Judge denies motion by OneUnited to dismiss Charles Street AME church bankruptcy

By Beth Healy, Globe Staff

The judge in the Charles Street African Methodist Episcopal Church bankruptcy proceeding on Tuesday denied a motion by the church’s banker to dismiss the case.

As part of the highly contentious fight between two black institutions, OneUnited Bank had argued that Charles Street AME was not eligible to be a debtor, and to seek bankruptcy protection, because it is part of the greater disctrict AME church.

Judge Frank J. Bailey of Federal Bankruptcy Court in Boston ruled that Charles Street, a historic church in Roxbury, is a nonprofit corporation and does have the right to seek bankruptcy protection. Charles Street is looking to renegotiate $5 million it owes the bank in two loans.

In light of his finding that the church is a corporation, Bailey, in a footnote, also said it would be “unreasonable and inappropriate for OneUnited to recover any portion of the fees and expenses for this motion” from Charles Street or the First Episcopal District, which guaranteed one of its loans.

In a separate order, the judge also denied a motion by the church for the court to disregard the bank’s votes against Charles Street’s plan of restructuring. Bailey wrote that the church was essentially arguing that it was in bad faith for a lender “to want to be paid immediately on loans that have matured.” On the contrary, he wrote, “This is not bad faith or an ulterior motive, just an appropriate and legitimate interest in recovering on its claims.”

The judge also noted that OneUnited rejected the plan after Charles Street offered to repay the money “over a very long term,” (30 years) and to discharge the district’s guarantee of the loans.

Ross Martin, a lawyer for the church, said: “We look forward to the trial resuming next week, finishing successfully demonstrating our reorganization plan, and moving forward.”

A lawyer for OneUnited declined to comment.