Photo by Robert Burroughs

“So far this looks like the hinges of Hades. It’s not. Every problem a place could have, we’ve had. I think the problems are being ironed out.”

Following a heated conversation with his employer on September 6, 1986, Robert Phillips was dumped from his job as project director for Warner Springs Ranch, the 2500-acre country-club resort 70 miles northeast of downtown San Diego. But his seat on the ranch association’s board of directors hadn’t yet been yanked out from under him. And now, two days later, a security guard was staked out at the ranch association’s darkened office in one of the storybook-cozy bungalows on the ranch, in anticipation of uninvited guests. And late that evening, they arrived — two ranch employees, Robert Phillips’s son Bobby, Jr., and Phillips’s nephew Kent.

Rossi: “When I used to walk on that project, people came up and shook my hand and thanked me for developing it.”

As security guards later retold the incident, Kent and Bobby demanded that the front-desk clerk give them a key to the association’s office. Once inside, they gathered up boxes of documents, several paintings, green windbreakers, and other belongings, packed them into the back of Bobby’s truck, and drove away, flattening a small fence as they left. A guard at the resort’s front gate allowed the pair to leave only after Bobby threatened to fire him. Bobby returned a few hours later, shortly after midnight, and wasn’t allowed through the gate, and he again threatened to fire the guard. When the ranch security chief was contacted by radio, Bobby warned that he could have the chiefs girlfriend fired from her ranch job, too. “Open the fucking gate!’’ he ordered. But the guards held their ground. And with a hard stare and a menacing “You’re gone!’’ Bobby left the ranch.

Much of the allure of this “wizard” land is in its sulfurous hot springs, which for centuries have seeped from deep fissures in the earth’s ragged surface.

A few weeks later, Robert Phillips wrote to the members of the Warner Springs Ranchowners Association, fighting to block the association board of directors’ move to force him out. He implored them to keep him on the board to help wrest control of the ranch away from its developer and fellow board member A. Cal Rossi, Jr.

The Pacific Crest Trail, which extends from the Canadian border to Mexico, cuts through the ranch, the vast majority of which remains uncluttered by development.

To bolster his case, Phillips wrote about the quagmire he found when he first came to work for Rossi at the ranch nearly two years earlier. “We could not and did not pay any of our bills on time,’’ he wrote. “We owed the telephone and utility companies thousands and were always a day or two away from having our telephone and power service discontinued.... The books had never been balanced. Checking accounts had never been reconciled. Weeks of search and inquiry uncovered our association bills in a large cardboard box at the developer’s office in San Francisco. Many of the envelopes containing bills had never been opened.” Financial records were either missing or in disarray, he claimed. Thousands of dollars in liens had been filed against the ranch. And, he wrote, “There was a substantial drug- and alcohol-abuse problem among employees.”

Shang Hecht recalls that the Los Tules residents “were very much in favor” of Rossi’s plans.

“It has been a long, bloody road out of the wilderness of the ‘good old days’ to daylight,” Phillips cautioned in his letter. “Rossi wants me off the board so that he can continue to control our association affairs.”

A few weeks later, on November 15, 1986, in the resort’s dining room, under a wide chandelier ringed with fake, molded deer antlers, a few hundred association members met to determine Phillips’s fate. Other members had already sent in their ballots on the matter. “Everyone was shouting,” recalls one woman present at the meeting. Robert Phillips loudly declared that he had been railroaded. “It was sheer chaos. He was trying to get a microphone so he could speak on his behalf,” she recalls. Nonetheless, the majority voted to depose Phillips. A month later, Phillips sued Cal Rossi and his ranch business partners on charges that included breach of contract and defamation of character.

"Timeshare takes away the exclusivity of it, and we were promised a private country club."

Phillips’s lawsuit is one of more than a dozen filed against the ranch or Rossi in the past five years. “That ranch has a death rattle from which, in my judgment, it will never recover,” Phillips asserted in a recent interview. “It’s been a disaster for the developer.”

Rossi, recounting the history of the ranch, admits the resort has “had its ups and downs.” Why the problems? Some ranchowners blame Rossi, and some of his handpicked cohorts, including Phillips, for poor planning and mismanagement and for overzealously guarding their own interests in the ranch. Even Rossi’s brother-in-law says Rossi is “one of the reasons the place is screwed up” and has supported litigation against the developer, action which he admits has frayed the family ties. Rossi blames the snowballing effect of early governmental interference with his development plans. Phillips blames Rossi and a group of ranchowners he views as malcontents who complained loudly and often about ranch management. “It’s not up to me (Phillips] to ascribe any Machiavellian conspiracy to their actions, but their actions are stupid and self-serving,” he says. “Talk about screwing up your own nest!” And he says Rossi, “can walk across a property in two hours and it’ll take you a month to get the property back in shape.”

By late '84, sales had fallen off so sharply that construction on the ranch came to a halt.

