Millville By the Sea property owners file suit against developers

Editor's note: This article has been updated with a response from W. Craig Havenner, president of The Christopher Companies. Havenner is one of the parties named in the lawsuit.

A homeowners’ group in the Millville By the Sea development is suing the community’s developers over numerous issues involving use of community property, financial issues regarding use of the funds belonging to the group and other matters.

The suit, filed in Delaware Chancery Court on July 23, lists the Millville By the Sea Property Owners Association Inc. as the plaintiff; and Millville Town Center LLC, Millville Seaside Properties LLC and Millville By the Sea Master Community Association Inc. as defendants.

Also named as defendants are three individuals — Charles D. Ellison, Pamela Wiles and Craig Havenner — directors of the Millville By the Sea Property Owners Association from 2010 to 2016. Havenner was also president of the Christopher Companies, one of three home builders who have been associated with the project. 

The 40-page court filing was obtained by the Coastal Point this week. The document lists 14 counts in which the Millville By the Sea Property Owners Association is seeking redress. The suit alleges, in part:

• Breach of contract between the developer and the POA in several areas, including public works agreements;

• Breach of fiduciary duties by the developer;

• Failure by the developer to act in good faith toward the residents of Sand Dollar Village; and

• Unjust fees imposed by the developer for expenses the residents were not obligated to pay.

Among the remedies being sought by the plaintiffs are:

• A permanent injunction addressing property owners’ rights to use certain amenities;

• An accounting of the developer’s use of POA funds;

In the lawsuit, the current board of the POA maintains that the developers, which have changed several times over the past 13 years, have systematically isolated the original section of the community, called Sand Dollar Village, from the rest of the community; have misused its POA funds; have charged Sand Dollar Village residents separate fees for amenities that were covered in the original POA documents; and have failed to turn over financial documents the now-resident-run POA has requested, among other allegations.

The legal action, according to the lawsuit verbiage, “arises from the complex and unworkable structure unnecessarily imposed on one section” of Millville By the Sea, “as part of a restructuring following the economic downturn” a decade ago.

“Driven only by a desire to extract as much profit as possible from the future development, the developer has chosen to ignore promises made to early purchasers ... in Millville By the Sea,” the suit alleges.

Those early buyers, the plaintiffs allege, “have been stripped of their rights to access amenities, participate in community governance and are being maligned and shamed before their neighboring communities.”

According to the timeline set forth in the lawsuit, Millville By the Sea was conceived in 2005, when investors calling themselves the Millville Group submitted a plan to the Town of Millville for development of a “large, common-interest community.” The underlying investor, the suit says, was the California Public Employees’ Retirement System (CALPERS).

In the ensuing years, the lawsuit says, the developer employed land development companies, including Miller & Smith and LDC Advisers LLC, to manage the development of Millville By the Sea.

Originally, plans called for more than 3,000 homes to be built on 756 acres within town limits, grouped in several small “villages” within the larger development. Plans for Sand Dollar Village, which was the first phase of the project, called for 250 homes, to be built in two phases. There are currently three other communities within Millville By the Sea.

Within the lawsuit are several documents, dating back to the first Public Works Agreement between the Town of Millville and Millville Town Center in 2007, for Phase I of Sand Dollar Village. That agreement stated that the developer would be responsible for items ranging from road improvements to landscaping within the community, as well as maintenance of landscaping until the Town inspects those elements and approves them to be turned over to the POA.

As of the filing of the suit, the Town had not done those inspections, according to the suit.

The lawsuit lists 30 amenities, including a performing-arts stage, bowling alleys, cafés, snack bars and “lounges,” an indoor competition swimming pool, several outdoor swimming pools and more.

Most of those items have not yet been constructed, but of those that have, the residents of Sand Dollar Village claim in the lawsuit that they do not have access to them as promised.

