Harbor Village Adrift in Sea of Lawsuits : Courts: The restaurant and shopping complex’s future is uncertain because of litigation brought on by financial problems. Some blame the economy. Others cite mismanagement.

The Ventura Harbor Village is foundering in a sea of litigation.

Business practices of the troubled shopping center’s past and present landlords have swamped it in lawsuits, and legal costs now consume one-quarter of the Ventura Port District’s $2-million annual budget.

The district’s lawyers are fending off suits from the harbor’s marina operators, angry shopkeepers and even the shopping center’s insolvent former landlord, Ocean Services Corp., which won a $16.9-million breach-of-contract award against the district last fall.

District officials are quick to blame the lawsuits on Ocean Services, which filed for bankruptcy protection in 1987 in a flurry of foreclosures that left half the village in the port district’s hands and half in Great Western Bank’s.

“The bottom line is a lot of the legal problems we have today were, quote unquote, set up years ago,” said Richard Parsons, the harbor’s general manager.

Others blame the legal troubles on the recession taking its toll on the restaurant and shopping center that, according to one market analysis, was greatly overdeveloped for the size of the Ventura market.

But Parsons and other district officials acknowledge that the port district does not have the experience to run a shopping center properly.

Yet the district is faced with the daily management headaches of leasing 122 acres of water and 152 acres of land to entrepreneurs for the Harbortown Resort Hotel, about 300 mobile homes, 1,600 pleasure boats and 100 commercial boats.

“We’re not in the management business,” said Port District Commissioner John Hammer, the most senior of the district’s five commissioners. “We’d love to get out of it.”

The latest in a slew of management-related lawsuits was filed in February by the Ventura Harbor Village Merchants Assn.

The suit claims that the merchants are losing money because the district, Great Western Bank and their management companies failed to build tourist attractions promised by Ocean Services, including an aquarium.

It also accuses the port district and its managers of poorly advertising the village, neglecting maintenance, harassing tenants over their leases and misusing maintenance fees.

“It’s totally absurd,” Parsons said of the suit. “They make references to verbal promises and unwritten promises. We say there are no verbal promises. Everything’s in the lease.”

But Ventura attorney Randolph E. Siple, who represents the merchants, said the current landlords are as responsible as their predecessor.

“One of the main big problems with the Harbor Village complex is it originally was conceived as a single marketing attraction, and Ocean Services had the whole thing,” Siple said. “When their financial world collapsed, you wound up with the port district running half of it and Great Western running the other, and those two cannot get together on how to run it.”

But although the port district is working to sell its half of the village, Great Western will sell only when it is prudent to do so, Hammer said.

“Until we have a good owner who is financially strong and is ready to make a long-term commitment to it, it’s going to continue to be short-term decisions,” Hammer said. “They’re not suffering as bad as they’d like to say, but there’s no question they’re going to suffer if you just don’t spend the money on maintenance.”

The district’s negotiations to sell its half of Ventura Harbor Village to a Denver hog farmer are moving tortuously and slowly, even as it heads for a Sept. 23 trial over a separate legal challenge that could wrest control of the shopping center’s future from its grasp.

That trial, to settle the complex questions of who owns what in Ventura Harbor Village, stems from the district’s choice of a company to build and operate the restaurant and shopping center more than 10 years ago.

“Ocean Services was a very questionable developer in a lot of ways,” Hammer said.

Ocean Services began building Ventura Harbor Village in 1981 with money that it earned by selling municipal bonds in the port district’s name--bonds that held the district liable in case of default by Ocean Services.

“First they borrowed from the bondholders, then they borrowed from the bank, and as you’re running out of money, your management in all respects starts to suffer,” Hammer said. “You don’t do the proper maintenance, you don’t have all the buildings totally rented out.”

In 1984, Ocean Services filed a lawsuit accusing the district of violating its lease by failing to dredge the harbor, raising the rent and blocking its development plans with other landowners.

The company had signed a $1.5-million option to develop part of the site in 1980 when it learned that the district had signed a 1976 covenant with another developer over another shopping village nearby, which prohibited the district from building another restaurant or store for 10 years.

