Auctioning goods from a self-storage unit in default is complicated enough for any self-storage owner, but do you know what to do if wine is part of those goods? Wine is a valuable commodity and is usually kept by collectors under controlled conditions. However, there are times, such as divorce or death, when the storage unit goes into default. It is then the facility owner has to do more than the normal procedures to auction off wine and reclaim his costs.
Jeffrey Greenberger, with the law firm of Katz Greenberger & Norton LLP in Cincinnati, says some states have a limited license to accommodate a lien sale of wine, although there are state-by-state differences. “The place to start is to call your state department of liquor control and find out what their requirements are. Generally, the state regulates sale of beer, alcohol and wine because of taxation,” he says.
Greenberger recommends facility owners consult an attorney and get a formal ruling from a state authority before acting. “For example, under Ohio’s revised code 4301.29, a lien alone does not get it done,” he says. “I suggest you prosecute to obtain a judgment against the tenant. The judgment can be executed against the wine, which can be taken by the Sheriffs Department and turned over to the liquor-control board for sale. The proceeds are turned over to an officer of the court, who will give the money to the facility owner.”
D. Carlos Kaslow, legal counsel for the Self Storage Association and author of The Self Storage Legal Review, says, “If I were dealing with wine, there’s a possibility it could be extremely valuable, or more valuable than goods found in a typical self-storage space.” Unless there are state regulations prohibiting selling wine at a lien auction, instead of holding a typical lien auction, Kaslow suggests making inquiries of people who regularly deal with wine.
“Wine is an item for which there is a recognized marketplace; and the value of the wine would depend on what kind of storage space it is,” Kaslow says. If kept in a wine-storage facility, it would command a better price, because there would be greater confidence it had been stored properly than if it had been kept in a regular storage facility. “It’s not hard to get a sense of what it’s worth and who would want to buy it,” Kaslow says.
If a sale is legal, there’s nothing wrong with contacting people in the wine business to take a look. “We requested an opinion from our state Attorney General as to whether we could legally sell wine pursuant to an auction without a liquor license,” says George McCord, co-owner of Plantation Cellars, Bluffton, S.C. “It was his opinion that, since the sale of wine was really not in the ordinary course of our business, but would merely be in the liquidation of a security interest in the wine, it was incidental only to foreclose a security interest in that property. We would not need a liquor license to sell it.”
Plantation Cellar’s lease includes the same lien rights as any other storage lease under South Carolina’s state statutes. “In the event we have to foreclose —and we haven’t yet—we would go through the same procedures to foreclose the interests of a tenant and sell his goods at an auction,” McCord says.
McCord suggests facilities in other states contact their attorneys and get an opinion. They could also obtain a formal ruling from the state authority on the legality of a sale pursuant to the lien rights granted by state statutes to a self-storage facility when it involves wine.
“We always go through our lawyers and then go through the court system,” says Vaughn Clarke, manager of Katonah Storage, Bedford, N.Y. “A judge has to authorize the sale of any wine product, and then we have to advertise it.” Katonah Storage has only been open for a year and so far, Clarke reports, it has had no defaults.
Goleta Valley Mini Storage, near Santa Barbara, Calif., offers wine storage as part of the facility’s unit mix, which also includes gown and fur storage. “The facility has not had to enforce any lien sales on our wine storage,” says Joanna Von Yurt, the facility’s owner. “But if we did, it would be handled the same way as other tenant liens in accordance with our state laws.” Prior to enforcing a lien sale, Goleta’s management makes every effort to contact the tenant.
Differences in State Requirements
Each state has its own regulations pertaining to the lien sale of alcohol from a self-storage facility, and they vary widely. A few examples are:
Arizona. Arizona Department of Liquor Licenses and Control has no provision for a special permit to sell wine at a lien auction.
California. Although Rule 79 of the California Code of Regulations states all sales of alcoholic beverages in California require a license, subsection (d) of Rule 79, titled “Sales Without a License,” covers the sale of alcohol when there is a lien due to default on payment. It reads:
Sales to Enforce Warehouseman’s Lien. A warehouseman, making a sale of alcoholic beverages to enforce a lien acquired under the Warehouse Receipts Act, shall sell distilled spirits only to distilled-spirits manufacturers, manufacturers’ agents, rectifiers and wholesalers, and shall sell beer and wine only to beer manufacturers and importers and to wine growers and importers. Written notice of sale shall be given to the California Department of Alcoholic Beverage Control at least one week in advance of sale.
