COLUMN ONE : In the Old Bloc, Who Owns What? : Property disputes have spread like a plague, especially in eastern Germany. They stifle investment, choke off economic recovery and demoralize the people.

The little boat-building yard along the River Spree on the southern outskirts of Berlin was never a booming business. But throughout its long, checkered life, there was always enough work to keep the place going.

Until the two Germanys were unified.

Now the only orders on the manager’s desk are those from the local bankruptcy court, the only sound in the yard itself a deafening silence, the product of a growing legal and bureaucratic chaos that swirls around an intensely emotive question: After more than 40 years of injustice, during which the yard changed hands four times, who really owns the business, now known as “Boatyard Mueggel-Spree GmbH”?

That seemingly obvious, straight-forward question, first raised last August by the daughter of the yard’s original owner, still hangs in the air. And the uncertainty has gradually strangled the modest business. Instead of inheriting an enterprise with a small order book and a hopeful future, whoever eventually takes control must build from virtually nothing.

The issue of disputed property has spread like a plague across the former East Bloc region, becoming a real or potential problem in countries such as Poland, Czechoslovakia and Hungary. But it is the formerly Communist East Germany where the controversy has become most severe, stifling investment, paralyzing the region’s economic recovery and demoralizing a people who had somehow come to believe that, in Germany, affluence and democracy were part of the same package.

Federal Justice Ministry spokesman Juergen Schmid has estimated that 1.2 million claims have been filed, mainly by western Germans, for the return of East German property confiscated by authorities of the Communist state between the time of its founding in 1949 and its demise last year.

Additional claims, for example those lodged by Jewish families for property confiscated during the Third Reich, have also been accepted for consideration, adding another layer of history and political injustice to the real estate tangle.

In total, the property issue is said to affect roughly half of all eastern German industry, tens of thousands of private homes and roughly half of the 41,700 square miles that comprised the former German Democratic Republic.

Although only a minority of these claims have been legally challenged, the absence of a functioning bureaucracy in the east to process them leaves much of the region in a legal limbo that has stifled business and blocked new investment.

The Aral oil concern, for example, early this year applied for permission to build gas stations at 80 different locations in and around Leipzig. But the city was unable to approve any of them immediately, in most cases because no one was sure who owned the land in question. Meanwhile, motorists wait in long lines to fill up at the city’s few hopelessly overloaded stations.

“It’s a mess, and only time can resolve it,” noted Schmid.

In an attempt to break this logjam and halt the region’s economic decline, Chancellor Helmut Kohl’s government earlier this month passed a controversial law permitting government trustees to sell disputed property if the buyer plans job-creating investment.

The constitutionality of the law has already been questioned, and some have called it a license for unprincipled investors to obtain prime land.

But simply processing the disputes has been agonizingly slow.

At the Finance Ministry’s regional government department, responsible for disputed property, the Boatyard Mueggel-Spree case is one of about 100,000 registered since last August; about 80 of those 100,000 disputes have been resolved, said department head Stephan Giesen. “And they are the easy ones,” he said.

Some cases are bold enough to grab headlines--such as the 84-year-old pensioner who claimed that one of eastern Berlin’s premier hotels, the Metropol, is on his property, or the Swiss woman who has demanded back the city’s main square, the Alexanderplatz, replete with television tower.

Other cases involve quiet, personal tragedies, like the Chemnitz couple who poured their life savings and years of work into a house they believed they would have forever, only to find they may now have to vacate it.

Still other instances are hopelessly complex.

What happens, for example, when a public road now runs through property determined by the courts to have been illegally taken from a private family 40 years ago? What becomes of the claim for the return of a small family business that has long since been integrated into a larger industrial complex?

In Poland, the government has begun what promises to be a long struggle to find a fair, affordable means of compensating thousands of private owners for billions of dollars in property confiscated or nationalized by the Communists beginning in 1946.

The post-Communist government has established a new ministry to oversee the process, and under the plan proposed by the ministry the government would not, in most cases, return nationalized property but would issue former owners coupons to be used as share-vouchers in Polish state-owned companies.

The plan’s designers say their proposal will help accelerate the process of privatizing state industry. Coupon holders, the government says, can sell them on the Polish stock market (planned to open next year) or buy mutual fund shares in privatized state companies.

In eastern Germany, it is the more routine cases that are at the heart of the problem--cases like the dispute over the Boatyard Mueggel-Spree, a company that traces its origins to 1932 and the entrepreneurial spirit of a Berlin master boat-builder named Max Schoenherr.

His enterprise, called Bootswerft Schoenherr, initially produced an assortment of small, mahogany pleasure boats for Berlin’s wealthier classes to enjoy the River Spree on lazy summer days. Then, with the onset of World War II, the firm made rescue boats for the German navy.

After the war, he produced more rescue boats, this time for the Soviet navy as part of a war reparations agreement. But in 1951, Communist authorities of the freshly founded German Democratic Republic moved in.

