Court documents provide insight into Spanish Peak’s legal conflicts
Club official mum on closure
Posted: Wednesday, October 12, 2011 12:15 am
CARLY FLANDRO, Chronicle Staff Writer | 2 comments
An official at Spanish Peaks, a ski and golf community in Big Sky, said Tuesday he couldn’t talk about the club’s closure, but court records indicate a history of legal and financial troubles. Scott Johnson, the general manager for Spanish Peaks, said he was staying mum “per attorney’s request.”
Monday, the club announced in a letter to members that it was closing and laying off its staff, citing a troubled real estate market and substantial operating losses. The club is also considering filing for bankruptcy, according to the letter. Though Spanish Peaks officials cannot comment on what led to the closure, court documents filed by or against the club provide some insight into its problems. In June, Gallatin County District Judge Holly Brown ruled that the club deceived customers when it didn’t tell them that pricey lots they were buying were located on active landslides. The case has been ongoing since 2009 and gained notoriety when it revealed inflammatory emails sent among Spanish Peaks managers that ordered salespeople to conceal the fact that many lots were part of an active landslide. In particular, Wade Pannell, then the vice president of design and construction at the club, told salespeople to “baffle (buyers) with BS rather than provide actual reports.” Spanish Peaks was found guilty of breach of contract and breach of “the implied covenant of good faith and fair dealing,” deceit, constructive fraud, negligent misrepresentation and violation of the Montana Consumer Protection Act.
Malcolm Drilling Company suit
Malcolm Drilling Company Inc., which was hired to stabilize landslides at the resort in 2008, has also filed a lawsuit against Spanish Peaks Holdings II, the company that owns the club. In a complaint filed in June, the drilling company alleged that Spanish Peaks failed to completely pay it for the work and owes $581,172. The company is seeking to be paid that amount, as well as accrued interest and attorney’s fees and costs. That case is ongoing.
KeyBank suit
Spanish Peaks has sued KeyBank National Association and, in a complaint filed in June 2010, alleged that the association had “continually promised” to loan it $100 million or more to build a lodge at the resort. “KeyBank ultimately failed to make good on its promises,” the lawsuit said, “apparently choosing to abandon (the entities involved) and the Lodge at Spanish Peaks in the fall of 2008.” The lodge was to include 49 personal residences, and a “wide range of amenities for the club’s members,” including a restaurant, lounge, ski shop, spa and fitness center. The lodge was intended to serve as the club’s “picturesque focal point” and was “imperative to the ultimate viability and success of the club as a whole,” according to the lawsuit. the spring of 2007, Spanish Peaks had completed the infrastructure necessary to develop the lodge and had sold numerous real estate parcels. But a year later, “the credit crisis had deepened,” the lawsuit stated, “and KeyBank’s own financial position had deteriorated.” Spanish Peaks alleges that KeyBank still continued to promise it would loan the money. “KeyBank, however, ultimately failed to keep its promise of providing a substantial credit facility for the Lodge Project,” the lawsuit said. In October 2008, Spanish Peaks suspended construction on the lodge and could not find alternative financing, “given the current depressed state of the credit markets.” Because the lodge is unfinished, sales of residences or commercial spaces have not been completed.
Member suits
Two couples, Robert and Karen Foster and James B. Karol and Joy E. Karol, filed a lawsuit against Spanish Peaks in March 2011. They paid deposits for golf memberships and condos, totaling $599,000, on the condition that they are mostly completed by a certain date. They learned in 2008 that construction on the lodge and their condos had been halted, but they were told they’d be completed by the mandatory Dec. 15, 2010, date. However, they have received no indication that construction has resumed. Spanish Peaks is accused of refusing to return the deposits.
The litigation is ongoing.