Since the summer of 1983, Rossi has been hauled into court by contractors seeking payment for work done on the ranch; by two prominent San Diego attorneys, who bought into the ranch but tried, unsuccessfully, to get out of what they believed was a sour deal; by insurance companies that don’t want to cover him in his legal battles; by San Diego’s latest law firm, for his refusal to pay for its work on his behalf; and by a few former ranch employees. Four ranch share-owners, among them Chet Maxey and attorney James Hoffman, have filed two lawsuits against Rossi, one a class action in behalf of the individual ranchowners, charging, among other things: construction defects, violations of the ranch covenants, inadequate capitalization, mismanagement, misappropriation of ranch association facilities, and “wrongful domination” of the association board of directors by Rossi. “He has so many suits now, they’re like most of us get junk mail,” says one ranchowner.

The rolling green hills reminded John Scott of Campsie Glen in the Scottish countryside he left 34 years ago.

In response, Rossi calls Robert Phillips’s pleading letter to the ranchowners’ association “self-serving” and his lawsuit “cocka-mamie.” Of the other legal actions, he says, “I just don’t think it’s fair.” He claims the suits are a “very distorted” version of the truth. “When I used to walk on that project, people came up and shook my hand and thanked me for developing it.”

Chet Maxey: “He came in, started getting power, brought his relatives in, and started spending money foolishly."

But the skeins of legal entanglements are just part of the strange saga of the place called Warner Springs Ranch, a microworld where latitude and longitude are marked in degrees of enchantment and accursedness. Even Robert Phillips tempers his acerbic comments when he talks about the ranch. “It’s an absolutely wizard piece of property in a wizard location,” he declares. And on this solitary point do all warring factions lay down their hatchets and their legal briefs.

The buyers list read like a Burl Stiff society column: paint-men Robert and Nicholas Frazee; hotel owner Judson Grosvenor; businessman Dominic “Bud” Alessio; developers Ernie Hahn, Doug Manchester, and Graham MacHutchin; former marineworks vice-president Bill Kettenburg; and insurance man Robert Driver.

The resort is cradled 3200 feet above the sea, along the eastern expanse of the San Jose Valley. To the west is Lake Henshaw, to the east lies the Anza-Borrego Desert, and all around are mountains with names like Eagles Nest, Hot Springs, Volcan, and Mesa Grande. The Pacific Crest Trail, which extends from the Canadian border to Mexico, cuts through the ranch, the vast majority of which remains uncluttered by development. The trail is a favorite of hikers and horseback riders.

Tracey Tippetts “Rossi had his personal chefs flying down on weekends from San Francisco."

Much of the allure of this “wizard” land is in its sulfurous hot springs, which for centuries have seeped from deep fissures in the earth’s ragged surface. One of the resort’s two Olympic-sized swimming pools is fed by mineral waters that flow from a boiling earthen cauldron, down a hill several hundred feet, and into the swimming pool, where the temperature hovers near 100 degrees.

The current tale of Warner Springs Ranch began in 1975, when A. Cal Rossi and his partners paid $2.8 million for the property, which had been a resort for most of the past 100 years. Almost immediately, their development plans were derailed by opposition from local Indians, environmentalists, and archaeologists. The partnership sold the ranch to a group of German investors in 1976. The Germans filed for bankruptcy in 1979, and Rossi, who still had a trust deed on the property, bought Warner Springs Ranch back again in late 1980. In 1982, Rossi attracted the attention of corporate giant RKO General, which, through a subsidiary, became a general partner, investing $2 million in his unique project.

Rossi had become intrigued by a novel resort concept he’d heard about and set out to apply it to Warner Springs Ranch, gilding the basic plan with a little country-club élan. Under the concept, 2000 “undivided interests” in the ranch would be sold. Buyers would not own a specific lot but would share equally in ownership of the land and the resort’s guest bungalows, swimming pools, lodge, golf course, and other facilities. Unlike a timeshare project, those who bought interests could stay at the ranch for up to two weeks at a time, year ’round. “I thought I was buying into a private country club which had history, beauty, class,’’ says Chet Maxey, a retired Southern California Edison field supervisor. “I like the concept of ownership — you have something tangible.” Many apparently shared Maxey’s optimism.

And this time, Cal Rossi would make sure his redevelopment plans would not be lost in a maelstrom of opposition, as they had been in 1976. He talked with Indian representatives from two nearby reservations about setting aside a 240-acre cultural preserve and about building a museum there to honor their ancestry. Rossi also wooed homeowners from Los Tules, a 60-home subdivision that was the ranch’s northern neighbor. He chartered a bus to take the homeowners to the country administration center to support him when the board of supervisors met to approve his development plans. Afterwards, according to Lillian “Shang” Hecht, one of the Los Tules residents, Rossi treated the bunch to dinner at Anthony’s on Harbor Drive. He also offered them a special chance to buy ranch interests at $13,500, before he went to the general public with a $17,500 initial asking price. Shang and Bill Hecht figured, at that price, “It’d be silly not to belong.” Shang Hecht recalls that the Los Tules residents “were very much in favor” of Rossi’s plans, which included the renovation of the resort’s original 96 tum-of-the-century bungalows and construction of 154 new ones, new tennis courts, a children’s camp, an equestrian center, and golf-course improvements.

