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Field of dreams

Developer Bill Bird’s tumultuous attempt to develop San Luis Obispo’s Dalidio farm

It was 1992, and South County farmer Ernie Dalidio was tired.

He wanted to quit growing produce on a 131-acre parcel of agricultural land adjacent to Highway 101, just four miles from downtown San Luis Obispo.

The prospect of profits accruing from the land had been steadily diminishing over the years, and it was increasingly difficult for the mild-mannered Dalidio to financially justify the operation.

Surrounded by commercial developments and housing tracts, the farmland had become the epicenter for conflicts focusing on land uses.

Those disagreements were becoming more frequent and strident; some had already resulted in lawsuits filed by nearby residents complaining about the noise of farm machinery and the use of pesticides.

Besides, Dalidio was busy farming another, much more profitable, parcel near Cayucos, and trucking his produce to distant marketplaces.

That was when a neighbor offered Dalidio a possible solution: give him an option to the Madonna Road land for its development into a 40-acre shopping plaza.

At the time, it seemed like an ideal situation for Dalidio. His dynamic new business suitor had apparent credentials to accomplish the daunting task of weaving a prospective project through the maze of bureaucracy that lay ahead. His name was William L. Bird, and he was the developer of Central Coast Plaza, a large shopping mall built in 1985 and located adjacent to the Dalidio property off Madonna Road.

But a simple solution was not in the cards. Not by a long shot.

Even as an Oct. 23, 1992, deal was being inked between Bird and Dalidio, the developer was wrestling with some rather large legal problems: He was being sued by the corporate lender whose money helped complete Central Coast Plaza; he owed hundreds of thousands of dollars in back taxes; he was defaulting on a note held by the city of San Luis Obispo; and the shopping center development was teetering on the verge of financial insolvency.

Dalidio was relatively unconcerned about the lawsuit, filed by Mutual of New York (MONY), viewing it as a simple business dispute. Bird had failed to make three scheduled mortgage payments, and MONY was pressing for foreclosure. Of Bird’s other money problems, Dalidio was equally ambivalent.

But the roots of the developer’s legal dilemma reached even deeper than the obvious. Soon Bird was to become embroiled in a squabble in which he would be accused of fraud and misappropriation of funds–a litigious catfight that would resonate for eight long years.

And today, a decade after Bird and Dalidio agreed to their pact, their planned new shopping Mecca is not one inch closer to fruition, and is, in fact, deeply mired in a scramble of widely ranging controversies.

One of those conflicts centers on construction and funding of a new, $12-million freeway overpass at Prado Road, meant to simplify vehicular access to the planned Dalidio development. The overpass would be at least partially funded with local taxpayer money, according to Bird’s current plan.

"The overpass benefits the city," said Bird. "It is something the city desperately needs, and it’s been on their transportation plan for years. They haven’t had the money to do it, so they made it a requirement of our project."

Bird, a 65-year-old developer from Glendora with 40 years in the business, started encountering trouble shortly after he launched the Central Coast Plaza project.

He sought and received a "leasehold estate" from MONY in 1991, incorporating a loan eventually exceeding $22 million, to finish development of the Central Coast Plaza property. The 10.75-percent loan was secured with the trust deed on the property, as well as assignment of rents and income from the property.

In some ways, the arrangement was a hopeful one for MONY: Bird had been in arrears on the shopping center’s tax payments since 1988, and owed more than $500,000 in back taxes, penalties, and interest. MONY anticipated the new financial boost would help solve the vexing tax situation and boost the development into the black.

Under terms of the new lease, payments to MONY would total $175,000 monthly. Bird would manage the property through a company of his called Trojan Enterprises.

During this period, Bird had his eye on the undeveloped property adjacent to Central Coast Plaza, owned by Dalidio and a family trust. The Plaza land is located within the city limits of San Luis Obispo. However, the Dalidio farm property is located in an unincorporated county area, and this circumstance would eventually cause big headaches for the would-be development.

The adjacent land had been farmed since the early 1900s by Dalidio’s grandfather and father, and then by Ernie Dalidio himself.

When Dalidio stopped farming it in 1992, he gave a corporate farm outfit a "very favorable, long-term lease."

It wasn’t long after Bird received the big development loan from MONY, according to court papers filed nearly a decade ago, that big problems began to develop between the new partners.

MONY lawyers informed Bird in March 1993 that he was in default on his loan obligations and that the corporation intended to foreclose on the property for breach of contract.

In June 1993, lawyers for the corporation filed the first of several lawsuits, this first one recorded in a San Luis Obispo court. According to MONY attorney Douglas L. Hendricks, Bird simply stopped making monthly payments on the mall loan, until he owed 90 days back rent as well as the back taxes.

