Notorious Slumlord an Expert at Evasion : City Officials, Creditors Frustrated as Owner Manipulates Bankruptcy Laws

Robert and Marjorie Blanchard treat themselves and their customers well. They live in an expansive home nicknamed “Casa de Cielo” on exclusive Mt. Helix and serve pricey French fare at their elegant Rancho Santa Fe restaurant, Les Blanchard.

But tenants in many of the apartment buildings the Blanchards have owned throughout San Diego have received a different level of treatment. Their grimy homes have had leaky roofs, broken windows, battered fixtures and roach infestations--conditions that city officials say are the result of the Blanchards’ cavalier attitude toward maintaining their decaying properties.

The extent of Robert Blanchard’s substandard housing has helped him gain a reputation as one of San Diego’s most notorious landlords and made him the target of a new effort by the city attorney’s office to impose stiff penalties on landlords who collect rents without making repairs on their property.

“He is definitely a slumlord,” said Joseph Schilling, who heads the city attorney’s code enforcement department. “Blanchard has gone to collect the rents. . . . He always knows the conditions his tenants are living in.”

‘He’s Been Flouting the Law . . . .’

“It is time that somebody stopped (him),” added Rob Ross, an attorney for the Legal Aid Society of San Diego, which is considering filing a separate lawsuit against Blanchard on behalf of a tenant who has no heat and a leaky roof. “He’s been flouting the law and laughing up his sleeve.”

On the advice of his attorney, Blanchard, who has taught in San Diego city schools for 21 years, declined to discuss his pending legal problems when approached at his restaurant by a reporter. Blanchard and his wife did not return telephone calls placed to their home and restaurant.

Their attorney, Dennis Burns, did not return three messages left with a secretary at his El Cajon office.

Blanchard did refer a reporter to three repairmen who, he said, could describe the repair work he has commissioned on his buildings. San Diego Housing Commission officials agree that Blanchard often tried to repair violations once their inspectors made him aware of them. But too often, officials said, Blanchard allowed the apartments to deteriorate again.

During their tenure as landlords, the Blanchards apparently have owned 13 different multiunit rental properties, two single-family residences, condominiums in La Costa and Palm Springs, their home on Mt. Helix and the Rancho Santa Fe restaurant, according to Schilling’s investigator, Dennis Smith.

But because of foreclosures and sales of their properties, mostly in the past year, Smith believes the Blanchards now own just two multiunit rental properties, a single-family home, the two condominiums, the Mt. Helix home and the restaurant.

Three city agencies--the city attorney’s office, the city’s Building Inspection Department and the San Diego Housing Commission--have recently taken action against the Blanchards in an effort to enforce city, state and federal codes requiring that landlords keep their properties safe and free of health hazards.

But the Blanchards’ list of detractors does not end there. Their penchant for repeatedly filing “bad faith” bankruptcy petitions to halt foreclosure proceedings against their properties has frustrated creditors’ lawyers, one of whom labeled them “a creditor’s nightmare” in legal papers.

“This is one of the more significant abuses (of bankruptcy laws) that I have ever seen,” said Thomas Gilmore, an attorney who represented Imperial Savings Assn. in an effort to foreclose on an apartment building Blanchard owned.

“It was obvious to the judge, as it was to the other secured creditors, that (the Blanchards) weren’t really serious about reorganizing their debts, and all they wanted to do was forestall the foreclosures. Usually, they’re hoping that something will happen to bail them out,” Gilmore said.

Schilling last May filed a civil suit charging Blanchard with “unfair business practices” for allegedly collecting rents without maintaining properties. The suit, which seeks as much as $500,000 in damages, currently cites three properties but may be expanded to include all of the violations in Blanchard’s properties between 1983 and 1987, Schilling said.

The Blanchard case illustrates the difficulty that government agencies face in trying to force a recalcitrant landlord to keep up private property. After months of effort and considerable expense, the city probably will collect nothing from Blanchard, Schilling said.

Ironically, it is the Blanchards’ battles with their creditors that may protect them. Schilling believes that by the time court battles are over, the Blanchards will have few assets with which to pay fines and even fewer rental properties to repair. Only after a judge decides the case can Schilling consider going after the Blanchards’ home or restaurant, he said.

Meanwhile, the best hope for repairing the apartments now lies with the people who have bought them from Blanchard and his creditors, Schilling said.

“I think when we originally filed the suit, we were obviously more optimistic about recovering money from him as well as getting corrections made,” Schilling said.

Blanchard’s complex at 4121-37 46th St. is among the properties targeted by the city lawsuit.

At 4131, a small one-bedroom bungalow, the roof leaks into the bathroom and the bedroom, as it has for 18 months, said a tenant who asked that his name not be used. Roaches share the apartment with the four men who live there. There is no smoke alarm, which is required by city codes. The bathroom sink does not work properly.

