On Jan. 30, Yong Piening, the owner, signed a lease-to-buy agreement with Joel Costonis. The two agreed on an owner-financed deal where Costonis was to pay Piening a percentage of the monthly and annual profits until he reached the purchase price of $3.4 million.
When Costonis took possession of the building, it had recently been closed by the fire marshal, and the Department of Environmental Conservation had a 2 1/2- page list of citations on the structure.
  
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Less than a month later, Pacific International Bank, Piening’s lender, asked the court to put the building in receivership. Piening had not made payments for 15 months, said court-appointed receiver Kevin Tubbs. A foreclosure hearing was set for June.
Before Tubbs took possession of the building, Costonis offered to take over the payments for Piening even though their contract explicitly states Costonis is not responsible for any outstanding debts Piening had. The bank agreed, as foreclosure is always a last resort.
However, Tubbs said, the bank never received its payments, and Pacific International asked Tubbs to lock the building to protect its assets.
Tubbs toured the building in the beginning of March and found tenants living in the rooms, many of whom were working for room and board from Costonis. The bank gave them a few days to get their property out, then Tubbs changed the locks.
The court revisited the matter on March 12. Piening and Costonis pleaded their case to the judge claiming the business could make a profit. The judge ruled to lift the receivership.
Shortly thereafter, the city of Palmer revoked the building’s business license citing $64,894.38 was owed in back taxes.
A few days after the March 12 ruling, Piening called Tubbs to get possession of the keys. Tubbs was confused because he had already seen Costonis in the building. Piening thought Tubbs was joking at first, Tubbs said. When she realized he was serious, she asked Tubbs to take receivership of the building again.
“I’ve been a court-appointed receiver for a long time,” Tubbs said, “but I have never seen a mortgagee ask for her property to be put back into receivership.”
The building can only be put into receivership by a court ruling, and the judge could not fit the case into the docket until Thursday.
In the meantime, Costonis still controlled the building under the contract Piening had signed, but he could not get a business license from the city. The state and the borough have already given him licenses, said Costonis, but the city will not do so until he pays the entire sum of back taxes.
Without a business license, he cannot generate the revenue to pay the city and the bank, Costonis said.
“I’ve already agreed to pay the $55,000 in back payments to the bank,” said Costonis. “I am willing to make up the back taxes, but they are not willing to work with me. Ideally, they would give me a provisional license and demand I make quarterly payments on what’s owed.”
City Manager Bill Allen said the city is willing to work with people if there is a legitimate case of hardship. However, in this case, the city does not want to extend a line of credit to Costonis when he still does not technically own the building.
“I don’t know who owns the property. I don’t know if I’m dealing with the bank, with Joel or with Ms. Piening,” Allen said. “This thing is in litigation. The city does not want to be involved in it. (...) If Joel becomes the owner and he applies for a business license in good standing with all the utility bills and taxes paid, we will give it to him.”
Costonis said he could probably pay the debt out of his own pocket, but he has no assurances he will get his license if he does.
“I’m starting to feel like I’m throwing good money after bad,” he said. “Am I going to gamble and risk the integrity of my hard-earned money on a debt that’s not mine? Right now, the business cannot afford to put out $65,000 before I start bringing money in.”
Beyond the $3,000 to $5,000 Costonis claims he is losing everyday, the impact to Palmer is his main concern, he said. In addition to the bar, restaurant and hotel, the room in the back was a place for teenagers to hang out in an alcohol-free environment. He said he partnered with the Red Cross to give victims of domestic violence a place to stay, and employees were allowed to temporarily work for room and board if they needed help.
Additionally, Palmer is stifling their own economic growth, Costonis said. All of his employees are now out of work, and other revenue-generating businesses were headquatered in the building. A new visitor center was even looking at moving in, he said.
“The fact that the city won’t give me my license is incredibly counterproductive,” Costonis said. “If I lose (the building), it will sit vacant for a long time.”
