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Judge sets receivership duties

By Mike Eldred

NEWFANE- Windham Superior Court Judge John Treadwell appointed a receiver to protect Hermitage properties under foreclosure by Berkshire Bank in an order signed at 8:37 pm on Wednesday, June 6.

The order follows a May 18 decision granting Berkshire Bank's emergency motion to appoint Alan Tantleff, of FTI Consulting, as receiver to maintain and protect several Hermitage properties under foreclosure in Wilmington and Dover, including Hermitage ski area and golf course properties, four inns, five townhouses, several building lots, and personal property belonging to Hermitage Inn Real Estate Holding Company and Hermitage Club.

The order sets out the receiver's duties, as well as limitations to the receiver's powers. Throughout the order, the receiver's tasks are limited to those “necessary” to maintain the properties in a “mothballed” state. The receiver's expenditures for necessary costs will have priority over the dozens of other lienholders, but Treadwell warned that any charges the court cannot determine are necessary will not be granted priority.

The receiver's duties include paying necessary bills and debts, and paying other costs that “if not incurred, could reduce or lead to a reduction in the value of the subject properties” at an auction anticipated to occur after foreclosure. “Necessary bills shall include taxes, assessments, lease payments on the ski areas, insurance costs, and utilities.”

Also listed as “necessary bills” are staff salaries and contracts to provide cleaning, security, property inspections, and maintain the golf course greens. But the order also suggests that the Hermitage Golf Course will not be open for the 2018 season, limiting landscaping work at the course to that necessary to “maintain their value as a working golf course for next season, summer of 2019.”

The receiver is ordered to maintain the ski area, however, “with the goal of allowing a future potential auction purchaser to re-open for parts of the 2018-2019 ski season.”

The receiver is also ordered to secure properties to the extent necessary to prevent theft, vandalism, or other damage. The duties also include securing and preserving “all paper records and devices such as computers … that might store records,” but grants the Hermitage access to those records “to whatever extent they might need to do so during these proceedings to conduct their normal business activities.” The order allows the receiver to secure employee, guest, and marketing records, but “the receiver shall not review any such records to any extent more than is necessary to identify them as personal proprietary data.”

In his order, Treadwell addressed several Hermitage objections filed on May 29 in opposition to a proposed order submitted by Berkshire Bank following the court's May 18 decision. The Hermitage had objected to paragraphs in the proposed order that would have required the receiver to take custody of Hermitage business records and emails and secure accounts and computers with new passwords. Treadwell ruled in favor of the Hermitage, ordering the receiver to “secure and preserve” any records left on the property. “But there is no need, based on the information before the court, to have the receiver commandeer the Hermitage defendants' email accounts and change (their) passwords.” Likewise, Treadwell also ordered the receiver to “make reasonable efforts to accommodate the Hermitage defendants' need for office equipment, including computers, to continue their restructuring efforts.”

The Hermitage also objected to granting the receiver any authority over their bank accounts, or other actions that would impede their ability to obtain bridge financing, which they suggested was actively under negotiation. Treadwell agreed, declining to grant the receiver any access Hermitage bank accounts. “Nothing in this order is intended to impede the Hermitage defendants' efforts. The court has not granted the receiver access to, or control over, the (Hermitage) bank accounts, as there is no evidence suggesting that is reasonably necessary to preserve and maintain the subject properties.”

The order requires the receiver to prepare and submit a budget to the court, and to submit expenses for review each month for the first two months, then on a quarterly basis.  The order appears to have been effective immediately, as Treadwell set July 6 as the date of the first report. 

Berkshire Bank filed for foreclosure on the Hermitage properties in February. In their complaint they said the Hermitage was in default on$17.1 million in three loans. In April, the bank filed an emergency motion asking the the court to appoint a receiver to protect and maintain the value of the property. At that time Berkshire Bank listed another $864,000 in expenses they had incurred to keep the property out of jeopardy, including more than $660,000 in delinquent property taxes paid to the town of Wilmington.  Treadwell granted the motion in an order on May 18, and set a timeline for Berkshire Bank's proposed order, and objections from the Hermitage and other defendants.

Under the order signed this week, the receivership will be dissolved if the Hermitage pays Berkshire Bank in full, if both parties agree to dissolve the receivership, or at the termination of the proceedings. The receivership may also be dissolved if the Hermitage shows “that they have become capable of maintaining and preserving the value of the subject properties for the balance of these proceedings.”

The Deerfield Valley News

797 VT Route 100 North
Wilmington, VT 05363

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

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