January 7, 2009 - Stowe Mountain Lodge, Stowe VT

Buyers sue Stowe resort over delays

Stowe Mountain Lodge is the defendant in a growing number of lawsuits filed by people who signed contracts to buy accommodations in the resort’s lavish new housing complex.

Stowe Mountain Lodge is the defendant in a growing number of lawsuits filed by people who signed contracts to buy accommodations in the resort’s lavish new housing complex.

The lodge is the centerpiece of a series of $400 million in upgrades, dubbed Spruce Peak at Stowe. The project is designed to give Stowe something the iconic mountain resort lacked: luxury, slopeside accommodations. Stowe Mountain Lodge, including its spa, bar and restaurant, was estimated to be a $200 million endeavor.

Since the opening of the lodge last summer, American International Group Inc., the resort’s owner, imploded as the nation’s subprime mortgage market unraveled.

The federal government bailed out the insurance giant, which now has little choice but to sell its noncore assets — and that might include parting with Stowe Mountain Resort. That uncertainty and delays in closing dates for the properties has made some buyers uncomfortable.

Aaron Kwittken, CEO of Kwittken & Co., a New York City-based public relations firm, and his wife have fond memories of Stowe and agreed to buy a share of a three-bedroom condo in the lodge. They placed a 10 percent deposit on the $369,000 cost of the one-eighth share in July 2007.

Stowe missed the Oct. 1, 2008, closing date it set to complete the deal, creating a breach of contract and a violation of Vermont’s Consumer Fraud Act, Kwittken claims in a lawsuit filed in Lamoille Superior Court on Dec. 10.

Some buyers began to ask questions about the finances of the project before deciding to sue.

Stowe Mountain Lodge “was already beginning to show signs of decay before AIG’s collapse and perhaps the numerous delays in closings was really an early warning sign,” Kwittken said by e-mail. “Many of us contracted owners asked reasonable questions regarding working capital, debt structure, etc., that still have been met with radio silence.”

Kwittken now wants out. He is suing for a return of his $36,900 deposit, with interest, attorneys’ fees, and nearly $1.5 million in punitive damages.

On Monday, Stowe Marketing Director Mike Colbourn said he was not familiar with the lawsuits and was not prepared to comment. When reached Tuesday, he declined to comment.

Kwittken’s attorney, Andrew Manitsky of Gravel and Shea in Burlington expects a formal response from the resort this week. The resort has filed a countersuit in at least one other case arguing the buyer is refusing to pay the balance due.

“Before filing lawsuits, I think that some of these plaintiffs still wanted to get the deal done, some wanted to pull out because of concerns over AIG, and some were in the middle,” Manitsky said.

The resort, Kwittken said, “has been unresponsive, to say the least.” He said he decided to file the lawsuit “with great reluctance and no other options at my disposal.”

One of many

Kwittken is one of at least a dozen people planning to sue the resort, said Jeremy Hoff, an attorney at Stackpole and French Law Offices in Stowe.

Hoff and Ed French, attorneys at the firm, said they know of 10 to 12 similar cases that have been filed in Superior Court. Their firm has filed four of the cases, all dealing with fractional ownership units, and plan to file three more this week, Hoff said Monday.

“Our claim is straightforward,” French said: Stowe failed to close on the properties.

Hoff and French’s clients are seeking a return of the deposits, legal fees — and to dissolve the purchase and sales agreements.

“A dozen plaintiffs, represented by a half-dozen attorneys, are suing over exactly the same thing,” Manitsky said. “They won’t close, but they won’t return the deposits. I won’t speculate as to what’s really going on here, but it’s wrong.”

Spruce Peak Realty LLC, which Hoff said is effectively the same entity as Stowe Mountain Lodge, filed a response to one of the suits on Dec. 29 that denies many of the allegations.

The resort also filed a counterclaim, stating the plaintiffs have breached an agreement by “refusing to pay the balance due on the purchase price.” The resort is “ready, willing and able” to sell the properties, the filing states. The resort is also seeking attorney fees.

Troublesome liens

Sales of the lodge properties require a clean title with no liens, French said.

Prospective buyers received an e-mail in late October from Spruce Peak Realty’s director of sales and marketing, stating that “a significant lien” had been placed on Stowe Mountain Lodge that may delay closing dates, according to a court filing by Stackpole and French.

Michael Langley, Spruce Peak’s director of sales and marketing, could not be reached for comment Tuesday.

Stowe Mountain Lodge is complete, but construction is under way on the second phase of the lodge, a performing arts center and a pedestrian plaza, said Jeff Wise, a Stowe spokesman. The construction is on schedule, he said.

He referred questions on the pending lawsuits to Walter Frame, Spruce Peak’s operations manager. Frame could not be reached for comment.

“Over the past several months, there have been several liens that have come and gone. ... But the main issue is: the contract closing date,” French said, declining to comment on whether or not the liens are a result of cash flow problems at Stowe.

Dealing with liens is a common part of the construction process, Frame said in late October.

The delays in finalizing the deals, particularly the missed closing dates, have provided an opening for the lawsuits.

“They took my client’s deposit, but they wouldn’t close. They picked the dates, and then missed them all. ... So we sued,” Manitsky said.

Original Story - Burlington Free Press