Litigation against Pleasant Pond Mill LLC, the deeded owner of the Clary Lake Dam, was temporarily halted when the company filed for Chapter 7 bankruptcy in March.
After a meeting of the creditors at the Augusta Armory on Monday, May 1, the stay will be lifted and legal action against the company can proceed, said bankruptcy trustee Pat Perrino.
With no assets to distribute, Perrino declared the abandonment of the property, which means Pleasant Pond Mill LLC will retain ownership of the dam, Perrino said. Once a report of no distribution is filed in the court, the stay protecting the company from legal action “goes away,” he said.
“Essentially you’re standing right where you were standing,” Perrino said to Paul Kelley, the sole member of Pleasant Pond Mill LLC, and the creditors who gathered for the meeting.
Whitefield Selectman Bob McKeen; Robert Rubin, who owns property on Clary Lake and has a pending lawsuit against Kelley and Pleasant Pond Mill LLC; and downstream property owner Richard Smith, the sole member of AquaFortis Associates LLC, attended the meeting as creditors.
Smith was previously a member of Pleasant Pond Mill LLC, but formed AquaFortis Associates several years ago, which assumed ownership of the historic mill building, a land parcel, and a building on top of the Clary Lake Dam, which Pleasant Pond Mill LLC previously owned.
Pleasant Pond Mill “is without any assets and is involved in litigation that seems to have no end,” Kelley said.
The company has outstanding legal fees, credit card bills, and back taxes of about $350,000, and owes $115,000 to Medius L3C, which holds a mortgage on the property, according to the Kennebec Journal.
Pleasant Pond Mill LLC has been the subject of numerous legal entanglements since the Clary Lake Dam was breached in 2011, resulting in a dramatic decrease in the water level of Clary Lake.
The Maine Department of Environmental Protection issued a water level order for Pleasant Pond Mill in January 2014, and a notice of violation for failing to comply with the water level order in October 2015. Kelley, Smith, and AquaFortis Associates were named in the notice of violation.
In January 2016, Rubin and his wife, Cheryl Ayer, filed a lawsuit against Kelley, Smith, Pleasant Pond Mill, and AquaFortis Associates in Lincoln County Superior Court, seeking damages for harm to their property as a result of the dewatering of Clary Lake.
After nearly 1 1/2 years, Superior Court Justice Daniel Billings entered a verbal default judgment against Kelley in late April because he failed to comply with the discovery process, Rubin said.
Information about the principals involved in Medius L3C was among the material Rubin and Ayer requested in discovery, Rubin said. Efforts to identify and contact the members or owners of Medius L3C have been unsuccessful. Kelley has said he is not an officer or member of Medius L3C.
Shortly after its formation, Medius L3C was assigned the mortgage on the Clary Lake Dam, which was previously held by Arthur Enos. Medius L3C foreclosed on the dam and held an auction for it in January 2016.
While there was a bid at the auction, the dam’s deed was never transferred.
The court’s judgment allows Rubin and Ayer to progress to the next phase of their lawsuit against Kelley and argue for damages, Rubin said. The couple is hopeful a similar judgment will be issued against Smith and AquaFortis Associates, Rubin said.
With Pleasant Pond Mill LLC no longer protected from legal action as a result of the bankruptcy proceeding, the couple intends to reinitiate legal action against it, Rubin said.
The role of a bankruptcy trustee is to administer a company’s assets to creditors, Perrino said. The abandonment is stating there are no assets to administer, which means the dam’s current ownership remains the same, he said.
“Essentially, everything stays the status quo,” Perrino said.
