I’ll See You in Court, by Michelle Chihara

“On the second floor, above the Union League Cafe on Chapel Street, downtown New Haven merchants from the College-Chapel area mingle over wine and cheese. Behind them hang photographs and paintings of New Haven. White Christmas lights, twined into a large wreath and two small Christmas trees, reflect in the floor-to-ceiling windows facing onto the street. Kathryn Garre, public relations representative for Schiavone Realty and Development Corporation (SRDC), asks everyone to be seated.

‘Okay, you’re going to start seeing people putting up the decorations soon-we’re getting the same crew as last year,’ she says. ‘This is the Holiday Calendar, if you’re having an event that’s not on here, please let me know as soon as possible, so we can all coordinate.’

SRDC and its tenants regularly coordinate holiday decorations, as well as maintenance, marketing strategies, and sidewalk sales. But on any given day, Schiavone is just as likely to summon a lawyer regarding a tenant’s lease as to call a plumber to fix a tenant’s drain.

SRDC manages most of Chapel Street between College Street and High Street, where the nineteenth century facades, glittering windows, and brick sidewalks create a world all their own. That world owes its existence to the vision of one man, its former landlord, property manager, and developer, Joel Schiavone.

An eccentric, impulsive banjo-player, Schiavone (SM ’58) organized the New Haven jazz festival for a number of years. He has appeared on the Green in a tutu. He never wears socks.

For a while, he owned the New Haven Nighthawks, a hockey team. When the Nighthawks threatened to leave the city, Schiavone camped out on top of a building and pledged to stay there until the team scared up enough support to stay. New Haven lost the team, but not Schiavone.

Since the 1970s, Schiavone persevered in his efforts to transform New Haven into an ideal college town, complete with boutiques, cafes, and an entertainment complex.

Joel and his wife Craig Schiavone, the current president of SRDC, have decried negative press about the downtown area. Tenants also express concern that the general public sees their district as crime-ridden and financially unstable.

The imminent departure of Kinko’s does not quell such concerns, though Schiavone himself is quick to downplay them. ‘We have things closing and opening and moving out all the time,’ he says. ‘Chapel Street is prime real estate.’

A month ago, the area lured Martha’s Millinery away from Branford. The owner, Martha Lear, a Manhattan-trained hat designer, says, ‘I came to New Haven to get into an urban area within Connecticut, in a quiet neighborhood.’

A year ago, jeweler Peter Endorf moved from Chapel and Park to join Schiavone’s block, bringing with him creative ideas to lure out-of-town customers into New Haven. At a neighborhood meeting, he introduced a guest, the advertising coordinator of Woman magazine. She proposed an ad campaign for the merchants that would target ’29-to-50-year-old upscale professional, suburban, affluent Connecticut women.’

The suburban dollar represents the ever-elusive golden ring for Schiavone’s neighborhood. At the merchants’ meeting, Kathryn Garre thrilled over the 26,000 audience members expected to pour into New Haven over Christmas for the Shubert’s Cats.

But despite the theaters, despite a $2 million dollar tax exemption on the Shubert, and five-year tax delayed phase-in on all renovated buildings, suburban dollars have fallen short of SRDC’s hopes. The Shubert remains dark more often than most had hoped. And in 1992, First Constitution Bank threw another obstacle in Schiavone’s path.

The bank initiated foreclosure procedures on virtually all of the College-Chapel area buildings. New Haven headlines have been heralding Schiavone’s ‘downfalls’ and ‘comebacks’ since the 1980s.

Meanwhile, Joel Schiavone says, ‘We still own the properties.’ He denies that the foreclosure case has meant anything. ‘First Constitution went bankrupt, so now we’re partners with the FDIC. It’s the bank’s fault that we’ve been having problems.’

Schiavone never really left. He’s been here fighting for his vision all along, and he’s left a trail of court records behind him. Tenants, even during the court battles, have continued to pay their checks to SRDC-FHC.

FHC stands for First Hamden Corporation, a subsidiary of First Constitution Bank. Technically, banks are barred from investing their own money with their customers’; lenders are prohibited from becoming joint partners in ventures with recipients of their loans.

