“We are thrilled to have completed a wonderful and safe experience for our members,” Barnes said. “With unprecedented snowfall and with our earliest season yet, we had 18 full weekends of corduroy skiing.”
The closing of the club’s ski season comes after months of financial and legal difficulties. Last spring, the Hermitage struggled to make tax payments that were past due on properties in Dover and Wilmington. Last week, Wilmington filed tax liens totaling $819,381 for taxes, interest, and penalties on about 33 delinquent Hermitage Club properties.
In March, the Hermitage Club was closed twice by the Vermont Department of Taxes, which has also filed liens for about $790,000 in rooms, meals, and sales taxes they say the club owes.
Dozens of contractors, vendors, and other creditors have filed nearly $9 million in liens and writs on Hermitage properties for money they claim they are owed.
The Hermitage Club, Hermitage Inn Real Estate Holding Club, and Barnes are the subject of at least 20 lawsuits in Windham County Superior Court, including three foreclosure actions. The largest of the foreclosure complaints, filed by Berkshire Bank, seeks $16.6 million in principal, interest, and penalties on two loans for a total of $17.1 million, or foreclosure on several Hermitage properties including the Hermitage Inn, Haystack Ski Resort and ski area lands, Haystack Base Lodge, Haystack Golf Course, Chamonix Townhouse Village, Haystack Golf Course, water rights to Mirror Lake, hundreds of acres of land, along with several smaller parcels., as well as the Snow Goose Inn, the Horizon Inn, and the Doveberry Inn in Dover.
A second foreclosure action, by former owner and current mortgage holder of the White House of Wilmington Robert Grinold, was filed against “White House by Hermitage LLC” and Barnes. According to the foreclosure suit, Grinold accepted a mortgage deed and promissory note for $1.4 million on the White House property in June 2015. As of August 2017, according to the suit, Barnes and the White House were in default of the mortgage terms, and owed $1,371,692 in principal and interest. On March 20, 2018, Grinold filed a motion asking the court to consider a previous motion for summary judgment and a shortened redemption period.
In a similar deal, the former owners of the Sawmill Inn, IVMJA, have also filed for foreclosure on the Sawmill Inn property. According to their foreclosure complaint, Hermitage Inn Real Estate Holding Company, owned by Barnes, owes $939,871.23, including principal, interest, and late fees, on a $900,000 mortgage. The foreclosure action also notes an additional $600,000 mortgage on the property.
Three suits have been filed by families who purchased condominiums through Hermitage Inn Real Estate Holding Company but have not been able to take delivery of the units. According to a suit filed by Pamela Keefe, a trustee of the Carol H. Butler trust, which has two memberships at the Hermitage Club, she entered into a purchase and sale agreement with the Hermitage Inn Real Estate Holding Company for a Chamonix Village condominium in November 2015. According to the agreement, Keefe was to pay $975,000 for the condominium, $69,550 including tax for a membership, $5,992 including tax for dues, and $30,000 for “deeded admission rights,” a total of $1,080,542. According to the suit, a later addendum to the agreement brought the total to $1,092,993.26. Under the agreement, Keefe made a $308,533.33 down payment on the unbuilt condominium, and made “progress payments” as various construction phases were finished. When the foundation was complete, for instance, Keefe paid $100,000 under the agreement. When the framing was complete, another $100,000 was due, and so on until the unit was completed. Keefe claims she made all of the progress payments, as required, eventually paying almost the total contract price, with the rest due on closing. But according to the suit, Barnes and the Hermitage were unable to transfer the property because it was encumbered by contractors’ liens.
Keefe’s suit claims the progress payments were intended to pay the contractors. “Defendants, however, used the trust’s progress payments to pay other expenses. The Hermitage failed to pay contractors, vendors, and other liabilities.”
Rose and Tyler Dickson tell a similar story in their lawsuit. They entered into a similar agreement with the Hermitage Inn Real Estate Holding Company in October 2015, and paid $982,955 of a $1,005,000 contract for a Garmisch Court unit. When the unit was completed, it was encumbered by liens and could not be transferred.
So far, Jennifer and Seth Goodman have the only lawsuit that has a final order. Like Keefe and the Dicksons, they paid a deposit and made progress payments on a Garmisch Court condominium totaling more than $910,000. On March 21, a court finding was filed giving the Hermitage Inn Real Estate Company 15 days to transfer the property to the Goodmans or pay them the $910,000, plus $299 per diem, as well as another $36,000 plus $11.84 per diem and court costs. The court finding also orders the Hermitage to “provide an accounting of all funds paid by plaintiffs.”
