Museion Services - Chapter 11 Case Summary
Museion Services LLC and affiliates, operator of a custom crush winery in Calistoga,CA, filed for chapter 11, citing the loss of anticipated hospitality build-out funding after First Republic Bank's 2023 collapse, revenue insufficient to support debt service, prepetition litigation costs, and a foreclosure sale of their Napa and Sonoma County properties scheduled two days after the filing, following a default on a $40.5 million loan originated by First Republic Bank and later assigned to JPMorgan Chase Bank. The companies filed the cases to preserve the going-concern value of their custom crush operations for the benefit of their clients and to pursue an orderly restructuring.
Business Description
Museion Services LLC and its debtor affiliates⁽¹⁾, a Calistoga, CA-based family-owned winery and custom crush operator, run a grape-to-bottle production winery and custom crush, barrel storage, and bottling facility in Calistoga, in Napa County, through Calistoga Vintner Services LLC ("CVS"), which does business as "Museion." Debtor Knights Valley California LLC ("KVC") owns the Foote Ranch (the "Knights Valley Property"), approximately 2,099 acres in the Knights Valley American Viticultural Area of Sonoma County. The Debtors operate alongside non-Debtor affiliates under common family ownership.
The facility includes a 125,000-square-foot production winery housing a full-service custom crush operation, an approximately 15,000-square-foot barrel storage room, wine tasting rooms, and retail space for direct-to-consumer sales. Custom crush, the Debtors' core business, gives winemakers an insured, fully equipped space to produce wine from their own grapes, and clients rely on the facility for every stage of production from crush through bottling. According to the Debtors, CVS serves approximately 20 winery clients for the 2026 harvest, including nine clients under Custom Crush Agreements and 11 under Alternating Proprietor Agreements (certain clients are party to both), as well as clients under barrel storage, bottling, and other agreements. The Debtors also produce a range of varietal wines under the Museion label, along with a sweet and a dry vermouth.
The Debtors' long-term plan is to build on the existing production and custom crush operation and develop the Calistoga site into a destination winery and hospitality campus combining wine production, tasting, food, and art and cultural programming.
(1) The Debtors are Calistoga Vintner Services LLC, Knights Valley California LLC, and Museion Services LLC.
Corporate History
Building the Calistoga Winery
CVS is a Delaware limited liability company originally formed as Sea Walk California LLC and later renamed Calistoga Vintner Services LLC. It assembled its Calistoga site in 2021. In May 2021 it acquired the former Calistoga Mineral Water bottling plant operated by Nestlé (approximately 14.3 acres, the "865 Property"), and in December 2021 it acquired the adjacent former Von Strasser winery (approximately one acre, the "965 Property"). Together, the two parcels on the Silverado Trail in the City of Calistoga total approximately 15.3 acres (the "Silverado Trail Property"). Several of the facility's first clients were winemakers whose own facilities had been damaged in the 2020 Glass and LNU Complex wildfires, and the Debtors cite meeting that need as one of the main reasons they invested in the facility's production and winery infrastructure.
Ownership and Management
Non-Debtor HF Real Estate Holdings LLC is the sole member of CVS and wholly owns KVC. CVS in turn wholly owns Museion Services LLC, a Texas limited liability company. The Debtors are part of a larger group of affiliated, family-owned entities held indirectly through HF Real Estate Holdings LLC and HF Master Holding LLC. Non-Debtor affiliates under common ownership include HF Master Holding LLC, HF Real Estate Holdings LLC, Illumination Technologies California LLC, Museion Winery LLC, and Gaia Services USA LLC ("Gaia").
Marcela Hernandez is the sole manager of each Debtor. Jorge Hernandez Anguiano, Marcela Hernandez's brother, serves as Chief Operating Officer of each Debtor, and Danielle Kirby serves as Chief Legal Officer.
Operations Overview
The Debtors' operations span CVS's winery and custom crush facility on the Silverado Trail Property and KVC's vineyard lease and water business on the Knights Valley Property.
