Peabody sues developers over loan default

PEABODY – The City of Peabody has brought a court action in an attempt to recover $667,717 from a promissory note they loaned to the development company and the owners of a Caller Street property.The City of Peabody, by its Community Development Authority, filed the court litigation in Salem Superior Court against River Development, LLC, of 21 Caller St., Peabody, manager and resident agent Peter Bagarella along with Robert C. and Susan P. Bagarella, both of 46 Alderbrook Drive, Topsfield.According to the complaint, River Development and Bagarella’s acquired title to the real property known as 21-23 Caller St., in December of 2004.In order to finance various renovation costs they entered into a loan arrangement with the city in a commercial promissory note for $745,000 with a first mortgage on the property from Beverly Cooperative Bank in April of 2008 for $4,350,000.On May 12, 2009, the City of Peabody issued a demand to the defendants for failing to honor the terms and conditions of the loan.Then while the city was attempting to work out a deal with them, Bagarella filed for homestead protection on their property in Topsfield, which the city maintains is for the purpose of defrauding and hindering the collection of the indebtedness, the suit states.The City of Peabody maintains, although the defendants have been paid some of the money borrowed, they are still owed $667,727.21 including accrued interest, late fees and collection fees, which the defendants have failed or refused to pay.Attorney Jill Elmstrom Mann, who filed the complaint in behalf of the City of Peabody, states she was informed that the value of the property, if sold at a foreclosure auction, would not be sufficient to satisfy the obligations to Beverly Cooperative and to the City.She has asked a judge to enter into a judgement in favor of the city to recover the total amount owed plus interest, late fees and reasonable attorney fees and court costs.