Who’s On First? Sonoma Valley Winery Saga Combines Falcon Crest, Abbott & Costello

PART ONE OF A SERIES: TURNING GOLD INTO LEAD

A set of county-approved use and building permits for a 125,000-case winery and tasting room at the northern end of Sonoma Valley may seem like a gold mine to many in the wine industry. But the decade-long soap opera of  Mobius Painter Winery and Cellars shows how even the best ideas from the best people can go very bad when investors turn on each other.

Mobius Painter’s long trail of lawsuits, fraud accusations, bitter recriminations, jilted buyers and angry, uncooperative investors may now be entering its final episodes in bankruptcy court.

U.S. Bankruptcy Court Judge Alan Jaroslovsky recently sent the quarreling partners back to the drawing board to hammer out an agreement that was not only equitable, but one which the average genius would be able to comprehend.

COURT DOCUMENTS TELL A FRACTURED TALE

In 1998 prominent winemaker Brooks Painter – who was then at Stags Leap Wine Cellars – was tapped to help create a new winery and custom crush facility.

The fledgling venture teamed up with Orange County developer Bruce Halvax. Through his efforts, a 15-acre parcel of vacant land was acquired on Highway 12 at the northern end of Sonoma Valley. The parcel lies across the highway, east of the Oakmont development and, north of (and adjacent to) the NovaVines rootstock nursery.

According to Halvax, the land purchase was all cash and part of a 1031 swap for a piece of land owned by him and a dozen other investors who became the landowners of the winery parcel. According to court documents, Halvax owned 36.2% of the land, the largest single fraction.

Then, in January 1999, Halvax filed the winery plans and permit requests with the County of Sonoma.

Shortly after the original sale closed, Halvax borrowed $100,000 from Interstate Lumber Profit Share Plan, a Riverside, Calif., corporation. The April 1999 loan was secured by a first trust deed on the 15-acres.

TAPPING ARIZONA

Following that transaction, Halvax raised an additional $480,000 from six more Arizona investors to further develop the planning and permitting for the winery. Halvax said this second group, (which included Painter), got a 1% interest in the land, an option to buy it, and a 90% interest in a new LLC formed to operate the winery.

LEGAL DOCUMENTS TANGLED & CONFUSING

A number of limited liability companies (LLCs) formed by Halvax to manage the operation and purchase the winery property form a lengthy, confusing and tangled series of companies and agreements that has made understanding the entire debacle a mind-boggling headache that even legal documents have described as “bizarre.”

In a lengthy interview with Wine Industry Insider, Halvax said repeatedly that he tried honestly to help investors preserve their money, but that he had become the scapegoat for the harsh feelings that arose. (More about this in the next installment).

In that spirit, a recent ruling by U.S. Bankruptcy Court Judge Alan Jaroslovsky reads like an Abbott and Costello, “who’s on first, what’s on second” routine as he tries to summarize the saga’s most recent foray into court.

125,000 CASE WINERY, TASTING ROOM, EVENTS APPROVED

In August 1999, Sonoma County approved Mobius Painter’s use permit for a 27,000-square-foot production facility and another 10,500 square-feet to be split among four buildings to house administration, tasting room, events and other uses.

In addition to the tasting room and approval to produce 125,000 cases of wine, the use permit allows up to 20 public events per year with up to 250 people per event.

Mobius Painter also agreed to CalTrans demands to improve the intersection with Highway 12 to provide safer traffic flow for itself as well as NovaVine and the Annadel Winery and Gardens on the adjacent parcel to the north.

EVENTS GO SOUTH WITH THE ECONOMY

On June 27, 2001, Halvax wrote to the Sonoma County planner in charge of the project to request an extension of time for completing the project.

The Halvax letter stated that, “the financial turmoil in the stock market and in particular the effect on Silicon Valley has hampered our efforts to complete the fundraising process that will allow us to build this facility.”

While the project’s grading and building permits have expired, Sonoma County did approve the extension and permanently vested the use permit.

Halvax said he paid $40,000 out of his own pocket (and was never reimbursed) to fund the additional work to vest the use permit.

FROM RECESSION TO RECESSION, MISSING THE BOOM IN BETWEEN

Despite having a use permit that many in the wine business consider worth millions in its own right, the damage was permanent. An ensuing series of chaotic desperation moves and the resulting discord assured that the fledging venture would leap from one recession to another and entirely miss the boom in between.

NEXT IN PART TWO:

The founder departs. Investor feuds heat up. Fraud charges fly.  Potential buyers get jilted. Halvax loses lawsuits, transfers assets to a new company and takes that one into the currently contentious Chapter 11 process.

JUST FOR FUN: WHO’S ON FIRST?