Delaware. Under Section 4301-29 (a), Delaware’s liquor license law states:
Subject to the provisions, restrictions and prohibitions of this title, the commissioner may grant a wine auction license to each qualified applicant therefore. No person shall operate a wine auction unless licensed to do so by the commissioner. For purposes of this section, a “wine auction” shall mean a person, partnership or corporation that sells rare or fine wines on consignment from the owners of said wines at public auction to those persons who are of legal age to purchase such items. A nonprofit organization may apply for a “wine auction gathering license” for a specific date upon application to the Commissioner as a fund raiser for their organization.
Florida. Florida’s Division of Alcoholic Beverages and Tobacco will issue a license for a one/two/three day permit or special sales license under Florida Statute 561.20(12)(a), Special Sales License. According to law:
This special sales license may also be obtained from this application for the sale of alcoholic beverages for a period of up to three days. This license does not permit the sale of alcoholic beverages for consumption on the premises, and only allows package sales in sealed containers.
Upon the filing of an application and payment of a fee of $25 per permit, the division may issue a license authorizing the sale of alcoholic beverages in sealed containers only, for a period not to exceed three days. This license is issued only for the purpose of authorizing a sale pursuant to: levy and execution; bankruptcy; insurance companies in possession of alcoholic beverages; license suspension or revocation; goods damaged by a common carrier; bona fide wine collector; pursuant to part 5 of chapter 679; or a bulk transfer pursuant to chapter 676.
Illinois. According to the Illinois Compiled Statutes Liquor Control Act of 1934, 235 ILCS 5, to sell liquor in Illinois, the seller must have an auction license. An “Auction liquor license” requires a person to obtain “prior written approval from the state commission to sell or offer for sale at auction, on a specified date, wine or spirits for private use or consumption, or for resale by an Illinois liquor licensee in accordance with the provisions of this act.”
The license will allow “the licensee to sell and offer for sale at auction wine and spirits for use or consumption, or for resale by an Illinois liquor licensee in accordance with provisions of this act. An auction liquor license will be issued to a person and it will permit the auction liquor licensee to hold the auction anywhere in the State. An auction liquor license must be obtained for each auction at least 14 days in advance of the auction date.”
The most recent requirement, which was imposed on applicants for an auction license, is that the applicant must first become licensed pursuant to the Illinois Auction License Act (225 ILCS 407/5-1, et seq.). This practically limits liquor-auction licenses to professional auctioneers. The Illinois State Office of Banks and Real Estate should be consulted for additional information concerning the issuance of auctioneer licenses.
New York. The New York State Liquor Authority MW-735 Lienor (One Time) requirements authorizes a warehouseman, railroad company, steamship company or other person who has acquired a lien pursuant to the law for the storage or carriage of alcoholic beverages, to sell alcoholic beverages to a licensee under the following conditions:
- The alcoholic beverages will be sold and delivered only to duly licensed manufacturers, wholesalers and retailers.
- The sale will be held on premises for which a warehouse permit has been issued.
- The alcoholic beverages will not be stored at the place of sale in excess of 48 hours after the date of sale unless stored in the name of the purchaser.
- Only alcoholic beverages in the original sealed containers, which comply with the provisions of the law with respect to labels and sizes of containers, will be sold.
- The duplicate permit or a photostat copy thereof will be delivered to each purchaser.
- The permittee will pay all excise taxes imposed by or under the provisions of the tax law.
- Such permit shall be valid for one transaction only.
The application must be accompanied by a typewritten list, signed by the applicant, listing the alcoholic beverages to be sold and stating quantity, type, brand name and the size of the containers.
Regardless where a self-storage facility is located, it is obvious disposing of wine found in a defaulted unit can involve legal complications not easily solved through the usual liensale process. It is critical to find out if your state allows the sale of wine without a liquor license. It is also critical to follow all the guidelines set forth by any state that allows the sale of wine under a lien sale.
“Facilities should contact their attorney and also get an opinion or a formal ruling from the state authority that a sale of wine goods, pursuant to the lien rights, can be granted by state statutes to a self-storage facility,” McCord says.
For a list of state liquor-control boards, visit www.aft.treas.gov/alcohol/info/faq/subpages/lcb.htm