In 1981, Schiavone needed mortgage money to create his downtown vision. First Constitution put up that money and created First Hamden Corporation as a way of getting around the no-joint-venture rule. The SRDC-FHC pannership transformed the neighborhood.

Everything was fine until the recession in the early 1990s. First Constitution suddenly became more concerned with the money that Schiavone owed than with the money that Schiavone was helping them make.

In 1992, First Constitution demanded, in writing, that tenants in Schiavone’s block pay their rent directly to the bank. Schiavone ordered his tenants to continue paying rent exclusively to him. Stuck between squabbling landlords, a number of the tenants wanted a third party to decide the matter for them.

The logical choice was a judge; so all parties went to court. Attorney Frank Cochran filed a suit on behalf of the tenants. Meanwhile, Schiavone applied in federal court for an order appointing SRDC ‘rent receiver’ for the Chapel area buildings.

‘He tried to steal a march on the foreclosure case and on the tenants,’ says Cochran. Since Schiavone was the property manager and the developer, the court decided in his favor.

As rent receiver, Schiavone gets a cut of the rent and continues to manage the properties. By the time the tenants managed to get partially reimbursed for their legal fees, a separate court had already decided where their checks would go. Schiavone retains his receivership as long as the foreclosure case remains open, which it technically is.

When the bank folded, the Federal Deposit Insurance Company stepped in to shoulder First Constitution’s debts. Schiavone effectively became the FDIC’s partner. Legally, however, the situation isn’t that simple. FHC (the subsidiary of First Constitution) is still on the books in the tax assessor’s office and on rent checks, and First Constitution is still in the courts.

That 14 parties are now involved in the case gives the distinct impression that corporate entities have been multiplying between legal motions.

New Haven’s courthouses hold endless lists of cases involving one or more of Schiavone’s corporate incarnations. Even in the federal court records in Hartford, at least eight cases come up under Schiavone’s name.

One claimant who has consistently won his cases against Schiavone is Bill McNeiece of McNeiece Construction – a longtime business partner and formerly a high-ranking employee of Schiavone’s. McNeiece sued SRDC for breach of his contract for work on the Taft, including remodeling The Gap. In the settlement McNeiece was awarded $108,890.80.

Even Schiavone’s ex-wife, Allyn Schiavone, has sued Schiavone. She foreclosed on property of Schiavone’s in the prestigious Thimble Islands off the New England coast. She took his East Crib Rock Island in 1993 as collateral for some $3 million that he owed her.

Of course, legal strife doesn’t prevent Joel Schiavone from maintaining amicable interactions with the parties with whom he is sparring’ in court. According to the owner of the Anchor Bar and Restaurant, Marshall Moore, Schiavone’s habit of lunching at his establishment has not been broken since the two became involved in a legal dispute.

Moore’s Anchor Bar and Restaurant has been a New Haven fiture for 40 years. Schiavone is currently suing him for alleged overdue property taxes. Before Moore paid, he wanted explanations for certain increases in his property tax. Moore’s lease includes a provision that he pay a certain percentage of the property taxes assessed to the building. Schiavone has been unwilling, or unable, to account for the amounts in question.

‘I invited the suit,’ Moore says. ‘I’d be willing to pay if he’d be willing to show me the documents.’

Schiavone has also served eviction notices to Moore, which Moore has avoided obeying, legally. ‘I feel no animosity towards any of them,’ Moore says. To date, the tax suit is still pending. Moore’s lease on the Anchor, though, will be up fairly shortly.

If Schiavone succeeds in his current negotiations to repurchase the College-Chapel area buildings, he may step back in as Moore’s landlord. But Moore is not worried that Schiavone might evict him. Moore banks on his reputation as a New Haven staple. He loves reciting Jodie Foster’s memories about the city where she went to college.

‘I remember New Haven,’ she said in a recent television interview. ‘I remember Yale, and all the people there, and of course, I’ll never forget the Anchor Restaurant.’

Kasilios Kalogeridis, owner of the Copper Kirchen, has property tax complaints similar to Moore’s. The two men watched the residential apartments above their restaurants undergo renovation. Years later, they found themselves paying a share of the increased property taxes, reassessed to account for these improvements. Both feel that they should riot finance renovations that don’t benefit their own businesses.