Several contractors have filed lawsuits seeking payment for services they have provided. Craig Doersch Painting, a Newtown, CT company, has filed a suit seeking $76,384 for materials and labor at the Hermitage. Southern Vermont Masonry had filed a suit for $89,950 in labor and materials. Roofers, carpenters, plumbers, designers, and other providers have also filed lawsuits for money they say the Hermitage owes them.
Suppliers have also filed lawsuits, including Reinhart Food Service, which is seeking payment of $1.305,452.91 for “food, related goods, and services” and $287,827.28 in other costs. Reinhart, like several other large creditors, say their contracts with the Hermitage were backed by an additional personal guarantee or promissory note from Barnes. “It is undisputed that while Defendant James Barnes personally guaranteed payment of that note, he has failed to abide by his individual promise to pay if the corporate defendants failed to honor their payment obligations.”
Documents filed by Reinhart suggest they are concerned they have a short window of opportunity to be made whole. In a document objecting to the Hermitage’s motion for an extension of time to respond to the suit, Reinhart refers to the foreclosures and other actions facing the Hermitage. “The dire financial circumstances facing the defendants (Hermitage) compel the plaintiff (Reinhart) to press forward with alacrity.” Reinhart points out that they’re one of Barnes’ and the Hermitage’s largest creditors, “but the collectable assets of the defendants appear to be dwindling.”
The Hermitage Club ski area at Haystack isn’t the only part of the operation affected by the suits. The Berkshire Bank foreclosure includes the Haystack Golf Course. A lawsuit filed against the Hermitage Club by TCF Equipment, a company that leases, among other things, golf carts and other golf course equipment, seeks $191,825.67 in lease payments past due, future contracted payments, interest, penalties, damages, and other costs. The lease agreements were for 74 golf carts, a Cushman beverage vehicle, a Cushman driving range cart, and a Toro Pro Core greens aerator.
Lorista Holdings owns four downtown properties, including the Vermont House, which the company renovated and leased to the Hermitage Club in October 2014. Lorista has filed a suit against Barnes, the Hermitage Club, and Hermitage Inn Real Estate Holding Company for failing to pay the required rent. According to the suit, the lease was “personally guaranteed” by Barnes, and included a minimum rent, and “certain other additional rent.” Lorista says Barnes and the Hermitage “have failed to pay all minimum and additional rent due, owing the amount of $168,049.77. Lorista is also seeking damages, interest, court costs, and attorney’s fees, as well as possession of the building.
Three former employees have filed suits against Barnes and the Hermitage. Former managing directors Robert Balewicz and John Santaniello have filed a suit alleging sexual harassment and wrongful termination. The suit also alleges that Barnes failed to pay Santaniello’s moving expenses as agreed. In the suit they describe a hostile work environment and harassment that affected their personal relationship. Balewicz’s and Santaniello’s suit was filed in response to a suit filed by Barnes and the Hermitage, accusing Balewicz of defamation after he reported and discussed alleged illegal accounting activities and illegal “kickbacks” for real estate referrals. Balewicz has also filed a “whistleblower” complaint with federal labor authorities, claiming that his termination was in retaliation for reporting the activities.
In January, Dan Solaz, Hermitage Chief Financial Officer from February 2015 to December 2017, filed a lawsuit seeking $159,000 in wages he says he is owed under contracts and agreements with Barnes and the Hermitage. Solaz says a “confidential investment memorandum” was part of his compensation package at the Hermitage. According to the suit, the CIM was “customarily offered to (Hermitage) executives” and represented the promise of a certain sum of money in addition to salary, in compensation for services. In Solaz’s case, the sum was $28,000 in “deferred compensation” in addition to annual cash compensation of $225,000. The suit also claims Barnes agreed to pay Solaz a bonus of $171,620 in 2016, but required that $75,000 of the amount be “deferred.”
In March 2017, Barnes contacted Solaz, according to the suit, in an attempt to force Solaz to use the deferred compensation, now totalling $103,000, toward the purchase of 25 Sawmill Village LLC, “a company that holds as its sole asset the Sawmill House, a single family dwelling.” At the time, Solaz was living in the Sawmill House.
Solaz says the transaction for the sale of the house, and the company that owns it, was never completed.
When Solaz’s employment at the Hermitage was terminated in December 2017, according to the suit, Barnes and the Hermitage failed to pay him the accrued salary under the CIM for 2015, 2016, and 2017, as well as the deferred bonus payment.
In their answer to the suit, the Hermitage claims the additional compensation under the CIM was “conditioned upon certain performances” and was “surrendered” when Solaz signed an executive employment agreement in January 2017. The Hermitage also denies that Barnes agreed to an annual cash bonus, that he required (Solaz) to defer payments or to use any deferred compensation for the purchase of Sawmill House. Barnes and the Hermitage deny that Solaz was owed any money following his termination.