With approval of his redevelopment plans in hand, Rossi finally began selling ranch interests in 1983. And they sold quickly, in part because of the ranch’s richly textured history and also thanks to expensive marketing campaigns. “They were spending money out of control,” marvels one former salesman, Tracy Tippetts. Chartered buses each weekend brought in some of San Diego’s most illustrious citizens. Sales efforts targeted symphony boosters, civic clubs, Rancho Santa Fe and La Jolla homeowners, and airplane owners (the ranch has a small airstrip).

“We went through the political community, the wealth community, whoever’s a mover and shaker,” says Tippetts. Another former salesman, Chip Hasley, adds, “Don’t underestimate the appeal Warners had to old San Diego families. That was really powerful.” Some had visited the ranch as children, when the likes of Mary Pickford, Charlie Chaplin, John Wayne, Jean Harlow, and Douglas Fairbanks stayed there, along with San Diego mayors, judges, and other notables.

“It was top drawer; it was elegant,” says Tippetts of the ranch in 1983 and early ’84. “That first year [Rossi] really did make a noble effort to project this first-class, European resort image out there.”

As a result, the buyers list read like a Burl Stiff society column: paint-men Robert and Nicholas Frazee; hotel owner and symphony benefactor Judson Grosvenor; businessman Dominic “Bud” Alessio; attorneys Dan Broderick, David Loadman, Dale Larabee, and Bryan Gerstel; restaurateur Michel Malecot; former county administrative officer Frank Aleshire; developers Ernie Hahn, Doug Manchester, and Graham MacHutchin; former marineworks vice-president Bill Kettenburg; and insurance man Robert Driver, among others.

One salesperson recalls a well-known San Diego businessman visiting the ranch in 1984 with a woman other than his wife. “It was kind of comical because he just showed up in his Mercedes and wanted to check out the golf course.” When told only ranch-owners could play the course, he introduced himself, perhaps thinking his weighty name would get him onto the greens. “I know who you are,” the salesperson told him. “Then he got real nervous ’cause he had some cheeseball in the car besides his wife.” The businessman returned later with his wife by his side and bought an interest.

But the sales staff enjoyed more than personal dramas in those halcyon days. They used the ranch bungalows free of charge whenever they didn’t feel up to the commute to their homes in the evening. They played golf and tennis with new ranchowners. “It was like working on a cruise ship, a luxury lifestyle in a recreational mode, and that was our job,” says Tippetts. Meals were lavish and fee. “We’re talking rack of lamb, steak,” Tippetts recalls. “Rossi had his personal chefs flying down on weekends from San Francisco. You just got nauseated at having to order first-class meals after a while.”

Cal Rossi, himself, cut quite an elegant figure, in his blazers and snappy bow ties, driving his $35,000 tobacco-colored Jensen Interceptor. “He just had an international flavor and reputation of being a real Renaissance man, a Gatsby,” says Tippetts. Others are less flattering. One time-ranch salesman Pat Roche (who later quit and earned the ire of ranch management by reselling interests at prices well below those charged by the resort), says Rossi possesses a “certain demeanor, like he’s above everything, some kind of blue blood.” “Cal is an egocentric,” says Shang Hecht. “He believes his judgment is infallible, which it isn’t — it’s been proven so.”

In the annals of corporate success, the story of Anthony Calagio Rossi, Jr., would begin with, perhaps, a lusty trumpet call. He likes to tell the story about how, as a teen-age Fresno farm lad, he leased fig trees grown as windbreaks along cropland borders and then sold the figs at a profit. And how he began his first shopping-center development before age 20 and opened his first restaurant at 21. He has since developed luxury hotels and award-winning restaurants up and down the state. He also helped pioneer the gold rush to condo conversions in the state, with projects such as the Seville in La Jolla.

Not all of Rossi’s projects have been unqualified success stories, though. He and his attorneys have spent more than two years trying to settle one lawsuit in which he was accused of defaulting on a $33 million construction loan used to build a hotel in Monterey. Rossi countersued the savings and loan, charging it forced him to invest in worthless properties as a condition of the loan.

In 1983, when Rossi began selling ranch interests, potential buyers paid $800 deposits for each of 1134 of the ranch’s 2000 shared ownerships. Not bad for a relatively untested concept in resort living. But by early 1984, buyers were taking their deposits back and dropping out of the project in bunches. So many withdrew, in fact, that the ranch lacked the minimum of about 600 sales required by the California Department of Real Estate in order to close escrow. The ranch marketing director even approached some owners and salespeople and asked them to buy up extra ownerships. Finally, the first escrows closed in March of 1984, with about 630 interests sold.

