A federal judge has ruled that the Ventura Port District can be forced to sell land to pay off a $15.5-million debt that it owes the developers of Ventura Harbor Village.
The long-awaited decision opens the door for creditors to force the sale of district-owned land, although attorneys said the case will very likely be tied up in appeals and other legal battles. A forced sale could disrupt plans for development of the harbor area.
U. S. District Judge Harry L. Hupp's decision, filed in Los Angeles on Thursday, ends a yearlong legal battle in which Port District attorneys argued that the agency could not be compelled to sell public property.
The Port District owns 178 acres in and around Ventura Harbor, including the Ventura Marina Mobile Home Park and a prime 20-acre parcel that has been considered as a possible location for an educational marine center.
Port District attorneys argued that all the district's land was needed to generate revenue for its operation. But the court disagreed.
"Among the public duties that the district has is to pay its judgment," Hupp wrote in his 23-page decision.
"If the sale of revenue-producing property . . . or undeveloped property is necessary to cause the payment of the judgment," he wrote, then a court can order the sale.
The ruling represents a victory for Ventura Group Ventures, a contingent of about 20 shareholders that successfully sued the district for negotiating in bad faith with developers of the Ventura Harbor Village shopping center.
The Port District was ordered by a Ventura County jury in 1991 to pay $31 million in damages to developers. The amount was later reduced to $15.5 million, but with interest now adds up to about $23 million.
The district subsequently filed for bankruptcy in 1993--the only Ventura County public agency ever to do so--and the case has bounced among bankruptcy, state and federal courts for several years.
While state laws are at issue, a federal judge is hearing the case because one of the plaintiffs is the Federal Deposit Insurance Corp. The FDIC is a player because it took over a bankrupt Kansas bank that had lent money to the original investors of Harbor Village.
An attorney for Ventura Group Ventures praised Hupp's decision Friday and said he hoped that it would compel the Port District to stop litigating and pay the debt.
"I would hope that they have exhausted themselves and, rather than just continue to pay attorneys, they would [see that] maybe there is a better way to solve the problem," said John Johnson, the shareholders' attorney.
But a Port District attorney said Friday that more litigation is expected.
"We think there are some legal errors in the decision and we are going to be considering an appeal in respect to those legal errors," said Israel Saperstein, an attorney representing the Port District.
Although the decision allows creditors to force the sale of district property, attorneys said Friday that they expect the case will be tied up in appeals and kicked back to Bankruptcy Court before any action is taken.
Ventura Group Ventures must wait until the case is resolved in Bankruptcy Court before it can push for the sale of property--an action it says it will take if the Port District does not devise an acceptable plan to pay off the debt, Johnson said.