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El Cajon Brewing Company, Chapter 11

Discussion in 'US - Pacific' started by evilc, Oct 22, 2012.

  1. CarlStarrett

    CarlStarrett Member

    Location:
    California
    They have about 8 of their own and maybe a dozen or so others. My wife really likes the Quatro Cajones Quad IPA.
  2. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Ick...things aren't looking good right now. Court documents indicate that ECBC is 28 months behind just on the alone. In addition to rent, there is common area maintenance fees, property taxes and insurance.

    I feel badly for the employees there, but the bankruptcy court lifted the automatic stay so the landlord could continue the eviction lawsuit. I'm guessing they will be out of business by the summer.
  3. Xul

    Xul Member

    Location:
    California
    28 months? They opened in October 2011...I don't know when they moved into the space, but did they ever even pay rent?
  4. CarlStarrett

    CarlStarrett Member

    Location:
    California
    The court documents say that the lease was signed in October of 2009, so it would seem they have paid maybe 6 months of the rent during that time. It seemed like construction took forever too.
  5. UCLABrewN84

    UCLABrewN84 Member

    Location:
    California
    Shit, I better get down there and tick before they go under. :rolleyes:
  6. Sebowski

    Sebowski Member

    Location:
    California
    I'm enjoying both. Thanks for the updates, Carl.
  7. evilc

    evilc Member

    Location:
    California
    The entire existence of this place been a clusterfuck. 2 year delays in opening, the works.
  8. MacNCheese

    MacNCheese Member

    Location:
    California
    Stay out of Malibu El Cajon Lebowski. Stay out you deadbeat goldbricker!

    28 MONTHS behind on rent! Fuck that!
    JRoth420 likes this.
  9. evilc

    evilc Member

    Location:
    California
    How exactly does a business recover and make good on 28 months back rent? 2 customers per hour doesn't seem like it will cut it.
  10. DoughIn

    DoughIn Member

    Location:
    California
    Douche bag had it coming. What a sorry despicable
    Man. I could have made that place work
    By brewing beer and being part of the brewing
    Community. Collaborations, beer dinners, events
    Tap take overs etc etc...
    But liars and cheaters who rip others off (especially
    Relatives)
    Always get what's coming to them.

    I would keep my eye on that DB cause he will
    Try to take the equipment out of there for sure.
    Probably stash it in a Kingdom Hall
    The system is NOT attached to the floor.
  11. sandiego67

    sandiego67 Member

    Location:
    California
    He is free to do whatever he wants with the equipment.

    I don't understand how anyone can think that the equipment belongs to the landlord.

    Take another brewer, Ballast Point for example. They don't own the building that they occupy in Scripps Ranch. Does anyone really believe that their landlord somehow owns all of the brewing and bottling equipment because it is bolted to the floor?
  12. nanobrew

    nanobrew Member

    Location:
    California

    I agree in thinking the landlord doesn't own the equipment, but neither does this owner of ECBC. He has sooo much outstanding debt that I am sure there is a loan on the equipment, or at least he would have t sell the equipment to pay off other debts (such as rent or the massive generous loan he got from the city).
  13. evilc

    evilc Member

    Location:
    California
    You and your brother should hold an exhibition boxing match in El Cajon. I'd buy tickets!~
  14. MacNCheese

    MacNCheese Member

    Location:
    California
    It might end up wherever Alpine's 30bbl brite tank went too...

    Keep the updates coming! This War of the Roses is entertaining!
    JRoth420 likes this.
  15. CarlStarrett

    CarlStarrett Member

    Location:
    California
    I disagree. I think this place was doomed from the beginning. The location, the layout, the lack of a full liquor license, it just wasn't going to work.
  16. evilc

    evilc Member

    Location:
    California
    How many beer focused brewpubs have full liquor licenses?
  17. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Take a look earlier in this this thread for my discussion about fixtures. I realize that real estate law isn't exactly the most exciting thing to talk about in a form dedicated to beer. That that become attached to real estate like water heaters, furnaces and other items that tend to be bolted down or "permanently" attached are usually fixtures. A fixture becomes party of the property and legally belong to the landlord.