The Silverado Trail Winery
The 865 Property has been retrofitted as a production winery and custom crush facility with a barrel room, tank farm, and crush pad, and is zoned Light Industrial and Community Commercial. The 965 Property is approximately 8,000 square feet, including a tasting room, wine production areas, a tank farm, a crush pad, and offices, and is zoned Community Commercial. The site also includes two hot water springs that once supplied Calistoga Mineral Water. A substantial portion of the 865 Property remains undeveloped, and under existing zoning that land can support expanded winery operations as well as complementary commercial uses such as residential, food service, hospitality, and events. The Debtors cite a valuation of the 865 Property of approximately $76.4 million on an as-is basis and $99 million on a stabilized basis, upon completion of the originally planned commercial build-out and additions.
The facility processes both red and white wine. Its equipment includes an optical sorter, a large-format Europress, tanks from 3 to 15 tons with individual pumps, VinWizard tank monitoring with InnoVint integration, and climate-controlled barrel storage with generator backup. Because the facility sits within the City of Calistoga, it is not subject to Napa County's requirement that a winery source 85% of its grapes from within the county, so clients may bring in fruit from any appellation.
Client Agreements
CVS contracts with clients under two primary arrangements, supplemented by ancillary agreements:
- Alternating Proprietor Agreements — The client maintains its own ABC Type 02 license at the premises and produces wine under its own bond. This gives the client more flexibility over what it does itself at the facility, including the ability to conduct tastings there.
- Custom Crush Agreements — CVS handles the entire production process. The agreements are auto-renewing and long-term (three- or five-year terms), with pricing built into the agreement, and custom crush clients cannot conduct tastings at the premises. A short-term version serves clients who want CVS only to crush their grapes; the resulting juice is removed a few weeks later for processing elsewhere.
- Ancillary agreements — Barrel Storage Agreements cover clients who only store barrels or who keep wine with CVS after their Custom Crush or Alternating Proprietor Agreements expire. Barrel Storage and Bottling Agreements cover bottling of already-processed wine, or serve as an add-on for storage and later bottling after those agreements expire. Lab Testing Services Agreements cover lab testing.
Outgoing clients typically sign a Mutual Termination Agreement that sets out the exit process and final invoicing and contains a mutual release. All clients sign a Non-Disclosure Agreement with their first contract package, and the nondisclosure obligation survives termination or expiration for three years.
The Knights Valley Property
The Knights Valley Property comprises 17 assessor's parcels. Approximately 31 acres are Cabernet Sauvignon vineyard leased to Beringer Vineyard ("Beringer"). KVC also stores, manages, and commercially supplies irrigation water from three licensed reservoirs on the property: Lake Mallacomes and the Upper and Lower Squirrel Lakes. KVC owns, operates, and maintains the pumping infrastructure that delivers water to the on-site vineyard leased to Beringer and to Beringer's neighboring Knights Valley vineyards.
Newmark Knight Frank Valuation & Advisory, LLC prepared an appraisal for First Republic Bank dated April 12, 2022, which valued the Knights Valley Property at $42.3 million on an as-is basis as of March 17, 2022, and at $61.4 million on a prospective basis upon completion of proposed lot line adjustments, vineyard development, and related infrastructure. The Debtors have since completed road improvements on the property, and a portion of the timbered acreage has been cleared and is now plantable.
Workforce
The Debtors do not directly employ their workforce. Gaia provides employee labor, staffing, and human resource services to the Debtors under an Intercompany Services Agreement dated July 1, 2022 between HF Master Holding LLC and Gaia, and co-employs the workforce with TriNet HR III, Inc., a professional employer organization. CVS's workforce includes eight hourly employees, nine salaried employees, and two independent contractors, covering winemaking, cellar and production operations, facilities maintenance, sales and hospitality, accounting, legal, and management.
