BURLINGTON — Berkshire Bank worries that an involuntary Chapter 7 bankruptcy petition filed against the Hermitage Club's operating company could open up the opportunity for club founder Jim Barnes "to do mischief during the suddenly created gap period."
"Please do not put the fox back in charge of the hen house for any part of the gap period however long that may be," wrote Berkshire Bank's attorney Elizabeth Glynn of Ryan Smith & Carbine, Ltd. of Rutland in an emergency motion to keep in place the state court-appointed receiver, who has preserved and maintained assets subject to a foreclosure complaint brought by the bank last year, or appoint him as interim trustee. "Regardless of whether the gap period is 21 days or two years while the involuntary [petition] is contested, the receiver should remain in place to preserve the status quo and protect the estate from mismanagement ..."
Glynn said without the order, the receivership is "arguably stayed" with Barnes and the debtor Hermitage Inn Real Estate Holding Company LLC "arguably free to resume misappropriating estate assets during the gap period as they did prior to the appointment of the receiver in the Berkshire Bank state court foreclosure action."
"The receiver could be powerless to stop them," Glynn wrote in the motion filed Friday in U.S. Bankruptcy Court for the District of Vermont. "The underlying state court foreclosure is replete with creditor claims that allege mismanagement and misappropriation by Mr. Barnes and the debtor. Keeping the receiver in place during the gap period would prevent that reoccurrence and maintain the status quo."
Berkshire Bank foreclosed Hermitage properties in Dover and Wilmington in February 2018. The Vermont Department of Taxes closed down all Hermitage establishments the following month for failure to pay taxes.
Glynn said most of the resort is subject to the bank's mortgage and security agreement with HIREHC, which another bank,
a contractor and an employee filed an involuntary Chapter 7 bankruptcy petition against last week.
"Virtually all the remaining debtor real property taxes by the town of Wilmington and town of Dover is mortgaged to Berkshire Bank," she wrote. "There are a few vacant land parcels that are not."
Alan Tantleff of FTI Consulting Inc. was appointed as receiver of the Hermitage's private ski resort, golf course and several inns in June 2018. He is "well qualified in his role" and "the best person to maintain the status quo during the gap period," Glynn wrote. "He is familiar with the properties and has the processes in place to do that."
In Windham Superior Court, Civil Division, the bank recently filed a motion to preserve assets after Tantleff accused Barnes of removing snowmobiles from a storage shed at Haystack.
"The resort's real and personal property is plastered with notice against trespass orders to keep James Barnes from entering the subject property and removing receivership assets without the receiver's permission," Glynn wrote in Friday's filing.
Federal Bankruptcy Judge Colleen A. Brown issued an order scheduling a hearing on the emergency motion for 10 a.m. Thursday.
The involuntary bankruptcy filing could be contested, Glynn wrote.
"For example, at least one of the petitioners is arguably a 100 percent secured judgment lien creditor," she said. "Another petitioner arguably contracted with Hermitage Club LLC, not the debtor. Mr Barnes has a long history of being confusing about the entity he was dealing through."
The petitioners included Bobbi Resek, who handled sales/memberships at the club and has a contract dispute involving $28,027; Dan Solaz, former chief financial officer for the Hermitage who has judgments against the company totaling about $320,917 for unpaid wages and other payment owed; and Lakeland Bank, which claimed to be owed about $350,203 after the company defaulted on a loan used for purchasing snowmaking equipment.
A new report for a voluntary Chapter 11 bankruptcy concerning Barnes' wife Donna Barnes, who blamed Hermitage business issues in the initial filing in March, says: "Husband, who was sole income provider, is filing a Chapter 11 bankruptcy for his business. Through this restructuring, income will be coming into the household. The debtor also plans to work for the restructured company, will generate income from a rental property and will obtain other work if necessary."
As of Sunday afternoon, there had been no filings for bankruptcy submitted by the Hermitage entities.
Reach staff writer Chris Mays at firstname.lastname@example.org, at @CMaysBR on Twitter and 802-254-2311, ext. 273.