by David Croyle
Several Ford City Borough residents have objected to the foreclosure on the Heritage Industrial and Technology Park by Farmers and Merchants Bank of Western Pennsylvania (F&M). They filed paperwork in the Armstrong County Court of Common Pleas on Monday, December 28, asking a judge to stop the foreclosure until their position can be heard.
Attorney Chuck Pascal said he was hired to represent Renee Zacour, her parents Richard and Alberta Zacour, neighbors Elizabeth Germy and Diana Walbert, Christa Walbert, and Kim Bish.
On July 30, 2004, the bank granted a Commercial Mortgage Loan to the Greater Ford City Community Development Corporation (CDC) for $1 million and a Line of Credit for $330,000. The CDC, at that time, was managing the borough-owned property. As collateral for the loan, the Borough agreed to secure the loan with the property, although it was not in control of the money from the loan. After the CDC defaulted in making payments to the bank, foreclosure action was filed on November 6, 2009 by Pittsburgh law firm Grenen and Birsic on behalf of the bank and the Kittanning Paper first announced the story on November 13.
In a letter to Borough Solicitor Frank Wolfe, F&M’s attorney James Grenen explained the bank’s position in a single statement. “The bank has elected to move forward with a foreclosure, as necessary, in order that this property may be ultimately transferred to an entity in a position to complete this project as contemplated,” he wrote.
The Borough had until mid-December to file a response if they intended to challenge the foreclosure. At a council meeting on December 7, Council, by a 4-2 vote, agreed to not defend the action. Therefore, a default judgment was granted to the bank.
Pascal said that he has filed a request for the judgment to be re-opened so a response by his clients can be filed.
“Opening the judgment means we can put a response to the foreclosure,” he said. “We contend the underlining mortgage is unlawful and beyond authority of council in 2004. If that is the case, the bank cannot foreclose on an unlawful mortgage.”
Council the only way a municipality can encumber debt is by pledging the taxing power of the municipality.
If Pascal succeeds, it means the bank cannot take property and Ford City will continue its ownership. “Whether Ford City is responsible for the loan is another thing. The loan is in name of CDC. In theory, the CDC remains responsible, but is in bankruptcy,” he said.
“Normally the loan would be in Borough’s name. This is more complicated because the loan not in Borough’s name. I do not know how it will end up because of this technicality. This is an issue for down the road.”
Councilman Tom Shaffer, who will be leaving his position in January, felt that Council did the appropriate thing. “The people of Ford City elected six members. Those members voted to not put the taxpayers on the line. The CDC had management mistakes and the foreclosure is the result of those mistakes.”
“The property and improvements were paid for by taxpayers,” Pascal maintains. “A lot of state money, loans, and grants from the State paid for it. The property has value. The Borough should sell it, not the bank. The value is a result of taxpayer money. The taxpayer should reap benefits of the sale of the property.”
Pascal criticized the bank for not following proper process for encumbering the property. “The bank is a Pennsylvania bank and knows the law. The bank should know that in order for a municipality to incur debt, they have to go through a process. This was not some bank out of Kansas that doesn’t know PA law!”
Pascal said he has not received a date for his day in court. “I haven’t got an order back from the court regarding intervening. I do not know what the court is deciding. It is up in the air.”
The park was originally an 8.791-acre piece of land between Second Avenue and the Allegheny River that housed the former Shop 1 and 2 buildings of the PPG complex.