Camden County Court Judge Sherri L. Schweitzer last month 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.
Apparently, the recent mortgage bill was also not paid. The bank is now running right back to court and asking the judge to let them sell the apartment 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 property owners have failed to make the full monthly installment payments since January 1, 2023.
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.
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 immediate judgement appointing a receiver to manage the current tenants and also to sell the property.
Following the filing of this motion, the property owners immediately 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 also begged 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.
The bank has now filed a new motion seeking to seize the apartment building on the basis that the mortgage bills continue to not get paid.
The bank's attorney pointed to the property owner's answer to the foreclosure complaint, in which they admit that they "did not pay all amounts requested in connection with the Loan Documents."
The motion is returnable on Friday, November 17. The property owners have not yet responded to the motion.
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