Properties Previously Owned By Erich Russell Under Chapter 7 Bankruptcy Proceedings, Rabbit Ridge Winery is Now a Tenant
June 15, 2021
A Paso Robles winery, vineyards and other assets may be liquidated under bankruptcy proceedings, according to a court ruling issued Monday.
U.S. Bankruptcy Judge Mark S. Wallace on Monday placed property owner Northern Holdings LLC into Chapter 7 under the U.S. Bankruptcy Code. Northern Holdings filed for bankruptcy protection under Chapter 11 on Oct. 28, 2020, a day after acquiring three Paso Robles properties from Erich Russell, owner and founder of Rabbit Ridge Winery and Vineyards, according to court documents.
Wallace ruled Monday, after a U.S. Trustee overseeing the bankruptcy proceedings asked the court either to dismiss the Chapter 11 reorganization case or to convert it into a Chapter 7 matter, according to court records filed with the U.S. Bankruptcy Court for the Central District of California.
Among other points, the trustee alleged Northern Holdings had “failed to provide crucial financial information” since filing for bankruptcy in October and had used “cash generated by its properties without authorization,” according to court documents. A lender, Farm Credit West, said it had not consented “to the use of its cash collateral,” according to court filings.
Rabbit Ridge is now a tenant, according to court records. The winery at 1172 San Marcos Road in Paso Robles remains open, according to a Rabbit Ridge representative, who added that Russell is no longer the winery owner, though he remains the winemaker. Russell filed for bankruptcy in January 2020. However, that case has been dismissed.
Northern Holdings' bankruptcy proceedings have included a court-ordered marketing and sale of the winery, vineyards, homes and other assets which, until last fall, belonged to Russell.
Millions of dollars are at stake. Farm Credit, which has tangled with Russell for years, said it is owed more than $19 million, though it would accept $15.4 million to settle the debt, according to court filings. In addition, San Luis Obispo County is owed more than $3 million in real property taxes.
Northern Holdings told the court in February a company named Hilco Real Estate LLC would handle the sale of the Paso Robles properties included in its Chapter 11 bankruptcy case.
As of Monday, Hilco advertised the holdings on its website as “Two Magnificent Properties Available Together Or Separately In One Of California’s Premier Wine Regions.” The listings included about 310 acres of vineyard with a “turnkey Winery” and a 7,500 square-foot hilltop estate and a guest house on 160 acres. Built in 2002, the 45,262 square-foot winery can produce up to 400,000 cases a year, according to Hilco.
The bids were due June 10 under the Chapter 11 proceedings. On June 11, Leroy Codding, who represents Northern Holdings, said the company has received “several bids” on the various properties up for sale, according to court records. Northern Holdings is prepared to accept a bid for the property that includes the hilltop home on Live Oak Road, according to Codding’s court filing. Codding did not identify the possible buyer or the dollar amount offered for that property though he stated that the bid was “several million dollars higher” than its appraised value, according to the document.
Codding also reported “significant interest in the winery facility and the vineyard,” according to his court filing.
What happens next is unclear. A Hilco representative on Monday declined to comment on Monday’s proceedings.