Massanutten Village, the beleaguered ski resort and time-share development in the Virginia Blue Ridge, was sold this week to a Charlottesville partnership for $3 million. The transaction, however, was later frozen by a federal judge who said the original owners should have 30 more days to pull together financing for a $35 million bailout plan.
"The deed was recorded but we've been ordered not to disburse the proceeds," said John Sills, the Staunton lawyer handling the sale. "The judge said we should stop things where they were and not do anything else that would make the transaction difficult to undo."
Sills said that U.S. Bankruptcy Judge H. Clyde Pearson had okayed the sale of the resort Thursday morning, after denying motions for a delay by some of the lesser creditors in the tangled bankruptcy case.
That afternoon, however, creditor Commonwealth Capital Corp. of Charlottesville went to U.S. District Court in Charlottesville and won a stay. According to The Associated Press, U.S. District Judge James Michael based his decision on what he perceived as "a rush" to close the sale of the resort.
Time-share development at Massanutten -- a four-season mountain resort with a golf course, ski mountain, hotel and conference center, individual homes and 150 time-share town houses -- slowed to a halt early in 1983 when construction companies filed $120,000 in liens in Rockingham County Court against developer First Federal.
A bailout financing plan, put together by First Federal's President John Swaim, fell through later in the year. When Union National, which held $7.5 million in loans secured against the property, threatened to foreclose last December, First Federal and three subsidiaries filed for bankrutpcy.
Creditors originally supported a second First Federal bailout plan, put together with the help of a Texas firm, First Houston Capitol Resources Fund Ltd. That plan called for selling the assets at Massanutten and sister resort Lake Placid Club Lodges in New York for $35 million, along with half of the equity share in a new company formed to continue time-share development at both resorts. Swaim would have retained the other half of the equity in the new company, recently chartered as Berkeley Resorts Inc.
First Houston could not find an investor in the time allotted, however, and was unwilling to back its commitment with a $350,000 earnest money deposit. Finally, Judge Pearson approved a Union National reorganization plan in September, appointing a trustee to sell Massanutten to Charlottesville developer C. Dice Hammer and James E. Lambert of Del Ray Beach, Fla., with the proceeds paying off Union National's secured debt.
Commonwealth Capital, an unsecured creditor facing at least a $400,000 loss, petitioned the bankruptcy court two weeks ago to allow it to post a $350,000 bond on behalf of First Houston, to be forfeited if First Houston did not come up with a binding $35 million financing agreement within 60 days.
Sills said that under the stay, First Houston will have 30 days to come up with financing for the bailout.