Rossi blames the drop-out rate on the months of delay between the time he began selling and the time escrows closed, a lag he further blames on government interference with his efforts. The department of real estate, he says, wouldn’t allow the project to proceed until the county and state agreed on the planned realignment of Highway 79, which bisects the ranch.

But Rossi's critics contend that many buyers pulled out because they were already dissatisfied with the state of affairs at the ranch. The final subdivision report issued by the department of real estate in late December of 1983 had estimated that the 154 new bungalows, golf pro shop, and other improvements would be finished by July 1984. But the completion date for the bungalows kept receding into the distance, into mid-, then late 1985, then into 1986. Owners and salesmen say, as a result, buyers in 1984 often had trouble securing reservations to stay in the 96 existing bungalows. “People figured, ‘Geez, they’re never going to build the units,’ ” says Earl Cecil, Rossi’s brother-in-law, who worked in ranch marketing at the time.

Not only were construction plans delayed, but the cost of a ranch interest had escalated rapidly, from $17,500 in June 1983 to $29,500 by March of 1984. Rossi and his marketing staff had originally priced ranch ownerships in anticipation of a complete sell-out within three years. Today, almost six years after the shares first went on the market, about 700 interests remain unsold.

By late ’84, sales had fallen off so sharply that Rossi was having trouble getting his bank to pump fresh funds into the project. Construction on the ranch came to a halt. Bills piled up, and suppliers demanded cash on delivery. Between mid-1983 and the end of 1986, according to records in the county recorder’s office, at least a dozen liens were filed against Warner Springs Ranch by contractors and suppliers seeking payment.

In February of 1986, the ranch was required to pay SDG&E a $41,000 security deposit to ensure that the power bill would be paid.

“Money — that was the basic problem. [Rossi] didn’t have the money to finish the deal,” says ex-marketing staffer Earl Cecil. “There was a slug of money uselessly spent. Once you’ve had a sales failure in something,” he continues, “it’s really hard to bring it back. It costs you a lot of money. If you don’t have the money, it can be terminal. That’s where Rossi was.”

Finally, in January of 1985, a restless group of ranchowners, calling themselves the Owners Advisory and Communication Council, wrote Rossi a loveless letter. Why weren’t the bungalows, the golf clubhouse, and other improvements finished? “Is there a cash flow problem? Is the developer broke? ... What is happening with the restaurant? Why are prices going up and service continually poor?”

The same group, in the summer of ’85, hired attorney and fellow ranchowner Bryan Gerstel to make a formal request to inspect the resort’s financial records, which owners contended they’d had difficulty obtaining. “It was a stone wall. No information was forthcoming,” says Steven Arter, who headed the owners’ council. During this time, Arter says, Rossi called him at home one night and warned him, “I don’t know what you’re trying to pull, but I’m coming after you with everything I’ve got.” (“That doesn’t sound like something I’d say,” responds Rossi.)

The same month disgruntled owners formed their advisory council, January 1985, Cal Rossi hired Robert Phillips as project director of Warner Springs Ranch. The following spring, Phillips wrote to the owners, saying, “Your ranch-owners’ association is insolvent” and exhorting them, “Let’s either kill the ranch or cure it.” His letter urged owners to vote to increase to $115 the monthly fee they paid for ranch operations and maintenance. The owners eventually approved the increase, although many who owned or controlled shares, including salesmen Tippetts and Roche, had, at various times, refused to pay their assessments.

When ranch shares first went on sale, the monthly operations and maintenance assessments were set at $65.60 per share; Cal Rossi was to pay those fees for all 2000 ranch interests through March of 1985, when the owners would begin picking up the tab for their own interests.

In the Maxey-Hoffman lawsuits, the owners now contend the original maintenance assessments were low-bailed to lure potential buyers. In court documents, the ranch manager who preceded Phillips stated that she and another employee were hired in 1983 to put together a ranch budget, and they developed one in which the assessments would have been closer to $110 per month.

In fact, the $65.60 figure didn’t generate enough cash to cover operating expenses; and attorneys for Rossi, in May of 1986, went to the board of directors at the ranch asking that Rossi be reimbursed the $1.4 million he said he contributed in 1984 and 1985 to cover the shortfall. Fellow board members Chet Maxey and Jim Hoffman contended the association didn't owe Rossi anything. After a protracted dispute, Rossi agreed to settle for $132,000 of the $1.4 million.

In addition to their complaints about the construction delays and the monthly assessments, owners also objected to increased charges for bungalow rentals, meals, and other amenities that had been promised “at cost” when they bought into the ranch. A March 1984 story in the San Diego Daily Transcript reported that a prime-rib dinner at the ranch costs about $4.00, and a well drink was about 50 cents. Ranch shareowner Frank Singer, who flies between Huntington Beach and Warner Springs Ranch in his Bonanza six-seater, heard the same sales pitch about cheap steak dinners when he bought his interest. “I told the salesman anyone who buys that has to be kind of stupid." But a lot of people did buy the pitch and were angered when the charges were increased. The most recent ranch menu lists dinner prices from $8.50 to $11.00.

