A lawsuit made in 2010 over a defaulted loan issued more than a decade ago has not run its course yet, despite the fact a final ruling in federal bankruptcy court was made last year.

Attorney Ross Martin of Ropes & Gray earlier this month submitted a motion on behalf of his client, Charles Street African Methodist Episcopal Church of Boston, requesting the court alter or amend its prior judgement that said the church must repay a loan it defaulted on to OneUnited Bank.

In 1999, the Roxbury-based church acquired a nearby building it planned to transform into a community center, and secured a $3.6 million loan in 2006 from OneUnited Bank to help with this plan.

By 2010, it had defaulted on the loan, prompting OneUnited to sue the church.

The church filed a counterclaim, alleging the bank knew the church could not complete the community center given its financial situation and relationship with its loan guarantor, and would therefore default on the loan.

Last year, a federal bankruptcy court judge ended the hotly contested dispute, saying in his opinion that OneUnited did not know the church would default on its loan.

But in his filing earlier this month, Martin challenges this finding.

The church had a loan guarantor – its parent organization, the First Episcopal District AME Church in Philadelphia – for the loan it received from OneUnited. But the district did not come to the project’s aid when it was failing.

The court in its findings in 2016 said the church did not prove that the bank knew about the district’s intentions to not aid the project should it fail.

The court further wrote in 2016 that, “The absence of evidence on this point leads me to find that the church has not carried its burden of proving that, when the loan was underwritten, it was likely to fail.”

Martin asserts that the church in its court arguments did present evidence that the bank knew about the district’s true financial situation and its commitment to the project, but chose to ignore the facts.

If the church alters its findings on this point, he wrote in his filing, then it can alter its overall judgement to instead rule in favor of the church.

Martin points to a finding the court made in a memorandum from November of last year that said there was evidence to suggest the district was not in as great of financial shape as the parties thought, or that the district would come to the aid of the church for loan repayments.

He said the bank did not do the proper due diligence at the time.

In a response to Martin’s filing also submitted this month that urges the court to reject Martin’s request, attorney Kevin Handly, representing OneUnited, said the bankruptcy court has already found no evidence that the bank acted deceptively or unfairly when making the construction loan.

He points to the court’s initial findings about how OneUnited viewed the district’s role in the transaction.

“Three of the bank’s decision makers … made clear in testimony that without the district’s guaranty, they individually, and the bank as an organization, would not have approved the loan,” read the court’s memorandum. “They also believed the district had demonstrated an interest in the success of this loan and would not let it fail.”

Dispute Between OneUnited Bank And Charles Street Not Over Yet

by Bram Berkowitz time to read: 2 min
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