“This house is not good,” the tenant said in broken English. “And it’s too small for four persons. It’s really hard (to live here). We have a lot of problems.”

Schilling’s lawsuit targets three of the many properties Blanchard has at one time or another owned throughout the city: 3154 Imperial Ave., 3045 L St. and the 46th Street units. With the aid of the Building Inspection Department, Schilling is compiling a list of the code violations on the properties, dating back to 1983.

The Blanchards no longer own 3154 Imperial. They lost it through foreclosure to the San Diego Housing Commission in August. Land records shows that 3045 L St. was sold in November. The couple apparently still owns 4121-37 46th St.

Building Inspection Department and San Diego Housing Commission records show numerous violations of health, building, fire, plumbing and electrical codes at the three properties. (The Housing Commission inspects the properties because it is responsible for some of the tenants living in the buildings under a federal rent subsidy program.)

“The (Building Inspection Department) has informed the defendants about the violations and issued notices to correct,” Schilling said in court papers. “Defendants have either ignored the notice, refused to repair or have eventually corrected the violations after a lengthy delay of several months . . . Often the repairs are mere Band-aids and the problem reoccurs within several weeks.”

Apartment 6 at 3045 L St., for example, failed Housing Commission inspections Oct. 22, 29 and 31, 1985, before passing on Nov. 6. Among the violations was a water leak from the ceiling that flowed down a light fixture in the dinette, a condition an inspector labeled “a very dangerous electrical hazard.”

At 3154 Imperial Ave., which Blanchard recently lost to the Housing Commission through foreclosure, a Housing Commission inspection on Dec. 22, 1986, found 32 housing code violations in Apartment 1 alone--including water and electricity that were shut off, a wall heater that was not working, cabinets in disrepair, a leak under the sink and the presence of roaches.

The apartment failed inspection again on Jan. 20, 1987, before being passed Feb. 3.

Blanchard “is not a property manager,” said Joe Johnson, who oversees the rent subsidy program for the Housing Commission. “That’s what he is not. There’s more to being a landlord than owning units.”

Elizabeth Morris, the Housing Commission’s acting executive director, said: “Judging from the experience that Building Inspection has had, as well as our experience in Section 8 (the federal subsidy program), we’re fortunate that most other landlords maintain tighter control of the physical condition of their projects.”

Johnson credited Blanchard with frequently attempting to repair violations once they were noted. Many of the units did ultimately pass inspection, even if three or four visits were required, he said.

City housing inspectors’ reports on the 46th Street complex show the same kind of deterioration found by the Housing Commission.

In an April 28, 1986, inspection of 4133 46th St. after a complaint was filed by a tenant, Building Inspector Joe Russell found a leaky living-room ceiling, dry rot around windows, broken windows, leaky faucets in the bathroom and kitchen, holes in the exterior walls, and “general disrepair of all units, including high grass, weeds and debris in the yards.”

‘Basically No Changes’

Despite 13 months of trying to get Blanchard to clean up the units--during which other violations were found--”basically no changes” were made as of May 13, 1987, Russell reported in a legal declaration filed in court by Schilling.

During one encounter with Blanchard at the 46th Street property, Blanchard told Russell to “take all the pictures you want, it is not going to do you any good,” Russell alleges. Blanchard added, according to the legal papers, that “we wouldn’t have this problem if I could get rid of the dopers.”

The Housing Commission’s dealings with Blanchard are not limited to the federal program. The commission has given him five separate rehabilitation loans--three in 1980, one in 1981 and one in 1985--and watched with chagrin as he defaulted on four of them.

No other landlord has ever walked away from a Housing Commission-backed rehabilitation loan, said Vicki Bonner, manager of the loan program.

Commission officials were forced to foreclose on four of Blanchard’s properties last year to pay off the rehabilitation loans. They have sold one at a loss, and hope to sell two others. But the value of the eight-unit building at 3154 Imperial Ave. had declined so steeply that the commission could not recover a penny of the $68,000 loan it made to Blanchard in 1985.

Records show Blanchard paid off one loan last April--far ahead of schedule--then defaulted on the four others almost simultaneously. Housing Commission officials are mystified about his apparent financial problems.

“He went delinquent all at once,” Bonner said. “He was making payments all along, and that’s why we made that loan (on the Imperial property). He told us that someone broke into his house and stole all his credit cards and his wallet and that’s why he couldn’t pay us.”

Since the four foreclosures--one of which he repeatedly stalled by filing bankruptcy petitions--Blanchard has called several times and offered to buy the properties back. None of the offers was acceptable, Morris said.

“I think (Blanchard) would have a tough time” persuading the commission to sell the properties back to him, she said.