Under a lease with the ranch-owners’ association, Warner Development Company (a Rossi-controlled firm) operated the ranch restaurant and a gas station. Audits show what a losing proposition the restaurant was for Rossi, whose restaurants elsewhere have been success stories, lavishly praised in the press. An April 1986 Arthur Andersen & Co. audit listed Warner Development Company’s operating losses at $1.08 million in 1984 and $638,500 in 1985 — losses that were attributed to the restaurant. Subsequent audits showed losses in 1986 and ’87 of more than $200,000 in both years.

Rossi claims the restaurant ‘‘was never supposed to be profitable,’’ adding that the initially low prices for rooms and food were based on an assumption that the guest bungalows would have a 60 percent occupancy rate. While the ranch does fill up completely on some weekends, occupancy rates have averaged only 24 percent in some winter months. The 1989 ranch budget predicts August to be the year’s busiest month, with occupancy averaging 44 percent.

The audits highlight other problems at the ranch as well, lending credence to some of Robert Phillips’s departing salvos. “During 1984 the association’s accounting records and systems were poorly maintained," said an August 1986 auditors’ report. Certain basic accounting procedures, including the reconciliation of bank accounts, “were not being performed.” (The audit also called the ranch's initial monthly assessments of $65.60 “grossly inadequate”) An audit for 1985 found that the ranch association outspent its revenues by half a million dollars that year. And an April 1988 auditors' report noted that accountants “were unable to satisfy ourselves” on the accounts receivable balance because of “inadequacies of the accounting records.”

Rossi’s critics contend that these poor accounting practices led RKO to withdraw as a general partner in Warner Springs Ranch in July 1985. “They ran,” says Earl Cecil. “They got out because they could see [progress on ranch construction and sales] wasn’t happening as fast as it was supposed to happen. And a lot of money was being spent, and there was going to be a big call for future funds." Rossi says RKO pulled out simply because the company was liquidating all its hotel investments.

But attorneys Dale Larabee and David Loadman couldn’t convince a superior court judge that the acceleration in ranch or the innumerable construction delays were reasons enough to get their money back. In August 1987, the judge ruled against the two, who had purchased 11 ranch interests in 1984. The judge said that Rossi couldn’t be held to the initial “projections" of costs.

But the ranch faced other problems as well. In October of 1985, one of the cooks, an intern from the Culinary Institute of America in New York, filed a complaint with the labor board seeking overtime pay she said she hadn’t received. In her complaint, Teresa Brown included the critique of the ranch she had sent to the institute’s administrators. “I cannot state strongly enough how important it is that no other student go to Warner Springs Ranch." She detailed injuries that had occurred to workers at the ranch. These included oil burns she claims she suffered because of an inadequately maintained fryer and an accident in which restaurant supervisors balked at taking a young Mexican restaurant worker to a clinic after he cut his hand badly while playing soccer at the ranch. “Nobody wanted to take him because he was an ‘illegal,’ ’’ Brown said recently. “It wasn’t until we started yelling and screaming — we made such a scene — that finally somebody took him."

The honeymoon for Robert Phillips and beleaguered ranchowners was shortlived. By the summer of 1985, barely six months after he was hired, Phillips, in a letter to owners, was calling owners’ council leader Steven Arter “a legend in his own mind"; Phillips charged that the owners’ council was asking for cash contributions to “bankroll their self-styled position as protector of the owners." In the same letter, Phillips responded to complaints about a lack of pest and weather control in ranch structures by writing that Cal Rossi had “spoken to both the pests and the weather and they refuse to cooperate.... He has attempted to influence the weather through the lighting of candles at the chapel. The chapel is currently out of candles."

Such comments hardly endeared Phillips to the owners. Nor did he gain favor with some purchases he made, including a baby grand piano, several paintings, and floral plantings, when the ranch association was struggling to stay afloat. And there was also the controversial deal in which Phillips had firewood shipped from Oregon. “That’s one of the reasons we fired him, finally," Rossi says of the deal.

According to an auditors’ report, Phillips bought the firewood from his brother-in-law in Oregon, paying him $10,000 in association funds. Under the terms of the purchase, the wood was to be packed in boxes containing one cubic foot of wood each, labeled with the ranch logo, and shipped to Warner Springs. The audit report says each boxed cord cost $384. The February 1988 owners’ class-action suit claims that firewood was available locally for “less than half that price." The telltale accountants’ report also said Phillips paid a relative $2100 for three horses in November 1985.

“I think those transactions will stand on their own — period," responds Phillips. He said local suppliers were unwilling to supply the wood as he ordered it. “Everybody connected with that lost money except for the ranch-owners, and it’s just not a pleasant thing for us to talk about." He adds that the ranch was “damn lucky” to buy the horses because the equestrian facility was “short of good horses."

