Investors claim beach development plan was only fraudulent marketing scheme

Marilyn Tennissen Nov. 11, 2008, 1:46pm

UPDATE, Jan. 14, 2015: The following case was dismissed with prejudice. The new owner of the property is Seagrass Beach LLC, and is not the defendant nor related to the defendant in this suit, Seagrass-Caplan.  

Claiming they were lured by promises of a new luxury beach development complete with tennis courts, swimming pools and private fishing lodges, a group of local investors bought property on the Bolivar Peninsula.

The men now say they have been left with nothing but empty lots of sand and have filed suit against the developers for what they allege was a fraudulent marketing scheme.

Plaintiffs Julian Rayzor, Jason Whitney, Tyrell Garth, Thomas Novak and Chris Whiddon claim they purchased subdivided lots at the Seagrass-Caplan development planned along Texas 87 along the Gulf of Mexico on the Bolivar Peninsula.

According to a lawsuit filed Oct. 31 in Jefferson County District Court, the men were told that Seagrass would be a "secluded, seaside village" with a variety of amenities and accommodations including "beach houses, seaside cottages, marsh houses and a private hunting and fishing lodge."

There would also be an elevated plaza, a pool surrounded by cabanas, and "spacious manicured green areas," the complaint states.

Seagrass was to be developed by Crown Team Texas. The suit names Seagrass-Caplan LLC, Crown Team Texas LLC, Crown Team Construction LLC, Allco LLC, James L. Hayes, Thomas Harrison, Denise Harrison, TDRB General Partners LLC, TDRB Investors Ltd., Bolivar Holdings LLC, Seagrass Property Owners Association, Leroy Faulk Jr. and Michael Lege as defendants.

The Seagrass Web site states that Crown Team Texas is the addition's developer, with Arcon Architects, Crown Team Construction Design Builders and Allco Construction Managers as members of the development team.

In addition to the outstanding amenities, the investors claim they were promised that water would be provided through the Bolivar Peninsula Special Utility District, a central piped propane system was being installed and underground electrical power would be provided by Entergy.

Sewer service for the addition would be provided by Bolivar Utility Services LLC, a private company related to Crown Team Texas and owned and operated by Hayes and Lege.

The plaintiffs alleged they were told "development construction should begin in December 2005."

Another phase of the addition would include a "bay side planned coastal community with mixed recreational, tennis courts, stables, over 100 marsh homes," the suit states.

"Defendants circulated color photographs of the above promises showing the finished Seagrass project," the suit states.

Phase I lots were sold for $150,000, with Phase II lots selling at $175,000 and additional phases going for $200,000 to $250,000.

According to the complaint, the plaintiffs entered into purchase agreements with Seagrass, based on the promises and presentations, and obtained third party financing from financial institutions and purchased their lots.

"As of the filing of this action, defendants have not fulfilled their above described representations and promises, and plaintiffs allege that defendants never had any intention of making good on their representations and fulfilling promises, on which plaintiffs relied in purchasing and holding the beach property," the plaintiffs original complaint states.

The suit lists the following allegations:

  • No sewer hookups have been provided to the lots, despite the fact that a special segregated fee was collected from the lot owners, in addition to the price of the lots;

  • No water system has been installed;

  • No electrical hookups have been provided to the lots;

  • No common area was developed. No landscaping, no trellis, no sidewalks, no swimming pools. In fact, none of the said promised development was started;

  • Defendant has not acquired the necessary permitting and satisfied the requirements for any construction to occur – accordingly, not a single home has been constructed – or even begun to be constructed – a slab has not, and can not be installed, due to defendants' negligence;

  • No central piped propane system has been installed;

  • No construction of any kind promised has occurred; and

  • Not only was no land developed for fishing and hunting, the real property that was to be used by plaintiffs and other Seagrass residents as a private hunting and fishing grounds is encumbered by an insider transaction between defendants."The above list is merely an example of defendants' misrepresentations, unfulfilled promises and tortious conduct," the complaint states.The plaintiffs allege that the defendants' actions are due to a common, financial interest among the defendants.According to the complaint, Crown Team Construction was formed in
    October 2004 with Hayes, Lege and Faulk as principals. Hayes and Lege then became principals in Crown Team Texas in February 2005 and Seagrass-Caplan in March 2005.

In June 2007, Allco Ltd. was organized with defendant Harrison and E.R. Allen and general partner T. W. Harrison LLC.

Lance Fox then organized the Seagrass Association in September 2007. The directors of the Seagrass Assocation include Hayes, Lege and Fox. According to the complaint, the association was charged with providing maintenance, preservation and architectural control of the lots and common areas and "promote the health, safety and welfare of the residents."

In early 2008, defendant Denise Harrison organized TDRB Investors Ltd. and TDRB General Partner LLC. The plaintiff alleges the entities "were set up with the purpose of encumbering property to the benefit of defendants, and against the welfare and interests of plaintiffs."

In April 2008, TDRB Investors Ltd. then granted Bolivar Holdings LLC a line of credit, backed by a $1 million lien against the 2,227 acres which was to be used as hunting and fishing grounds.

"Defendant Bolivar Holdings LLC, by and through defendant Hayes, executed a deed of trust conveying said property to defendant TDRB Investors Ltd.," the complaint alleges. "Lance Fox, director of Seagrass Association, the entity charged with promoting the welfare of plaintiffs, is the trustee on the Deed of Trust and notarized the Deed of Trust on April 1, 2008."

The plaintiffs claim the "evolution" of the entities illustrates a "complex shell game involving all defendants."

"Defendants shared common owners, common representatives and common officers who committed to various representations and omissions of material fact concerning the development of the beach property … all in an effort to induce plaintiffs to purchase and hold their respective lots to the benefit of defendants and against the welfare and rights of the plaintiffs," the suit states.

The 23 page suit includes allegations of breach of contract, breach of fiduciary duty, fraud, negligence, gross negligence, breach of express and implied warranties and violations of the Texas Deceptive Trade Practices Act.

The plaintiffs are seeking actual and consequential economic and non-economic damages, mental anguish damages, attorneys' fees, costs of court, interest and other just relief.

Kip Lamb of the Lamb Law Firm in Beaumont is representing the plaintiffs.

The case has been assigned to Judge Gary Sanderson, 60th District Court.

In September, the beach front as well as the bayside marsh lands on the Bolivar Peninsula were seriously damaged and eroded by storm surge from Hurricane Ike. Due to the severity of the destruction, state and Galveston County officials are unsure when or if any repairs to previously existing homes or businesses or any new developments – such as Seagrass – will be possible.

Case No. B182-650


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