The Housing Commission is not the only creditor knocking on the Blanchards’ door. Records in federal Bankruptcy Court show that the couple have been pursued by banks who lent them money for their mortgages and a plumber who did repair work on several apartments.

In dodging these creditors, the Blanchards have adopted a tactic that opposing lawyers call “bankruptcy abuse.” Simply by filing a few documents and a court fee, anyone can be granted temporary, automatic protection from creditors until court proceedings begin and the petitioner files further documents showing how he will pay off his debts.

Court records show that the Blanchards repeatedly filed for this protection using three different chapters of federal bankruptcy laws. The filings were made under Robert Blanchard’s name, under Marjorie Blanchard’s name and jointly, but the necessary documentation was not included. The tactic stalled foreclosure efforts while attorneys for creditors went to court to have the petition dismissed.

Efforts last year by Great American First Savings Bank to foreclose on two Blanchard properties--719-723 West St. and 734-740 West St.--detail the Blanchards’ actions chronologically.

‘Truly Astounding’

After the Blanchards stopped making payments on mortgages of $104,000 and $124,000, Great American went to court in an effort to foreclose on the property. What followed, according to legal papers filed by Great American attorney Sheri T. Joseph, was a “truly astounding series of consecutive bankruptcy filings” that constitute a “creditor’s nightmare.”

According to Joseph’s legal papers, Robert Blanchard filed for bankruptcy Oct. 8, 1986, but the petition was dismissed when he did not submit additional documents in November. He refiled Jan. 9, 1987, only to have that request dismissed Jan. 28 at Great American’s request, by a judge who ordered that he file no more bankruptcy petitions before May 25.

Despite the order, Marjorie Blanchard filed for bankruptcy Feb. 6. The request was dismissed Feb. 19. She also filed Feb. 10. That case was dismissed with prejudice July 22, and she was ordered not to file any bankruptcy proceeding for 180 days. Another case filed by Robert Blanchard was dismissed Aug. 13.

Seemingly in the clear for the first time in almost a year, Great American scheduled its foreclosure sale for Sept. 28. Wrote Joseph: “The result was infuriating but hardly surprising: The Blanchards flagrantly ignored the previous orders and filed their new (bankruptcy) cases on Sept. 10 and Sept. 21 . . . This is truly a creditor’s nightmare, where debtors feel so immune from the law that direct court orders prohibiting refilings pose no threat and carry no weight.”

Great American ultimately was able to have the foreclosure prohibition lifted, and a judge levied a small fine against the Blanchards in connection with the repeated bankruptcy filings.

“What I told the court is that (Blanchard) is doing it solely to get the benefit of the automatic stay,” Joseph said in an interview. “That’s why it’s bad faith, because he doesn’t have any intention to use the bankruptcy for what it’s intended: to give the debtor some legitimate breathing room.”

“It is frustrating, (because) there very often are no consequences . . . An extra two or three months of not having the property foreclosed means an extra two or three months of rent. It can add up. So even if (Blanchard) knows that (he) is going to lose in the long run, it adds up,” she said.

When he was appointed the city’s full-time housing prosecutor in 1984, Joseph Schilling found a system that assessed landlords small fines for violations at individual buildings but had no means of forcing them to repair many buildings at once.

He has used criminal statutes to file 29 complaints against landlords, resulting in 25 convictions that usually produce small fines less painful to landlords than the major civil penalty Schilling is seeking from Blanchard. No landlord has ever been put in jail.

Recently Schilling learned that the theory of unfair business practices was used against Los Angeles landlords, and he is now trying to apply it to the Blanchards.

But he has a problem. The Blanchards are losing or selling their properties--which in one bankruptcy filing were valued at $4.27 million--at an alarming rate.

They have lost at least six of the properties through foreclosure since last May. Another was scheduled for auction on the courthouse steps Tuesday, but that sale was postponed when Blanchard filed for bankruptcy again, said Beverly Huber of Imperial Corp. of America.

The couple apparently have sold or lost most of the others since 1985. Investigator Smith believes the Blanchards now have just two rental properties, the two condominiums, a single-family residence, their Mt. Helix home and the restaurant.

Federal and county tax liens filed in the past two months against the restaurant total more than $30,000, according to investigator Smith. It is also unclear whether the restaurant is making any profits that Schilling could attach, or whether Schilling could go after the wages Blanchard receives as a schoolteacher.

All of which may make it extremely difficult for the city to ever recoup anything from the Blanchards. Schilling admits that any gain may be a Pyrrhic victory.

“Maybe we were a bit naive, when we first filed the actions, about the possibility of recovering (damages),” Schilling said. “I’m going to try my best to see that the city gets the last laugh instead of Mr. Blanchard. But I’m not so sure that Mr. Blanchard isn’t going to be the one who laughs last.”