    As a practical matter, however, most landlords won't press the issue because the next tenant might not necessarily be a brew pub and the landlord might want the stuff out of there.
  18. MacNCheese

    MacNCheese Member

    Location:
    California
    I disagree. If you make good beer, people will come. Look at Alpine. A family friendly brewpub will bring in families, look at Pizza Port. I'm sure with new ownership the place could thrive, the beery world is slowly expanding east.
    JustXBeer likes this.
  19. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Ones that aren't in the best locations for a brewpub. ECBC said in court documents they were trying to get a full liquor license.
  20. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Legally, the landlord does own the equipment if it is permanent attached to the building. Would the landlord want it? Unlikely.
  21. evilc

    evilc Member

    Location:
    California
    Alpine isn't in a good location for a brewpub. Think they need a full license? All you need is good beer.

    Do brewpubs get rave reviews when they serve Skinny Girl margaritas?
    jp7161 likes this.
  22. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Perhaps...I've never been to Pizza Port. But there is one other factor to consider. A restaurant usually needs a decent lunch to keep open. El Cajon isn't exactly an economic power house.

    if you look at some of the other local breweries, they usually have a busy lunch rush. If ever visit the Old Columbia Brewery on a weekday, they are packed for lunch. They are within easy walking distance for thousands of people who work downtown. Not so much for restaurants in El Cajon.

    And of course we know the layout was horrible. Even when it is busy, the place looks dead.
  23. MacNCheese

    MacNCheese Member

    Location:
    California
    Yeah but once a building is set for a brewery (water, drainage, gaslines) it makes sense to put another brewery in. That's massive TI right there. And....the beery world is exploding. So that equipment could be sold off VERY fast, there are 30+ breweries in the planning stages...so if the landlord was owed rent, keeping the hardware and selling it off would offset the rent loss. Landlord would be fool to not keep it if they could. Hell the wait time for a new brewhouse from Premier Stainless is 6 to 9 months. Any brewery in planning would jump to get a discounted pre-built system Now...vs. waiting.
  24. MacNCheese

    MacNCheese Member

    Location:
    California
    Go to a Pizza Port, see how a real brewpub is done. If you enjoyed the crap ECB was slinging...you'll fall over dead when visitng PPOB.
  25. CarlStarrett

    CarlStarrett Member

    Location:
    California
    I have no information regarding the financial condition of the place in Alpine. But a smaller footprint in a less desirable location can also mean much lower overhead.
  26. CarlStarrett

    CarlStarrett Member

    Location:
    California
    I suppose it might work with the right people in place, but it really depends on the landlord as well. It has been years since that place had a tenant paying rent and now might be the right time for someone to make an offer to step it.

    If I recall correctly, that place used to be a Blockbuster or Hollywood Video that went out a long time ago.
  27. sandiego67

    sandiego67 Member

    Location:
    California
    Generally, improvements made by a tenant that are permanently attached to the property become part of the real estate. A trade fixture is an improvement that is attached to real estate that is unique to the operation of a business. It may be removable by a tenant if it can be done without damaging the property. A trade fixture is installed by a tenant under the terms of a lease and is used in the business of the tenant. Trade fixtures are removable by the tenant before the lease expires, however, the tenant is liable for any damages caused by such removal. They are distinguished from other fixtures which are considered improvements to real property and which must be left intact when the tenant vacates the premises. In the U.S., a sale of land generally includes any permanent fixtures, unless an item is expressly excluded. Trade fixtures are an exception to this general rule. Common factors examined in determining the nature of the fixture include the degree of the item’s annexation or permanence to the property—whether it can be removed without material injury to the land or building to which it was attached; the extent to which the item was adapted for the intended use of the property, that is, its appropriateness for the poses for which the property was used; and the intention of the person who annexed it.
    pinkgrenade likes this.
  28. nanobrew

    nanobrew Member

    Location:
    California
    that doesn't sound right at all. How the hell would it be the landlords property? This is not some new venting system running through the roof, or plumbing and pumps under ground. It can be removed without destroying the building. I can see how the landlord can take ownership due to the missed payments. However, in your scenario, a landlord could raise the rent once the lease is up to some ridiculous amount, and then keep the near million dollars worth of equipment. I have heard of plenty of breweries when moving and expanding that sell off their old equipment.