It was 1985 by the time legal disputes with that developer were resolved and the village construction was finished, and Ocean Services had spent $5.1 million on a project that had not paid any profit.

In 1987, with $5 million in debts, Ocean Services sought bankruptcy protection, and the original investors, including individuals, pension funds, mutual funds and investment groups, became creditors.

The largest creditor, Bank of America, foreclosed on some buildings in Harbor Village. Great Western Bank did the same.

The lawsuit continued to move through the courts.

On Sept. 21, 1990, the trial jury that had spent six weeks slogging through legal documents wearily reentered Ventura County Superior Court and announced its verdict: Ocean Services was entitled to $31.5 million for breach of contract.

The court later adjusted the award to $16.9 million after hearing arguments from the port district, which plans to appeal in the next 30 days, Parsons said.

If the state 2nd District Court of Appeal upholds the jury award, the district’s insurance companies probably will file suit to avoid paying, and the district itself does not have $16.9 million to spend on the award, Parsons said.

In a separate legal battle, a dispute over ownership of the bonds used to build the shopping center erupted in 1988 between the district and the investors, represented by CIB Development of Huntington Beach, said Jack Swafford, the port district’s attorney.

The dispute has prompted opposing lawsuits by the district and Bank of America, which represents CIB. Both cases are bound for a trial beginning Sept. 23.

“The legal and financial problems that have unfolded at the village are as complex as any billion-dollar deal,” Parsons said with a sigh. “Nobody in their wildest imaginings could have guessed how this would unfold.”

CIB has introduced a new wrinkle that could eliminate the need for litigation--a potential buyer.

Thompson Marine Enterprises, Inc. of the Denver area is negotiating to take over the district’s half of the beleaguered Ventura Harbor Village and assume its debts, officials said.

The company’s principal owner, Hayden Thompson, who owns one of the largest hog farms in the United States, could not be reached Friday for comment. And Thompson’s local agent, Ken Haymaker of Tarzana, declined to comment on the negotiations or the company.

Under the deal, Thompson would assume $6.5 million in debts to be repaid to the investors, and would take control of the Ventura Harbor Village, Parsons said.

The company would also lend $1.5 million to the district to help retire the debts.

To wrap up the deal, the district would contribute $1.08 million in cash toward erasing the debts.

Negotiations revolve partly around the value of the property, which the district says is $8 million and the Bank of America argues is $11 million, Parsons said.

A Ventura County Superior Court judge has urged the parties to work toward a middle ground of $9.5 million.

If the Thompson deal fails, the district could sell Ventura Harbor Village to another buyer, give it up to a court auction or go to trial, Swafford said.

In the meantime, the district is juggling two additional lawsuits, one filed by Francisco Rangel and one by Almar Ltd., which operates Ventura Isle Marina.

Rangel, owner of the former village restaurant called La Marina Cantina, filed a suit alleging that the district and its property manager, Newman Properties Inc., forced the restaurant out of the village because he complained about management and because he is Mexican-American. The first court hearing is scheduled for Oct. 7.

Almar sued Ocean Services and the district in 1982, alleging that Ocean Services’ decision to locate a fish-receiving dock near some of the marina’s pleasure-boat slips is devaluing the slips and costing the marina money.

Parsons said the district is negotiating with Almar to rearrange the docks to make room for more large boats and reduce the noise, traffic and smell from the nearby fish-receiving dock.

Parsons, Hammer and former Commissioner Russ Smith blame many of the tenants’ difficulties and the district’s resulting legal problems on Ventura’s slow-growth policies and a sluggish economy.

“The better their business is, the smoother things go,” said Smith, who now runs the Ventura Visitors and Convention Bureau. “When business is not good, the finger-pointing starts.”

Smith called the harbor “a little jewel” that could prosper if managed properly by a sole, wealthy, savvy investor: “They’re going to have to get somebody with deep pockets going in, because otherwise it’s just going to go down the tubes.”

Harbor manager Parsons said: “As long as we have these legal problems hanging over it . . . there’s no way I could say things are going to get better. But if they’re resolved, then I think the harbor will be in pretty good shape.”