Prepetition Obligations
The First Republic Bank Loan
First Republic Bank provided CVS the financing set out below through promissory notes secured by deeds of trust ("Note 1," "Note 2," and "Note 3"). CVS is the borrower on each note, and each deed of trust is also a fixture filing, assignment of rents, and security agreement.
| Note | Dated | Original principal | Collateral | Balance alleged in Notices of Trustee's Sale |
|---|---|---|---|---|
| Note 1 | May 5, 2021 | $20,500,000 | Deed of trust on the 865 Property and assignment of leases (CVS); deed of trust on the Knights Valley Property dated May 1, 2021, and assignment of leases (KVC) | $22,877,973.68 |
| Note 2 | December 1, 2021 | $10,000,000 | Deed of trust on the 965 Property and assignment of leases (CVS) | N/A (retired under Note 3) |
| Note 3 | April 25, 2022 | $20,000,000 | Deeds of trust on the 865 Property and the 965 Property (CVS) and on the Knights Valley Property (KVC); assignment of leases (KVC) | $23,367,045.07 |
Note 1 bears interest at 3.85% annually; the declaration does not disclose the rates on Note 2 or Note 3. Under Note 3, CVS received net funding of approximately $9.8 million after closing costs and retirement of the outstanding balance on Note 2. Note 1 and Note 3 together make up the $40.5 million credit facility (the "Loan"), which is secured by the Silverado Trail Property and the Knights Valley Property and was later assigned to JPMorgan Chase Bank, N.A. ("Chase Bank"). The Loan is guaranteed by Jorge and Ana Hernandez, the parents of Marcela Hernandez, and by certain other non-Debtor affiliated entities.
Equipment Financing
CVS finances much of the equipment used in its winery and custom crush operations. Its equipment financing agreements are with VFS, LLC ("VFS"); VFS's affiliate Loeb Term Solutions, LLC ("Loeb"); North Star Leasing, a division of Peoples Bank; and Byline Bank.
Events Leading to Bankruptcy
The Stalled Hospitality Build-Out
According to the Debtors, their business model at the time of the First Republic Bank financing assumed that, once CVS reached $3 million in annual revenue, additional funding would be provided for mixed-use hospitality development, which represented approximately 75% of projected future revenue in their original model. The Debtors state that they reached that milestone in April 2023, nine days before First Republic Bank collapsed and was sold by the FDIC to Chase Bank, and that further funding was discontinued after the Loan was assigned to Chase Bank. That, in the Debtors' account, left CVS without the capital needed to complete the build-out while debt service obligations continued to accrue.
CVS's gross revenue from operations fluctuated from approximately $3.1 million in 2023 to approximately $3.6 million in 2024 and approximately $2.9 million in 2025. The Debtors attribute these revenue levels to the loss of anticipated revenue from the unfinished commercial and hospitality build-out. CVS also sought additional, more flexible financing through a C-PACE loan, but that effort ended when Chase Bank declined to subordinate its liens.
Litigation and Regulatory Matters
The Debtors have also been involved in a number of prepetition disputes, which, according to the Debtors, diverted management attention and, through defense and settlement costs, further constrained liquidity:
- VFS and Loeb — VFS sued CVS in the Michigan Circuit Court for the County of Oakland in November 2025 for payment default under equipment financing agreements. On June 16, 2026, VFS and Loeb moved for prejudgment possession of certain winemaking equipment.
- North Star Leasing — North Star Leasing filed a similar payment-default action against CVS in Orange County Superior Court in September 2025, with trial set for May 2027.
- Peppertree Capital Management — Peppertree Capital Management has sought to enforce a New York judgment against unrelated parties in an action pending in Napa County Superior Court. The declaration does not describe the Debtors' role in that action.
- Inglenook — Niebaum-Coppola Estate Winery, L.P. (dba Inglenook) sued CVS, alleging that certain fermentation tanks CVS bought from Inglenook's agent were stolen. CVS settled for $35,000 in June 2026 in exchange for a statement from Inglenook that CVS had no knowledge the tanks had been stolen.
- Napa County District Attorney — In April 2025, CVS received a Notice of Illegal Discharge from the Napa County District Attorney's office relating to a 2024 tank leak, which the Debtors state was promptly remediated. A stipulated judgment assessing civil fines was entered in March 2026, and the fines have been paid.
- Resolved payment-default claims — CVS resolved payment-default claims brought by USA Spray, and by Creditors Adjustment Bureau on behalf of Bay Alarm, through settlement and payment plans.
Chase Bank Default and Foreclosure
CVS is in default under the Loan. Chase Bank's enforcement advanced as follows:
- February 20, 2026 – Chase Bank recorded a Notice of Default and Election to Sell Under Deed of Trust on Note 1, reflecting a default amount of approximately $4.1 million as of January 28, 2026.
