Members of Valley Stream’s First Apostolic Church Seventh Day were given a holiday miracle on Dec. 22, when a state appellate court granted a stay pending appeal in the congregation’s foreclosure battle with the church building’s former owner.
While the fight is by no means over, the decision means that the church’s members will be able to continue to worship while they appeal the Oct. 15 summary judgment by State Supreme Court Justice Arthur Diamond that the West Merrick Road building’s former owner, Manhattan-based L&L Associates Holding Corporation, was within its rights to foreclose on the property.
“It’s a breather,” said the church’s pastor, the Rev. John Millwood. “We’ve been praying, we’ve been planning . . . The stay is a huge temporary win for us. We think it’s an indication of where this thing could go.”
The church’s troubles began in September 2016, when Millwood closed on the property, paying L&L half of the building’s sale price of roughly $725,000 in cash, and took out a nearly $363,000 three-year mortgage from the company to pay the remainder.
After moving his congregation from its previous location in St. Al-bans, Queens, Millwood said he dutifully made the mortgage payments to L&L every month for a year, hand-delivering checks to the firm at its Garden City office. But while he was applying to Nassau County in November 2016 for tax-exempt status for the church, unbeknown to Millwood, county and village taxes had been accruing on the property for four months.
In September 2017, L&L stopped taking mortgage payments, and Millwood said he realized something was amiss. Soon afterward, he received a letter stating that L&L was foreclosing on the property, and that he would need to appear in court. The letter did not disclose the reason for the foreclosure, however, and it was only later that the county notified him that he had unpaid tax bills.
“We thought that by paying the taxes, it would make the problem go away,” Millwood said, and county officials told him that pending the passage of a state bill that would retroactively grant the church tax-exempt status for the period when the county was processing its application, he would be reimbursed.
State officials said they expect to pick up Senate and Assembly versions of the bill during the next legislative session, starting this month.
The church had owed roughly $83,000 in county taxes and nearly $18,000 in village taxes. Already strapped for cash after paying for half of the property, Millwood went to his congregation to fundraise and pay the back taxes.
The Nassau County treasurer reported receipt of the taxes owed in February 2018, and the village reported receipt of the taxes owed in April.
But at that point, L&L had said it was not interested in whether the taxes had been paid, arguing in court that by defaulting on the taxes, the church had violated the terms of its mortgage, giving L&L grounds to sue to foreclose on the property, and it is seeking interest, punitive damages and attorney’s fees of roughly $70,000 before it will relent in its efforts to take the property away.
L&L “recognized the areas where we’re vulnerable,” said church congregant Glenda Clarke, speaking to the Herald during a Sabbath in early November, “and after meeting the financial needs they were looking for, now they’re thinking, ‘All right, let’s see what else? Let’s keep pushing and see what we can get from them.’”
In his decision, Diamond wrote that Millwood and his congregation had made every attempt to rectify the situation, and would likely be refunded the missed tax payments pending the passage of state legislation. “Thus, in the interest of justice,” he wrote, “this foreclosure matter should be dismissed.
“Unfortunately, the evidence before the court does not support such a decision in the interest of justice,” Diamond continued, saying that the terms of the loan, as presented to him, did not contain a catch-up provision to allow the church to take care of outstanding tax payments.
Christian Browne, of the Uniondale-based law firm Sahn, Ward and Coshignano, and church’s attorney, said the punishment being meted out by L&L is “draconian” and that there was nearly a century’s worth of case law supporting his claim that a technical default — a violation of a loan deal that does not arise from missed loan payments — is not grounds for foreclosure.
“If you don’t pay your electric bill, for example,” Browne explained, “your house doesn’t get taken away.”
A spokesperson for L&L could not be reached by press time.
The parties have until Feb. 4 to submit their appeals in order for the stay to remain in effect. Browne estimated that the appeals process could take up to two years.
Millwood said he was hopeful about what the stay could portend for the appellate court’s decision, but that all options were on the table should L&L prevail in the case. Among them, he said, would be to take out another private loan to pay L&L — a risky move, he said, considering the position that the church is now in. Securing a loan through a bank is, however, difficult as banks are generally reluctant to approve loans for religious organizations.
“We’re not going to get kicked out,” Millwood said. “I will sell my personal residence before I let that happen.”