Dismissal of 417 Rentals’ bankruptcy case means Mt. Vernon can proceed with expected legal action

Legal action being taken by the city of Mt. Vernon against 417 Rentals will proceed, thanks to the dismissal of the company’s Chapter 11 Bankruptcy case on Jan. 16 of this year.
Bill Petrus, attorney for Mt. Vernon, said the city is currently seeking an injunction against 417 Rentals from continuing to rent out units at a Mt. Vernon complex located at 301 W. Mt. Vernon Blvd., as apartments due to the company’s failure to meet conditions which the city stipulated when it issued a permit to Chris Gatley, the then owner of the building, to rent the units out as efficiency apartments.
“Renting of rooms at the Walnuts as housing … due to their small size, is only allowed under what is called a conditional-use permit,” Petrus said. “The city granted Gatley (and) 417 a conditional-use permit to use the Walnuts as efficiency apartments so long as 417 complied with two conditions: having a full-time, on-site manager and keeping the gate closed on the north end of the lot.”
According to a petition provided by Petrus, the city issued Gatley the permit during a meeting on June 3, 2008. About two months later, Gatley transferred ownership of the Walnuts to his business, 417 Rentals. However, the petition states, 417 failed to live up to the provisions of the permit and the city’s Planning and Zoning Commission held a hearing on Oct. 3, 2017, to determine whether the conditional-use permit should be revoked. The commission recommended revoking the permit, and at a meeting on Oct. 10, 2017, the Mt. Vernon Board of Aldermen followed the commission’s recommendation and revoked 417 Rental’s conditional-use permit for the Walnuts.
The petition stated that 417 Rentals continued to rent out units at the Walnuts as efficiency apartments, in violation of the city’s municipal code, and requested a permanent injunction from 417 renting out the units, as well as the city’s attorney fees, costs, “and for whatever other relief the Court deems just and proper.” After the city filed its petition on March 20, 2018, Petrus said, Gatley’s attorney used 417’s pending Chapter 11 Bankruptcy case, filed on Aug. 25, 2017, to keep the city’s lawsuit from moving forward.
“People (and) companies filing bankruptcy get the benefit of an automatic stay of any other collection proceedings or litigation,” Petrus said. “When we filed the case, his attorney filed Suggestions of Bankruptcy, claiming relief under the stay. I believe there is a disputable issue about whether the automatic stay provisions can keep the city from enforcing its ordinances, but without litigating it in the bankruptcy court, it remained a question.”
With the dismissal of the bankruptcy case, Petrus said, the litigation is now free to proceed. Currently, a hearing is scheduled for Feb. 13, though Petrus said he would have to continue the case because he will be unable to be present on that day.
“I anticipate a hearing to determine whether the injunction is granted,” he added.
Gatley was the victim of a shooting in Brookline, near Republic, on Sunday, Jan. 27, of this year, and he is currently in critical condition at a hospital in or around Springfield. The Greene County Sheriff’s Office, which is currently investigating the shooting, is currently declining to state whether or not the shooting was accidental or if they have a suspect, citing the ongoing investigation. However, Petrus said the shooting will have no effect on the city’s litigation.
 “The shooting of Mr. Gatley should have no effect or impact on our case against (417 Rentals), Petrus said. “It is a separate entity from Mr. Gatley for all legal purposes.”
While things have not worked out with 417, Petrus said the case demonstrates the city’s willingness to be flexible on its zoning ordinances for the benefit of its residents.
“If the city had simply stood fast on its zoning regulations, the property would have been left to deteriorate or had to have been torn down,” he said. “By creating the use of efficiency apartments, the city allowed the owner to make a new use of that property that, in theory, could have provided a service to citizens and the city. Hindsight being 20-20, we know that 417 was not the right company to run such an operation, as the building was not maintained during the time 417 owned and tried to rent it, along with failing to comply with the conditional use permit, (but) I still stand by the city’s decision to create the use of efficiency apartments. If a new owner purchases the property and brings it back up to the standards of our code, the new owner can seek a conditional use permit to allow the renting of efficiency apartments at that location again, keeping the property productive and contributing to the city rather than becoming an eyesore.”