In the latest skirmish in a long-running bankruptcy case, a lawyer for OneUnited Bank suggested in federal court Monday that the historic Charles Street AME Church should sell its main sanctuary to the highest bidder, along with the other properties it has agreed to sell.
The church’s lawyers rejected the notion as outrageous, and even the judge noted the request was contrary to the point of reorganizing under Chapter 11.
It’s the debtor’s right, Judge Frank J. Bailey said, “to retain for its own use the core property that is fundamental to its mission.’’
But the bank’s counsel, Douglas Gooding, said the two bids the church had received so far from nonprofits, for $2 million each, were not high enough. The church needs to hire a more aggressive broker, he said, and market the properties more widely, into June. The bank also wants the right to bid on the properties, using the debt it is owed.
“The marketing process has been woefully deficient,’’ Gooding told the judge.
The fight between two prominent black Boston institutions erupted more than two years ago, when OneUnited threatened to auction off the Roxbury church because Charles Street had fallen behind on another loan. OneUnited had loaned the church $3.3 million in 2006 to build a nearby community center, and Charles Street struggled to repay the loan during the financial crisis.
Now, the congregation has given up its dream of having a Roxbury Renaissance Center next door. Facing financial realities — and the judge’s rejection of their first reorganization plan last fall — the church has offered to sell the nearly completed center, an adjacent parking lot, and storefront space, as well as a house in Milton.
But the bank continued to take a hard line, by casually raising the idea of Charles Street’s merging with another nearby African Methodist Episcopal church, or leasing back its own church space.
“That’s offensive,’’ said Charles Dale, a lawyer for the regional church of which Charles Street is a part, the First Episcopal District of Philadelphia.
The bank contends that the district church should make good on its guarantee of the construction loan and has been asking the judge to dismiss the case or prevent the church from reorganizing its debts. OneUnited last fall replaced its lawyers from Pierce Atwood with Choate Hall & Stewart.
Gooding, of Choate Hall, objected Monday to what he said was an additional problem with the bids the church presented: the appearance of a conflict of interest, because the church’s law firm, Ropes & Gray, has a relationship with the bidders, Horizons for Homeless Children and Action for Boston Community Development, an agency that provides services to poor families.
Diane Patrick, the governor’s wife and co-managing partner of Ropes & Gray, serves as an honorary board member of Horizons, which is looking to house an early childhood center for 200 homeless children at the site. Another lawyer from the firm serves as clerk for the development agency.
A lawyer for Horizons said Patrick’s post was mainly symbolic and that she has had no influence on the bid. In fact, the lawyer, Douglas Rosner, said it was the nonprofit’s broker who had found the church’s community center space and suggested a bid.
The US bankruptcy trustee agreed that the bidders’ ties to Ropes require greater disclosure. He also defended the bank’s right to bid on the properties as a creditor.
Rosner refuted the bank’s contention that the Roxbury properties could fetch far more money from a commercial buyer. “This property has really a not-for-profit, public-mission use,’’ he said.
He also said allowing the bank to bid on the properties would be unfair to the other parties, because the bank would have an edge. Rosner said Horizons had been in talks to buy the space for a year and cannot wait for an extended sale process.
“We can’t continue to do this dance,’’ he said. “Timing is important.’’
The judge indicated that with two interested bidders ready to buy the properties, there seemed to be an urgency to get the deals done.
“Isn’t it a great time to move this case? There’s the melting ice cube,’’ he said.
The judge said he would rule shortly on whether the church should be sold with the other properties and whether the bank can use the debt to bid, as well as other matters related to the sale.Beth Healy can be reached at email@example.com. Follow her on Twitter @HealyBeth.