Woodstock eyes legal action over Public House shutdown, but settlement on the table

The city of Woodstock appears to be working out a settlement with Public House after the operator of the restaurant defaulted on a city loan and was late on rent payments, public documents show.

The restaurant, located in the basement of the Old Courthouse on Woodstock Square, abruptly closed at the end of March. The city owns the Old Courthouse and was Public House’s landlord.

[ UPDATE: Woodstock settles with Public House over restaurant shutdown ]

“To be clear, the City cannot ignore your obligations under either the Loan or the Lease,” Woodstock City Attorney Ruth Schlossberg wrote in an April 28 letter to restaurant owner Kathryn Loprino. “... However, the City would much prefer to see this matter amicably settled in a way that would benefit both parties and protect the City’s and the Courthouse owners’ interests. A negotiated settlement ... would be preferable to forcing this matter to litigation.”

Public House, which the city attorney called “an important institution in the City,” had been in that space for years prior to the Old Courthouse renovations, which concluded last year. To help the restaurant through the disruption of the renovation and to assist in compensating the city for unpaid rent during the COVID-19 pandemic, Public House received a revolving loan from the city of almost $400,000. Some of the loan would have been forgiven, but the stipulation was the eatery would be open for five years after renovations wrapped up.

A series of letters from Schlossberg to Loprino, written around the time of the restaurant closing, indicates the city’s willingness to negotiate but also making it clear that the city would protect its interests and would not forgive the loan. The April 24 letter indicated Public House owed the city $345,000 in principal and interest payments and late fines.

A message left for Loprino wasn’t returned. The city did not provide any written responses from Loprino.

The agenda posted for Woodstock’s City Council meeting Tuesday indicates the council plans to talk behind closed doors regarding “probable litigation” involving Katlo Inc., the company that owns Public House. A vote is expected to follow.

The city released the series of formal notice letters in response to a records request from the Northwest Herald.

In a March 28 letter to Loprino, the earliest one in the series, Schlossberg wrote, “The City is willing and eager to work with you for a smooth transition as you close your business, but we also want you to be on notice that we intend to assert our rights under the lease and the loan documents to protect the Courthouse owner and the City’s taxpayers.”

Schlossberg wrote in that letter that Public House had last paid rent in February. She followed up in an April 8 letter Public House had paid March and April rent but still owed for the electric bill.

Schlossberg also wrote March 28 that the loan’s collateral included fixtures and equipment inside the restaurant, and all of it had to stay in the space when Public House closes.

In a letter dated March 29, Schlossberg asked Loprino to collect keys from the Public House staff and turn them over to the city and writes that there would be a walk-through the morning of April 1. The letter also stated Public House operators could only take personal property with them and would have to itemize anything taken. After the walk-through, access to the building was through the city and only during normal business hours. A city staffer had to be there, and that agreement was to be in place through April 5.

Schlossberg asked Loprino to sign the letter if she felt it sums up the discussion she had with City Manager Roscoe Stelford and Executive Director of Business Development Danielle Gulli. Loprino’s signature appears on the letter.

The city wrote in the March 29 letter the city is aware Public House was working on getting a buyer lined up. Schlossberg also wrote: “We again need to emphasize that no property should be removed from the Premises except as identified in our letter of March 29.”

In an April 24 letter, the city said they hadn’t gotten an April loan payment from Public House and thus they have to pay the rest of the loan balance. The city said the restaurant operators needed to pay them the $345,000 owed within 10 days of receiving the letter.

The city wrote that the 10-day window would end May 5, and if Public House didn’t pay up, the city would take legal action starting May 6. Among the actions they said they would pursue was seeking discovery of Loprino’s assets.

In a letter dated May 8, Schlossberg wrote the city didn’t get the payment and that the city would take steps to repossess and sell the collateral, the proceeds of which can go against the loan balance.

While Public House was the first business inside the Old Courthouse to close its doors at that location since renovations concluded, it’s been joined by others in recent weeks. Makity Make, a DIY craft store which was upstairs in the Old Courthouse, closed its doors May 25, though its Algonquin location remains open and the Records Department, one of the incubator businesses, announced plans to move to a larger space elsewhere in downtown Woodstock.