Join Our Telegram Channel


Camden County Court Judge Sherri L. Schweitzer has denied a motion to appoint a receiver to take over management of - and sell - a 82 unit multi-family apartment complex in Stratford Borough known as the Cornell Manor Apartments. However, Judge Schweitzer warned the owner that he had better pay his bills ASAP or else he will "very quickly" lose his building.

The building is owned by a Lakewood based company which - as first reported here on FAA News - is involved in a massive ponzi scheme affecting numerous Lakewood area residents, as well as investors from across New York, New Jersey, and Ohio.

At the very same time that the Lakewood company notified Iowa State officials that they could no longer afford the nursing homes they purchased 2 months prior, they also stopped paying the monthly mortgage for the Cornell Manor apartment building they purchased for $9 million just several months prior.

In response, as previously reported here on FAA News, back in June 2023, the bank filed in New Jersey Superior Court, Chancery Division in Camden County for a foreclosure proceeding.

According to the lawsuit:

The Lakewood based company, under the names Cornell Manor LLC, Five Star Store It Mason LLC, Five Star It Ohio I LLC, took out a $9,183,000 mortgage for their purchase of the property on July 18, 2022.

The Mortgage Note provides that the property owners are to pay interest only payments in monthly installments beginning on September 1, 2022 and continuing every month 24 months until August 1, 2024 when the balance of principal and interest would be due and payable. 

The Mortgage Note provides for interest at a variable rate based on 30-day SOFR, plus a margin of 4.75% (the “Variable Interest Rate”), at an initial rate of 6.11438% per annum, subject to adjustment on a monthly basis commencing on October 1, 2022 pursuant to the terms of the Mortgage Note.

The Mortgage includes a security agreement in the form of collateral creating a security interest to the lender in, among other things and without limitation, all fixtures, fittings, appliances, apparatus, equipment, machinery, furnishings, furniture, carpets, chattels and articles of personal property of every kind and nature whatsoever then owned or later acquired by defendant Mortgagors, as well as all proceeds and products of the same.

As of January 1, 2023, the property owners failed to make the full monthly installment payments due. No payment was made in any month since then.

Pursuant to the terms of the Mortgage Note, if the property owners do not pay the full amount of each payment on the date it is due, they will be in default. If they continue to be in default, the entire unpaid principal amount of the Loan, any accrued interest, any Prepayment Charge, and all other amounts payable under the Mortgage Note and any other Loan Document will become due and payable, at the option of Plaintiff, without the need for any prior notice.

The foreclosure lawsuit, filed by Newark Attorney Matthew J. Schiller, Esq., seeks for the Court to fix the amount due pursuant to the Mortgage Note and Mortgage (i.e. the mortgage holder is seeking for the Court to calculate the appropriate interest amount due), as well as judgement barring and foreclosing the defendants from all equity of redemption in and to the Mortgaged Property, and judgement that the Mortgaged Property be sold according to law to satisfy the amounts due to Plaintiff.

Pursuant to the terms of the Mortgage, the mortgage company reserves the right to pay taxes, insurance premiums, maintenance and security costs, the costs of repairs, water charges, sewer charges, attorneys’ fees, as necessary to secure the property, with the right that such amount be added to the claim and be repaid from the proceeds of the sale of the Mortgaged Property.

The lawsuit seeks for judgment directing that the mortgage company be repaid for these expenses as well.

In addition to seeking for a sale of the property, the mortgage holder is also seeking for the collateral located on the property sold by the sheriff together with the property at a single public sale.

After the property owners failed to answer the foreclosure complaint, as previously reported here on FAA News, back in July 2023, the bank cranked things up a notch by filing a motion seeking judgement appointing a receiver to manage the current tenants and also to sell the property.

