Member alleges consumer fraud

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NEWFANE — A member of the Hermitage Club, who lives in Rhode Island, alleges he is owed more than $1.4 million as a victim of consumer fraud and breach of contract.

Douglas Hollenbeck is suing Hermitage founder Jim Barnes and Hermitage Inn Real Estate Holding Company LLC. The parties entered into an "investment conversion agreement" in September 2016, according to an affidavit filed last month in Windham Superior Court, Civil Division.

At the time, Hollenbeck owned a membership interest in the company, wrote his lawyer John D. Stasny of Woolmington, Campbell, Bent & Stasny of Manchester Center. As part of the agreement, Hollenbeck expected to receive Lot 22 in the High Country Trailside Development in Wilmington. The real estate is in "a large residential development and private club known as the Hermitage Club," according to the affidavit.

Owning Lot 22 "would have provided Hollenbeck and his family with a place to build a residence for their use in Vermont," wrote Stasny.

The agreement, Stasny said, indicated that the Hermitage was pursuing Act 250 approval for its master plan. The state requires ski resorts obtain that permitting.

The agreement also said Hollenbeck could swap out the property for a permitted building lot in Stag's Leap if Act 250 approval was not granted for High Country development. Stag's Leap homes are below the Clubhouse at the members-only ski resort Haystack Mountain and have "the convenience of a mid-station drop on the lower mountain lift," according to a description on hermitageclub.com

Stasny said Hollenbeck performed his obligations under the agreement but Barnes and his company did not convey either property

to Hollenbeck.

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"If Lot 22 had been conveyed to Hollenbeck in accordance with the agreement for further development, it would now have a value of approximately $900,000; the same value has been indicated by Barnes and HIREHCO for similar lots in the High Country Trailside Development," wrote Stasny.

Stasny said Hollenbeck had been persuaded into entering the agreement after being told he also would receive five interests in the company's $100,000 Club, or a membership interest worth $500,000, and would be able to use accrued returns from those interests to buy building materials for Lot 22.

"The statements were false because Barnes knew that HIREHCO's financial problems would impede its ability to generate any returns that Hollenbeck would be able to use to his benefit, and that the same financial issues along with regulatory issues would prevent the conveyance of Lot 22," Stasny wrote. "As another example, the agreement provided that Hollenbeck would receive a '$500,000 membership interest ... in Barnstormer Summit Lift, LLC,' and Barnes made claims to Hollenbeck about what the returns from Barnstormer would be, but Barnes misled Hollenbeck by concealing the fact that Barnstormer was already unable to meet obligations to its members."

Hollenbeck is calling for a jury trial with hopes of being awarded damages, the title to Lot 22 and attorney fees. He believes he is owed $500,000 for the "lost value" of the investment and $900,000 for the property.

Hermitage-related entities are involved in a foreclosure case spanning the members-only ski resort at Haystack Mountain, four inns, a golf course and townhouses. The Vermont Department of Taxes shut down several of the company's establishments after it failed to pay taxes.

Members are now waiting to hear about a re-structuring deal that could reopen properties and settle judgments against the company.

"We know it has been a while and we wanted to let you know that we've been working continuously to finalize terms satisfactory to all parties," Hermitage President Harper Sibley wrote to members in an email Monday. "We expect to have final terms by Wednesday ... and will provide an update then."

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


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