During an emergency hearing on the District’s lawsuit against landlord Sanford Capital on Tuesday, attorneys for the company refused to admit that serious housing-code violations persist at its 11-building Terrace Manor complex in Ward 8.

The District seeks to appoint a third-party, called a receiver, to take care of Terrace Manor and immediately conduct repairs, and also to hold Sanford Capital in civil contempt for allegedly shirking a court-monitored plan to rehabilitate the property. Judge John M. Mott scheduled the hearing after Attorney General Karl Racine requested it to discuss recent motions his office had filed.

Complicating the case, Sanford Capital principal Aubrey Carter Nowell filed for Chapter 11 bankruptcy for the Terrace Manor property on March 30. The bankruptcy proceeding is in federal court. 

Yesterday Nelson Cohen, the lawyer representing Nowell in his bankruptcy case, asserted to Mott that the state court did not have “jursidiction to appoint a receiver” under the federal bankruptcy code.

“There is no emergency,” he said—a statement that drew visible shock from three Terrace Manor tenants in the courtroom. “It is not conceded that there are housing-code violations,” Cohen added when Mott brought up the concern of public safety. “That determination [as a matter of fact] has not been made.”

On the same day, murky brown water filled the unlocked and unsecured basements at two Terrace Manor buildings. In one building, padlocks were open and dangling from their bolts outside three vacant apartments. Large gaping holes with ripped insulation material marked the ceilings in two of those units, and a wood floor was buckled up like a fault line in the earth. Black mold spots dotted the walls, and one unit was missing its refrigerator.

Outside another building, three small children in yellow and navy school uniforms debated the spelling of the words “bat,” “sat,” and “store” while four other kids played chase. Feet away, the building door was open, and its basement not secured.

Shining an iPhone flashlight into the pitch-dark basement revealed a set of stairs. The first three steps down were dry. The fourth step was covered in a thin layer of filthy water. The fifth step, if it exists, was invisible. A City Paper reporter took a dry old stick from the complex yard and plunged it into the water. It came out about 18 inches wet.

Inspections by the District’s Department of Consumer and Regulatory Affairs this year unearthed 1,083 code citations across 16 of Bethesda-based Sanford Capital’s 18 known D.C. properties. The District is suing the company over conditions at two of those properties—Terrace Manor and a collection of buildings at the Congress Heights Metro stop. 

In court on Tuesday Stephen Hessler, Sanford’s attorney in the D.C. Superior Court case, told Mott that his client “absolutely” contests recent findings by a DCRA inspector, whom Hessler said he wanted to cross-examine. “What does the District think we haven’t done—or have done?” he asked. “We’re prepared to show there have been substantial efforts” to repair.

Hessler is poised get his opportunity next week. Mott scheduled a hearing for Monday, at which each side will have an hour to present evidence and cross-examine key witnesses. “I do want to get this resolved, and soon,” the judge said. Mott explained that he “almost certainly has the authority to appoint a receiver if one is needed,” despite the bankruptcy case. Next Monday, the hearing before Mott will follow a bankruptcy court hearing before Judge S. Martin Teel Jr.

“It’s very clear the respondents want the bankruptcy court to pay as little attention as possible [to the city’s claims against Sanford],” Jane Lewis of the D.C. Attorney General’s office told the court yesterday. “When we came into court with suit, they had already demonstrated a pattern and practice [of neglect].”

In addition to Racine’s lawsuit and the bankruptcy matter, the company has appealed all of DCRA’s recent housing-code citations in the Office of Administrative Hearings. A DCRA spokesman says OAH continued that case until May 11 and the department is conducting reinspections. The assessed violations amount to nearly $540,000 in potential fines.

Outside the courtroom after Tuesday’s hearing, Nowell declined to comment to a City Paper reporter about his company’s practices, conditions at its properties, and both the hearing and his reasons for pursuing bankruptcy at Terrace Manor. “Have a nice day,” he parted with, as he and his attorneys left the courthouse.