- May 21, 2026 – The 90-day cure period expired without cure.
- September 16, 2026 – Chase Bank recorded a Notice of Trustee's Sale, posting each of the properties for foreclosure on October 16, 2026.
The Debtors attribute CVS's inability to cure to revenue insufficient to support the payments due under the Loan, in part because CVS could not complete the planned expansion that would have allowed it to process additional grapes, store additional wine, and operate a hospitality component.
Chapter 11 Filing
The Debtors filed Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas on October 14, 2026, two days before the posted foreclosure date, and have requested joint administration of the cases. According to the Debtors, the cases are intended to preserve the going-concern value of their operations for the benefit of their custom crush and alternating proprietor clients and to pursue an orderly and efficient restructuring for the benefit of all stakeholders.
First Day Motions
- Schedules — An additional 23 days, through November 20, 2026, to file the Debtors' schedules of assets and liabilities, schedules of current income and expenditures, schedules of executory contracts and unexpired leases, and statements of financial affairs.
- Wages — Authority, but not direction, to pay accrued prepetition payroll obligations, estimated not to exceed $82,000, subject to the $17,150 per-employee priority cap under section 507(a)(4), and prepetition independent contractor obligations, estimated not to exceed $10,500 in the aggregate. The motion also seeks authority to continue payroll and contractor payments in the ordinary course. Payroll for the pay period ending October 9, 2026 was processed prepetition, but certain employees may not have processed their checks before the Petition Date. The first postpetition payroll date is October 23, 2026.
- Insurance — Authority, but not direction, to maintain and administer the Debtors' insurance policies, issued by Federal Insurance Company (a subsidiary of Chubb Group of Insurance Companies) and State Compensation Insurance Fund of California for the May 26, 2026 through May 26, 2027 policy period and covering general liability and property, auto, excess and umbrella, and employer liability, and to pay related obligations as they come due, including prepetition amounts. The motion also seeks authority to renew, revise, extend, supplement, or replace the policies in the ordinary course without further court order.
- Cash management — Authority to continue the existing cash management system, which is made up primarily of three accounts at Chase Bank and BMO Bank, and to continue ordinary-course intercompany transactions. CVS holds a primary operating account at each bank, through which receivables are collected and ordinary-course expenses, including payroll, are paid. KVC's Chase Bank account collects receivables, primarily rent under leases on which the Debtors are landlords, and pays ordinary-course expenses; it also sweeps additional receivables, which are consolidated in CVS's operating account. The Debtors would keep the BMO Bank account open to collect and sweep lingering receivables into debtor-in-possession accounts to be opened at Wells Fargo. The motion asks the court to waive section 345(b) to the extent continued use of the system is inconsistent with it.
- Utilities — An order barring utility companies from altering or discontinuing service on account of unpaid prepetition invoices and setting procedures for resolving disputes over adequate assurance requests. The Debtors' historical average monthly utility cost is approximately $34,800 in the aggregate, led by Pacific Gas & Electric (electric and gas, $17,000 average monthly), Kleen Solutions Environmental (wastewater, $7,000), the City of Calistoga (water, $5,500), and Upper Valley Disposal (waste, $2,500). The Debtors are current on their utility obligations, and no utility provider holds a deposit. As adequate assurance, the Debtors would segregate by accounting approximately $17,400, equal to 50% of their three-month average monthly utility cost, in their debtor-in-possession operating accounts for the duration of the case. The amount could be applied to postpetition payment defaults and adjusted for terminated services or arrangements reached with individual utility companies.
- Critical vendors — Authority, but not direction, to pay up to $107,000 in aggregate on prepetition critical vendor claims. According to the Debtors, these vendors are generally the sole providers of the goods or services they supply. The vendor schedule totals $106,696. The largest claims are Woodside Electronics Corporation (harvest equipment, $38,018), Kleen Solutions Environmental, Inc. (wastewater hauling, $26,950), McCollum General Engineering (septic monitoring and permitting, $13,143), and Crown Equipment (specialty forklift parts and service, $10,739).