At one point, the San Diego Sheriffs Department had its own problems with Phillips. Minutes of the September 6, 1986, ranch board meeting reveal that he advised the board against turning over to the sheriff the names of children who had come in contact with an accused child molester — a 22-year-old male counselor who worked in the Warner Springs Ranch youth camp in the summer of 1986. The man had been left in charge of several young girls overnight while their parents stayed in ranch bungalows elsewhere on the property. Phillips defends his recommendation by saying, “I did not trust the manner in which the sheriffs department would handle it." He feared the questioning might end up “putting thoughts in their heads," damaging the children, and perhaps wrongfully incriminating the counselor. The following February, the counselor pled guilty to charges of molesting a seven-year-old girl at the ranch.

In spite of the bad blood, even Phillips’s detractors give him credit for making progress in ranch construction, jarring the property from its ghostly standstill when he went to work there in 1985. “He came in when this ranch was at its lowest ebb and turned it around," says Chet Maxey, who is quick to add, though, “He came in, started getting power, brought his relatives in, and started spending money foolishly." Says Frank Singer, “He was excellent when it came to completing the ranch. He started running the ranch like a dictator."

In the spring of 1986, Rossi and Phillips engineered a controversial deal that would eventually find its way into Maxey’s and Hoffman's individual and class-action suits. In December 1985, at the urging of Rossi and the rest of the Warner Springs Ranch board of directors (including Maxey and Hoffman), the ranchowners had voted to allow half interests to be sold. Half-owners would be allowed to use the ranch only every other month. Owners had been persuaded when the board told them that as of the preceding spring, sales of full interests in the resort had “all but ceased, due to changing market conditions." In spite of the developer’s early optimism, Rossi and his partners still owned 1030 unsold shares, more than half of the original inventory. And the ranch was only 20 percent full on weekdays.

Less than three months after this new concept was approved, Phillips signed a contract with Interval International, a vacation exchange firm, which brought timesharing to the exclusive Warner Springs resort. Maxey, in court papers, later claimed the developer “conned" owners into believing half-interests would allow the ranch to be sold out within 18 months. And owners now say they didn’t know at the time that Rossi and Phillips intended to begin timesharing.

Under the contract, buyers of half interests at the ranch could swap some of their time for vacation time at other Interval International resorts. And Interval International vacationers, with no ownership ties to the ranch, would be able to use the resort for allotted times.

“It never even went to the board," says Maxey, who contends he and fellow board member Jim Hoffman learned of the contract several months after it had been signed. (The board at the time included Maxey, Hoffman, Rossi, Phillips, and James Day, who, according to Earl Cecil and others, is Rossi’s cousin.) The revelation of the contract riled Maxey and Hoffman for several reasons. “Timeshare takes away the exclusivity of it, and we were promised a private country club,” says Maxey. ‘‘I didn’t buy timeshare.” Maxey and Hoffman, in a letter to owners and in the owners’ suits, say the Interval International contract violates the ranch covenants, codes, and restrictions in several ways, most basically because one of the covenants states that only one-year contracts are allowed. The Interval International contract was to last four years.

The timeshare contract, as Pat Roche saw it, was “a knee-jerk” decision, a desperate move to accelerate sales because they were hurting. Roche also speculates that the timeshare contract might have made the ranch a more attractive buy for a subsidiary of Southmark Corporation, which Rossi was wooing in 1986, as well as to buyers of individual half-interests.

Rossi says the decision to contract with Interval International “had nothing to do with the Southmark deal at all.” He also says owners ‘‘who really understand [the timeshare plan] endorse it ” Both Rossi and Phillips contend they didn’t need the board of directors’ approval to sign a timeshare contract to be used as a sales tool for marketing unsold ranch interests.

Although Chet Maxey and James Hoffman were often on the losing end of votes of the ranch board of directors, there was one issue on which Maxey, Hoffman, and Rossi were able to form an alliance. And the alliance would close the final chapter on Robert Phillips’s tenure at Warner Springs Ranch but open yet another round of litigation for Rossi. In September of 1986, Maxey, Hoffman, Frank Singer, and some others from the ranch flew to San Francisco for a business meeting about a new idea Rossi had for cutting financial losses. During a discussion in Rossi’s office, the discussion turned to their questions about some of Robert Phillips’s recent actions. “We convinced Cal there was a problem there,” says Maxey. Singer relates, “I brought it to Cal’s attention that Bob Phillips was not the person he thought he was. Cal was absolutely shocked.” Very soon after that trip, Rossi fired Phillips, and Phillips filed his breach-of-contract lawsuit.

Rossi hired San Diego’s biggest locally based law firm. Gray, Cary, Ames, & Frye for his defense. At the next board meeting, James Hoffman, himself an attorney with the firm, voiced strong objections to Rossi’s choice of counsel. According to the board minutes, Hoffman felt that his connection with both the ranch and the law firm “would cast doubt on his independence, in the minds of some owners.”

