Judge mulls consumer fraud order against Hermitage

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NEWFANE — A Rhode Island man is waiting on the court to determine what he will be awarded in a case related to a real estate deal and investment in the Hermitage Club.

"I'm not going to make an order from the bench," Judge Robert Gerety said Monday in Windham Superior Court, Civil Division. "I'm going to enter a judgment order. I want to mull it over a little more."

The judge is considering the monetary award and whether to order the defendants Hermitage Inn Real Estate Holding Company LLC and club founder Jim Barnes, who did not attend the hearing, to convey property to the plaintiff Douglas Hollenbeck. The lawsuit alleges consumer fraud and breach of contract.

Hollenbeck said he purchased a founding membership in the club for $1 million in 2011 then entered into an agreement with Barnes in 2016 to convert the initial investment into five $100,000 memberships, and get trailside property and a $500,000 stake in Barnstormer Summit Lift LLC, which is subject to separate litigation. Interest for the five memberships would accrue by 8 percent annually and be applied to a "house account" for lodging, meals, ski lessons and spa use, according to testimony.

Hollenbeck said Barnes told him he could use those house credits for building materials to construct a house on the lot that came in the agreement. According to testimony, the deal included an undeveloped parcel in High Country Trailside with the stipulation that if permitting fell through, Hollenbeck could get property in Stag's Leap, which is below the Clubhouse on the lower mountain and also offers ski in/ski out abilities. But Hollenbeck said that Stag's Leap lot has already been sold.

About six Stag's Leap homes are now occupied with Barnes in one of them, Hollenbeck told the court, but High Country is not yet permitted for subdivision. He said there also is no water, sewer or electricity for the development area.

Hollenbeck looked over an email from June 2016 that indicated a financial overview report of HIREHC would be coming soon. Barnes "said the outlook was very good," Hollenbeck told the court.

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Hollenbeck claimed Barnes never mentioned missing tax assessments or cashflow problems.

"You cannot conceal that stuff," Hollenbeck's attorney John Stasny said. "That is fraud. When you are selling membership or equity and then real estate to boot, you have got to disclose that stuff to the entity."

Stasny wants his client to receive at least $500,000 for the investment in the five memberships. He pointed to the Vermont Consumer Fraud Act, which says the court can use its discretion and award up to three times the value of the consideration for exemplary damages if the plaintiff "can prove the defendant acted in bad faith or maliciously."

Stasny said damages for the loss of real estate could total $900,000. Hollenbeck told the court he agreed with estimates from Barnes that valued Stag's Leap homes somewhere between $500,000 and $700,000, and High Country homes at about $1 million if the Hermitage was still operating.

An email to Hollenbeck from Barnes from March 1 indicated that a bankruptcy filing was "imminent," according to testimony. Hollenbeck said he "heard something about a personal bankruptcy" but wasn't sure whether it would be filed by Barnes or his wife.

The judge told Stasny he made a clear presentation.

Reach staff writer Chris Mays at cmays@reformer.com, at @CMaysBR on Twitter and 802-254-2311, ext. 273.


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