Bequest on Sale : S.F. Residents Believe Catholic Church’s Liquidation Is Untrue to Benefactor’s Wishes

When Elmer J. Towle, heir to a zipper fortune, multimillionaire landlord and devout Roman Catholic, died Oct. 21, 1984, he did not leave just some of his real estate empire to his local parish. He left it all.

Towle’s gift consisted of choice properties spread over much of the South of Market district--a part of town in the midst of a redevelopment Renaissance. With an estimated worth of more than $18 million, the bequest was the largest donation in the history of the San Francisco Diocese.

At first, there was a catch. A clause in Towle’s 13-page will required the diocese to wait at least five years after the death of his widow, Myrtle, before it could sell the holdings and distribute proceeds to Catholic charities named in the will.

But on Sept. 8, 1986, lawyers for Myrtle Towle and the San Francisco Diocese won a decision from the Marin County Superior Court to break the will.

The court granted Towle $4 million as her share of future property sales. The rest went to the church, which was given the go-ahead to sell the properties.

Since the court decision, the Estate of E. J. Towle, a holding company handling the Towle bequest on behalf of the church, has sold 11 of the 31 residential and commercial properties.

But in the process, the tale of Towle’s gift has taken an ugly turn.

Tenants of the properties, who considered themselves members of Towle’s extended family and referred to him affectionately as “the Captain,” are up in arms.

Towle’s beloved church, they charge, has turned on them with the indifference of a corporate raider. So eager are the diocese and its property managers to sell off the bequeathed treasure and collect the cash, tenants say, that renters once assured that they would never have to move are being evicted.

Although there have been only half a dozen evictions so far, the church has said renewals of residential leases at the unsold properties “will be considered on an individual basis.” Tenants say they fear this means more evictions and the further killing off of a rare and worthwhile neighborhood.

“I’ve done nothing else in the past two months except fight the Catholic church,” said Mark Rennie, an entrepreneur-artist-lawyer who has lived and worked in a Towle-owned building since 1977.

Rennie was sued by the church for refusing to move out and for subletting to other tenants without permission. He countersued, alleging breach of lease and wrongful eviction. He said he has settled the matter out of court and declined to discuss details.

Last month, Betty Graff, a 76-year-old widow, also filed suit against the church for wrongful eviction. Graff lived in a Towle-owned house for 22 years and claims Towle assured her she could live there until she died. The house formerly belonged to Towle’s mother.

In her lawsuit, Graff said she never received an eviction notice, but she moved out in 1986 after representatives of the Estate of E. J. Towle, the church property managers, told her the company wanted to sell the house.

“The whole dichotomy of the situation is you have the Captain, who represented the old San Francisco with his generosity, integrity and love for his fellow man,” Rennie said. “And then you have the new San Francisco and the new Catholic church and what it professes. That new reality is real estate wars and funny money pricing.

“But the Captain’s desire wasn’t to throw out the poor pensioners to maximize profits for the church.”

Church administrators said the evictions so far have been prompted solely by tenants’ negligence to pay rent or illegal subletting and unsafe structural problems in some of the buildings.

Bruce Egnew, finance director for the Archdiocese of San Francisco and a co-administrator of the Estate of E. J. Towle, wrote a memorandum defending the church in last month’s issue of the magazine San Francisco Catholic. “Captain Towle’s will never makes any reference, even indirectly or obliquely, to the tenants in his properties,” he wrote.

Elmer Towle was as astute a businessman as he was religious, amassing real estate holdings from Los Angeles to Seattle. His inherited wealth came from his family’s invention of the zipper and Nevada silver interests.

Towle began buying San Francisco real estate during the 1930s, primarily south of Market Street, the main downtown boulevard bisecting the business district.

He is credited with the emergence of SOMA, shorthand for South of Market, as a center of commerce and hip culture in the mid-1970s. The area became a kind of bohemian preserve, which Towle encouraged.

Towle-owned apartments, flats and warehouses along Howard, Folsom and Mission streets became live-in work spaces for many artist-tenants. A de facto patron of the arts, the Captain believed it was beneficial for young, creative people to live and work in the same place at affordable prices.