Writing that "the appointment of a rent receiver is necessary to protect and preserve the value of Plaintiff’s security," Plaintiff demands judgment against the defendants appointing a receiver of the rent, income and profits of the property; directing all tenants to pay the receiver all rent, income and profits; directing defendants, their agents and employees, or any other party in possession of the property to immediately turn over to the receiver (i) all of the monies now on deposit with them as rent security for the property, (ii) any monies now on deposit in any operating accounts for the property, (iii) all papers, documents and other things affecting the rental and operation of the property that they may have in their possession; authorizing the receiver to, among other things, rent or lease any party of the property for a term not exceeding one year (unless otherwise authorized by the Court); keep the property insured against loss or damage; pay taxes, municipal assessments, and water and sewer charges due on the property; file a tax appeal for the property; market the property for sale; and otherwise do all things necessary for the due care and proper management of the property.

"Moreover, on or about May 17, 2023, the Borough issued multiple citations with respect to the Property for overgrown grass and for having debris spread throughout the yard in violation of the Borough’s code requirements," Mr. Schiller added.

In their motion filing, they cite the Appellate Division ruling in Barclays Bank P.L.C. v. Davidson Ave. Assocs. Ltd. which found that "a receiver should be appointed when it appears necessary to protect the mortgagee’s security.”

The property owners have retained New York Attorney David J. Goldsmith Esq. of Schlam Stone and Dolan LLP to seek to stop the appointment of a receiver.

Mr. Goldsmith answered the foreclosure complaint, admitting that the property owners "did not pay all amounts requested in connection with the Loan Documents."

However, Mr. Goldsmith is also begging the court to halt the appointment of a Receiver, asserting that "at no time since this foreclosure lawsuit was filed has any rental income been misappropriated in any way unrelated to the Mortgaged Premises. Nor will the property owner make any such payments while this action remains pending."

"All rents collected from tenants are used to pay the operating expenses for the property including the cleaning, maintenance expenses, management of the building, permitting, licensing and inspection costs, repairs, utilities, insurance and payroll for the building’s staff. There are no utility, water or sewer charges that are past due. There are no property taxes on the property which are due.

"Based on the rents collected and operating expenses for the Mortgaged Property, the amount currently in the operating account, together with future rents collected, will continue to be sufficient to pay the operating expenses of the Mortgaged Premises, including property taxes - outside of mortgage payments."

Somehow, the mortgage simply can't be paid.

However, Mr. Goldsmith, argued that the mortgage language simply does not warrant a receivership, "The contractual language on which Plaintiff relies is not controlling. To the contrary, a contractual provision by which the borrower consents to the appointment of a receiver upon default is not enforceable as written, but simply provides one factor for courts to consider when determining motions for the appointment of a receiver."

At oral arguments on the motion, Judge Sherri L. Schweitzer asked, "why would I NOT appoint a rent receiver?"

Mr. Goldsmith responded, "because that is a drastic measure which is appropriate only when there is a real danger to the security interests of the lender, which is not actually going on here. The only thing going on here are "internal disputes" which will likely be resolved in the coming weeks.

Mr. Goldsmith added that a trial on foreclosure action has been scheduled to be held on January 3, 2024, and pre-trial discovery for that case is ongoing, should a trial be necessary. However, what they are trying to do today is to already argue the merits of the foreclosure action. This is inappropriate timing. We feel that everything will be resolved soon and a foreclosure trial will not be necessary.

Judge Schweitzer conceded, saying, "the foreclosure matter remains pending and proceeding on schedule. Yes, I do have equitable authority to appoint a receiver. However, in this case, the bank has not met the burden of getting the court to exercise it's equitable authority to appoint a receiver. The appointment of a rent receiver is only appropriate when there is a real danger to the security interests of the lender. As the last property tax bill has been paid, I don't see any real danger to the security interests of the lender. Rather, the bank is simply trying to quicken up the foreclosure action by filing this motion."

"However, if the next tax bill in November is not paid then I will entertain a motion on short notice to very quickly appoint a receiver. Your "differences" and "internal disputes" are simply not a reason for this property to be placed at risk, and not paying taxes is a significant risk," Judge Schweitzer warned.

To join a FAA News WhatsApp Group, click here.

To join the FAA News WhatsApp Status, click here.

No comments: