El Cajon Brewing Company, Chapter 11

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

Word has it he is already taking stuff home....

 

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.

 

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.

 

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.

 

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.

 

Fair enough.

 

All depends on how the lease is written...beyond the law the devil is in the details of the contract.

 

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.

 

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