The Israel Supreme Court today rejected the appeal filed by Kobi and Judith Richter against the verdict by the Lod District Court obligating them to pay $12 million (NIS 43 million) to Benjamin Cohen, a UK citizen, who was involved in the dispute with them over ownership of a property at 11 Mul Hayam Street in the prestigious community of Arsuf. The court also rejected Cohen's appeal of the District Court's ruling that the house belonged to the Richters, not him.
The legal saga began in February 2012, when Cohen filed a lawsuit in the Lod District Court involving an extremely bizarre real estate tale. According to the statement of claim, a house in Arsuf worth $8-10 million belonging to the Richters was sold to Cohen without their knowledge through Adv. Jacob Harkavy, Judith Richter's cousin, who held it in trust for the Richters.
The story begins with a land dispute in the spring of 2008, when Harkavy contacted Cohen, a UK citizen living in the US, and tried to persuade him to invest in a real estate venture in Romania that Harkavy initiated with partners, including a man named Guy Bezalel. According to the lawsuit filed by Cohen, Harkavy explained that he could not obtain financing for the deal in Romania, and offered a house he owned in Arsuf as security for the return of Cohen's investment. Cohen alleged that Harkavy concealed from him at the time the fact that the house belonged to the Richters, and told him that it belonged to him, and was registered in his name. Cohen also alleged that a lawyer examined the Land Registry extract on his behalf, "which indeed reflected the statement by Adv. Harkavy that he was the sole owner of the property."
According to the statement of claim, after Cohen was convinced that the house belonged to Harkavy, and that the investment was worthwhile, he agreed to lend Harkavy $5 million to be used to buy the real estate venture in Romania. All of Cohen's actions were carried out by his legal representatives in Israel: his sister, Miriam Jacoby, and her husband, Ami.
In his claim, Cohen alleged that the Richters had demanded that he cancel the agreement to buy their home, claiming that they were unaware of the transaction, and that Havkavy was a trustee on their behalf, not the real owner of the property. In his lawsuit, Cohen demanded that the Richters honor the sale agreement, because they had not bothered to register the house in their name, while a caveat had been registered in his favor.
The house will not be taken, but the Richters will pay
In October 2015, Lod District Court Judge Avraham Yaakov ruled that the Richters would keep the house in Arsuf, and that the caveat in favor of Cohen would be deleted from the Land Registry, along with the mortgage on the house in his favor. At the same time, however, the judge made this rule subject to the Richters and Harkavy paying Cohen $8 million and reimbursing him for the NIS 1.4 million in purchase tax he paid on the house, subject to an interest and linkage mechanism he set. "The Richters wanted their ownership of the property to be concealed from the rest of the world, so it is improper for them to complain to others about their success in this intention," the judge wrote in his ruling.
At the same time, the District Court allowed the Richters to file a lawsuit against Harkavy for damages caused them by the sale of their property to Cohen and the registration of the mortgage and caveat in Cohen's favor. The court ruled that the mortgage in Cohen's favor would be deleted, subject to Richter and Harkavy jointly and individually paying Cohen the following amounts: $5 million in principal, plus a €1.5 million consensual interest payment (minus $200,000 paid to Cohen), and reimbursement of Cohen for the NIS 1.4 million he paid for property tax, plus interest and linkage. The judge also issued an order to split the remedies in accordance with a petition filed by the Richters, in order to enable them to sue Harkavy for the damage that they alleged that he had caused them by registering a mortgage and a caveat in favor of Cohen.
The Richters later appealed the ruling to the Supreme Court and petitioned for a delay in execution of the judgment through Advocate Alex Hertman, Advocate Uriel Prinz, and Advocate Dr. Shlomit Wallerstein from the S. Horowitz & Co. law firm, The appeal and petition alleged that the District Court's ruling contained factual and legal errors. The Richters also alleged that if they paid the debt now amounting to tens of millions of shekels in order to pay off the mortgage, there was a real concern that if their appeal was accepted, Cohen would be unable to return this amount to them.
At the same time Cohen, the purchaser of the house, appealed through Advocate Giora Erdinast, Advocate Dan Sella, and Advocate Tal Erdinast from the Erdinast, Ben Nathan, Toledano & Co. law firm the District Court's ruling that the Richters owned the house. Among other things, Cohen alleged that the sale agreement was valid because it had been contracted in the framework of substantial proceeds, so that Cohen's rights in the property, which had been purchased in good faith, had priority. He further argued in this context that there was a complete correspondence between the debt agreement that Kobi Richter had waived in the framework of the sale agreement and the maximum value of the property as determined by the District Court - $10 million.
The Supreme Court rejected both appeals. Justice Uri Shoham, with the concurrence of Justice Neal Hendel and Justice George Karra, noted in the judgment that there were no grounds for intervening in the District Court's factual findings. "The findings were well-grounded, and support the legal conclusions reached by the court," Shoham stated. He further ruled that he also accepted the District Court's ruling that the mortgage agreement was valid, while the sale transaction for the property was invalid and the element of the proceeds in this agreement was far less than the value of the property at the time. He also accepted the District Court's views concerning a reduction of the interest rate in the framework of the mortgage agreement, since the rate stipulated amounted to "consensual compensation" that was disproportionate to the damage that could have been expected at the time that the agreement was contracted.
"I did not find that an error was made, or that there was any fault whatsoever in the court's ruling," Shoham concluded.
Published by Globes [online], Israel business news - www.globes-online.com - on April 11, 2018
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