Congregation Atzel Chaim of Siget, led by Rabbi Jacob Teitelbaum, serves a Hasidic Jewish sect of more than 300 people in the Borough Park section of Brooklyn. The building is facing foreclosure.
Congregation Atzel Chaim of Siget, led by Rabbi Jacob Teitelbaum, serves a Hasidic Jewish sect of more than 300 people in the Borough Park section of Brooklyn. The building is facing foreclosure. (NYLJ/Andrew Keshner)

A Brooklyn rabbi does not have the authority to stop foreclosure of the synagogue where he lives and leads a congregation because his name was left off the mortgage and other documents, a judge recently ruled.

Congregation Atzei Chaim of Siget argued that Valley National Bank’s foreclosure on the premises was faulty because, among other things, it did not name Rabbi Jacob Teitelbaum as a party in the action even though he was the property’s “true owner” while the congregation was “really a nominee for [Teitelbaum], who is the essence of the congregation.”

But Brooklyn Supreme Court Justice Carolyn Demarest (See Profile) rejected the argument, noting Teitelbaum—though living there with his wife and eight children—was not a signatory to the loan’s promissory note or mortgage.

“As Teitelbaum is not an indispensable party, summary judgment is not precluded by the failure to join him as a party,” she wrote in Valley National Bank v. Congregation Atzei Chaim of Siget, 503142/12, as she granted the bank’s summary judgment motion and an order of reference in a Jan. 3 decision.

The congregation serves a Hasidic Jewish sect of more than 300 people in the Borough Park section of Brooklyn.

In 2008, the congregation borrowed $499,000 from State Bank of Long Island, which later merged into and operated as part of Valley National Bank.

In court papers, the congregation said the premises had a “dual capacity” of being the “shtiebel”—or site of community prayer and association—and the rabbi’s residence. “This dual property function has existed since about 1970, when the present Rabbi’s grandfather established the Congregation at its present location. In such Hasidic sects, the Shtiebel is the Rabbi’s home and his presence is the essence of the Shtiebel.” The congregation said when it entered the mortgage, the bank was informed of Teitelbaum’s residence at the site.

Demarest noted the mortgage “expressly indicates” the property is not improved as containing dwelling units “nor does the name Teitelbaum appear anywhere in the mortgage documents.”

After the congregation’s default, the bank commenced the foreclosure in 2012.

The congregation claimed the action was a residential foreclosure, not a commercial one, because of Teitelbaum’s residence. As a result, the congregation argued the bank had to give it and Teitelbaum special notice pursuant to provisions of the New York Real Property Actions and Proceedings Law applying to residential foreclosures.

Furthermore, the congregation said the action had defects including a failure to join Teitelbaum as a “necessary party” and furnished a bank statement, telephone bill and telephone directory as proof Teitelbaum lived there with his family.

The bank countered that the rabbi was not a necessary party because it was a commercial loan and he was not a signatory on the note.

In court papers pressing for summary judgment, the bank said “instead of presenting a bona fide defense to [Valley National Bank's] claims, Borrower obfuscates by mischaracterizing the facts and attempts to divert attention from its acknowledged commercial loan default by repeatedly alleging that the Rabbi and his family actually reside in the synagogue that is the mortgaged commercial premises.”

Taking up the argument that the action was a residential foreclosure matter requiring special notice, Demarest said provisions of Real Property Actions and Proceedings Law say such an action requires the borrower to be a “natural person” with the debt taken on “primarily for personal, family or household purposes.”

“The Property at issue in this action is a religious structure and is not residential real property,” the judge said.

She added that language in a mortgage rider signed by three congregation trustees—none being Teitelbaum—said the mortgage did not cover real property “principally improved or to be improved by one or more structures containing in the aggregate not more than six residential dwelling units, each having their own separate cooking facilities.”

When asserting Teitelbaum was a necessary party, the congregation pointed to a 1996 Appellate Division, Second Department, ruling, East N.Y. Sav. Bank v Austin Mall Assocs., 224 A.D.2d 652, that involved a bank’s attempt to foreclose on a Queens shopping mall.

There, the Second Department affirmed a lower court’s denial of the bank’s summary judgment motion with leave to renew after joinder of the tenants, who were “necessary parties.”

But Demarest distinguished the ruling, noting tenants in the shopping mall case had leases to the subject property.

“In this action, defendant has not established that Teitelbaum has a lease to the Property and, even if Teitelbaum does have a lease, he may not be dispossessed by a purchaser at a foreclosure sale absent further proceedings,” Demarest wrote.

Joseph Zelmanovitz of Stahl & Zelmanovitz, who represented the congregation, said he respectfully disagreed with the decision and said it was “too early” to decide on an appeal.

“At this stage, we’re talking to the bank’s lawyers to see if there’s something we can do to resolve this,” he said, but declined to elaborate.

Teitelbaum could not be reached for comment.

Steven Rand of Zeichner Ellman & Krause represented Valley National Bank and declined to comment.