DATE: Tuesday, October 28, 1997             TAG: 9710280252
SECTION: LOCAL                   PAGE: B5   EDITION: FINAL 

SOURCE: BY MARC DAVIS, STAFF WRITER

DATELINE: VIRGINIA BEACH                    LENGTH:   71 lines

INSURANCE FIRE TRIAL OF 2 SCHEDULED FOR FEBRUARY

Five years have passed since a $1.6 million waterfront house burned to the ground in the pricey Birdneck Point neighborhood.

At the time, investigators called the fire arson, but they never made an arrest. Later, two insurance companies accused the owners in a lawsuit of setting the fire, but the case never went to a jury.

Now, the civil case against Joseph and Judy Houska is on track again.

On Monday, the Houskas appeared in Norfolk's federal court and a judge scheduled the case for trial in February. He also joked with seven lawyers about how long the case has dragged on.

The delay is especially unusual in Norfolk, where the federal court's ``rocket docket'' ensures that most lawsuits go to trial within a year.

``Litigation's got to end somewhere. . . . We're going to end this case and I'm going to get it out of here,'' said U.S. District Judge Robert G. Doumar.

Later, Doumar declared, ``There isn't any mystery about this case.''

Indeed, the basic issues have not changed since the house at 1333 Mockingbird Place burned down on Aug. 7, 1992:

Did the Houskas, a millionaire couple in dire financial straits, torch their home for the insurance money, as the insurance companies claim? And did they lie on their insurance claims, inflating the value of the house's contents and sometimes listing items that were not in the house?

At the time of the fire, the Houskas were out of town and the house had been for sale for two weeks. The two-story home was among the most expensive houses in Virginia Beach. The Houskas personally designed and built it in 1990. It had five bedrooms and sat on 1 3/4 acres on Linkhorn Bay.

When it burned, the house was listed for sale for $1.6 million. Real estate agents said several prospective buyers expressed interest before the blaze.

Afterward, the Houskas filed an insurance claim of $1.24 million for the house and $647,000 for personal belongings. They never received a dime.

Instead, two insurance companies accused the couple of arson and of lying on their insurance forms, listing lost property that wasn't in the house.

At the time, the Houskas were in deep financial trouble. They had filed personal bankruptcy one year earlier, and their development company, PHP Associates, was in corporate bankruptcy.

``We've taken the case as far as it can go, and there's not enough to charge someone, as far as the commonwealth's attorney's office is concerned,'' Fire Capt. Earl Stanton said in 1994, two years after the fire.

The insurance companies, United States Fidelity & Guaranty and American Bankers, sued the Houskas in 1994. They want a judge to declare that the insurance companies are not liable for the fire.

A trial on the issue began in 1995, but was stopped after three days because of a mistrial.

Soon after, the Houskas, who now live in California, landed in more hot water. They were charged with bankruptcy fraud in 1995. Prosecutors accused the Houskas of hiding valuable assets, mostly expensive jewelry and antiques, in their 1991 bankruptcy. A jury acquitted the couple after a six-day trial.

Now the insurance lawsuit is back. Some technical issues remain, the main one being: Who would actually get the Houskas' insurance money if they prevailed in court? It could be the Houskas' bankruptcy trustee, or it could be a bank that held the house's mortgage.

The Houskas lay claim to $647,000 in insurance for personal belongings, but the bankruptcy trustee has first claim on the $1.24 million for the house.

One thing remains unchanged: The Houskas ``still contend they were innocent of any wrongdoing or crime,'' their attorney, Andrew M. Sacks, said in court Monday.

The trial is scheduled to start Feb. 24 and last about one week. ILLUSTRATION: BETH BERGMAN/File photo

The home of Joseph and Judy Houska at 1333 Mockingbird Place on

Birdneck Point in Virginia Beach burned down on Aug. 7, 1992. At the

time, investigators called the fire arson, but they never made an

arrest. KEYWORDS: ARSON FIRE INSURANCE FRAUD TRIAL

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