The eighth and ninth foreclosures against companies affiliated with developer Charles Cefalu and his mother, Sophie, have been filed in Warren County, extending the scope and underscoring the complexity of the firms' financial difficulties.
The newest lawsuits not only pertain to properties already facing foreclosure by other investors and lenders, but include the latest round of disputes about whether the mortgages were recorded accurately.
The nine foreclosure actions since May are calling due a combined $3.36 million in loans from at least five different limited liability companies tied to the Cefalus. The loans cover 14 buildings, including the large Crandall Square Condominium project on Maple Street and a slew of residential and commercial properties on South, New Pruyn, School and Broad streets.
SBC Properties LLC is named in all but one of the lawsuits. The company is managed by Sophie Cefalu, who has personally guaranteed many of the mortgages in foreclosure; while Charles Cefalu serves as a consultant and vice president of acquisitions, according to minutes from a recent SBC investor meeting obtained by The Post-Star.
According to one of the most recent lawsuits, filed Sept. 16, Queensbury residents Robert and Karen Olson are seeking about $110,000 from SBC for mortgages on 86 South St. and 14 New Pruyn St. The couple say SBC fell behind on its payments in December 2008.
In the latest foreclosure, Queensbury resident Ann de Avila is seeking about $102,000 from SBC, also for a mortgage on 86 South St.
The lawsuit was filed Oct. 16 by de Avila on behalf of her late husband's estate; in it she says SBC has been behind on its payments since September 2008.
A complicated transaction
The Olsons and de Avila aren't the only ones foreclosing on 86 South St., a small building across from Rite Aid.
Back in July, an investor group from Lake Placid became the first to foreclose on that property, which set off a chain reaction of litigation from the other parties, all of whom believe they hold the primary mortgage.
The order of multiple mortgages is important because, in the event of foreclosure, the primary lender is paid
According to court documents, the de Avilas sold 86 South St. to SBC Properties for $107,500 in 2005, and agreed to hold a mortgage in that amount. Court records show that, on the day of the sale, SBC also obtained a $60,000 mortgage for the building from Adirondack Real Estate Holdings, where Charles Cefalu served as treasurer.
Progressive Title and Abstract Services, owned by Charles Cefalu, recorded both mortgages with the Warren County Clerk's Office, listing Adirondack Real Estate's loan first and de Avila's loan second.
De Avila's lawsuit claims this order was incorrect, that hers was the "true purchase money mortgage." Her lawsuit also alleges that Sophie Cefalu acted outside the scope of her authority as a member of one or more of the companies and engaged in "certain intentional and willful conduct," to de Avila's
De Avila is seeking unspecified damages from Sophie Cefalu. De Avila's attorney did not return calls seeking comment. Similar claims of inaccurate recording have been raised by property owner Peter Shabat, who this summer initiated foreclosures on multiple buildings he sold to LLCs affiliated with the
The dispute over 86 South St. doesn't end with de Avila.
That "other" mortgage held by Adirondack Real Estate was transferred a few months after the sale to local investors Robert and Karen Olson, who say they've held it ever
When an investor group from Lake Placid filed a foreclosure lawsuit in July seeking payment for that same mortgage, both parties realized that Adirondack Real Estate had sold the note twice, and that SBC wasn't paying either of them.
The lawsuit from Lake Placid Opportunities LLC prompted the Olsons to file foreclosure and assert their claim as the true owners of that $60,000 note.
The Olsons' foreclosure action tipped de Avila that she was not in possession of a first mortgage on 86 South St. - the building she had sold to SBC four years
The attorney for the Olsons, Mark Lebowitz, said his clients took over the mortgage from Adirondack Real Estate Holdings years before the company sold it again to Placid Management Opportunities. He said the Olsons have title insurance, obtained through Charles Cefalu's title company.
"If (the mortgage) was first assigned to the Olsons, then Adirondack Real Estate Holdings didn't have any mortgage to sell (to Placid Management Opportunities)," Lebowitz said.
Kenneth Schwartz, a Latham attorney representing the Lake Placid group, said his client has filed a title claim with the insurance underwriter used in their transaction, which Schwartz refused to identify.
Charles Cefalu has said the title agent in that transaction was Caldwell Title Abstract Inc. in Lake George, and that he has no affiliation with that firm. Caldwell did not return The Post-Star's call seeking comment.
Charles Cefalu: Refinancing
In regards to de Avila's claims, Charles Cefalu said public record s hows the accurate order of the mortgages. He added that the transaction took place five years ago with de Avila's late husband, and now the claim is being represented by the
"In all of these transactions, all of the parties were represented by counsel," he said Thursday.
Charles Cefalu added that most of the transactions happened four or five years ago, and SBC had been paying on the loans for a long time before the trouble erupted.
As for the claim between Placid Management and the Olsons - that one mortgage was assigned twice - Charles Cefalu said the second assignment was an error on the part of the company tasked with ensuring the property had a clean title. "The title searcher missed some filings, but it was an insured transaction," he said.
Charles Cefalu said he is working with investors and lenders to renegotiate the terms and expirations of at least six of the mortgages in foreclosure, and he is also looking into economic development tax credits as a means of injecting some capital into downtown projects. He said the renegotiated loans should close by the end of the year.
"We're making tremendous headway in renegotiating terms," he said.
With respect to the largest foreclosure action - the $1.4 million loan on Crandall Square Condominiums - Cefalu said he expects that transaction to be refinanced by the end of this year or the early part of next year.
"There are some private equity funds that are very interested in making an investment in downtown Glens Falls," he said.
Francis Smith, the attorney for Community Preservation Corp., which is foreclosing on the condo project, said late last week that nothing has changed on the status of the foreclosure action.
Asked whether he was aware of a refinancing effort being negotiated by Charles Cefalu, Smith said, "I haven't heard anything about