And, indeed, the relationship between Rossi and his law firm later came back to haunt Hoffman. When he and Chet Maxey sued Rossi in December 1987, Rossi and a new group of attorneys fired their own cannon shots, charging that Hoffman had a clear conflict of interest on his hands. Though Hoffman had been on the ranch board of directors for two years and had wrangled with Rossi during that time on many of the issues addressed in the suit, Rossi contended in a June 1988 court declaration that “most of the allegations” in Hoffman and Maxey’s suit came out of information Hoffman learned from his own law firm (Gray, Cary) during the course of the Phillips litigation.

Hoffman denied any conflict in pursuing his lawsuit against Rossi and told the court he didn’t have access to any information that wasn’t available to all ranch board directors. But last June, a superior court judge sided with Rossi and disqualified Hoffman from his suits against the developer. (Neither Hoffman nor other Gray, Cary, Ames & Frye attorneys would comment for the record on why the firm chose to represent Rossi or on the charges of conflict of interest.) The judge also disqualified the law firm of Duke, Gerstel, Shearer, and Bregante, which had been representing Hoffman and Maxey. Maxey and the other owners hired a new law firm and carried on with the litigation.

If Gray, Cary didn’t regret its decision to represent Rossi because of problems the situation caused Hoffman, the firm came to regret the decision for another reason. Gray, Cary had begun representing Rossi in December of 1986, but by April 1987, David Monahan, one of the firm’s attorneys, was penning letters to Rossi insisting that the firm be paid. Because Rossi had so urgently needed the firm to respond quickly to some papers filed by Phillips, “and because of my understanding of your reputation and stature," Monahan wrote Rossi, the firm didn’t insist on a retainer fee before beginning its work for him. “This has turned out to be a mistake.”

Monahan wrote Rossi again in May 1987: “I appreciate that you are undergoing some serious cash flow problems at this time, but I am sure that you understand that we expected to be paid...” And again in June, Monahan reminded Rossi that he had agreed to pay most of the law firm’s bill after Southmark’s deal to buy into the ranch had been completed. Finally, in August, Rossi’s counsel became his opponent when Gray, Cary sued him for $43,000 in legal fees.

Undaunted, Rossi hired Lawrence Alioto, son of former San Francisco mayor Joe Alioto, to handle the Gray, Cary suit. Alioto had represented Rossi in the past in other court battles. The dispute over legal fees was finally settled early this year when Rossi paid Gray, Cary an undisclosed sum of money.

Rossi’s explanation for refusing to pay the firm’s bill was that he didn’t “think they treated me fairly.” He claimed the lawyers racked up most of their bill seeking to move the Phillips suit from San Francisco to San Diego. “They were pushing to bring it in their back yard,” Rossi claims of the attorneys. The law firm contended, in court documents, that it was Rossi who had requested the change of venue.

As if the embattled Warner Springs Ranch needed another controversy, there are now signs of discord between Cal Rossi and Southmark, which he had welcomed as the managing partner in the ranch in April of 1987. “They just don’t know how to market it,” says Rossi, who contends the huge and financially troubled real-estate firm has turned to “cheap promotions” to try to entice buyers. “Buying a piece of Warners is buying a real piece of a legend. You’ve got to respect it and understand it. They’re not selling it.”

Rossi also says Southmark officials “have a habit of trying to pick your brains, and pick your company, and then take the rest of your profit, too.” As an example, Rossi cites a recent court loss suffered by Southmark, in which a San Diego jury awarded a Rancho Bernardo couple $130 million in damages (later reduced to $22 million) after the couple claimed Southmark bought two companies they owned, funneled Southmark's bad debt into them, and then fired the former owners.

Southmark and Rossi formed a new partnership, into which 900 unsold ranch interests were transferred. Before the deal could be consummated, though, Rossi had to convince the board of directors of the ranch association to release the Bank of America from the obligations of a 1983 agreement, under which the bank would set aside $6.3 million to guarantee the completion of ranch improvements and construction.

Finding themselves, once again, in opposition to Rossi, James Hoffman and Chet Maxey argued against releasing the bank, saying they feared there would be no way to guarantee that the improvements would be completed without the obligation. And once again, Maxey and Hoffman were outvoted. In February of 1987, with Maxey and Hoffman dissenting, the board approved the release of Bank of America from the obligation. Hoffman immediately sent the board a angry letter claiming the vote might be invalid. The release “was not approved by a disinterested board of directors,” Hoffman said, noting that Rossi and other board members with financial ties to Rossi had a “material interest” in releasing the bank so that the sale of the ranch to Southmark could proceed.

“We [Maxey and Hoffman] refused to sign the set-aside letter so Mr. Rossi signed it, which I think is a tremendous conflict of interest,” contends Maxey. Counters Rossi, "It might have been more prudent or nicer [for me) not to have voted on it." He had felt at the time that the matter of the set-aside letter had to be resolved and that "somebody’s gotta step up and do something.”

