Old World Village Suit to Go to Jury : Business Owners Accuse Developer of ‘Reign of Terror’

A four-year legal battle pitting the developer of the quaint Old World Village shopping center against business owners who accuse him of conducting a “reign of terror” and are seeking more than $1 million in damages is expected to go to an Orange County Superior Court jury this week.

The specific claims are relatively mundane, involving allegations of fraud by the center’s developer. But lurking behind the legalese in the lawsuit filed against developer Josef Bischof by the Old World Owners Assn. are darker allegations--brought out during courtroom testimony--of racism and acts of harassment that span almost the entire eight-year history of the 50-store center in Huntington Beach and include anonymous death threats against some of Bischof’s vocal opponents.

The problems at Old World stem in part from the reluctance of the center’s strong-willed developer to relinquish control over the day-to-day managing of the unusual center, where store owners or their managers are required to live in residential units above their shops. Bischof built Old World--one of only a handful of residential-commercial centers in the United States--after splitting up with his partners in the original Alpine Village center in Torrance.

Declines Comment

Bischof’s attorney, Joseph Donahue, declined to comment on the case, and Bischof could not be reached for comment. But in an interview when the bitter feud at Old World first surfaced in 1982, Bischof denied any wrongdoing, claiming instead that he was being persecuted by a small group of shop owners who were trying to gain control of the center for themselves.

Principally, the suit claims that Bischof through the closely held company he operates called West Coast Soccer League:

- Spent $30,000 in association funds earmarked for Old World’s grand opening to advertise instead for a two-month series of Oktoberfest parties held at his restaurant.

- Knowingly understated the size of his restaurant in order to avoid the full share of monthly advertising and maintenance fees assessed of each business in Old World by the owners association.

- Charged about a dozen store owners illegal interest on mortgage loans privately financed by West Coast Soccer League by tacking a $2,000 management fee onto each loan.

- Failed, as the developer, to build a clubhouse and sun deck for the use of Old World’s resident shop owners, even though the two structures were included in a list of condominium amenities filed with the state Department of Real Estate and used in advertising the sale of Old World’s unusual combination of residential and business units.

Most of the allegations in the suit stem from events that took place from the time the first Old World parcel was sold in 1978 and the filing of the action in 1982, when the acrimony between Bischof and the rival faction on the owners’ association board of directors led to the court-ordered appointment of an independent arbiter, who resigned after attending several acrimonious board meetings.

Because of its location on hard-to-find Center Drive, squeezed between the Huntington Center retail mall and the San Diego Freeway, advertising has been a perennial problem for Old World. Robert S. Lewin, attorney for the owners association, said that of the 14 jurors selected for the case, only one had heard of Old World.

Funds Misuse Alleged

Julietta Lewis and Yvonne Rofer, the leaders of the coalition of anti-Bischof shop owners, claim that one reason for the Old World’s relative anonymity is that the developer has misspent the association’s advertising money to benefit his own business.

Bischof, who owns a beer garden and restaurant in the village, initiated an annual two-month Octoberfest in 1978, which, he said, would help bring more business to the village. But Lewin claims the Octoberfest primarily benefits Bischof.

“The major economic benefit is to his beer garden, where it’s held. It does bring people to Old World,” Lewin said, “but the reality is that there’s not much economic overflow to the other stores. People don’t go shopping; they go drinking.”

In testimony, Lewis, who lives above her Peruvian imports store, said the Octoberfest makes nights “a nightmare time to live there,” with loud music, crowds of unruly partygoers and drunk patrons wandering into private residential areas.

In late 1978, when the first Octoberfest was to be held, the suit claims, Bischof told the owners association that he would place about $60,000 worth of advertising in local and regional media, promoting both Old World’s grand opening and the inaugural Octoberfest. The association paid Bischof about $35,000 for its share of the advertising, $20,000 in cash and $15,000 as a credit against future assessments on Bischof’s restaurant.

But invoices from the advertising agency Bischof hired show that only $39,257 was spent on advertising--most of it for the Octoberfest, the suit alleges.

“When we look closely at the invoices,” Lewin said in a recent interview, “approximately $30,000 was for Octoberfest advertising and only $6,000 was for the grand opening.”

The suit also contends that while Bischof claims his restaurant is only 8,380 square feet--and pays assessments to the association based on that square footage--the building actually covers 19,000 square feet. In addition, Lewin argues in the suit, the open-air beer garden around the restaurant is used as a business area, so the entire 31,000-square-foot lot should be used to compute Bischof’s assessment--which would nearly quadruple his monthly association fees.

Other allegations include claims that Bischof used association funds to pay his personal business bills, including a $6,500 property tax bill for fixtures in his restaurant.

But the claim for $1 million in damages from Bischof is not based primarily on those allegations, Lewin said in a trial brief prepared for the judge who is hearing the case. Instead, the attorney wrote, Lewis, Rofer and the other plaintiffs are seeking to punish Bischof for his “reign of terror.”

Lewis, who was secretary of the owners association board in 1982, when many of the actions at issue in the case took place, said in court testimony she has tape-recorded more than 200 board meetings over the years because of “anonymous hate letters” received by several board members who opposed Bischof. She also testified that two Old World directors received telephoned death threats in attempts to prevent them from attending board meetings.

She told the court that at some of the meetings she taped, Bischof called some board members “creeps,” “stooges,” and “misfits.” On one occasion, Lewis said, Bischof shouted: “Go back to the Third World where you came from, you Mexicans.”

Lewis is Peruvian, and Rofer’s husband was born in Mexico. In his 1982 interview with The Times, Bischof denied that ethnic prejudice was involved in the dispute. But he later characterized Old World as a “German village,” called the Lewis-Rofer faction of the board a “junta” and said that “those South Americans should get out of this German village.”

In testimony during a court session last week, Lewis said she believes her vocal opposition to Bischof has resulted in a number of incidents over the years. They include, she said, an attempt to smash her store’s display window with a brick, the slashing of the tires on her car and the killing of her cat. And on several occasions, she said, songs associated with the Nazi movement in Germany were sung late at night beneath her bedroom window.

Lewis and her attorney acknowledge that the suit--whatever its outcome--is unlikely to ease the tension between the two factions at the center. But Lewin said he hopes that, if the association wins a judgment against Bischof, the developer “will simply have to understand that he can’t continue to treat the place like his own personal fiefdom.”