CDLB Publishes Article on Arnstein & Lehr Helping West Side Church Avoid Foreclosure

CDLB Publishes Article on Arnstein & Lehr Helping West Side Church Avoid Foreclosure
March 4, 2015

[caption id="attachment_2759" align="aligncenter" width="650"] (From left) Michelle G. Novick, a partner at Arnstein & Lehr LLP; pastor Dwight Gunn; and Michael L. Gesas, managing partner of Arnstein & Lehr’s Chicago office, stand inside the main sanctuary of Heritage International Christian Church on the city’s West Side. The firm helped the church work through the legal system to stay open. Photo courtesy of Michael R. Schmidt[/caption]  

On a Sunday morning following services at Heritage International Christian Church in the Austin neighborhood, the approximately 350-person congregation prepared to hear about a different kind of salvation. 

Their pastor, Dwight Gunn, stepped away from the podium.

Michael L. Gesas, managing partner of Arnstein & Lehr LLP’s Chicago office, stepped forward. Gesas addressed the congregation of the 12-year-old church Gunn helped open. It was October 2013, and the attorneys at Arnstein & Lehr had saved the church and its nearby properties from foreclosure. 

That was just the beginning. 

The church, with its main sanctuary at 5312 W. North Ave., owns four other properties on the block. Two are commercial buildings with storefronts and apartments. Another two buildings for religious use hold a 125-seat sanctuary, a kitchen, a dining area and a space for children’s church and Sunday school classes. 

The congregants, Gunn recalled, were inquisitive and concerned.

“It was basically a do-or-die moment,” Gunn said about the church facing foreclosure in September 2013. “We were literally 24 hours away from losing everything we had worked hard to gain.”

The properties were set to be foreclosed on Oct. 1. On Sept. 30, Gesas and his colleague, Michelle G. Novick, filed for Chapter 11 bankruptcy, a tactic that delays the foreclosure proceedings. 

  A ‘home run’ 


Bankruptcy is a test of faith. No one knew that better than the lawyers.

“We needed to act fast,” Novick said. “If we were going to do anything, such as filing a bankruptcy case, we had to do it before the foreclosure sale. So time was of the essence.”

The problem for the church was one that many churches faced during the recession, Gunn said. Since about 95 percent of a church’s funding comes from congregant donations, funding dipped. That occurred, he said, “very gradually” over a four- or five-year period that coincided with the end of the church’s mortgage loan with the Evangelical Christian Credit Union (ECCU). The recession brought stricter lending regulations for faith-based organizations, which prevented ECCU from giving the church a loan big enough to cover its nearly $2.2 million debt.

“Our current attorney at that point said, ‘This is a little beyond my scope,’” Gunn said.

That lawyer recommended Arnstein & Lehr.

“In our business, everything is an emergency,” Gesas said. “People don’t come in and say ‘Gee, I have a problem a month from now.’ It’s tomorrow.”

After filing for Chapter 11 protection, the lawyers worked with the church’s accountant and Rudnicki & Associates — a financial adviser Novick selected — to get its finances in order while keeping Gunn informed so he could do the same for the congregation.

“He was so committed to this church, to the membership, to seeing this through,” Novick said. “He believes in this church and the membership. And he believed in me as a trusted adviser.”

Nine months into that process, ECCU sold the debt to Greenwich Investors XLVI Trust 2013-1. Gunn and the lawyers were concerned because the debt was moving from a Christian-based lender that had a history with the church to a private equity firm that did not. 

Instead, Gunn said, it was “a blessing in disguise.”

Greenwich, it turned out, was very accommodating. Novick reorganized the church’s finances, modified its loan and reached a settlement with Greenwich. The foreclosure case was dismissed in December 2014 when the church and Greenwich reached a new three-year mortgage. As a result, Gunn “looked like a hero to the membership just in time for the Christmas holiday,” Novick said. 

Gunn felt the same about Novick and Gesas.

“Of course,” Gunn said, “going through it is a little more cumbersome and very nail-biting at times.” Bankruptcy doesn’t always run as smoothly as it did in this case. “But for us,” Gunn said, “it was a home run.”

  Instruments of God


Gunn has a name for his vision of West North Avenue: “Heritage City.” That means the church will help provide jobs, low-income housing, access to meals and education in financial literacy. His neighbors know him. On a Friday morning in January, Gunn was stopped on the street by a man with developmental disabilities whose family makes him leave the apartment when they aren’t home.

“Did you pray for my uncle yet?” the man asked Gunn. “My uncle is sick. He’s at the doctor. Can you pray for my uncle now?”

“Let’s do it right now,” Gunn said.

Gunn placed his hands on the man’s shoulders and asked God to heal the man’s uncle and to give the family “peace and direction and guidance.” The two men said “amen.”

“All right?” Gunn asked the man.

The man smiled.

“I love you brother,” he said.

“I love you,” Gunn said.

Throughout bankruptcy, Gunn sought to provide similar calm to his congregation. That’s why bringing Gesas to the church was vital. Congregants had basic, urgent questions: Are we going to lose our church? Will our donations go directly to saving the church? Gesas explained the bankruptcy process to the congregation, making sure they all understood the steps the firm would take to save the church.

“God uses everyone,” said Shirley Smith, a minister who handles the church’s day-to-day operations. “You can be sick. The doctors are there. They’re an instrument of God. You have to let them use their knowledge to heal you, but they’re led by God. And it’s the same thing with the lawyers.” 

The firm reduced its fees by 20 percent and ultimately charged about $140,000, a price that two board members called “suitable for our needs.” Three months after the church’s case was dismissed, all involved say the church’s future is strong.

“Today, we feel like this is our church again,” Rodney Craig Ward Sr., one of the church’s 12 deacons, said Sunday. As he spoke, the morning services were just beginning. The sound of song, prayer and the church organ boomed through the floorboards.

“There’s no uncertainty now,” Ward said. “Heritage International Christian Church is ours.”

By Jack Silverstein, Law Bulletin staff writer


View the PDF version of this story here

Listen to Michelle Novick's audio commentary here

Reprinted with permission from Law Bulletin Publishing Company.