so intractable. This case has been pending since 1996. It has gone to arbitration which failed after years…one begins to wonder if there is any interest in resolving this case” [EDOC 14]). The court also notes that Shomron has gone out of her way to conflate issues and confuse the court. The brief on this motion is a rambling 34 pages that lack a table of contents and table of authorities. This brief pales in comparison to the 45-page post-trial brief that also lacks a table of contents and table of authorities. One wonders if this was done on purpose to obfuscate as it is in total violation of the rules of the Commercial Division, this Part, and common sense. This was in addition to purposeful omissions and misrepresentation of the record that could only have been designed to take advantage of a judge who is new to a case that has been pending for almost 30 years. The Report of the Special Referee is over 80 pages long. In Action No. 1, the Special Referee rejected Shomron’s accounting, holding that it was “inaccurate and incomplete” (Report pg. 85). The Special Referee reviewed several schedules in Shomron’s “accounting” and specifically found hundreds of incorrect or incomplete entries about income, loans, and expenses. Even after all the time this case has been pending, Shomron is unable or unwilling to account for hundreds of thousands of dollars. This does not reflect well on Shomron’s credibility. The Special Referee also found that Shomron breached her fiduciary duties to Fuks by engaging in active misconduct, as delineated on pages 74-76 of the Report. This also does not reflect well on Shomron’s credibility. In Motion Seq. No. 28, the Shomron defendants (Rakia Associates, 2701 Broadway Associates, Ruth Shomron, Estate of Howard Simon, and Larry Goldstein) move for what effectively would be a do-over of the proceedings before the Special Referee. As far as the court can discern, Shomron seeks for the court to set aside the following aspects of the Report: 1. The Referee found that Shomron was entitled to a constructive trust in the amount of $1,158,316.66. Shomron wants this amount increased to $1,596,154.25. 2. The Referee found in paragraphs 105-107 that loans to R&L from Shomron herself, as well as Harry Sloan, 2701 Broadway, Moti Zilber, Michael Kaplan, Kahn, Helfman and defendant Rakia Associates were “valid and enforceable.” Shomron wants the Report modified to declare that R&L is entitled to repay: (1) Shomron the sum of $598,905.27 plus interest at a rate of 10% per annum, (2) 2701 Broadway Associates the sum of $67,373.51 with interest at the rate of 10% per annum; (3) Rakia Associates the sum of $13,444.62 with interest at the rate of 10% per annum; (4) Harry Sloan the sum of $13,444.62 with interest at the rate of 10% per annum; (5) the Estate of Michael Kaplan the sum of $95,000 with interest at the rate of 13% per annum; and (6) Moti Zilber the sum of $4,000 with interest at the rate of 10% per annum, or, alternatively, remanding the eighth counterclaim to the Special Referee to issue a new report on the amount to be repaid for each loan. 3. Shomron wants the court to reject that part of the Referee’s Report that found Shomron’s accounting to be “substantially and significantly” inaccurate and incomplete. 4. Shomron wants the court to reject that part of the Referee’s Report that found Shomron had breached her fiduciary duty to Fuks and awarding judgement to Fuks in the amount of $375,000. 5. Shomron wants the court to reject that part of the Referee’s report that dismissed Shomron’s fourth affirmative defense in Action No. 1 for statute of limitations. 6. Shomron wants this court to modify the Referee’s Report by issuing a judgment in favor of Shomron and against Fuks on Shomron’s seventh counterclaim in Action No. 1 involving allegations that Fuks derailed the successful conversion of property to cooperative ownership. 7. Shomron wants the court to reject that part of the Referee’s Report that found in Action No. 1 “that the Ninth, Tenth, Eleventh and Twelfth counterclaims are moot” and granting the relief sought in those counterclaims. 8. Shomron wants the court to reject that part of the Referee’s Report that found the Action No. 1 counterclaim for abuse of process with respect to the arbitration proceeding was without merit. 9. Shomron wants the court to modify the Referee’s Report to award attorneys’ fees for the successful prosecution of Action No. 2 that resulted in the return of four cooperative apartments to the partnership that Fuks fraudulently acquired from the partnership. DISCUSSION 1. Increasing the Amount of the Constructive Trust This issue dealt with the amount of rent and profits Fuks received on the four apartments mentioned earlier (see background, supra [discussing Action No. 2]; see also 13 Misc3d 1228 [A]), that Judge Stackhouse determined must be held for the benefit of R&L. The Referee held that Shomron’s forensic accountant, Alfred Pruskowski, was entirely credible and agreed with his calculations. In particular, the Referee agreed with Pruskowski’s conclusions that the total expenses at issue were $437,837.59 and that the profits were $662,628.85. The Referee also agreed with Mr Pruskowki’s interest calculation of $933,525.40. However, it would appear from Pl Exs. 3 and 4 in Action No. 2 that the Referee mistakenly believed the $662,628.85 represented gross, rather than net profits. According to Exhibits 3 and 4, this number was what remained after subtraction of expenses (i.e., net profit). Therefore, the court modifies the Report to impose a constructive trust in favor of R&L in the amount $1,596,154.25, plus the $933,525.40 that Pruskowski calculated, plus statutory interest on $662,628.85 from January 1, 2018 (the date after Pruskowski’s interest calculation stopped). The court also makes abundantly clear that this constructive trust, asserted as it was in a derivative action, is for the benefit of R&L, NOT Shomron individually, as Judge Stackhouse ruled so long ago. 2. The Eighth Counterclaim Loans in Action No. 1 In the eighth counterclaim in Action 1, Shomron alleged that, in order to operate the various premises, R&L obtained loans from: Salon, 2701 Broadway, Helfman, Zilber, Rakia, Kaplan, Kahn, and Shomron herself, bearing interest rates of 10% (Doc 11 [Answer with Counterclaims, Action No. 1], 112). The Referee found that such loans were valid and enforceable and that Shomron was therefore entitled to a declaratory judgment. However, the Referee did not issue judgment as to the amounts of those loans. This may have been because all the eighth counterclaim asks for is a declaration that the loans are valid and should be repaid (id.