POA President Walter Bartus told the Coastal Point that the amenities that have been built, such as a swimming pool, are only accessible to the Sand Dollar Village residents if they pay extra fees, in addition to POA fees.

He said the POA has attempted to resolve these issues over “at least” the past 18 months, with no success. “We didn’t want to go that route,” he said of the lawsuit.

Bartus said that, in 2014, there was a restructuring of the board, although with the same board members. The major difference, he said, was that at that time the POA was “severed” from what was then called the Master Association for the community.

Bartus said the initial reason given for the split was that the developer felt the dues for the POA were not sufficient to meet the needs of the growing community. He said, however, that although he has since tried to get answers as to exactly why the split happened, “We cannot get a straight answer.”

According to the lawsuit, at an informal meeting with POA members on Sept. 26, 2014, “the developer claimed … that the new structure was needed because the existing POA documents did not provide sufficient flexibility to permit the POA to automatically join” the newly structured community association.

He said that when the POA was transferred from developer-managed to resident-managed in 2016, “We found several things that were concerning to us,” and that a promised audit of the association books was never produced by the developer.

The POA alleges in the lawsuit that the POA has overpaid maintenance-fee assessments to the new Millville By the Sea Master Community Association, to the tune of $100,000, following increases in 2016 and 2017.

In addition, the suit alleges, between May 2014 and August 2017, the MCA used funds from the Sand Dollar Village POA to pay for services such as snow plowing, pool repairs and lifeguards — the last two for a pool that is used by the entire community and for which Sand Dollar Village residents now must pay extra to use.

Those transactions, according to the lawsuit, total $112,946.34.

The POA lawsuit lists another $370,175.04 within electronic records recovered by them that they categorize as “unsupported by paper records” and which they say need further analysis. Those expenditures, the lawsuit alleges, “appear related to electronic charges for developer-controlled structures, excessive management fees and legal invoices directed to the POA for the law firm representing the developer.”

There are also “unexplained transfers” of POA funds to the developer-controlled MCA, according to the legal action by the POA.

In addition to those allegations, the POA also seeks relief from alleged actions taken by the developer to set Sand Dollar residents apart from the rest of the community. One example listed in the lawsuit is the use of different-colored wristbands for Sand Dollar Village residents who wish to use the community pool than those used by other residents of Millville By the Sea.

Those changes occurred after the overpayment issue was raised with the MCA, the plaintiffs said.

In addition, the lawsuit alleges, the MCA “acting in bad faith,” terminated its agreement with the POA, the result of which was that “the POA that was to once hold title to all amenities has now lost any right to act on behalf of its members to access amenities.”

Bartus said the homeowners in Sand Dollar Village were surveyed earlier this summer regarding whether they wished to pursue legal action against Millville Town Center.

“We could see that things were not progressing well” toward an agreement, he said, and the board decided to ask its homeowners for their thoughts. More than 200 homeowners replied, and of those, “92 percent said we should go forward” with the lawsuit, Bartus said.

Millville Town Center originally had until Aug. 23 to respond to the lawsuit. The developer, through its attorney, has received an extension until Sept. 23, according to Bartus.

Havenner contacted the Coastal Point on Friday, Aug. 31 with the following statement on the lawsuit: "For the record, my company, The Christopher Companies, was the second of three homebuilders in the Millville By the Sea community and at the present time is the only homebuilder active in the community. At no time has my company, its principals or any related parties ever served in the role of 'developer'. Neither I nor my company has ever been in a decision-making role as it relates to any of the allegations set forth in the suit.

"Other than our contractual relationship with the developer of the community and my perfunctory minority role as a builder member of the association's board of directors, neither I nor my company has had anything to do with nor influence over the actions or decisions of the developer of Millville By the Sea POA or Master Association," Havenner said. 

Millville By the Sea project manager Al Ruble had no comment on the lawsuit, but said he would forward questions to other management personnel. As of Friday, Aug. 31, no response had been received. 

By Kerin Magill
Staff Reporter