New York church sues Indy-based Disciples of Christ fund over disputed loan

A small New York City church has sued Indianapolis-based Disciples Church Extension Fund after the nonprofit lender allegedly declined to release $7.3 million in loan funding advances for a proposed development on the church’s property near Central Park.

La Hermosa Christian Church filed the lawsuit in June in the New York  Supreme Court’s New York County Commercial Division. The extension fund, which is the financing arm of the Indianapolis-based Christian Church (Disciples of Christ) denomination, denies the lawsuit’s allegations.

The lawsuit alleges the extension fund  defaulted under the parties’ loan agreement by failing to make advances requested by La Hermosa in November and December 2023 and January 2024.

The complaint claims the extension fund promised to advance funds to La Hermosa to finance the pre-construction phase of a construction project that would develop its property with a high-rise building that would offer housing, a new church and new local community facilities.

Disciples Church Extension Fund Vice President Rev. Rhonda Hopewell said in an emailed statement that her organization fully denies the allegations.

“Disciples Church Extension Fund, or DCEF, has been a partner with La Hermosa Christian Church and supported their ministry for many years. DCEF’s role has been as a pre-development lender,” Hopewell said in the email. “While we fully deny the allegations in the case, it is our sincere hope that the church can find a development partner to help them accomplish their desired project. In the meantime, DCEF has a responsibility to be good stewards of the funds entrusted to us from our investors, donors, and partners.”

Samuel Levy, an attorney with New York-based Blank Rome LLP who is representing La Hermosa, told Indiana Lawyer in an email that as a policy, his firm does not comment on active litigation matters.

The extension fund filed a motion in August to dismiss the case.

In that motion, the organization asserted that it had supported the New York church’s dream, as evidenced by its provision of a pre-development loan and advancing more than $11 million to the church for the project.

“This project, however, has lost its focus, through no fault of DCEF, a non-profit lender to churches which offers extremely generous terms,” the dismissal motion alleged.

The extension fund argued that La Hermosa still has no firm prospects with a developer to develop the property, with no financial institution going to make an approximately $300 million construction loan to a small church with no endowment that lacks a credible financial development partner.

In its lawsuit, the New York City church describes itself as having fewer than 100 active members and an annual operating budget of less than $220,000.  It is one of about 3,600 Disciples of Christ congregations in the United States and Canada.

On its website, the extension fund says it was founded in 1883 as the ministry of the Christian Church (Disciples of Christ) to help congregations with capital project planning and financing.

The lawsuit describes DCEF as having extended, since 1933, more than $1 billion in financing to churches throughout the United States.

La Hermosa is suing for breach of contract, breach of an implied covenant of good faith and fair dealing and for declaratory judgment, as well as lawsuit expenses.