This article was updated on Aug. 7.

WELLFLEET — The historic property at 70 Main St., not far from Wellfleet’s center, has seen more than its share of woes over the last two years. Now it is scheduled to go on the auction block. The auction, originally announced for Aug. 15, has been postponed to Thursday, Oct. 17.

John O’Toole and Grant Hester, a Provincetown couple, bought the former Inn at Duck Creeke for $3,145,000 in April 2022 with the help of two mortgages. They borrowed $1.6 million from Seamen’s Bank and got a Small Business Administration loan for about $1 million from Cape & Islands Community Development, according to documents at the registry of deeds.

Seamen’s Bank has foreclosed on its loan and scheduled the upcoming auction, according to O’Toole, who claims the bank has violated the terms of the mortgage agreement.

“We have been asking them to sit down with us since March,” said O’Toole this week. “We are now going into Chapter 11 [bankruptcy] to stave this auction off.”

The five-acre property has multiple buildings, ranging in age from 100 years to more than 200. O’Toole and Hester run the 22-room Copper Swan Inn in a few of those buildings at one end of the property. Trudy Vermehren leased a restaurant building at the other end, where she operated the Fox & Crow Cafe, a year-round gathering spot, from mid-2022 to September 2023.

Live entertainment offered there during Vermehren’s tenure was popular but resulted in an outcry in February 2023 from neighbors who eventually filed a complaint in state Land Court. That case was settled in May, several months after Vermehren closed the Fox & Crow, but the agreement, approved by the court, will apply to future businesses at that location. It requires all windows to be closed during live indoor performances; outdoor entertainment will require a special permit.

‘CalamariGate’

The relationship between Vermehren and her landlords quickly went downhill because of the deteriorated condition of the buildings and disputes over finances, with each side accusing the other of trying to stymie their operations.

O’Toole and Hester accused Vermehren or her employees of stashing rotting fish in the rafters of a cocktail lounge they were planning in order to delay its opening — an accusation denied by Vermehren’s attorney, Bruce Bierhans, who dubbed it “CalamariGate.”

Vermehren’s complaints included broken windows, missing screens, and broken locks in the employee housing units and lack of hot water in both the cafe and employee housing despite assurances from the landlord that the water problem was fixed. O’Toole said any broken windows in the employee housing were replaced, and screens were not required.

O’Toole and Hester served Vermehren with an eviction notice in July 2023, claiming she had failed to pay one month’s rent ($6,000) due June 1 as well as another $8,000 for employee housing she was leasing.

Bierhans argued that the $6,000 was not a rent payment but the final month’s payment under her five-year lease. Vermehren withheld the employee housing payment because of the substandard condition of the housing, Bierhans said.

O’Toole and Hester moved forward with the eviction in Orleans District Court, and Bierhans filed a complaint against them on behalf of Vermehren, seeking $200,000 in damages for her loss of investment in the restaurant, loss of employees, and loss of business. The two sides are still in negotiation on the latter case. Bierhans said this week that the damages being sought now stand at about a half million dollars.

The eviction case became moot when Vermehren moved out in late September. She ultimately decided to close the Fox & Crow permanently rather than open in another location.

The restaurant building remains vacant.

Woes continued for O’Toole and Hester through last fall. A quick-spreading fire on Sept. 11 destroyed the large building attached to the restaurant, which housed the lounge opened by O’Toole and Hester in July 2023 on the first floor as well as worker housing above the lounge.

The building that burned is called the “Hodge-Podge House,” according to the state’s inventory of historic properties. It is described as “a conglomerate of small buildings and building components moved to the site from elsewhere in Wellfleet and cobbled together” by then-owner and amateur builder Joseph Price Jr. in the 1930s.

Fire Chief Richard Pauley said the construction of the building allowed the fire to spread quickly inside the walls and up to the attic, and the multiple stairways inside made it difficult for firefighters to maneuver. The cause of the fire remains unknown but was deemed not suspicious by the state fire marshal.

Three months before the fire, Pauley performed a required inspection of the new lounge, which was set to open, and found a few minor violations. He also inspected the employees’ rooms above the lounge and ordered a stove removed from a former bedroom that had been converted to a kitchen, saying it was a fire hazard. All the buildings on the property lacked required heat and smoke detection systems connected to an alarm company. Pauley gave O’Toole and Hester until May 2024 to install the systems.

Answering to the Bank

O’Toole said that difficulties accessing fire insurance payments, which are being held by Seamen’s Bank as the primary mortgage holder, have caused the current foreclosure.

The burned building’s interior has been gutted, O’Toole said, and the owners will preserve what they can of the exterior. “It’s not going to be leveled,” he said.

O’Toole claims that Seamen’s Bank, which is overseeing distribution of the insurance proceeds of over $900,000, has “micromanaged” the demolition and refused to release the funds for work that’s been done. “Now there’s a bunch of local people who haven’t been paid for their work,” O’Toole said.

“In my opinion, at every part of this journey they have stymied us until they could say we are in default,” O’Toole said in an email. “They have forced us into an unnecessary Chapter 11 restructuring so that we can prevent their scheduled auction, an event that should never have happened given that they have $909,816.33 of our money on deposit.”

In a handful of emails provided by O’Toole, the tone on both sides shows patience running out. O’Toole demanded that invoices be paid, and Seamen’s loan officer Thomas Johnson repeatedly told O’Toole he must provide “invoices, receipts, verification of payment etc.” to receive reimbursement. He and O’Toole disagreed on whether the allocation for demolition had been exceeded.

Asked to comment, Johnson responded in an email.

“The bank only recently became aware of a bankruptcy filing by the owner of the real estate,” Johnson wrote. “On the advice of the bank’s legal counsel, this is not the appropriate forum to respond to the claims of Mr. O’Toole other than [to say] the bank strongly disagrees with the assertions he has made.”

Bob Morrill and his wife, Judy Pihl, owned the property at 70 Main St. for 35 years, buying it at a bankruptcy sale in 1980.

“It was a real source of pride and happiness for us,” Morrill said in a phone interview. “We were very close to our staff and our customers.”

After retiring and selling the property in 2015, Morrill and Pihl remained in contact with many of them. “We traveled to Europe to visit some of our employees,” he said, adding a former employee was currently visiting them in Wellfleet.

Morrill and Pihl ran all the businesses on the property themselves, which included the inn and two restaurants: the Duck Creek Tavern and Sweet Seasons Restaurant. “Our motto,” said Morrill, “was five acres, four buildings, three businesses, two owners, and one goal: survival.”