Bird said at the time that rent revenues were falling short of the amount needed to make the monthly payments, and that he, personally, had been making up the difference of about $25,000 monthly. He said he asked MONY for relief in the form of lower payments, but that MONY refused.

Compounding his problem, Bird added, was the mall’s lack of significant anchor stores, boasting only Gottschalks department store at that time.

So Bird simply stopped making payments. He hoped, he told the court at the time, that by doing so he would "get the attention" of MONY, and that corporate officials might reconsider terms of their agreement with Bird.

In the meantime, Bird’s financial obligations to MONY increased by another $504,000.

MONY attorney Hendricks argued to San Luis Obispo Superior Court Judge Paul Coffee that monthly rental income from the mall actually exceeded $225,000. Hendricks contended that Bird’s actions were simply a way to force a contract re-negotiation, and declared that the mall owner was proceeding in a questionable way.

"Deciding that we are going to withhold our payments because we don’t like the terms of the loan is a little like walking into a department store, and if you don’t like the price on a television, you take it out to your car so you can negotiate a better deal," Hendricks told the receptive Coffee.

When Bird did not meet the payment demands made by the court, a receiver was appointed by Judge Coffee to handle the mall’s finances, collect rent, and make payments to MONY.

Two weeks before the court-appointed receiver, Greg Webster of Sacramento, was to have taken over the case, Bird made a little trip to his bank.

Bird withdrew $350,000 from a property checking account held at the Foothill Independent Bank of Glendora. He converted those funds into a cashier’s check made payable to himself.

For the next 14 days, Bird continued to receive rental checks from mall tenants, according to court papers, and placed those funds in the Foothill Independent Bank account.

Webster was to become responsible for those funds on Monday, Nov. 1. But before the bank closed on the previous Friday, Bird withdrew $43,000 from the account and put it, along with the $350,000 from the previous withdrawal, into a bank account owned by Bird’s daughter, Kathryn L. Smith, who also served as controller of Trojan Enterprises.

Monthly rental revenues from mall tenants also were banked in Smith’s accounts, court documents showed.

Webster, a real estate asset specialist, met with Bird in Glendora on Nov. 1, 1993, to discuss "facilitating a smooth takeover" of the mall’s assets.

That was when Bird, according to Webster’s subsequent report to the court, "indicated he has (all) requested documentation ... [but] that he has no intention of providing either the requested documentation or any funds" to Webster.

Bird also threatened the receiver with a lawsuit, claiming Webster had no right to seize the $20,000 that remained in Bird’s Foothill Independent Bank checking account.

In April 1994, Webster filed his report to the court, noting that he had been able to recover $143,972 in ongoing rental fees for MONY. He asked to be discharged from the case and petitioned the court for $17,491 for his fee, which was paid from accrued rental funds.

MONY filed a second lawsuit against Bird that same month, this time in a Los Angeles County Superior Court, alleging Bird illegally converted funds and made fraudulent transfers of those funds to private accounts controlled by him. The action charged Bird with expropriating the funds in an effort to hide them from his creditor.

This action also named Bird’s wife, Marilyn, and daughter, Kathryn L. Smith.

In December 1995, a judgment was entered requiring the Birds to pay $1.01 million to MONY. Additionally, Smith was ordered to pay $50,000 in punitive damages.

Then, the judge awarded to MONY a constructive trust of an "undivided 6 percent interest in the Dalidio option."

At this point, Bird’s active interest in Central Coast Plaza was forfeited to MONY.

The option concept was later turned into tangible property by Bird, who offered a portion of the Dalidio property as a means of satisfying obligations of the constructive trust.

Meanwhile, Dalidio patiently watched Bird’s travails.

"He took a lot of heat back then, and a lot of it was very unfair," Dalidio said about Bird. "I had some dealings with that MONY set–they were a real bunch of bad characters to work with. I’ve never had anyone talk to me like those guys talked to me. I can sympathize with what Bill must have been going through. I had to consider the source of his problems."

And, Dalidio added, "I couldn’t believe it when the judge ruled against Bird."

"MONY had a pretty slick attorney from San Francisco, and I’m afraid he out-slicked our attorney," recalled Bird last week. "He managed to convince the judge to rule against us."

Two years after the judgment against him, in a May 1997 effort to settle the terms of the judgment, Bird signed an agreement with MONY to grant the company "four to five acres" of the Dalidio property. Location and configuration of the parcel was to have been agreed upon by the parties. The approximate value of the property in question was $1.22 million.

MONY intended to use the acreage to add to the Central Coast Plaza, for construction of a Target store, additional parking for Gottschalks, and hotel construction and redevelopment of Central Coast Mall.

Bird and MONY representatives were unable to reach agreement on the location of the parcel even after a contract extension, and on April 15, 1998, Bird decided that MONY’s option to the property had been "terminated."

