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WARREN -- An effort by Sergio DiPaolo to retain control of the former Packard Electric plant while in U.S. Bankruptcy Court received a setback earlier this month when bankruptcy Judge Kay Woods denied a motion to convert the bankruptcy from Chapter 7 to Chapter 11.
That decision could pave the way for the property to be sold.
The property is the center of a fight between local businessmen DiPaolo and Christopher Alan, a Warren native who came back from California in 2015, promising to bring nearly 1,000 high-paying engineering jobs to the city by bringing an automatic parking garage manufacturing facility to the city.
The former Packard Electric plant on Dana Street is owned by Maximus III Properties LLC, which was placed under Chapter 7 bankruptcy on Oct. 7, 2017. DiPaolo owns Maximus III Properties LLC.
Under Chapter 7 bankruptcy, the property is sold by an assigned bankruptcy court trustee. Under Chapter 11, the owner is allowed to negotiate with creditors for the repayment of debts, but does not have to sell the properties.
Alan leased the Dana Street property from DiPaolo in 2015, with the stated intention to purchase it.
However, the two sides could not come up with a final deal.
DiPaolo placed Maximus III Properties LLC properties on Dana and Griswold streets in Chapter 11 bankruptcy in September before they could be sold for its failure to pay property taxes of $261,100. The bankruptcy court changed the filing to Chapter 7 on Oct. 2, because it was felt the property could be quickly sold by a trustee and the debts paid.
DiPaolo sought to have the bankruptcy changed back to Chapter 11, which would have allowed him to negotiate with creditors to alter debts owed without selling the property.
During the Feb. 1 bankruptcy hearing, DiPaolo noted the former Packard Electric building on Dana Street has value and he has a buyer ready to purchase the property.
DiPaolo told the court the potential buyer was GEP Fuel & Energy Indiana, LLC. DiPaolo told the court that he had to maintain control of the property because the trustee previously made disparging statements about it, which reduced its value.
Woods, in her ruling, said DiPaolo has failed to provide sufficient reasons to allow the case to move back to Chapter 11 bankruptcy.
"Mr. DiPaolo's desire and intent (is) to resume control of the debtor and be put back in charge of the debtor's day-to-day operations," Woods wrote in her opinion. "This would benefit Mr. DiPaolo, but it is not at all clear that there would be any benefit to the debtor, the creditors, or the bankruptcy estate.
Woods said the fact that DiPaolo failed to notify the trustee of his efforts to sell the property to GEP is the cause of the sale's risk.
"The court will not reward Mr. DiPaolo's conduct in failing to disclose the potential purchaser to the trustee by reconverting the case," Woods wrote.
Warren Safety Service Director Enzo Cantalamessa said GEP pulled out of the negotiations to purchase the property once it learned of the environmental obligations the purchaser will have to take on.
"We are waiting to see if the court will allow the trustee to make a direct sell to Christopher Alan," Cantalamessa said.
DiPaolo could not be reached for comment Wednesday.
During Wednesday's council meeting, an ordinance to remove concrete barriers on Dana Street was placed in first reading. The barriers were placed on the street at the request of Alan to protect the properties from vandals.
Some neighborhood residents expressed concern the barriers were not increasing safety and causing other traffic problems, according to Councilman Alford Novak, D-2nd Ward.
Alan, through Dasher-Lawless, in the meantime has purchased the former GE building, which is across from the Packard Electric site, to be used for his facility.
rsmith@tribtoday.com