Suit filed against Barnes alleges fraud
by Mike Eldred
Mar 30, 2018 | 8796 views | 0 0 comments | 124 124 recommendations | email to a friend | print
Foundations of uncompleted condos at the Hermitage Club
Foundations of uncompleted condos at the Hermitage Club
WILMINGTON- A lawsuit filed in US District Court on Thursday afternoon accuses Hermitage Club founder and owner James Barnes of fraud, and seeks to recoup more than $2 million paid for three townhouses that were never built.

Three plaintiffs, RTM Capital Partners, a New Jersey corporation; LPV-15, Hermitage, LLC, a company registered in Delaware and doing business in Vermont; and Matthew Curtis, a Chatham, NJ, resident say they entered into separate purchase and sale agreements with the Hermitage and Barnes for three townhouse units in the same building at13 Grenoble Way. According to the plaintiff's attorney Erin Miller Heins, of the Burlington law firm Langrock, Sperry & Wool, all three of the town houses were to be built off-site by Ritz-Craft, a Pennsylvania-based modular home manufacturer.

In September 2015, Curtis signed a contract to buy unit 402, for $1.1 million, plus $80,250 for a Hermitage Club membership, and $30,000 for “deeded rights.” Curtis made a $300,000 down payment and agreed to make $100,000 payments when certain phases of construction were complete. In July 2017, according to the suit, “Barnes and/or others acting at his direction represented to Curtis, that progress was being made on the construction of unit 402 and requested that Curtis advance additional funds.”

Believing that progress was under way, and “Barnes' representations … that funds advanced by Curtis would be used exclusively for that construction” Curtis paid an additional $270,000 on July 24, and a $24,246.47 three days later for “selected upgrades.” At that point, Curtis had paid a total of $594,246.67 for the unit.

The suit claims Barnes and others working at his direction continued to tell Curtis that construction was proceeding on the unit. But on November 13, “Barnes representatives finally acknowledged to Curtis that no progress was being made on unit 402.” In fact, according to the suit, Ritz-Craft, the modular construction company, had returned the initial deposits for Unit 402 to the Hermitage and/or Barnes. To date, only the foundation has been poured at the site.

“Despite having knowledge that no progress was being made, and that Ritz-Craft had returned the initial depost funds, Barnes failed to disclose this fact to Curtis and, in fact, made false representations to Curtis to the contrary.”

The other plaintiffs tell similar stories. LPV-15, Hermitage LLC entered into a $1.3 million purchase and sale agreement for Unit 404 and a Hermitage Club membership on December 3, 2015. After paying $300,000 down, $441,281.10 in additional payments based on representations that progress was being made on the unit, the company discovered that no unit had ever been built. Only the foundation exists. Builder Ritz-Craft had returned the initial deposits to Barnes and/or the Hermitage.

RTM Capital Partners agreed to pay $1.26 million for a membership and unit 401 at 13 Grenoble Way, “for the personal use of its principals,” according to the suit. The company made a $500,000 down payment in February 2016. “In reliance on Barnes representations that progress was being made on the construction of Unit 401 and that funds advanced by RTM would be used exclusively for that construction, RTM sent another $245,000 to Hermitage and Barnes on or about August 2017.” As the plaintiffs discovered, RTM's unit was never constructed, and the funds “allegedly sent to Ritz-Craft for construction of unit 401 had been been returned to Hermitage and/or Barnes months earlier.” Only a foundation existed.

In the first of eight counts, the three plaintiffs say Barnes' actions violate Vermont's Consumer Fraud Act. “Barnes' false representations to plaintiffs about the status of construction on their townhomes, Barnes' use of funds advanced by plaintiffs for other purposes, and Barnes failure to disclose that Ritz-Craft had returned the townhome deposit funds constitute misrepresentations, practices, and/or omissions likely to mislead plaintiffs” and “constitute unfair and/or deceptive acts or practices in commerce causing the plaintiffs to sustain damages in a significant amount.”

According to the suit, Barnes has not returned any of the money paid by the plaintiffs. “Plaintiffs have demanded that the townhomes be constructed or the funds be returned, but Barnes has refused to return the funds and has not constructed the townhomes. Barnes' actions show that he has wrongfully converted the plaintiffs' funds to his own use and enjoyment and/or that of the Hermitage.”

The plaintiffs also accuse Barnes of fraudulent misrepresentation for his claims that progress was being made on units even though construction had not started and Ritz-Craft had returned deposits. They also accuse Barnes of fraudulent concealment for hiding “material facts” regarding the lack of progress and return of funds from Ritz-Craft.

Barnes is also accused of fraudulent inducement for seeking progress payments even though construction on the units had not commenced. “Barnes fraudulently induced plaintiffs to transfer additional funds to Hermitage by providing express and/or implied assurances, both verbally and in writing, that funds advanced by plaintiffs would only be used solely for construction of plaintiff's townhomes, and that work was progressing on those townhomes.”

In two final counts, Barnes is accused of unjust enrichment for retaining the plaintiffs' money, and “tortious interference” for allegedly violating the terms of the purchase and sale agreements.

Barnes has not yet filed an answer to the suit.
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