The Eastern Missouri appellate court ruled in favor of the Jewish Center for Aged last Tuesday (July 21) in its trial seeking an injunction to prevent PAMI, the mortgage holder of the Cedars at the JCA, a 252-bed senior care facility in Town and Country, from foreclosing on the facility without first giving the JCA the ability to purchase the mortgage note.

The Missouri Court of Appeals – Eastern District heard oral arguments for the case in June. The appeals court’s decision was filed July 21, upholding the 2008 ruling by St. Louis County Circuit Judge Melvyn W. Wiesman that PAMI, a subsidiary of Lehman Brothers, must give the JCA a “purchase notice,” as stipulated in the original lease of the ground upon which the Cedars was built.

Before the Cedars at the JCA was constructed, JCA leased the ground to JCA Support Co., a separate legal entity, with a provision that any future mortgage holder on the facility built there would have to provide JCA with the opportunity to purchase the appraised leasehold interest before the mortgage holder could foreclose.

The Cedars at the JCA opened in 2003. The JCA and PAMI went to court in late November 2007, seeking to halt PAMI’s attempts to foreclose on the Cedars. PAMI purchased the $55-million mortgage of the Cedars in a HUD auction in September for $19.1 million, according to Department of Housing and Urban Development records. The Cedars had been in default on its mortgage payments since 2005. Judge Wiesman granted a temporary restraining order in December, requiring JCA to post a $1.5 million bond.

Ken Rubin, president of the JCA Board of Directors, said the Cedars leadership was pleased with the decision, but declined to be interviewed further before press time.

Gary Eisenberg, an attorney with Herrick, Feinstein LLP, a New Jersey firm representing PAMI, said his client did not wish to comment.

In the decision, the three-judge panel of the appeals court upheld four key points PAMI disputed in their appeal:

* The “purchase notice” provision in the ground lease is “a covenant that runs with the land” and is “binding upon Appellants [PAMI] regardless of whether they were a party to the original lease

* The JCA was not granted a purchase notice by PAMI

* It was “inconsequential whether JCA Support was the alter ego of JCA” in light of the lack of a purchase notice

* The trial court did not abuse its discretion in failing to appoint a receiver to collect rent pursuant to the assignment of rent clause contained in the deed of trust.

PAMI can now appeal the decision. According to Beth Riggert, Communications Counsel for the Missouri Supreme Court, an appeal can be filed for a re-hearing by the Eastern Missouri Appellate Court (typically also with a request that if the appeals court denies a re-hearing, that it transfer the case to the Missouri Supreme Court for consideration). A re-hearing, if granted, would be decided by all 14 judges on the Missouri Court of Appeals -Eastern District.

Riggert said another option is for parties to appeal directly to the Missouri Supreme Court. She noted that less than 10 percent of appeals court cases are transferred to the Missouri Supreme Court.

If the appellate court and the Missouri Supreme Court decline to examine the case, the existing appellate decision will stand.

Additionally, PAMI could offer a purchase notice to the JCA or negotiate a settlement.

Rubin said in a 2008 interview that he was confident that if PAMI offers a purchase notice, the JCA will be able to make the purchase.