The foreclosure sale of the Greater Cleveland Avenue Christian Church can go forward as planned on Friday, a federal bankruptcy judge announced after denying a church motion on Wednesday that would have forestalled the sale.
After a hearing that lasted more than three hours, Judge Catharine Aron took a 10-minute recess and came back with a ruling that left members of the congregation in saddened silence as they filed out.
Acknowledging the congregation's love for their church, Aron called it unfortunate that the decision members were hoping for "will not occur today." Aron denied the church's motion to modify its reorganization plan in a way that would have allowed the congregation to stay in its building.
More than 65 members of the congregation filled the courtroom to capacity for the hearing, but many declined comment as they filed out of the courthouse and gathered in the parking lot around their pastor of more than 30 years, Bishop Sheldon McCarter.
The church had asked Aron to modify its loan from Apex Bank to give it more time to pay: The church proposed extending the maturity date by three years, to 2022, and paying an interest rate of 6% on $3.3 million owed to the bank.
With more time, the church argued, it could arrange financing to pay off the Apex loan, which now has a payoff total of about $3.5 million.
The church has been paying Apex $13,000 per month as rent during the bankruptcy proceedings. Making interest-only payments on the new plan would have required the church to pay Apex some $25,000 per month.
Aron said the church simply can't afford the costs of financing. She pointed to an earlier point in the church's bankruptcy proceedings when it had been unable to come up with $2.7 million needed to pay off a lower total that had been negotiated last year with Apex.
Aron said the church hadn't shown it could meet the heavier burden of paying off a $3.5 million debt.
The foreclosure sale is scheduled for noon Friday at the Forsyth County Courthouse at 200 N. Main St.
The church had proposed and agreed to in February a reorganization plan that called for the church to either pay off its debt to Apex or vacate the property and deed it over to the bank. The church failed to refinance and failed to turn over its deed to the bank.
The church is one of Winston-Salem’s oldest African American churches, founded in 1893. It moved to a new site on Lansing Drive in 2000. It now uses the name Greater Church.
The church had filed for Chapter 11 protection in April 2018. Chapter 11 is designed to allow a debtor to restructure finances and keep operating.
Wednesday's hearing featured testimony from McCarter, who had to stop testifying at once point as he visibly struggled to keep his composure. McCarter said that when he signed the church's reorganization plan, he had no idea how hard it would be to get new financing for a church in bankruptcy.
Under questioning from the judge and Daniel Bruton, the Apex attorney, McCarter acknowledged that members of his congregation had not found out the church was in bankruptcy and threatened with the loss of its building until a story about the foreclosure appeared in the Winston-Salem Journal on May 16.
McCarter said only the church's board of directors had previously known about the bankruptcy filing. McCarter portrayed himself as someone unfamiliar with the details of refinancing, and said he had trusted the church's financial advisers to come up with a workable plan.
Aron said it was clear that church leaders should have known the church's loan was in trouble for long period of time, since the church had obtained multiple extensions on a loan that originally came due in 2012.
"For at least four years you had the ability to educate yourself about what it takes to refinance," Aron told McCarter. "Then ... Apex agreed to take out $600,000 (less) and you still could't get refinanced ... there is no one who appears to be willing to refinance the church."
In a filing last week, Apex contested the church’s claim that it had reached an agreement with a charter school to lease space from the church for $10,000 to $15,000 a month. In a recent filing, the church had said the extra money would allow it to service a new loan on its debt.
On Wednesday, McCarter testified that the lease had failed to materialize but said he had an agreement for a local non-profit group to lease the church's gym for $5,000 per month. McCarter said he was also negotiating with a day care on a lease of church space.
Under questioning, however, McCarter acknowledged that the lease had no firm commitment from the nonprofit group to lease the gym for any particular period of time.
McCarter denied saying something at an earlier hearing that both the judge and Apex attorney said they had heard him say: That the church could still meet its financial obligations even if it lost its building.
"I have never said that we could find another place," McCarter said. "I have never said that in court." McCarter acknowledged that the church's reorganization plan, which he signed, including possibly losing the church property, but said he never thought that was going to happen.
The judge asked McCarter if he remembered her telling him, in an earlier hearing, that she was concerned about his plan to ask members to donate an extra $100 per month and that he needed to tell members the church was at risk. McCarter said he didn't remember that.
McCarter said his church was "more determined than ever to hold on to what we love, which is Greater Church."
"We have had a major impact in Winston-Salem that speaks volumes to what we are," McCarter said. "We have had problems, but we are bouncing back strong."
One matter that didn't come up Wednesday was the pastor's compensation. In its original bankruptcy filing, the church had proposed to leave that untouched at more than $200,000 per year, including perks that included housing and car allowances.
More recently, the church had agreed to drop the pastor's salary altogether, although he would still keep "love offerings" from the congregation that, in one two-month period, had totaled more than $9000.
Philip Sasser, the attorney for the church, said that since the church property has a valuation of some $6 million, a sale for much less would be giving value to the bank that "should remain with the debtor, with the congregation."
"A whole lot of people over a whole lot of years gave a lot of money," Sasser said.
Willie Baker, a mortgage broker working with the church, testified that while the church had lined up $2.7 in financing recently, filling the gap between that amount and the Apex payoff total "would be quite challenging."
But Baker said that with a three-year extension of the debt, financing that gap would be "quite feasible." If the church could get out of bankruptcy, he said, it could find better interest rates.
Bruton said the church pastor's belief that he could get financing was not enough.
"The debtor can't finance this debt, plain and simple," he said.
McCarter and his church have gotten lots of public support on social media since the foreclosure news hit, with Sheriff Bobby Kimbrough publicly calling on Facebook for people to support the church. McCarter said he had also received words of support from Mayor Allen Joines and members of the city council.
Some voices on social media were critical as well, questioning the pastor's salary.
After the judge made a decision on Wednesday, the Rev. John Mendez, pastor of Emmanuel Baptist Church, said in a telephone interview that while he did not have any comment on the church's plight, the bishop "is my friend."
"It is sad to hear," Mendez said. "They have meant a lot to this community over the years."