Stowe resort loses lawsuit
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By Thatcher Moats TIMES ARGUS STAFF - Published: July 14, 2009
STOWE – A judge has ruled that Spruce Peak Realty, the company behind a large development at Stowe Mountain Resort, failed to uphold its end of a real estate deal last fall and now must return a $53,800 deposit to two plaintiffs.
The ruling, issued last week by Judge Christina Reiss, could affect a number of similar lawsuits against the company that are still pending.
Edythe DeMarco and Thomas Byrne of Pawtucket, R.I., filed a lawsuit in November 2008 in Vermont Superior Court in Hyde Park, arguing that Spruce Peak breached its contract by not closing on a condominium on the agreed-upon date.
Spruce Peak could not close the deal because a contractor had placed a lien on the property.
After they were told of the lien, DeMarco and Byrne demanded that the company return their money.
Spruce Peak refused to release the deposit, so DeMarco and Byrne sued.
The Stowe Mountain Lodge, where the plaintiffs had intended to buy "fractional interest" in a condominium, is the centerpiece of a large new luxury development called Spruce Peak at Stowe, which is part of the Stowe Mountain Resort.
The resort is owned by the embattled insurance company American International Group, and the lien was placed on the properties last fall, about a month after AIG began its nosedive and was bailed out by the federal government.
It's unclear how much of a connection there is between AIG's collapse and the liens placed on the properties in Stowe.
AIG suffered from catastrophic cash flow problems as it collapsed. But in an e-mail message to DeMarco last fall, a Spruce Peak employee characterized the lien as something that can happen during large construction projects.
"There was a significant lien placed on the property last Thursday by the Construction Manager," wrote Michael Langley, the Director of Sales and Marketing at Spruce Peak at Stowe. "As projects of this scope close out, there can be disagreements among and between the owner, the Construction Manager, project suppliers and subcontractors regarding additional costs."
By early December of last year, the liens against the property had been removed, according to court documents.
Now the Stowe Mountain Resort is for sale as AIG tries to unload assets in order to pay back $180 billion in federal aid. The sale was announced in May — though many saw it coming long before then – and includes Spruce Peak at Stowe, the Stowe Mountain Lodge and the Spruce Camp Base Lodge.
Also for sale are use of extensive acreage of privately owned and leased government land, lifts, grooming and snowmaking equipment, two golf courses, residential properties, the Stowe Country Club and 10 restaurants and grills scattered around the base area.
Much of the bricks-and-mortar assets have been built up over the last six years as part of a $400 million upgrade.
Lauren Day, a spokeswoman for AIG, would not comment on whether the resort had been sold or what bids, if any, AIG had received for it. She also would not comment on the connection between AIG's troubles last fall and the lien the contractor placed on Spruce Peak properties.
Judge Reiss did rule in favor of Spruce Peak on one claim made by the plaintiffs, who argued that the company was guilty of unjust enrichment. Reiss denied the plaintiffs' request for summary judgment on that claim.
The deposit money was held in escrow by an escrow agent, not by Spruce Peak, though Spruce Peak refused to have the money released, she wrote.
"This is not necessarily because Spruce Peak claims title to it, but because the parties are in a dispute regarding whether DeMarco and Byrne are entitled to its return," Reiss wrote. "Spruce Peak has not appropriated the deposit for its own use, dissipated it, or assumed possession of it."
If Spruce Peak continues to withhold the deposit, though, the plaintiffs' claim of unjust enrichment could have merit, said Reiss.
Jeremy Hoff, a lawyer with the Stowe law firm Stackpole & French, who represented the plaintiffs in this case and represents seven other plaintiffs with similar claims, said he hopes this ruling will give him leverage in his negotiations with Spruce Peak.
"I'm hoping we don't have to do this seven more times," he said. "Hopefully we'll be able to have some productive conversations after this."
Hoff said at one point there were roughly two dozen claims against Spruce Peak that were similar to the claims made by his clients.
A spokesman for Stowe Mountain Resort said he could not comment because of the pending cases.
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