Haystack Mountain chairlift investors sue for $9.8M
They are calling for Hermitage Inn Real Estate Holding Company LLC to resign as manager of Barnstormer Summit Lift LLC to remove the conflict of interest that is allegedly holding up default remedies offered under the loan agreement. They also want financial records needed for them to complete their individual tax returns.
Barnstormer was founded to help with the construction and financing of the chairlift with a $7,825,000 loan in November 2015, according to an affidavit filed last month in Hartford, Conn., Superior Court, Civil Division. The agreement included a repayment period of five years at an annual interest rate of 10 percent in cash and an additional 5 percent in Hermitage "house credits."
In the affidavit, Thomas P. Kelleher described himself as a member of Barnstormer since November 2017 and one of five plaintiffs supported by at least 25 other members of the investor group.
"Based on the information available to us, the plaintiffs and the members who support us appear to own at least 80.13 percent of the disinterested membership interest in Barnstormer, i.e., the total membership interest excluding [Hermitage founder] Jim Barnes' interest, and collectively own 64.18 percent of the entire membership interest in Barnstormer, including Barnes' interest," said Kelleher, adding that the company made just one interest-only payment to his group in March 2016 then stopped making payments.
Kelleher said the company provided "certain consideration to members ... in the form of house credit, but the totality of these considerations fell far short of the amounts due under the promissory note."
No notice was given to members about the default, something required under the agreement, according to the affidavit. Barnes amended the note and agreement in an attempt to bring the account current, Kelleher said, but no other payments were made and no notification of the default came to members.
A total of $9,858,545 was due as of October 1, according to the affidavit.
Kelleher said the receiver appointed by Judge John Treadwell in Windham Superior Court, Civil Division to preserve the value of Hermitage properties foreclosed by Berkshire Bank has no power to act as manager of Barnstormer and cannot mitigate any conflicts of interest involving HIREHC or Barnes. The bank foreclosed the company's ski resort, golf course and four inns, and it has a lien on the chairlift.
Barnes "due to his conflict of interest as guarantor of HIREHC's obligation to Berkshire Bank, which exceeds $17 million, refuses to cause HIREHC to cause Barnstormer to enforce the promissory note or the security agreement," Kelleher said. "Upon information and belief, Barnes and HIREHC further failed to file tax returns ... which leaves Barnstormer exposed to IRS penalty amounts to nearly $8,000 plus interest per month since March of 2018, which exceeds $60,000 as of today."
When one member of the investor group complained to Barnes about the default, Barnes offered to substitute their investment in the chairlift with interests in "equally elusive assets" without alerting other members of the group, the affidavit alleges.
Reach staff writer Chris Mays
at @CMaysBR on Twitter
and 802-254-2311, ext. 273.
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