Along with the living spaces, avant-garde restaurants and bars sprang up.

Rennie was one of the early innovators of trendy nightspots catering to the hip crowd that characterized the SOMA scene. In February, 1984, he established the Billboard Cafe, an artists’ restaurant, and later the Club 9 nightspot and the C. W. Saloon.

“The SOMA was the last frontier (for creative people),” Rennie said, sitting in his spacious studio with wooden floors and walls lined with computer art: enlarged computer print-outs that he painted. “Down here, nobody cared what you did. You were free to create. The Captain loved it.”

As SOMA expanded, it also gave birth to a vital and diverse mix of auto repair shops, leather bars, senior citizens’ residences, print shops, laundries, locksmiths, pawnshops, transient hotels and more restaurants.

Towle often visited his SOMA tenants and purposely kept their rents low. Even in 1984, he rented apartments, complete with a dining room and living room, for as little as $154 a month in his senior citizen buildings, according to Towle company records.

“There were times I disagreed with him about the low rents, but it was his property,” said Bill Calloway, who for five years was Towle’s property manager. “The Captain was very fond of his tenants. Whenever they had a problem, he was always there to hold their hand,” Calloway said in an interview.

Calloway resigned as property manager a year after Towle’s death, citing his disagreement with the church’s intention to sell the properties. “I think the Captain would be very upset at how his tenants are being handled,” Calloway said.

The San Francisco Diocese hired Whitehall Asset Management as its new property manager. Whitehall President Peter O’Hara refused to speak with a reporter about the Towle estate and the related controversy.

Ed Capella, the owner of Molloy’s, a blue-collar bar that has occupied a Towle-owned building since 1947, has until March 1 to relocate the tavern.

St. Anthony’s Dining Room, a homeless shelter run by the Catholic church and one of the beneficiaries, moved next door and gave Capella a year’s notice to move because it needs the space.

“I started receiving letters in the mail telling me I had to move out,” Capella said. “They got rid of the other two tenants in the building within a year after the Captain’s death. I guess it’s my turn.”

As for Caffe SOMA, things haven’t been the same since its monthlong closure last December for ceiling work ordered by the Estate of E. J. Towle.

“We lost all our night business,” said Paul Shultz, owner of the coffee shop. “Folks found other places to go.”

The cafe used to be the focal point of the SOMA community for its art shows and community events, as well as a popular late-night hangout.

These days, the cafe closes at 7 p.m. instead of midnight, and meetings of a different sort have been taking place. Tenants meet there to express their concerns over the evictions.

“We met to open up communication lines,” Shultz said. “People can’t sort out what’s going on. It’s a damned soap opera that’s affecting our lives and businesses.”

Richard Calton, a sales broker for Skyline Reality, has been proposing deals to purchase the Billboard Cafe and some SOMA warehouses from the church.

“I can sympathize with the tenants,” Calton said. “But speaking as a businessman, what they’re asking for will drive a landlord financially under. You can’t make a profit with rents that low in San Francisco. And South of Market is the hot spot right now with all the redevelopment going on there.”

Norman Phillips, public information officer at the San Francisco Diocese, said the church has a real need for income from the property. Tight finances have forced budget cuts and led to staff reductions across the board and the elimination of some church-sponsored programs, Phillips said.

“There are so many refugees coming in from Pacific Rim and Central-American countries who are saturating our social welfare services,” he said. “We haven’t been able to keep up with demand the last few years. And when your income keeps falling short to fund these services, the money has to come from somewhere.”

Meanwhile, the SOMA tenants fret.

Kerry Bowman said he expects an eviction notice any day. Three tenants in the building next to his were evicted after engineers hired by the Estate of E. J. Towle declared the building unsafe to live in.

Bowman, former owner of a SOMA leather bar, was disabled by a car accident in 1986. His only income is a monthly Social Security disability pension that covers his $200-a-month rent.

“If I get kicked out, I’ll have one option: to leave San Francisco,” Bowman said. “I can’t afford to live anywhere else in this city.”