The Ventura Port District could be forced to sell some of its land at the harbor to pay back the more than $15 million it owes to a creditor, a federal judge ruled Monday.
The decision represents a small victory for the creditor, Ocean Services, a bankrupt development company that successfully sued the district for not acting in good faith while negotiating the development of Harbor Village.
A trial set for federal court in September will determine exactly how the Port District will have to pay off its debt, which a lawyer for the creditor estimates has grown to $22 million with interest.
The decision could put the district's plans for a marine center in jeopardy, said DeWitt Blase, the attorney for Ocean Services. District officials have considered leasing 20 acres of harbor property to a Montecito entrepreneur who wants to build a $20-million marine educational center on the site.
"We're not opposed to the center," Blase said. "But we're opposed to the Port District giving the land away before they have paid us."
Richard Parsons, the Port District's general manager, played down the significance of the judge's ruling, saying no harbor project is in danger because no decision has yet been made on the sale of district land.
"It's just another uncertainty," he said. "And that makes it harder to do things."
The district voted to declare bankruptcy in August, 1993, seeking protection from Ocean Services, on the same day the state Supreme Court refused to hear the district's appeal of the multimillion-dollar judgment.
District officials still maintain that Ocean Services' quest for payment is futile, because the funds simply are not there.
"The district wants to pay," said Commissioner R. Nick Starr, "but (the judgment) is disproportionate to what its worth is."
Judge Harry Hupp, however, ruling in U. S. District Court in Los Angeles, said the agency can be forced to pay its debt, whether through selling part of its $50 million in assets or by plucking the money from its annual revenues.
The Ventura Port District, he wrote in his decision, "may not treat payment of the judgment as a discretionary matter which it may honor or not."
Hupp also turned down requests by Ocean Services to force the district or the county to raise property taxes to pay back the judgment. Such a mandate is not allowed under Proposition 13, the 1978 voter initiative that severely limits an agency's ability to increase property taxes, he said.
The judge refused to rule, however, on an Ocean Services request that it be allowed to siphon off Port District property taxes to recover its money. The judge left open the possibility of such a redistribution of taxes, but said he did not have enough information to decide.
The relationship between Ocean Services and the Port District dates back to 1979, when the development company signed an agreement with the district to build, among other things, an aquarium, a restaurant and retail shops.
What the company eventually constructed is now called Harbor Village--a complex of about 50 stores and eateries that surround more than 1,800 boating slips at Ventura Harbor.
According to court documents, the Port District did not reveal it had an agreement with another developer prohibiting the construction of retail facilities on certain parcels at the harbor. Ocean Services' officials said that when they learned of this agreement, district officials assured them it would not affect the Harbor Village project.
But the conflict led to a flurry of legal battles, which forced Ocean Services to halt construction and eventually sent it into bankruptcy, company officials allege.
By the time Ocean Services went bankrupt in 1987, the company had incurred $13 million in net operating losses, court documents said.
District officials have argued that the Port District did nothing wrong and that the company went bankrupt because of financial mismanagement.
Ocean Services' share in the judgment is now owned by Ventura Group Ventures, an investment group made up largely of former Ocean Services' owners, according to Blase, the attorney. Ventura Group Ventures bought the judgment for $115,000 after Ocean Services itself went bankrupt.