Napa, Calif -- With its current debt due in December--and still unpaid-- the incumbent lender to the Kirkland Ranch Winery sought a court order and was granted the right to foreclose on the property. Foreclosure proceedings have begun and could take several months before they are final.

Martin Jones, the president, told Wines & Vines that the operation is attempting to work with the lender while it reduces costs and maximizes revenue wherever it can. "We're still in charge of the winemaking and sales," he said.

A staff member elaborated in an e-mail note: "Tuesday, Jan. 27, 2009 was our last day at Kirkland. I have worked for them for three years. All employees have been let go. The winery is still open, with management working only."

The winery has also acted as a custom crush facility for other wineries, and Jones said that a number of other wine companies have wine aging and stored in the facility. "We do believe that the lender intends to close it down in time, but we're not sure of the time frame. We'll know more in the next week."

In the meantime, he's trying to work with the wineries with wine in the building to determine how to deal with it.

Kirkland Ranch has had a checkered history. It was founded with great hope by the Kirkland family, which once owned about 3,000 acres of ranchland in the mountains and hills of southern Napa County.

The winery was built in 1998 and has a permit to produce 200,000 gallons of wine annually, though it has capacity for far more. The cellar can hold 3,000 barrels, and the permit allows retail sales and tastings by appointment. In addition, the permit allows the winery to hold up to 74 events annually in its banquet and meeting facilities, a valuable franchise in Napa County -- although perhaps not so much in this out-of-the-way location on Jamieson Canyon Road (Highway 12).

The winery's location and its strategy as a western-themed winery never seemed to catch on. It was on the route in and out of Napa Valley from the Central Valley, but visitors seemed more anxious to get into the heart of the valley or home rather than stopping there.

A few years ago, it entered an ill-fated partnership with 360 Global, which had also purchased Viansa Winery & Marketplace in Sonoma County. It acquired a half interest in Kirkland Ranch Winery, but in 2006 ran into financial difficulties, losing $24 million in the first six months of 2006 against revenues of only $8 million.

Later that year, Kirkland Ranch Winery filed for protection and reorganization under Chapter 11 of the bankruptcy code, which essentially blocked foreclosure on a $20 million loan from Metropolitan Life. Kirkland Cattle Company also filed for bankruptcy protection because the ranch was collateral for the loan. In 2007, 360 Global filed for bankruptcy protection.

Last year about 2,000 acres of the ranch were sold to Silverado Premium Properties, which plans to file an erosion control plan to plant 300 to 400 acres of winegrapes.

The winery itself and surrounding acreage was recently offered for sale at auction for $22 million, but received no serious offers.