Blair Miller

(Daily Montanan) The president of the Original Montana Club Cooperative Association board said the co-op plans to file for Chapter 11 bankruptcy imminently to try to avoid foreclosure and keep the historic club in downtown Helena running with a bar and restaurant into the future.

Shareholders for the association voted unanimously last week to authorize the board to file for bankruptcy while it faces foreclosure after being sued last year for more than half a million dollars in unpaid assessments and interest by other owners of the Montana Club building. The Helena Independent Record first reported the shareholders’ vote.

In an interview, co-op board president Charles Robison said the hope was that filing for bankruptcy would pause the foreclosure lawsuit and prevent creditors from holding a sheriff’s auction and what he called a “fire sale” of the Original Montana Club Cooperative Association’s assets in the building.

“Debt is a tool, and it creates core protections against this foreclosure sale. We are obligated to repay what’s owed, and we have sufficient assets,” Robison said. “We just don’t want the sheriff to auction them all off.”

The Montana Club was founded in 1885 and rebuilt in 1905 after a fire destroyed the building. The Original Montana Club formed the Montana Club Building Condominium Owners Association in 1980, which was when the building was broken up with different owners. The club itself reorganized into a co-op in 2018 and reopened for dining, and the Original Montana Club Cooperative Association took over ownership of the Rathskeller and the second, third, and sixth floors, in 2021.

Robison said that filing for bankruptcy would allow the Montana Club to stay open five days a week and to pay its employees and vendors while a court decides how it should repay the money it owes, and the co-op figures out what assets to hold onto and which to sell.

Last October, the Montana Club Building Condominium Owners Association and other building owners sued the Original Montana Club Cooperative Association, claiming that as of June of last year, the co-op owed the owners association $579,131 in unpaid dues and assessments.

The plaintiffs asked a Lewis and Clark County District Court judge to find the co-op had breached its contract, to have the co-op pay back its dues and assessments plus interest, and to foreclose its lien on the property.

In a February court filing, the co-op admitted it was behind on its payments to the condo owners association but said it lacked sufficient information about other allegations contained in the original complaint.

At the end of July, the condo owners association filed a motion for summary judgment on one of the claims in the original suit, asking Judge Michael McMahon to issue an order saying the condo owners association was owed $648,000 in dues and assessments plus interest and foreclosing the co-op’s lien.

“The debt is substantially delinquent and despite demand, remains unpaid,” lawyers for the condo owners association said in the filing. “The failure to pay regular and special assessments is a substantial burden on the remaining condominium owners.”

McMahon gave the co-op an extension to reply to the motion for summary judgment which is due Sept. 20, according to court records. Robison told the Daily Montanan that filing for bankruptcy would stay any summary judgment in state district court.

He said he believes the co-op owes around $500,000 in dues and assessments and was not sure the current interest total. A bankruptcy court would determine the exact amount the co-op needs to pay to the condo owners association once the filing is made.

“We will be filing soon. I don’t have a specific date,” Robison said. “And very quickly, we’ll have to propose a plan and work through the process of the court looking at our plan, and getting a plan that the court will approve to pay off creditors.”

The co-op put the Rathskeller up for sale in June for $600,000, and while Robison said there has been interest in the bar, the board and co-op has discussed lowering the asking price. The Montana Club also was awarded a $90,040 Historic Preservation Grant in June by the Department of Commerce.

Robison acknowledged that the co-op will likely have to sell other assets aside from the Rathskeller, possibly including its sixth-floor banquet hall property, but said he hopes it won’t have to sell its liquor license unless a new buyer wants to run the full restaurant and bar businesses.

“We’re looking for the right buyer, the right opportunity,” Robison said.

Other options discussed at last week’s meeting include getting all of the building’s owners to sell the building and potentially lease back space, though Robison said the co-op has not had those conversations with the other owners yet.

“This (bankruptcy) is necessary to ensure that we have time to get to work through that,” he said.