They confiscated the boatyard and jailed Schoenherr on charges of hoarding and tax evasion--accusations later judged false by a western court.

The boatyard, meantime, became a state-owned, state-controlled “peoples’ enterprise.”

Unable to get his property back, Schoenherr fled to West Berlin, where he established a new boatyard, a business operated since his death in the early 1980s by his surviving daughter, Sonja, and her husband, Werner Reinhold.

Although it suffered from a lack of investment under Communist control, Schoenherr’s original boatyard survived in various forms through the November, 1989, revolution that ended the dictatorship in East Germany.

As in many eastern German businesses, the Communist managers quickly formed themselves into a limited liability company and braced for competition from the more efficient, technologically superior west.

As they did so, Sonja Reinhold filed a claim for the return of the family property.

Soon thereafter, a group of eastern German managers also demanded the right to ownership. They asserted that only their personal capital--invested in the boatyard between 1962 and 1972, a period when private investment in small businesses was still permitted by the Communists--prevented its demise.

According to Torsten Borczyk, a locksmith and former head of the yard’s trade union, the employees gathered enough work from a large exhibition of boat manufacturers in Hamburg last October to keep it in business at least provisionally until it concluded more permanent cooperative agreements for know-how from western companies.

“I can’t say we were successful, but we had enough to tide us over,” he said.

The new work, however, never came.

In one instance, the contract period was deemed longer than that of the expected legal dispute, and thus was disallowed by the Treuhandanstalt, the German government trustee of former state-owned property.

Borczyk said a second deal, worth an expected $800,000, was derailed because it would have required $125,000 in new equipment--an investment that authorities refused to allow as long as ownership remained disputed.

Last summer, the yard’s managers reached agreement with three western German private investors to expand its mooring facilities and establish links with the large German yacht producer, Dehler. But these investors also quickly withdrew once they learned that the ownership was in dispute.

With existing work completed and no new business worth the name, the managers earlier this year tossed in the towel. Bankruptcy proceedings began. Of the 70 people employed by Mueggel-Spree at the start of the year, three now remain to preside over the liquidation.

The Reinholds say small pleasure boat-builders on the Spree can no longer compete against cheaper, better-quality craft produced in Scandinavia and have already decided to turn much of the production space over to a small metal-working company and a producer of home and bank security systems, if they get the property back.

Sonja Reinhold also talks of renting out the old Schoenherr riverside villa, used in more recent years as the boatyard’s administrative office and employee apartments. “Maybe we’d set some space aside for my daughter,” she mused.

Peter Bittrich, one of the group of eastern German managers also claiming ownership, talks of building a large marina that would include boat-building, a swimming area and jobs for 45 people.

Under the recently passed law, the Treuhandanstalt can now give the property to a preferred potential investor before the ownership is resolved.

But this approach, too, raises questions, and the entire functioning of the Treuhandanstalt was thrown into further turmoil with the April 1 assassination of its chairman, Detlev Rohwedder.

Sonja Reinhold says that passing her father’s business to anyone else--no matter how impressive their plans--would amount to little more than a second, equally unjust confiscation.

“My father’s money, his business, his life were all stolen,” she said bitterly. “I’m trying to work through the past, just as everyone else, but the only just decision is for that land to come back to us.”

There are reports the case may be up soon for a decision, but such reports have come and gone before.

“There should have been a decision long ago,” said Borczyk. “There are 100 families thrown out of work because of this. Whatever’s decided now, it’s too late for Mueggel-Spree.”

Times staff writer Charles T. Powers in Warsaw also contributed to this story.

THE SINKING OF A BOATYARD

The legal snares enveloping thousands of properties in eastern Germany can be seen, in microcosm, in the history of one dispute involving a boatyard, Mueggel-Spree. Here are some key dates for the troubled enterprise: 1932: Berlin entrepreneur Max Schoenherr buys waterfront property on River Spree at Gronau, a suburban community on southeastern outskirts of Berlin. He establishes a thriving boat-building company, Bootswerft Schoenherr.

1951: Communists confiscate boatyard, jail Schoenherr on charges of hoarding and tax evasion--charges later judged by western court as false. Yard becomes state-owned, state-run combine and is renamed VEB Yachtwerft Berlin.

1962: Communist authorities transfer yard’s ownership to East German managers under framework of production cooperative. Managers allowed to invest own money in business, yet enjoy tax benefits of a state-owned enterprise.

1972: Amid final wave of East German confiscation of private property, yard is reconverted to state-run combine. New managers installed. Business renamed Boatyard Mueggel-Spree GmbH.

1989: Communist managers declare themselves private, limited-liability company.

1990: Ownership disputed; Schoenherr’s daughter and a group of eastern Germans who invested money in business both claim property. Legal uncertainties stifle business.

1991: Company declares bankruptcy. All but three of 70 employees released. Property dispute remains unresolved.