Club files objection to bank’s receiver appointment

NEWFANE- Last week, Berkshire Bank filed a proposed order of appointment for a receiver to maintain Hermitage properties under foreclosure, and on Tuesday the Hermitage filed an objection to the bank’s proposal. 
Both documents were filed following a May 18 ruling by Windham Superior Court Judge John Treadwell granting a Berkshire Bank motion to appoint Alan Tantleff, of FTI Consulting, as receiver to maintain several properties under foreclosure in Wilmington and Dover.  In the decision, Treadwell required Berkshire Bank to submit a proposed order clearly defining the receiver’s duties under the scope of the law, which he indicated was limited to the “care and preservation of the property.”  The judge also instructed the bank to structure the order to prioritize the receiver’s expenses that are necessary for the preservation of the property.  “Any unnecessary expenses may not be reimbursed at all after a judicial sale or may not be given priority among the liens.”
In their objection to the proposed order, the Hermitage takes issue with paragraphs that would require them to turn over business records, emails, computers, and passwords to the receiver.  Under Berkshire Bank’s proposed order, the receiver would “take possession and control of all Hermitage business records necessary in the reasonable determination of the receiver for the receiver to perform his powers and duties” and have “access to and review all mail and email of the Hermitage except personal mail and privileged attorney/client communications which shall be turned over to the addressee.”
The bank’s proposed order would also require the receiver to safeguard the Hermitage’s employee data, books and records, documents and email, cash on property and in various bank accounts, accounts receivable, personal property received or in storage from club members, food and beverage, and personal property.
In his objection, Hermitage attorney Bob Fisher says that the Hermitage is “not currently a going concern,” and therefore there is no need for the business records in order to “preserve and maintain” the properties.  “There is no running of the business, so to speak, and so long as the receiver receives the relevant notice of tax payments, etc., which are received by mail, there is no need to take over the business records and emails.” 
Fisher said that taking over the email accounts “simply acts as a means to entirely stifle the company’s attempts to restructure and pay off the debt to the (Berkshire Bank).  The appointment of the receiver should not prohibit the company from executing its restructuring, for to do so would amount to the receivership being a dissolution of a company rather than a mechanism by which to preserve and maintain a company’s assets.”
The Hermitage also objected to giving the receiver authority to change passwords and take over computer records.  “Any order should provide that the receiver be required to meet with the Hermitage technology director in order to protect the data, but not to interfere with the ability of (the Hermitage) to conduct its efforts toward a restructuring of the club and its debts. To grant the receiver the authority over all passwords and computers, etc., eliminates the ability of the Hermitage to provide the new lenders with the information required to close the deal.”
According to Berkshire Bank’s testimony at a hearing on their motion to appoint a receiver, incorporated into their proposed order, the receiver would charge $32,500 per month for the first two months, and $16,250 for each subsequent month, plus a 6% administrative fee.  The Hermitage objected to the fees during the hearing, and again in their written objection filed Tuesday.  
Fisher argues that, because the receiver will only be responsible for “mothballing” and maintaining the properties, rather than running the club business, the fee is excessive.  “(The Hermitage) suggests and respectfully requests that the fees charged by the receiver should be commensurate with property management fees in the surrounding area, and that (Berkshire Bank) be required to produce to the court three independent fee structures from property management companies for the proposed services to protect and preserve the properties.”
Fisher also questioned the 6% administrative fee, which he said was “duplicative of the work already being compensated by the monthly fees.”  Fisher called the 6% fee “unconscionable.”
Berkshire Bank’s proposed order would also require the receiver to “cooperate and coordinate” with the auction company that conducts the court-ordered sale of the property in the event of a foreclosure order, and to prepare the properties for the public auction.  Another paragraph calls for the receiver to assist with the foreclosure process.  
In their objection, the Hermitage says it would be a conflict of interest for the receiver, as “an arm of the court,” to coordinate with Berkshire Bank.  “Any unnecessary preparation of the premises is not required for the receiver’s duties to protect and preserve the assets,  such cooperation and coordination is tantamount to the receiver preparing the property for the upcoming ski season, which is specifically excluded from the receiver’s duties without further order of the court.”
The proposed order would also allow the receiver to change signatures on existing Hermitage bank accounts.  The Hermitage claims they are in the process of “receiving certain bridge loans” that will allow them to pay the money owed to Berkshire Bank, and prevent the foreclosure.  
In their objection, the Hermitage asks the court to “prohibit the receiver from having any authority or control over any new funds loaned to the Hermitage, and any bank accounts of the Hermitage. The receiver should have no authority to take control of all bank accounts because such action would cripple the company’s ability to facilitate restructuring.”
No deadline has been set for the court to issue a final order appointing the receiver. 

The Deerfield Valley News

797 VT Route 100 North
Wilmington, VT 05363

Phone: 802-464-3388
Fax: 802-464-7255

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