Trustee for former brewery files appeal

The three-year-old bankruptcy case involving the former Olympia Brewery property is headed to the 9th U.S. Circuit Court of Appeals.

The trustee for the bankruptcy estate of All American Bottled Water Corp., the historic property’s former owner, is appealing a recent decision by a federal judge as part of continuing efforts to try to collect millions of dollars to pay the defunct company’s creditors.

The trustee, Michael Hitt, filed his notice of appeal with the San Francisco-based federal appellate court last week. He did not reply to an e-mail or phone message seeking comment.

The appeal is focused on the terms of loan transactions that allowed All American to finance the purchase of the former brewery property. It stems from an adversary proceeding, or lawsuit, Hitt filed against the lenders that is tied to All American’s bankruptcy case.

The key issue Hitt intends to raise is whether U.S. District Judge Benjamin Settle erred when he upheld an earlier decision by a federal bankruptcy judge. Settle sided with U.S. bankruptcy Judge Paul Snyder’s ruling that the payment of $6 million in points, or fees, was integral to the loan transactions, the defense offered by the lenders. In other words, All American would not have secured the loans without paying the points.

Hitt and his lawyers have argued that the court erred when it “collapsed” the multiple transfers stemming from the loans, including the payment of points, into an integrated transaction. They argue that the payment of points should be scrutinized separately and is recoverable as a fraudulent transfer.

A fraudulent transfer occurs when a debtor makes an obligation without receiving reasonably equivalent value, and the transaction leaves it with little chance to pay creditors.

The lenders were RE Loans, a California-based investment pool; and Pensco Trust Co., which holds the retirement account of Barney Ng, a central figure in the loan transaction. They lent a total of $32.2 million in two transactions. The points were paid to Bar K Inc., the mortgage loan broker for RE Loans, and Ng, Bar K’s president. Ng has called Hitt’s appeal of the initial decision vindictive.

Snyder dismissed a second claim argued during the two-day trial in February, but Hitt did not appeal it.

Hitt’s legal brief to the federal appellate court is due Jan. 4, and the deadline for the lenders’ reply brief is Feb. 3. It’s unknown whether the court will hear oral arguments.

The court’s Web site notes that it takes between 12 and 20 months from the time an appeal is filed to hear oral arguments. It can take an additional three months to a year for a case to be decided.

All American Bottled Water Corp, led by chief executive L. Eric Whetstone, bought the shuttered property for $14 million on April 1, 2004. Whetstone planned to bottle water there. Whetstone abandoned the property in mid-2006, after the company fell deep in debt and he was unable to secure refinancing.

Creditors forced All American into bankruptcy in December 2006, and Hitt was tasked with liquidating its assets to pay creditors. Hitt was unable to sell the property, the primary asset, and lost it to foreclosure in March 2008. Well B Ng LLC, the current property owner managed by Ng, has put the property up for sale in an effort to recoup losses from the failed investment.

Christian Hill: 360-754-5427

chill@theolympian.com