# Court hearings on Bodie Island Beach Club takeover attempt



## Carolinian (Feb 10, 2006)

Members of Bodie Island Beach Club concerned owners tell me that it was a split decision in court this week, and the battle continues.

After Hurricane Isabell, a local businessman formed Seawray LLC for the purpose of taking over Bodie Island Beach Club in Nags Head and converting it to all whole ownership condos.  The resort is now 23 timeshare units and 7 whole ownership units.  He send letters to owners badgering them to sell to him, claiming he would win in the end anyway and they might as well sell while he was offering what he contended was a decent price (NOT!).  He started out with a large block of weeks he acquired from the former ''subsequent developer''.

The board undertook to rebuild the resort, and in June 2004 reopened the first 12 units.  Seawray filed a lawsuit later that summer contending it could vote the weeks it had acquired without paying maintenance fees, and that it did not owe the maintenance fees.  The HOA did not file an answer and when Seawray went for a default judgment that fall, it added another unexpected wrinkle, claiming also that the HOA had to hold a vote on whether to rebuild the resort.  At that time, the resort had mostly already been rebuilt.  The judge signed the order handed up as written by Seawray's attorney and included a provision requiring such a vote.

Seawray's hostile takeover was supported by the whole owners, who apparently thought that they would benefit by kicking out the timesharers and replacing them with other whole owners.  The fall HOA annual meeting saw a coalition of Seawray and the whole owners take control of the HOA.
Contacts among concerned timeshare owners at that meeting resulting in the formation of an active group of timeshare owners to resist these moves. They hired legal counsel and joined the battle.

Seawray had been attempting to force partition of just the timeshare units and leave the whole owners alone, apparently intending to buy the timeshare units, free of their dedication to timesharing, at the courthouse door for a song.  His first two partitiion proceedings of units dedicated to timesharing had come up on appeal from the Clerk of Court.  This was the issue on which the concerned owners were succesful.  The judge dismissed Seawray's actions, saying any partition had to be of the entire resort, encompassing the whole owners, too, not of individual units.  The whole owners now have their bacon in the fire, too, after their foolish coalition with Seawray.

The concerned owners were less successful on the two other issues.  One dealt with who was entitled to some of the insurance funds, the contractor (who had failed to file a proper lien on the property) or the timeshare owners.  Since the HOA president (a whole owner) had filed a document saying the resort was not going to be rebuilt, the timesharers felt they had a good case under the law to hold the money.  The judge ruled otherwise and that issue is headed to the Court of Appeals.  

The big issue was the concerned owner's declaratory judgment suit to declare that a vote whether to reconstruct was improper.  The presiding judge was from a neighboring county of the judge who signed the default judgment setting the whole takeover bid in motion.  He stated that he was not going to do anything contrary to that judge's order, so he entered an order dismissing the concerned owner's lawsuit.  That is also going up on appeal, and the concerned owners feel they have very strong grounds to reverse that on appeal.

I understand that one of the whole owners was in court for the hearings, and looked extremely unhappy, as one would expect.  In spite of the apparent assurances of Seawray, he discovered that what the concerned owners had been telling whole owners all along was true.  In law they are in the same boat.  If the resort gets sold, both groups lose.

What will happen now, other than the case proceeding to the Court of Appeals is uncertain.  If the whole owners shift their allegiance, as would seem to now be in their economic interest, a coalition between them and the timeshare owners would shift control of the board away from Seawray.

While there was a vote not to reconstruct taken last fall, its validity is in question.

I am told that the concerned owners are in it for the long haul.  If they stick to it, I suspect they may defeat Seawray.

Seawrays battle plan is in shambles.  While it probably could have digested a few units at a time at bargain prices, it is very questionable whether it could find the resources to compete to buy the whole resort if it ever goes to sale.
If the concerned owners win on appeal, as is probably likely, Seawray ends up owning about 800 timeshare unit/weeks still dedicated to timesharing.  They will end up with a very substantial m/f bill, and if they don't pay it, they may be the ones with their property at the courthouse door.


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