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Charles B. Mitchell Vineyards/Conti Estate Winery Files Chapt. 11

MC2 Wines, owned by Michael and Michelle Conti of El Dorado County, has filed Chapter 11 bankruptcy protection for its Charles B. Mitchell Vineyards/Conti Estate Winery located in California’s Fair Play AVA.

Attorney David Foyil of Sutter Creek — who represents both MC2 and the Contis — said he expects to enter a separate personal Chapter 11 filing on behalf of the Contis next week.

LAWSUITS, BANK’S DEFAULT NOTICE PROMPTED BANKRUPTCY

According to public documents and sources familiar with the bankruptcy, a growing raft of lawsuits and the threatened foreclosure on its real estate precipitated the filing. The filing was made Feb. 6 in Sacramento, at the U.S. Bankruptcy Court for the Eastern District of California.

The Bank of Alameda, which holds the trust deed on the winery’s real estate, filed a notice of default on February 4.  The Contis filed bankruptcy the day before.

While one lawsuit is mentioned specifically in the filing’s list of the 20 largest creditors, Wine Industry Insight has interviewed parties involved in additional legal proceedings.  Among those are a building contractor and  group of  growers whose litigation over unpaid grapes has been stayed by the Chapter 11 filing. (More on those in a follow-up article)

LIST OF LARGEST UNSECURED CREDITORS IS FLAWED

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Interviews and public documents indicate that the $2+ million loan from the Bank of Alameda is, in fact, secured by a first trust deed on the Conti’s real estate.

The winery, at 8221 Stoney Creek Road, Somerset Rd., consists on 39.6-acres with at least 12 acres of vineyard. The Contis purchased the property, along with associated winery assets, in February 2007.

DOUBTS RAISED ABOUT VALIDITY OF BANKRUPTCY FILING

WII has interviewed more than half a dozen people familiar with the filing — including creditors and others involved in litigation — who question the validity of the filing.

“The filing is in the name of MC2 Wines,” said one creditor, “but our contract is with the Contis, not the MC2 corporation.”

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Indeed, the El Dorado County Recorder’s office shows no deeds or other filings in the name of MC2, but numerous others in the name of Michael and Michelle Conti. Those include the winery real estate deeds, UCC filings,  as well as the default notice.

“The fact that the property is owned by the Contis personally and the bankruptcy was filed for the MC2 corporation may mean that Chapter 11 protection might not stay legal actions and foreclosure,” said a bankruptcy attorney not connected with the case. “That, however, is for the judge to decide.”

CONTI ATTORNEY SAYS TWO FILINGS ANTICIPATED

MC2/Conti  David Foyil emailed the following statement to Wine Industry Insight:

I represent both Michael and Michelle Conti in addition to MC2 Wines, Inc.  At the outset my clients and I anticipated filing two chapter 11 cases–one on behalf of MC2 Wines and the other on behalf of the Conti’s individually.  I expect the individual case on behalf of the Conti’s will be filed next week.  A notice of the related MC2 Wines case will be filed as well so all parties of interest can relate the two cases to the other as appropriate.  There is no legal requirement that the cases be filed concurrently, and the fact that they were not is not a basis to question the validity of either.

“There may, in fact, be some parties identified as creditors within the MC2 Wines case who are really creditors of the Conti’s personally.  In a situation where the relationship of the parties is not necessarily clear and a “skeleton case” is filed with limited information in order to invoke the protection of the bankruptcy court, I encourage clients to list potential creditors so at least everyone is put on notice of the pending proceedings.  That is also not a reason to question the validity of the case, especially when the schedules and statement of financial affairs have not yet been filed the purpose of which is to offer some clarification as to the relationship of the parties.

“Upon the filing of the Conti case, there will likely be some duplication of creditors, because as I understand certain transactions, the Conti’s personally guaranteed some obligations of the company.  However, I have just received a number of documents which will need to be reviewed, and which shed some light on which interested parties are creditors of the company and which are creditors of the individuals.

“I am unable to comment on any pending litigation at this time other than to confirm that I will be reviewing information regarding lawsuits to which my clients are parties and expect those issues to be raised in the Bankruptcy Court as both cases unfold and to further state that my clients are anxious to have their claims addressed as swiftly as possible”

SCHEDULES SET FOR COMPLETED FILING, HEARING, CREDITORS MEETING

The Bankruptcy Court has given MC2 until Feb 18 to file an extensive list of documents missing from its original, bare-bones filing.

The creditor’s meeting has been scheduled for 9 a.m., March 6 at the U.S. Trustee’s office, 501 I Street, Suite 7-500 in Sacramento.

The preliminary status conference has been set for 11 a.m., March 9 at the U.S. Bankruptcy Court, 501 I Street, Suite 3-200 in Sacramento.

ARTICLE CORRECTION

A correction has been made in the original article which stated that the Contis had filed Chapter 11 on Feb. 6. They filed their list of the 20 Largest Unsecured Creditors on Feb. 6. The original Chapter 11 papers were filed on Feb. 3.