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NO MORE PITY: JUDGE AGREES TO PERMIT SALE OF APARTMENT BUILDING OWNED BY LAKEWOOD PONZI SCHEMERS




Camden County Court Judge Sherri L. Schweitzer has just declared "no more excuses, no more pity," and ruled that a bank can 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.


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 their previous day in court, Judge Schweitzer held off from taking such a drastic measure after the property owners claimed that this was simply "internal politics" and that the bills would get paid in 30 days. After bills were still not paid and even the property owner's attorney admitted his clients were untruthful, the judge had enough and ordered them evicted.


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 was filed by Newark Attorney Matthew J. Schiller, Esq.


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.


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


At oral arguments on the motion, Mr. Goldsmith pleaded, "the only thing going on here are "internal disputes" which will likely be resolved in the coming weeks. We feel that everything will be resolved soon and a foreclosure trial will not be necessary.


Judge Schweitzer agreed not to immediately appoint a receiver. However, 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, adding that if the bills continue to not get paid, she will entertain a motion on short notice  to appoint a receiver.


Just a month later, the bank ran right back to court, again seeking to seize the apartment building on the basis that the mortgage bills continue to not get paid.


The property owners responded with some outlandish opposition - that actually the bills should have been paid with funds held in escrow at the bank, and the bank managers are the ones who were refusing to release these funds for the payment of the mortgage bills!


"In its motion, Plaintiff asserts that Cornell is in default on the Loan Agreement since January 2023, but fails to mention that Cornell’s inability to make the mortgage payments was caused by the Lender’s own conduct – to wit, the Lender’s inexplicable and bad faith refusal to make the requested and necessary disbursements from the Special Purpose Reserve (“SPR”).


"The parties contemplated from the outset that, for some initial period after the purchase of the Mortgaged Premises, rent collections alone would be insufficient for the Borrowers to timely make the mortgage payments. For that reason, the Borrowers were required to deposit with the Lender a SPR of $400,000 at closing....


"Since closing, the Lender has made several disbursements from the SPR at the Borrowers’ requests, but the Lender has refused to make further disbursements from it without any valid ground, thereby undermining Cornell’s ability to make the timely mortgage payments....


"Instead, the Lender declared Cornell in default, cut off any further disbursements from the SPR, accelerated the loan, and subsequently commenced this action," Mr. Goldsmith wrote.


Amazingly, just days later, Mr. Goldsmith notified the judge that he learned that his opposition filing "contained inaccuracies," and therefore he was withdrawing his opposition.


Shaking her head in bewilderment, Judge Schweitzer has just now entered an order granting the bank's motion to appoint a receiver to take over management of, and sell the building.


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