Beneath the jazzy stage and revered concerts at Monterey Live was a rickety financial foundation. While touring bands passed through, an absent landlord accumulated debt and a club owner took on a money pit. Investors jockeyed for position on the Alvarado Street jewel, setting the stage for a contentious eviction battle. Given the players involved – Vince LaRocca, who skipped town with a stack of unpaid bills, and Cedar Funding, the bankrupt real estate investment company – it’s surprising how long the show went on. The club’s abrupt June 2 closure was only a bookend to a volume of behind-the-scenes legalese.

Gary Smith ran Monterey Live for the past year and a half. (Full disclosure: My band, Para La Gente, has performed at Monterey Live and is working with the club’s former promoter on a future show.) Smith, who used to sell mortgages, says he originally approached LaRocca concerning a commercial loan in early 2007. LaRocca, who owned the building and ran the club (once called Viva’s), had previously borrowed $600,000 against the property from Cedar Funding.

Smith paid $175,000 to partner with LaRocca to run Monterey Live, though Smith says LaRocca changed the ownership from 50-50 to 51-49, giving LaRocca majority ownership. Then, Smith says, in June 2007, LaRocca vanished without giving Smith a pair of keys. He left the state and now resides in Fayetteville, Ark. “He owed a ton of money to a lot of people,” Smith says. (LaRocca could not be reached for comment).

According to his April 1 bankruptcy claim, LaRocca owes $3.8 million to a variety of lenders, the largest share of which he borrowed against the Monterey Live property. His claim says he owes Doug Forzani of Carmel $1 million; Cedar Funding, $500,000; Julio and Marie Ramirez of Carmel, $200,000; and Martine Mancilla of Seaside, $195,0000 – all tied to 414 Alvarado St. Other debts include $20,000 to Monterey-Salinas Transit and nearly $20,000 in unpaid taxes.

A few months later, Smith says he tracked down LaRocca. Smith, along with his wife Susan Miller, agreed to buy the business and its liquor license for $300,000, which included cancellation of the $175,000 debt. So besides a love for music, why did Smith get into business with a guy in this much financial trouble? “It got to the point that we were so far into this we didn’t have any jobs,” Smith says. “The only way to save our money was to buy the business.”

Smith says he agreed to pay $15,000 a month in rent – with the stipulation that Smith and his wife would assume the loans and own the building. But the arrangement left Smith to deal with a complicated array of investors.

The Cedar Funding loan was split between five different people and entities, including Forzani, Larry Rollins of Corral de Tierra and Cedar Funding’s mortgage fund. As part of an alleged Ponzi scheme, Cedar Funding, led by David Nilsen, attracted more than 1,500 mainly local investors, reaching an estimated $180 million in loans. Nilsen didn’t originally record the deeds of trust in investor names, and allegedly commingled funds and kept shoddy records. Nilsen did assign interest in LaRocca’s loan in May 2008 – right before he filed Chapter 11 bankruptcy. Forzani and Rollins, also known as Forrol Properties, then bought out the first deed of trust.

The property is now at the center of a test adversary case in the Cedar Funding estate. The investors contend they have an “equitable lien” in the property, though bankruptcy trustee Todd Neilson argues that the title to the loans should be returned to the debtor. “They want to own what they bought,” says Larry Lichtenegger, the plaintiff’s attorney, “and the trustee wants to take it away from them.” Bankruptcy Judge Marilyn Morgan ruled against the investors. Rollins and company are appealing the decision.

The same investors battling it out in federal court also filed an eviction lawsuit against Smith on April 16, about two weeks after LaRocca’s bankruptcy filing. The recently unsealed complaint alleges Smith and Miller owe $247,500 in back rent. “Mr. Smith did not pay the rent to anybody,” Lichtenegger says.

Smith counters that LaRocca violated the rental agreement. “He breached his contract, so technically we weren’t supposed to be paying him any rent because he was a dead-beat landlord,” Smith says. He claims the business was in the hole every month even without paying rent, adding that he wanted to buy the building and paid $30,000 down, which was lost when Forzani bought out the first deed of trust. Smith says the investors should be going after LaRocca: “We are on the same page,” he says. “We are both trying to get our money back from Vince.”

Ultimately, the investors and Smith couldn’t reach an agreement that would allow Monterey Live to live.

“We tried to work a out a deal,” Lichtenegger says. “[Smith] didn’t have enough money to pay the deed holder.” When asked why his clients didn’t try to collect from LaRocca, Lichtenegger says, “it doesn’t do any good to sue when somebody is broke.”

Before getting evicted, the club hosted its last show May 31, leaving bands and promoters looking for a new venue. Some shows were transplanted to Jose’s Underground Lounge and Ol’ Factory Café. But after talks of a deal with Ol’ Factory, four metal bands wailing inside the mellow Sand City hub didn’t go over well with the neighbors. Noise complaints during the Your Music Olympick’s June 12 competition dimmed any hope of Ol’ Factory becoming the new Monterey Live. Promoter Brian Conway, who directed marketing and promotion at Monterey Live, had to move shows – again.

Smith still owns the liquor license and name of Monterey Live, but says he is willing to give it up to the investors to settle the lawsuit. As for the building, Lichtenegger says investors will either rent it or sell it. But both remain unlikely until the bankruptcy issue is settled. The prime downtown location’s fate is tied up somewhere between federal courts in San Jose and Fayetteville. The search for a new indie music club continues.