The former owners of Point Pleasant's OB Diner said outside federal bankruptcy court on Tuesday that they plan to take the place back.
"We're going to fix it up and re-open it," said Andreas Kaiafas, standing outside a US Bankruptcy courtroom in Trenton with his brother, Antonios Kaiafas; Costas Kaiafas, Antonios' son; who are principles of former owner Tolis, Inc., and their attorney, Anthony A. Boyadjis. Tolis owned the diner from 1983 until July 2005.
And how long will it take to "fix it up?"
"That depends how nice we want to make it," said Andreas Kaiafas, smiling broadly. "But if we're going to fix it up, we need to be done before the summer."
But they can't take it back yet. Christopher Mitchel, president of Point Pleasant Beach Diner, Inc., still owns the business. And Mitchel and John Mitchel, of Christo and Demetri, still own the property.
Because Mitchel is delinquent in payments to Tolis, he may lose the place to the former owners.
Mitchel could not be reached for comment. His attorney, Marc Capone, and Patch have been trying to reach each other by phone.
Neither Mitchel nor Capone were in court on Tuesday due to Capone having a scheduling conflict, according to what Jeffrey Sponder, the trial attorney for the US Bankruptcy Trustee, said in the courtroom.
Boyadjis said his clients may be in a position to run the diner in four months or so, although it's indefinite due to several pending bankruptcy and foreclosure matters.
Regarding one of the pending bankruptcy filings, on Tuesday morning there was a hearing regarding the filing made by the current owners in May. This bankruptcy filing is for the business operation only, not for the real estate, which Tolis had also sold to the current owners with a pending mortgage.
Judge Kathryn C. Ferguson, at Sponder's request, granted converting the current owners' Chapter 11 bankruptcy filing to Chapter 7. However, Ferguson is also allowing Tolis to "seek other remedies outside of the bankruptcy."
The difference between a Chapter 11 and Chapter 7 filing is that a Chapter 11 allows a company to reorganize while still operating and Chapter 7 is a liquidation involving a company ceasing operation and having its assets sold, said Jane Linprecht, a spokesperson for the federal bankruptcy court.
When a bankruptcy filing is made, there is automatically a "stay" preventing creditors from seeking compensation outside of the bankruptcy proceeding. The judge's ruling on Tuesday lifted that stay, allowing Tolis to seek compensation through other means.
Although Boyadjis walked into the courtroom Tuesday hoping the judge would simply dismiss the US Trustee's request for conversion from Chapter 11 to Chapter 7, he was not unhappy with the ultimate ruling since the judge is leaving his clients with some wiggle room to get compensated.
"We're pleased with the judge's decision," said Boyadjis, who is also a cousin to the Kaiafas family.
So what are the "other means" Tolis will attempt to use?
"The uniform Construction Code provides for certain remedies that a secured creditor can take," Boyadjis said. "We had filed two foreclosure actions on the land and on a nearby house. We'll probably file a personal property foreclosure action on an emergent basis just so there is no question on the rights of ownership."
Boyadjis told Ferguson. "It will take us a while to rehabilitate it and re-open." He added that they don't even know if any food was left behind inside the diner.
"The debtor owes us about $2 million," including $800,000 on just one of the three outstanding notes, Boyadjis told the judge.
Outside the courtroom later, Boyadjis said his clients have repeatedly tried to work out payment arrangements and other adjustments to try to help the Mitchels keep the business and property.
"They stopped paying real estate taxes a long time ago," Boyadjis said. "We had to pay about $180,000 in real estate taxes for them. We could have foreclosed then."
"We also gave them more time to pay," said Andreas Kaiafas.
The Kaiafas family, years ago, had owned the Brick Diner on Route 70, which was called, at the time, the Ocean Queen Diner. The family still owns the land and collects rent from the current business owner, Boyadjis said.
On a real estate website page, the property of 6,340 square feet is listed as having an asking price of about $1.7 million. The listing says the diner seats more than 100 people.
At the time, Tolis Corp. was the seller and carried back a mortgage of $1,125,000, so Christo & Demetri has been making mortgage payments to the seller. However, they have been delinquent recently, Boyadjis said.
Mitchel, as president of "Point Pleasant Beach Diner Inc." doing business as "Ocean Bay Diner," filed for Chapter 11 bankruptcy on May 22, 2012, according to an online copy of the filing (see attached PDF). The "voluntary petition" has a long list of creditors owed a total of nearly $1.3 million (and that is just for the business, not for the real estate).
The creditor owed the greatest amount is Tolis Corp., 6 Lawrence Drive, Brick, which was owed $914,691.22, just for the business, as of May 22, according to the filing. Running a distant but still significant second is the state Division of Taxation which was owed $98,621.