Huntersville, North Carolina-based D9 Brewing, its co-founders and its parent company Community Brewing Ventures are facing a lawsuit filed by SouthState Bank, National Association, which claims the defendants have breached their contract with the bank.
According to the lawsuit, which was filed earlier this month in North Carolina’s Mecklenburg Superior Court and first reported by the Charlotte Business Journal on Monday, the defendants are in default on a loan and refused to use proceeds from the sale of brewing equipment to help pay down the balance.
SouthState Bank informed D9 and Community Brewing Ventures co-founders John L. Ashcraft Jr. and Andrew J. Durstewitz on October 6 that their loan was in default, according to the lawsuit.
Community Brewing Ventures rebranded in 2022 as Bevana, a platform that offered small breweries contract brewing and e-commerce services. Durstewitz told Brewbound that D9 and Bevana are both owned by Community Brewing Ventures, but remain distinct businesses.
According to SouthState’s complaint, the original promissory note issued on January 20, 2016, was for $600,000. As of August 2, 2023, its first maturity date, $202,525.57 was still owed to SouthState. The bank offered to extend the maturity date to November 2, 2023, under the condition of “the bank’s receipt of a payment of interest in the amount of $872.83,” which “shall be immediately due and payable in full,” as well as monthly payments of $6,985.27 beginning September 2, 2023, the bank wrote.
Two months later, SouthState learned of the equipment sale, which violated the terms of the company’s security agreement with the bank.
“That agreement clearly states that ‘Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the collateral,’” William L. Esser IV, partner at the bank’s law firm Parker Poe, wrote. “It also states that ‘all proceeds from the disposition of the collateral (for whatever reason) shall be held in trust for Lender’ and ‘Grantor shall immediately deliver any such proceeds to Lender.’”
D9 allegedly earned $300,000 from the sale, which the bank characterized as the liquidation of “all of its equipment.” The sale proceeds were “distributed to one or more of Ashcraft, Durstewitz and Community Brewing,” according to SouthState’s complaint.
Further, Esser noted SouthState has learned D9 “is insolvent and about to be placed into bankruptcy” and requested the bank “take a major discount on its loan and agree to only accept return of approximately 15% of principal.”
In an email to Brewbound, Durstewitz, who also serves as CEO of Bevana, refuted SouthState’s claim that the company was preparing to file for bankruptcy, but it was “always a possibility when dealing with rouge [sic] claims.”
Durstewitz told the Charlotte Business Journal the company plans to counter its bank’s claims.
“We are contesting SouthState’s predatory practice of repeatedly refinancing loans in 1-year increments as a method to gain further profits,” he wrote in a text message to the publication.
SouthState filed its complaint on November 3, the day after D9’s loan matured. It is seeking payment of $149,069.36, which includes $127,542.93 in principal, $2,082.60 in interest and $19,443.83 in attorneys’ fees, as well as $63.77 per diem in interest payments.
Ashcraft, Durstewiz, D9 and Community Brewing Ventures have yet to file a response to the complaint. However, Durstewitz told Brewbound that the lawsuit was “filed out of the blue.”
Asked if the company was aware the equipment sale would trigger such a reaction, Durstewitz said “the expectation was that SouthState would accept our good faith offer, which was in excess of current market value.”
“We were in active negotiation when the suit was filed, out of the blue,” he continued. “To clarify, the total principle [sic] of their loan has been satisfied and the majority of the equipment sold was not collateralized by them.”
Bevana has come under scrutiny lately as partners come forward about their uncertainties about the platform’s stability, as reported in Good Beer Hunting. Hints at Bevana’s troubles began to surface earlier this fall when Sandy Springs, Georgia-based Pontoon Brewing announced it would close due to “one of [its] main distribution partners not paying [it] for [its] product.”
“We are faced with a dire situation and are forced to temporarily close our doors while we find a new partner or buyer for the business,” Pontoon wrote on social media on October 12. “Our employees mean the world to us and it’s not fair to have them work for us while we are not certain we will be able to pay them.”
At the time, it was unclear which partner Pontoon was referring to, but the company confirmed to Good Beer Hunting on Monday that it was filing for Chapter 11 bankruptcy protection and taking legal action against Bevana.
Durstewitz told Brewbound that Pontoon “owes Bevana a substantial amount of money” and the company has “proceeded with a creditor claim” in the brewery’s pending bankruptcy filing. Pontoon has not returned a request for comment.
A handful of Bevana’s partners have closed permanently. Chicago-based Urban Brew Labs, cited in the March 2022 press release touting Bevana’s rebrand, shuttered in September 2022. Charlottesville, Virginia-based Champion Brewing partnered with Bevana in December 2022 and closed in June 2023 amid lawsuits unrelated to its relationship with the platform.
Durstewitz told Brewbound that Bevana is reevaluating its partner strategy after its first two years in business.
“While Bevana works with many great brands, we are unable to control the financial situation that sits below the surface,” he wrote. “In fact, we’ve gone to great lengths to partner in shouldering these [burdens] for the sake of the brand owners, wholesalers, retail[er]s and ultimately consumers.
“What we’ve learned in the 24 months since launching our first brand, is that we can’t be all things to all people, and need to be more selective in our due diligence processes.”