    edit: thank you sandiego67 for the post above.
  29. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Except that most "trade fixtures" are subject to a security interest in favor of the landlord contained in the lease. And if ECBC also granted a security interest to the seller of the equipment, then the fight would be between the landlord and the secured lender on the equipment.
  30. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Except it is an incomplete statement of the law in California. Every commercial lease I've ever drafted for a landlord or reviewed on behalf of a tenant has a security interest in favor of the landlord. Why? For the reasons noted by MacNCheese: it might be easier to get a new tenant in the place.
  31. nanobrew

    nanobrew Member

    Location:
    California
    well yes, as a security they can own the property. But you have been making it sounds as though they out right own it by principle that ECBC put it inside the property. The reason the landlord would own it is because ECBC has not been paying rent. Same as if I decided to stop paying my debts, I can have other thing repossessed to cover those debts.
  32. DoughIn

    DoughIn Member

    Location:
    California
    Word has it he is already taking stuff home....
  33. sandiego67

    sandiego67 Member

    Location:
    California
    The fact that they are in Chapter 11 Bankruptcy reorganization trumps everything. The judge/receiver could determine that their is no "equity" to preserve and order the equipment sold to the highest bidder to pay all of the debtors and establish their priority. It is highly unlikely that the Judge will hand over the equipment to the landlord.
  34. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Well, I was trying to avoid too much off topic discussion. Let's face it...law is boring. Beer is better than law, wouldn't you agree?

    If people are interested in hearing me blather on about the nuances of trade fixtures vs. fixtures vs. landlord and vendor security interests, I can do that. And if someone drops in a Wikipedia quote from case that doesn't even seem to be from California, I'll respond. So, my bad if I wasn't detailed enough.

    In 1975, the California Supreme Court decided a case where the landlord's security interest trumped the vendor's security interest. I'd have to dig a little deeper to see if that rule has changed.
    Beerandraiderfan and nanobrew like this.
  35. jtmartino

    jtmartino Member

    Location:
    California
    I am definitely interested in this discussion, and appreciate your input, but as a BA you need to drop whatever you're doing and get your ass to Pizza Port. You can thank me later.
    Beerandraiderfan likes this.
  36. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Well, not really. The Chapter 11 filing created the automatic stay, which halted all collection efforts temporarily. If the debtor is able to put forth a plan of reorganization that can be confirmed by the court, the confirmation makes the plan a binding court order. In this case, there is still no plan on file and the court rejected ECBC's proposal to assume the lease. The judge also granted relief from the automatic stay so the landlord could continue to seek eviction.

    Chapter 11 also does not provide an avenue for debtors to alter the priorities of the creditors. Secured creditors get paid before unsecured creditors. If the landlord does have a valid security interest per the lease, then any trustee assigned to liquidate the assets can't simply come in and take the equipment and not pay the security interest.

    Also, the only reason for a trustee to sell property would be if there WAS equity that generate money to pay unsecured creditors.
  37. CarlStarrett

    CarlStarrett Member

    Location:
    California
    Fair enough.
    jtmartino likes this.
  38. MacNCheese

    MacNCheese Member

    Location:
    California
    All depends on how the lease is written...beyond the law the devil is in the details of the contract.
  39. CarlStarrett

    CarlStarrett Member

    Location:
    California
    If true, there will most likely lots of litigation down the road.

    I feel badly for the people that work there. I know some of them read this forum and I've been recognized when I go in there. To be honest, as much as I enjoy the place, I can't see myself going back in there and that's really sad in a way. I like the people, food, beer and the service even though others don't. But when the place is probably going to be going out soon, I don't even want to think about what corners might be cut. Food safety is honestly a big concern for me now and I just can't see myself going back there now.
  40. HopHead84

    HopHead84 Member

    Location:
    California
    Do you happen to know the legal structure of El Cajon Brewing Company?

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