Three months after that, Bird assigned rights to the yet-undefined option parcel to San Luis Obispo Marketplace Associates, a limited liability company (LLC) located in Los Angeles County and comprised of himself and Dalidio.

MONY officials shrugged off Bird’s "reassignment" action, taking the position that they still maintained the only legal interest in the option.

This time, Bird sued MONY.

According to court documents filed by John Gaims, a Los Angeles lawyer retained by SLO Marketplace, "MONY’s failure and refusal to release its constructive trust in the Dalidio option has clouded title to the Dalidio property."

This, Gaims said, adversely affected his client’s "ability to obtain public entitlements to develop the parcel to its highest use." He said the controversy between Bird and MONY "will substantially damage SLO Marketplace by preventing it from recouping its investment."

The primary investment anticipated by SLO Marketplace would be the eventual financing of the property’s features. Those would include a 45-acre commercial development with anchor stores Target, Lowe’s, and Macy’s. Office space and parking are part of the new mall plans, and the development would be surrounded by a host of SLO city government-mandated additions covering the balance of the Dalidio property’s acreage. This commandeered land would be required to be used for so-called "open space"–construction of affordable and senior housing; a senior center; an Oriental garden; soccer fields and a competition track; and a park. The land would be deeded for these uses by Dalidio.

The lawsuit was settled two years ago. Bird and MONY lawyers declined to discuss terms of the agreement, but Bird confirmed that MONY no longer holds an option to the Dalidio property.

"I was sure glad to see MONY head on down the road," said Dalidio.

Since adoption of a 1994 San Luis General Plan, talk has centered on annexation of the Dalidio land to the city of San Luis Obispo, thus subjecting the development to the whims of municipal mandate.

The city’s planning commission gave the Dalidio plan a thumbs up last July; the City Council tentatively followed in September, crafting a memorandum of understanding (MOU) with SLO Marketplace Associates regarding details of a possible annexation and subsequent development.

But before things got too far along, city officials asked for satisfaction of Bird’s in-arrears note.

"Bird had signed a personal note for some of the road improvements associated with the Central Coast Plaza shopping center. Over the years he defaulted ... he didn’t pay on time," said SLO City Attorney Jeff Jorgensen. "Then he came forward with the Dalidio project. We were supposed to be negotiating an MOU, and we told him we weren’t particularly interested in negotiating with someone who was in default on a note."

Bird paid the city note in full in 1999.

According to Jorgensen, that fixed that problem in the city’s eyes.

"We entered into that MOU in the event that a Dalidio project was approved by the city, so that indicates that the city was then willing to do business with him, at least to that extent," said Jorgensen.

Following the City Council’s approval of the MOU, Dalidio told local chamber of commerce officials he was pleased.

"We’ve taken what we think is the right route because we’ve always felt that this property belonged within the city," Dalidio said. "That’s why we didn’t take the alternate route of going through the county. It’s been a long, arduous process but it’s going to be worth it because we feel it’s going to be a huge asset to the city and its residents."

But that was last year. In the interim, new people were elected to the council, and the matter was revisited. This time, Dalidio and Bird were not nearly as happy with the outcome. The previously approved MOU was scrubbed, and a cloud of doubt suddenly surrounded any future annexation of the site.

That prompted Bird and Dalidio to take their plans to the county. In this way, they could skip the entire process of annexation, and work–perhaps–under a more friendly governmental umbrella.

Noted Jorgensen: "Dalidio took his ball and went to the county, and the county is threatening to authorize the processing of [the project]. At the same time, the city is saying a development like this should occur within the city."

Bird thinks the deal might culminate more quickly with the city, "because there is so much history there. We have tried very hard on our end to see if we can’t do this with the city."

Recently, supervisors decided to initiate a 90-day effort to coordinate plans between the city, the county, and the developers. That process ends sometime in April, after which there either will be consensus, or the SLO Marketplace is back, again, at square one.

Bird’s past legal troubles notwithstanding, the man has his fans.

A local business executive who had financial dealings with Bird during the early 1990s said the developer "is tough but honest, and one who has the ability to let a lot of these kinds of money problems just roll off his back. But he’s a lot better than most developers out there. At least he has a sense of community around here."

And Dalidio, too, remains a steadfast supporter.

"Bill Bird is unconditionally one of the very best people I’ve ever worked with," said the soft-spoken Dalidio. "He has been extremely considerate, particularly with the situation we are in now. He is helpful, and all the years we have worked with him he has been a man of his word, and has always been a gentleman."

Time will tell. Æ

‘New Times’ contributing writer Daniel Blackburn can be reached for comment at [email protected]. His last article covered Proposition 65, California’s cancer warning law, (‘Give me a sign,’ March 7, 2002).




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