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Then They Went Kaput 

The tangled story of how a hotel bankruptcy darkened downtown dining

click to enlarge When the Montvale\'s owner filed for bankruptcy, two restaurants in the building soon closed. - YOUNG KWAK
  • Young Kwak
  • When the Montvale\'s owner filed for bankruptcy, two restaurants in the building soon closed.

The Sunday morning rush had died down, so the managers locked the doors and employees began to clean up. But this wasn’t just another end to a shift at Scout Tavern. It was the last.

An emotional atmosphere hung over the employees. “It was awful. Everybody looked miserable. Everybody was drunk. Because, whatever, right?” says Ben Cochran, Scout’s kitchen manager.

The next day, June 3, the locks were changed, leaving Scout’s 14 employees jobless and the restaurant — once popular for slam poetry, trivia and its eclectic ambiance — gutted and dark.

Catacombs Pub, Spokane’s Old World pizza restaurant, had came to the same fate about a month earlier. Catacombs and Scout, both situated in the bottom of the Montvale Hotel building on West First Avenue, are both owned by the hotel’s owner, Rob Brewster. The two restaurant closures resulted from Brewster filing for bankruptcy protection under Chapter 11 reorganization for the Montvale in February.

But the explanation for Catacombs and Scout closing is not necessarily that simple.

Amidst the Montvale bankruptcy, Chapter 11 trustee David Gardner took over ownership of the hotel located at the corner of First Avenue and Monroe Street in downtown Spokane. Gardner, an attorney with Spokane law firm Winston & Cashatt, then became the owner of Catacombs and the landlord of Scout.

The decision to close Catacombs was Gardner’s.

“Catacombs was running into a number of problems,” he says. “The most concerning for me as trustee was whether or not Catacombs was operating with appropriate licensure.”

Bankruptcy filings indicated Catacombs was simply a tenant of the Montvale Hotel building, but Gardner was told that at some point Brewster changed position, indicating that Catacombs was actually owned and operated by the hotel. Immediately upon learning of the change, Gardner took it upon himself to close the restaurant, he says.

“I’m not going to be responsible for the operation of a restaurant not operating under accordance of law,” Gardner says.

As for Scout, Brewster chose to close its doors. When he opened Scout at the end of 2011, his vision was to make the Montvale a destination hotel, like the Portland-based McMenamins chain. Opening Scout in the hotel’s building would aid that vision and provide a distinctive atmosphere where guests could eat and drink.

But Scout had money stolen over the course of the last few months, Brewster says, and that he says led to his decision to shut it down. Employees were stealing cash, he claims, and it caused him to lose interest in fighting for the restaurant.

“It became apparent that there was no reason whatsoever to keep fooling with the project,” Brewster says, adding that there were “a lot of shenanigans with the employees.”

Cochran, the kitchen manager, recounts one night at Catacombs when employees were pocketing money. “That night, not one cash transaction was done at Catacombs, and it was busy,” he says. When customers paid with cash, an employee would clear the order and keep the cash. Cochran says it was because late payroll checks had always been an issue, and that for some employees, the pocketed money was the only money they had.

Brewster says there were issues in the past, but everyone got paid and what the employees were stealing was more than they were owed.

Scout manager Lauren Sharkey says the paychecks of four employees bounced during the last two pay periods, and her last check came up short of what she was owed.

Additional problems occurred leading up to the closing of the two restaurants. Melissa Busch, manager at Catacombs and Scout, says both places were often out of what they needed — whether it was food, PBR or cash to pay vendors. Part of that problem was that funds between the two restaurants and the hotel were often shared, she says.

“They were paying for stuff in the hotel that should have stayed in the restaurant,” Busch says.

Gardner says that Brewster would take money from one of the three businesses and give it to whichever needed money.

“I don’t think they did a good job of respecting each businesses’ boundaries,” Gardner says.

At the beginning of May, Scout took its final turn for the worse when KREM 2 News aired an interview with Brewster talking about his “financial fall.” Sharkey says that although Brewster didn’t indicate Scout would be closing, people assumed they were done for.

“That really stuck us in the coffin,” she says.

Before Scout closed, a glimmer of hope presented itself when Dan Stadtmueller — bookkeeper for the Montvale, Scout and Catacombs — along with Janice Back, the former general manager of all three businesses, put in an offer on Scout’s lease to keep it open themselves.

The offer was rejected.

Stadtmueller says he doesn’t know why the offer was turned down. “It was extremely generous,” he says.

About a week before Scout closed, Gardner came forward with changes to the lease offer. Stadtmueller says he and Back accepted the changes, but the lease ultimately wasn’t given to them.

“The battle cry at the beginning was to not let the place go dark and then [the trustee and creditors] stood by and let it go dark,” Stadtmueller says.

Gardner says he rejected the lease offer mainly because Stadtmueller and Back wanted to lease the space on behalf of Scout but didn’t have the authority to do so.

What happens next with the spaces left behind by Catacombs and Scout is all under Gardner’s control. It is yet to be determined if Brewster, who currently lives in Seattle, will regain control of the building in the future.

A new tenant for the former Catacombs space is in the process of being approved and Gardner says the new tenant plans to open a restaurant within the next few months. The former Scout space is still in the process of being listed for rent. Other Montvale building tenants, such as Scratch Restaurant & Rain Lounge, are humming along and keeping the block lit, Gardner says.

As for the Montvale, Gardner says it’s operating well and staying full and alive in the midst of the bankruptcy.

“We’re putting heads in beds, as they say,” he says. 

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