Imar Hutchins, owner of Florida Avenue Grill, sued his New York-based financier on Monday, alleging “predatory lending” and “deceptive practices,” and will ask a D.C. Superior Court judge this week to issue a temporary restraining order to stop a foreclosure auction of the oldest, continuously operating soul food restaurant in America.
“This is a non-judicial foreclosure,” says Anu Kmt, the attorney for the 72-year-old restaurant and its owner. Since the foreclosure did not go through the courts, Hutchins had to file a complaint to seek to halt the proceedings and prove the lender had no right to declare a default on the mortgage.
“Most small businesses don’t have the legal muscle to fight back. This isn’t free. You have to go to court to oppose it. It’s very costly,” Kmt says. “This is like a legal hit and run. They ran us off the road, and we have to chase the ambulance back down.”
The lawsuit in D.C. Superior Court spells out the allegations against ATS One Holdings Corp., its affiliated companies and Ari Jay Cohen and Peter Aytug, the principals behind the companies. Hutchins alleges that, starting in summer 2015, ATS began returning the restaurant’s monthly mortgage checks as “undeliverable,” even after Hutchins and his attorney inquired about the lender’s apparent (and unannounced) change of address. The lender allegedly didn’t provide Florida Avenue Grill with a new mailing address.
Instead, in January of last year, ATS used the “alleged nonpayment of the mortgages as a pretext for declaring a default and very aggressively threatening . . .foreclosure,” the lawsuit alleges.
Hutchins alleges that he offered to give ATS a check for $23,555.30, the total amount of the apparently missing monthly payments, but ATS refused the money and threatened “legal measures in an attempt to get Plaintiffs to agree to pay off the mortgages early.” At that point, according to the complaint, Hutchins started sending a certified check each month to a new ATS address.
All those uncashed checks were enclosed in a Dec. 12 letter sent to Hutchins’ attorney, according to the complaint. The letter informed Hutchins that his “partial payments” had been rejected, the lawsuit alleges, and that ATS was initiating a foreclosure proceeding against the restaurant at 1100 Florida Ave. NW. The trustee’s auction of the property is scheduled for Jan. 18 unless a D.C. Superior Court judge agrees to the temporary restraining order on Thursday.
In an interview, Hutchins says that ATS claims he still owes $139,000, plus about $39,000 in fees, on two 2011 notes totaling $250,000. The Florida Avenue Grill property was valued in 2016 at $727,280, according to the D.C. Office of Tax and Revenue. This year, the property’s value is expected to rise to $789,830.
“It’s a money grab,” Kmt says about ATS’s motivations.
Alan S. Macdonald, attorney representing ATS and its owners for the case, declined to comment on the lawsuit, which he had just received.
“This whole incident has impacted the grill in the sense that it has been embroiled in a firestorm of controversy,” says Hutchins. “The fact is, if I hadn’t filed the lawsuit, most people would just kind of think the grill doesn’t pay its mortgage and look askance at me. . . I paid them every month, and that’s not good enough.”
According to Hutchins’s lawsuit, ATS (and its predecessor, Northern Funding) are real-estate lending subsidiaries of Northern Leasing Systems Inc., a company that the New York attorney general sued last year, alleging it engages “fraudulent and deceptive practices that trap small business owners across the country.”
The New York lawsuit involves allegations of leasing of credit card equipment with terms that are “onerous and totally one-sided in favor of” Northern Leasing, according to a press release from New York attorney general Eric T. Schneiderman. When a small business tries to cancel the contract or stop paying, Northern Leasing will send threatening letters and commence “collection actions in New York Civil Court,” the release alleges. The attorney general’s office claims Northern Leasing and its related companies filed more than 30,000 collection actions between 2010 and 2015 and obtained more than 19,000 default judgments, often because the businesses weren’t aware of the action.
The attorney general’s lawsuit is still pending. Defense attorneys have filed a motion to dismiss the case because, among other arguments, they say the statute of limitations has passed on the allegedly fraudulent actions. More than that, the lawsuit has no merit, says Arnold N. Bressler, a senior partner with the New York-based Moses & Singer, the outside counsel that represents Northern Leasing. “We feel, as a matter of law, that the case should be dismissed,” Bressler says.
Hutchins alleges in the lawsuit that in 2011 he agreed to a $200,000 “deficiency note” and a $50,000 “promissory note,” even though Hutchins in an interview says ATS never loaned him a single dollar of those funds. The restaurant owner alleges he was forced to agree to the notes or ATS would foreclose on Florida Avenue Grill and several units of the Lacey, the neighboring condominium project that Hutchins developed with loans from ATS.
“They did the same foreclosure move again and basically made me agree to this mortgage,” Hutchins says. “No money was advanced for this mortgage. . . I didn’t have the legal muscle at the time to fight them properly, so I had to assent to the mortgage or else they were going to foreclose on the grill. This is the kind of typical bullying tactics that they’ve used on me in the past.”