But Parsons said the Ventura Harbor Village may have been built too large for its market.

A market analysis completed in May said the village is the largest of its kind in Southern California, operating in one of the smallest markets.

“You could say it’s overbuilt, and that’s enough to get into trouble,” Parsons said. “When projects get into trouble, lawsuits result. They’re trying to spread the blame--maybe that’s too harsh. When you fail in business, there’s a cost involved, and they’re spreading the cost.”

But Siple, the merchants’ attorney, lays the blame squarely on the port district’s management style.

“It’s done from a far distance, in a sometimes dictatorial-sounding fashion, as opposed to really getting in there and living with these people and understanding that their profitability is the district’s profitability,” Siple said.

The merchants don’t want a large money settlement, just a plan for the landlords to work together as one, he said.

“I’ve tried everything I can, from the negotiating standpoint, to get one property management, one single advertising strategy,” Siple said. “And it falls on deaf ears.”

Pending Ventura Port District Suits

An Unwanted Dock

Parties: Ventura Isle Marina vs. Ocean Services Corp. and Ventura Port District

Filed: 1982

Allegations: Inverse condemnation--that the district’s decision to locate a commercial fish-receiving dock near VIM’s pleasure boat slips damages the slips’ value with noise, traffic and smells.

Relief sought: Better separation of the commercial dock and private slips, plus award of damages.

Status: After Superior Court judges ruled several times that the charges needed amending, the state 2nd District Court of Appeal ruled that VIM should be granted a trial. The state Supreme Court refused to hear an appeal of that ruling from the district, which is awaiting VIM’s next move. Negotiations are ongoing to reconfigure the slips so the commercial dock will affect them less.

Breach Charged

Parties: Ocean Services Corp. vs. Ventura Port District, et al.

Filed: 1984

Allegations: Breach of contract--accuses the port district of violating its lease by raising the rent, failing to dredge the harbor and failing to disclose previous agreements with other landowners that blocked some Ocean Services development plans.

Relief sought: Recovery of economic losses plus award of damages.

Status: A Sept. 21, 1990, Superior Court jury award of $31.35 million to Ocean Services was later reduced to $16.9 million. The port district’s appeal of the award is expected to be filed within 30 days in the 2nd District Court of Appeal. Ocean Services is in Chapter 7 bankruptcy proceedings.

Seeking an Interpretation

Parties: Port District vs. Bank of America

Cross-complaint: Bank of America vs. Port District

Filed: Original 1988, cross-complaint 1989

Allegations: None

Relief sought: The court’s interpretation of legal papers governing ownership rights on the half of the Harbor Village controlled by the district. The bank represents the shopping center’s original investors.

Status: A trial in Superior Court scheduled Sept. 23 could be avoided if the property is sold and the district uses the proceeds to repay the investors, or if the court orders an auction of the property. Negotiations to sell it to Thompson Marine Enterprises are said to be nearing completion.

Discrimination Alleged

Parties: Francisco Rangel vs. Ventura Port District and Newman Properties

Filed: February

Allegations: Discrimination and harassment--that the district and its property manager tried to force Rangel’s La Marina Cantina restaurant out of Harbor Village because he complained about management and because he is Mexican-American.

Relief sought: Award of damages.

Status: District has filed a response, with oral arguments to be heard in Superior Court on Oct. 7.

Attractions Sought

Parties: Ventura Harbor Village Merchants Assn. vs. Ventura Port District and Great Western Bank, et al.

Filed: February

Allegations: Breach of contract and harassment--that merchants are losing money because the port district, Great Western Bank and their management companies failed to build tourist attractions promised by now-bankrupt Ocean Services Corp., inadequately advertised the village, misused maintenance fees, neglected maintenance and harassed shopkeepers over their leases.

Relief sought: Fulfillment of Ocean Services promises, switch to single landlord, improved maintenance, accounting of maintenance fees and award of damages.

Status: Top merchants association officers resigned upon learning the suit was filed without their consent. The district has filed a response, with oral arguments to be heard Sept. 5 in Superior Court.

Source: Ventura Port District and court records