As a result of the April 1987 deal with Warner Springs Ranch, Southmark is currently paying the monthly assessments (now set at $150 per ranch interest) on approximately 700 interests, or more than $100,000 a month.

Southmark executives “are going to lose their shirts,” says attorney Michael Labazzo, who now represents Maxey and the other owners in their suits against Rossi. “Those shares cannot be sold for nearly what Southmark had hoped to get back.” Rossi's brother-in-law, Earl Cecil, figures what Southmark bought was “the privilege to make the payments on the unsold units. Southmark is in financial trouble. Here’s just another bad deal for them.” Paul Powell, vice president of a Southmark division and a current member of the ranch board of directors, declined to comment on those gloomy predictions or on Rossi’s claims about the corporation’s marketing plans.

The Dallas-based Southmark Corporation’s financial woes were detailed in a January 1989 article in the Wall Street Journal, which said the company is scrambling to sell its assets to stay afloat. Southmark officials had conceded that “even its ambitious plans to sell $500 million in assets might not raise enough cash to cover operating expenses and the $125 million in junk bonds payable this year.... Already, Southmark’s common stock is trading at bankruptcy levels.” So it may come as little surprise that Southmark is listening to proposals from ranchowners and foreign corporations interested in buying the company out of Warner Springs Ranch.

While some call his plan naive and unworkable, ranch-owner John Scott has been meeting with owners, urging them to consider pooling their resources to buy out Southmark’s unsold interests. John and Roberta Scott drove out to see the ranch for the first time on Christmas Day of 1983, he explained in a heavy Scottish accent. He was immediately enchanted — the rolling green hills reminded him of Campsie Glen in the Scottish countryside he left 34 years ago. And, as an avid golfer, “owning a golf course — even an extremely small part — I was enamored of that.” Scott says he’s got a “drawer full of notes and ideas” for improving the ranch, ideas that can’t be implemented until the owners have full control of the resort. “It’s the unhappiest of situations,” he says.

Cal Rossi predicts Scott’s idea will never ever work. According to Rossi, a better solution would be to split shares into fourths or eighths to increase the number of users, thus increasing ranch revenue. Rossi now says his original idea, to sell whole interests with unlimited ranch usage permitted, “is wrong in that it allows for too much time to be sold to one individual.” While Scott is trying to convince owners of the efficacy of his idea, several firms from Canada, Japan, and San Diego have reportedly expressed interest in buying out Southmark. But a ranch owner (who is also a real estate developer and who has brought foreign investors to see the ranch) says he told Southmark officials they’re dreaming about the price they’re asking. “I said, ‘Gentlemen, you’re not even close to reality on what the property is worth.’ ”

Attorneys for Rossi and his current and former ranch partners have met several times in recent months with attorneys for the ranchowners to try to settle the individual and class-action suits filed by Maxey, Hoffman, and other owners. Under the terms of the proposed settlement, insurers for Rossi, Southmark, RKO, and the ranch-owners’ association would ante up approximately $789,000, most of which would be poured into association coffers. (Approximately $37,000 would be paid back to ranchowners who contributed money to the lawsuits.) Rossi, who resigned from the association board in February as part of the settlement, confirmed he has recently considered refusing to sign the agreement. Three insurance companies were to split payments on Rossi’s $265,000 contribution to the settlement, and Rossi was to turn over the ranch restaurant's liquor license and assorted kitchen equipment to the association. But one of Rossi’s insurers has sued Rossi, contending its policy doesn’t cover Rossi for the acts alleged in the owners’ suits.

But Rossi declares that the insurance company initially agreed to participate in the settlement only to later “come back after me personally. That’s just not fair.” He said he hasn’t yet decided whether he will sign the settlement. (A few days ago, Maxey’s attorney said Rossi is now leaning toward adding his signature to the settlement.)

Owners say they’re seeing improvements in ranch management, the restaurant food, and other ranch amenities. And even some of the harshest critics don’t seem to regret their investment. ‘‘I certainly wouldn’t sell my interest,” says Shang Hecht, who adds, “So far this looks like the hinges of Hades. It’s not. Every problem a place could have, we’ve had. I think the problems are being ironed out.”

“Where are you going to find clean air in San Diego County in another couple years?” asks Earl Cecil. “Darn few places — and what a perfect setting. I just love it up there.”

And yet.... There is still a bit more trouble in Cal Rossi’s onetime vision of Paradise. Ranch-owners attending their annual meeting in March learned that the current ranch manager was resigning because of a “vocal minority” of complaining owners. “I have witnessed such intense rudeness toward employees by some owners that it comes to no surprise that we have a staffing problem,” the manager wrote in his farewell letter. He added that he, too, had been “verbally assaulted ... vehemently and rudely [with] vocabulary I haven’t heard since high school.”