Souvenirs auctioned off

November 22, 1992|By Frank Lynch | Frank Lynch,Staff Writer

Souvenirs Restaurant, the trendy eatery on Bel Air's Main Street, went to the auction block Thursday, a day after one of its co-owners filed for protection from creditors under federal bankruptcy law.

But as some 60 people huddled outside the restaurant in the rain for the 15-minute auction, only the mortgage holder, Key Federal Savings Bank, bid, offering $200,000 for the building and $25,000 for the restaurant fixtures and equipment.

Ownership of the restaurant, however, remains in dispute.

Before the Harford County Circuit Court can ratify the sale, the U.S. Bankruptcy Court must determine whether the debtor, Paul V. Thompson, is entitled to a 30-day grace period to come up with a reorganization plan.

If granted, Mr. Thompson, who owns the building with his ex-wife, Holly, would have to submit a reorganization plan, subject to creditors' approval.

The Thompsons, who divorced in January, had initially agreed to repay their $370,082 loan for the restaurant by May 1.

Key Federal said in court papers that as of Sept. 29, the Thompsons owed $415,824, including $42,918 in interest and late fees of $3,920.

Daniel W. Hume, a Key Federal vice president, referred a reporter's call to the bank's attorneys, Bernard Dackman and Gordon B. Heyman. Neither was available for comment.

Mr. Thompson said he filed for Chapter 11 bankruptcy Wednesday specifically to block sale of the Main Street building and restaurant fixtures.

"I'm going to do whatever it takes to protect my investment," said Mr. Thompson.

"I won't allow anyone to take the property away from me. Also, I'm trying to protect my ex-wife's business. She's put so much of herself into this business."

Mrs. Thompson, who bought the restaurant with her husband in May 1986, said she intends to keep it operating until the bankruptcy court makes a determination. She said the original mortgage on the property was issued to her and her husband by Commercial Bank, and they were awaiting an additional loan, subject to approval by Dan Fitzpatrick, who was the bank's president.

Before the second loan was made final, Mr. Fitzpatrick died, and the new officers rejected the loan. That put Souvenirs' owners in the hole immediately, Mrs. Thompson said.

In 1987, the Thompsons refinanced their mortgage through Key Federal Savings Bank. The $400,000 loan called for monthly payments of $4,404.

By 1990, business at the Main Street restaurant increased substantially, said Mrs. Thompson, and by 1990 she was having no difficulty paying her bills.

She began to notice a drop in business early in 1991 and said it has continued on a downward spiral since.

By June 1991, the Thompsons owed about $700,000, including over $200,000 in federal taxes and another $110,000 for a personal loan from a Harford County dentist.

To protect her investment, Mrs. Thompson filed for bankruptcy under Chapter 11 on Sept. 3, 1991.

On Aug. 7 of this year, Judge James F. Schneider dismissed the petition because Mrs. Thompson failed to file a reorganization plan within a "reasonable" time.

On Jan. 9, 1992, the judge ordered her to file a monthly financial report or have her bankruptcy petition dismissed on May 3.

The judge extended the deadline to Aug. 3, when papers filed by Mrs. Thompson's attorney, Thomas DeCaro, indicated she was seeking a buyer or an investor.

That steady decline brought her to the brink of losing her entire investment Thursday when auctioneer Joe Cooper of Alex Cooper Auctioneers, Inc. entertained offers on behalf of Key Federal.

Mrs. Thompson said she recognized several restaurant owners in the crowd Thursday and believes they were there to buy the equipment only. "Let's face it," she said, "it would be cheaper for them to buy this at an auction. I don't blame then for seeking a break."

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