Thursday the court ruled to put the building back into Tubb’s receivership. During the hearing Costonis was at an interview with KWHL in Anchorage. Less than an hour after getting back to the 49th Star, Palmer Police showed up with Tubbs.
The police ordered him to collect his personal belongs and leave the building immediately. The bank had taken possession of the building and issued a trespass order if Costonis returned.
“When I toured this building three weeks ago, it was ready to either run or sell,” said Tubbs. “Now look at it. The rooms are thrashed, all the TVs and artwork are gone, and the room full of liquor is missing.”
But even Costonis admits that this all could have been avoided if he got title insurance on the original transaction.
“Had I done this the proper way, this wouldn’t have happened,” said Costonis. “I didn’t want to do that for personal reasons.”
Now, the building will go to the foreclosure hearing in June.
Comments
23 comment(s)Lexicographer wrote on Apr 8, 2009 10:53 PM:
Palmerman wrote on Apr 5, 2009 11:25 PM:
Who will be the next victim?
Prison might be too good for this guy. "
Another Valley Mom wrote on Apr 5, 2009 6:57 PM:
Another Valley Mom wrote on Apr 5, 2009 6:54 PM:
business owner of wasilla wrote on Apr 4, 2009 3:46 PM:
OH wow wrote on Apr 4, 2009 2:51 PM:
When its a pollitical deal they always win.. "
Rainboo wrote on Apr 4, 2009 1:31 PM:
akroho wrote on Apr 4, 2009 10:50 AM:
guess the Olympics really are over... wrote on Apr 4, 2009 9:32 AM:
What a tremendous waste of court costs and time we all have to pay to get this scum and her "partner" out of our communities.
Delinquent Property Tax---what's the big deal? Some developing contractors (Россия) don't pay their property taxes either, ever, hoping to flip their bank funded new constructions before taxes are due or just let the penalties ride tacking them onto the selling price to get paid sometimes years later in a closing. "
Casper wrote on Apr 3, 2009 6:11 PM:
Jane Doe wrote on Apr 3, 2009 5:49 PM:
Timely Tax Payer 2 wrote on Apr 3, 2009 12:47 PM:
JustBecause wrote on Apr 3, 2009 12:21 PM:
There ya go. Still feel sorry for him? "
Mr. Obvious wrote on Apr 3, 2009 12:13 PM:
Never paid staff, electric, gas, garbage, tax, bank, vendors, or the REAL owner- and tries to cry foul?
Mommy says sorry it happened to you?HARDLY. This guy did this to himself, then screwed everyone.
He paints the windows in psychotic diatribe blaming the city manager, owner, and town of Palmer for what amounts to his own woeful lack of business accumen.
When he finally understands who his worst enemy is, let's hope there is a mirror nearby! "
DO NOT DO BUSINESS IN PALMER wrote on Apr 3, 2009 11:53 AM:
contractor wrote on Apr 3, 2009 9:52 AM:
khbalaska wrote on Apr 3, 2009 9:41 AM:
Timely Tax Payer wrote on Apr 3, 2009 9:02 AM:
Whatsinaname wrote on Apr 3, 2009 9:00 AM:
Dumb dumb dumb wrote on Apr 3, 2009 8:29 AM:
John Smith wrote on Apr 3, 2009 3:50 AM:
voice of reason wrote on Apr 3, 2009 3:47 AM:
How embarrassing to the paper. Soapy Smith is rolling with laughter over this one.
Did the business owner Yong Piening ever get interviewed? Was the attorney for the case interviewed? Any chance the court records have been reviewed?
The proof is in the pudding and the writer of this article has an empty bowl.
CON ARTISTS LIKE THIS DO NOT BELONG IN ALASKA. ASK HIS EMPLOYEES IF HE IS FOR REAL.
Shame, shame, shame. "
Valley mom wrote on Apr 3, 2009 12:24 AM: