Diner at it appeared in the '70s. © Ron Dylewski

After a previous bid to reorganize under Bankruptcy Court supervision was dismissed less than a year ago, the Highland Park Diner again is asking for the court's protection from creditors.

The new filing comes as the prominent local eatery faces a foreclosure action filed by its previous owner and as it struggles with state and federal tax woes.

Its previous owner, Robert Malley, who in the early 1980s revived it as a restaurant, retired and sold the business to its current owner, Evangelos Zissis, several years ago.

Zisco Restaurant LLC, which does business as the Highland Park Diner, filed its most recent Chapter 11 petition in the U.S. Bankruptcy Court in Rochester on Dec. 28. The filing states that Zissis is the corporation's sole member. The petition lists Zisco's current assets at $145,800 and liabilities at $446,923.

In 2006, Zissis inked a $127,500 mortgage on the restaurant property at 960 S. Clinton Ave. with Malley's real estate company, Malcro Corp.

In November, Malcro filed a notice of foreclosure against the eatery, according to records on file with the Monroe County Clerk's Office. Malcro's current claim on the South Clinton Avenue tract and diner building stands at $99,000, the restaurant's bankruptcy petition states.

Zissis said in an interview this week that a balloon payment on the mortgage is due and he currently would have difficulty paying in full. He filed the Chapter 11 petition in hope of restructuring the loan but has not discussed the possibility with Malley.

Malley did not return a call seeking comment.

The diner's previous Chapter 11-filed under Zissis' ownership in June 2008-was dismissed in February after the U.S. Trustee complained that the business had failed to file a reorganization plan and that Zissis appeared to have used company assets to pay personal expenses.

Zissis blamed the filing's failure on his attorney at the time. "I got bad legal advice," the restaurant owner said.

Approximately $560 that Zissis spent to pay hotel bills and roughly $1,000 spent at a sporting goods store and a Ralph Lauren outlet may well have been legitimate restaurant expenses, but without records detailing the outlays, it was impossible to say whether they were justified, filings state.

Zissis, who also had filed a personal Chapter 13 case in 2008, failed to turn over corporate records in the personal filing, said an attorney in the Rochester U.S. Trustee's office in a motion seeking dismissal of the 2008 case.

Court records show that Zissis' personal Chapter 13 case was converted to Chapter 7 and that the court denied him a discharge in the converted case. The discharge was denied because Zissis had been excused from debts in a 2002 personal Chapter 7, the records show.

The earlier bankruptcy would have caused the restaurateur to fun afoul of a rule barring Chapter 7 petitioners from receiving a discharge within seven years of a previous debt discharge.

Financial records submitted along with the Highland Park Diner's latest Chapter 11 filing show that it had net income of nearly $67,000 on sales of some $318,000 in the first eight months of 2009. The restaurant states that it lost $65,895 in 2008 and ran red ink of $108,607 in 2007.

The diner's bankruptcy petition states that it owes back taxes of more than $134,000. The restaurant's stated tax liabilities include sums owed to the city of Rochester and Monroe County for property taxes and to the state for unpaid sales tax and unemployment insurance fund contributions.

Also noted are amounts owed to the Internal Revenue Service for unpaid withholding and income taxes.

In a motion joining the U.S. Trustee's bid to have the restaurant's earlier Chapter 11 dismissed, filed in February, the state Department of Taxation and Finance said it had planned to seize the business, which at that time owed $70,000 in taxes delinquent since 2006.

The diner's past losses partly were due to unrelated investments that went sour at the same time when the iconic restaurant's business dipped, Zissis said in the interview. But in 2009, the outlook improved.

"We've turned a corner," the diner owner said. "We've completely remodeled and hired new help. Like everybody else, we had some bad times, but things are looking up now."

Manufactured and delivered in the 1940s to its present location at South Clinton and Highland avenues by the Orleans Diner Co. of Albion, Orleans County, the Highland Park Diner is one of the classic eateries known as railroad car diners.

They resembled railroad cars and often were delivered in prefabricated sections on flatbed rail cars. Railroad car diners dotted U.S. cities and highways through much of the 20th century. Many, including the Highland Park Diner, had a streamlined design, neon signs and extensive chrome trim.

Originally called Dauphin's Superior Diner, the building was turned into an OTB parlor in the 1970s. In the early 1980s, the building was renovated and revived as a restaurant by its previous owner, Malley.

Originally published online here: http://www.whec.com/news/stories/s1366472.shtml