Sheriff's auction could be next for troubled brewery

0 Comments | La Crosse Tribune, Oct 04, 2000 | by Magney, Reid

City Brewery owners lost another round in court Tuesday as a judge ruled they don't have any more time to save the brewery from foreclosure.

Judge John Perlich's decision means the brewery could go to a sheriff's auction in the next few months - which might actually be good news for a group of local investors trying to buy the former Heileman Brewery.

City Brewing Co. President Randy Smith said after the hearing that the local investors group has made progress in negotiating with unsecured creditors whose claims have been holding up the sale.

Smith said that the investors would prefer to buy the brewery directly from Congress Financial Corp., which foreclosed on the mortgage held by James Strupp and John Mazzuto.

But if Perlich orders a sheriff's sale or auction, Smith said that would eliminate the unsecured creditors' claims on the property. The disadvantage, Smith said, is the amount of time it could take to hold a court-ordered sale.

"The best-case scenario is a consensual sale as soon as possible. Everybody wants this to go through quickly. We don't want a hiatus period," he said, because that would add startup costs.

"My clients are disappointed in one sense, but they're still optimistic a deal can go forward," City Brewing's attorney Brent Smith said after the hearing. "They're not going to stand in the way of a deal ... as long as the deal is along the lines the receiver has said."

Brent Smith said the terms of the deal involve the investors paying off Strupp and Mazzuto's debt to Congress Financial, as well as other obligations the two men personally guaranteed. In court, Brent Smith argued that Strupp and Mazzuto had more time to "redeem" the brewery from foreclosure because wording in a contract with Congress Financial was contradictory.

Attorney William C. Meyers of Chicago, representing Congress Financial, argued that this was not a mortgage between a lender and a home buyer but a contract between experienced business people who had attorneys representing them.

Meyers said Strupp and Mazzuto were in default on their $5 million loan from Congress Financial "after day one." Meyers said they renegotiated the contract in February with the agreement that "they had to find somebody else" to buy the brewery.

Strupp and Mazzuto's agreement to waive the six-month redemption period "was the only reason Congress was willing to give them more time."

Perlich said the contract was "not the most brilliantly drafted document in the world, but it's not my job to redraft it or run the brewery or save jobs."

Perlich said it is clear Strupp and Mazzuto waived their rights of redemption, and there's no claim they didn't understand they were waiving their rights.

Over the next two weeks, attorneys for both sides will submit the amounts they think Strupp and Mazzuto now owe Congress Financial. In August, the amount was $4,445,000, but Strupp and Mazzuto now dispute that, Brent Smith said.

Randy Smith said one possible hitch would be if Strupp and Mazzuto were to file for bankruptcy, which would take the foreclosure matter out of Perlich's hands.

As long as the deal goes as outlined, Brent Smith said, Strupp and Mazzuto "are not looking at doing anything rash."