While Moore paid the first two increased bills, Kalogeridis refused to pay from the beginning. ‘It’s a matter of pride,’ he says. Kalogeridis has been in and out of court with Schiavone since 1988 when he first got the increased property tax bill. Eventually, due to the FDIC’s involvement, he was able to take Schiavone to the federal courts. ‘He would have thrown me out,’ Kalogeridis says. ‘But I said no. I’ve been here for 30 years.’

Eventually, a court decision granted Schiavone $19,000 of the over $40,000 he was demanding in tax money. Kalogeridis won a new lease, as well, but it took him two and a half years in court. Kalogeridis estimates that he has spent at least $20,000 in lawyers fees over the past few years alone. ‘I’d rather pay for the lawyers,’ the Copper Kitchen owner says. ‘I won’t let anybody push me around. I work seven days a week. I do it the honest way. Ask him if he can say that.’

Other tenants jump to defend SRDC. ‘It’s the only clean part of town,’ Phylis Satin, owner of the Wave Gallery, says. ‘They’re always fixing, cleaning, doing. Joel Schiavone’s vision has kept up the College-Chapel area.’

Lisa Ferretti, owner of Urban Objects, has been in her current location for seven years. ‘They’re unbelievable landlords,’ she says of the Schiavones. ‘Problems are taken care of within an hour, or that day at least. If the FDIC were to sell these buildings off individually, the area wouldn’t have the consistency of his vision-especially in terms of things like the plants and the lighting at holidays.’ Ferretti doesn’t feel that her rent is too high, but she wouldn’t disclose what she pays. ‘I negotiated my own terms,’ she says. ‘I don’t know what my neighbors are paying.’

Ferretti’s immediate neighbor is Frances Baker of Sugar Magnolia, one of several tenants who pressed charges of favoritism against Schiavone in 1994. In November of that year, several commercial and residential tenants subject to SRDC’s receivership came forward to complain about SRDC’s conduct. Charges included favoritism, bad-faith lease negotiations, and racial discrimination.

The plaintiffs included Baker, Moore, Kalogeridis, and Gene and Jill Cam, owners of Sakia, the Native American crafts boutique. The court ruled that the claims were worrisome but unsubstantiated. It added that SRDC’s actions were justified as part of its duty as rent receiver to ‘maximize rental income.’

However much these landlordtenant disputes preoccupy individual merchants, for Schiavone they pale in comparison to the drawn-out foreclosure case. ‘The foreclosures are a double-edged sword,’ says Matthew Nemerson, president of the Greater New Haven Chamber of Commerce. ‘By lowering the basis of the investment values, you can lower rents and make downtown more economically viable. But it’s cruel and unjust punishment for those who tried to create their vision.’

Viability, though, necessitates that the corridor continues to be treated as an integrated whole – what one tenant sees as a little monopoly and what Nemerson calls ‘central planning.’ As long as the district stays intact, Nemerson says the foreclosures need have no effect on New Haven. ‘It’s simply an unfortunate situation for Joel, or for the taxpayer, depending on what happens,’ he says.

The heart of the complications lies in First Constitution’s position as both entrepreneur and creditor. The bank started out by acting like a partner, but it cracked down as a creditor when it started having trouble. The first sign of light at the end of the legal tunnel came in August of 1994 when all parties signed a binding mediation agreement. For all its legal jargon, it essentially represents an agreement not to have a winner. A judge-appointed third party will mediate a decision that seems fair to everyone involved.

After the final hearing, Schiavone will have the first option to buy the buildings, but he will be able to do so only at the mediator’s assessment of a fair price. Even if this case manages to reach its conclusion in the next six months, it will still have been in the courts for three years. And given the system, this case is sure not to be SRDC’s last suit. The sheer volume of litigation surrounding the Chapel Street corridor seems to be the price of maintaining the grand vision that launched the project.”
-Excerpt courtesy of Yale University, The New Journal, Volume 28, Issue 3, “I’ll See You in Court,” by Michelle Chihara, November 30, 1995. (top) “The Warner, a popular apartment building for Yale students moving off-campus, is one of the properties managed by the Schiavone Realty and Development Corporation.” Image courtesy of Yale University, The New Journal, Volume 28, Issue 3, “I’ll See You in Court,” photo by Brendan Koerner, 1995

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