In 1927, a restaraunt called "Frank's Place", named for it's owner Frank Torres, opened in Moss Beach, California. By all accounts a glamorous place with great food, a wonderful atmosphere, and a steady supply of prohibition-era liquor, Frank's Place attracted the hoi polloi of the Bay Area.
One of the regulars, a young woman, found herself attracted to the piano player, who returned her affections. It wasn't long before the two were making time to see each other. As one might expect, the young woman's husband did not take this situation well. One night, as the pianist and the young woman were walking on the beach together, they were attacked. Nobody ever reported quite what happened, and the management's connections to local law enforcement kept the story from being looked into, but what is known is that the pianist was injured, but returned to play the piano the next night, the husband vanished and was never heard from again, and the young woman was dead from knife wounds, the blue dress that she had been wearing now soaked in her blood.
Since that time, numerous strange events have been associated with the locale, now known as the Moss Beach Distillery. The young woman is said to be routinely sighted, usually wearing a cut, torn, and bloody blue dress, but occasionally said to be seen looking healthy and with her dress intact. In the women's restroom, people have reported hearing laughter and a woman speaking when nobody was present. Guests sometimes report seeing the face of the woman appear in a mirror, also in the women's restroom. Throughout the establishment, lamps are said to swing or otherwise move on their own, it has been claimed that objects have been seen levitating, and furniture has been reported to move. Women have reported losing ear rings only to have them to be found stashed together in various parts of the building. Phones have rung, but when answered nobody was on the other line. People report having been touched by an unseen force, sometimes lightly, sometimes more forcefully, and often playfully. And rooms have been locked from the inside without anybody within them who could have locked them.
Commentary: Shortly after I graduated from UC Santa Cruz in 1998, I obtained a car and began routinely driving up Highway 1 to San Francisco - the long-way to get there, but the most scenic route. On these trips, I passed through Moss Beach and always saw the signs for the distillery, several of which advertised the presence of the Blue Lady. Naturally, I was curious, but being as how I was always making the trip on my own, and I have never been particularly comfortable eating at a nice resturaunt by myself, I never did stop in to see what was up.
I never did forget the place, though, and have been intending to look into the ghost story for some time. Two years back, my girlfriend ended up looking into it for me, rather accidentally. I had been working on a very stressful project for several months, being out of town for ten days, home for four, and then out again for another ten. My client was hostile, the working conditions were physically tough, and the job itself was extremely boring*. She felt that I needed to relax, and thought that I would enjoy going up to the distillery for a nice dinner out and a bit of time in an allegedly haunted building. We ended up not going because, after having driven five hours to get home, I didn't want to drive another four-hour round trip to go to dinner. After we had decided not to go, Kay told me that she had gathered some information about the place from people who had lived in the area, and that these folks all claimed that the distillery made the story up in order to attract more customers, especially tourists driving up California's portion of the Pacific Coast Highway (AKA Highway 1).
I didn't know how true this was. While there was no doubt that the distillery was playing up the "haunted house" angle to draw customers, it is also not uncommon for an establishment to do this with existing ghost legends. So, the fact that the distillery was going out of its way to make people think that it was haunted did not necessarilly mean that there wasn't an existing ghost story prior to the current advertising campaign.
Since then, I have found out a bit more. When a group of people from the show Ghost Hunters arrived to do an episode, they found speakersm trick mirrors, and lamps with motors that were made to move seemingly on their own. Considering that the Ghost Hunters folks have been known to engage in their trickery and showmanship to make their television show more exciting (and to make mundane evenings look like exciting "ghost investigations"), I was rather surprised that they, of all people, were the ones uncovering this (I also have wondered if the distillery management might have had something to do with the stuff beign uncovered as part of a publicity stunt, but I really have no idea). Still, there you go.
So, was there truly a legend of the Blue Lady, prior to the distillery getting into gadgetry and showmanship? Perhaps, I don't know. However, there can be little doubt that they have done a good deal to provide the experiences via technology that people were wanting through supernatural activity.
Alot of people, I have noticed, are bitter about this sort of thing, viewing the distillery owners as frauds. I don't agree. I view this as being something akin to telling a story around a camp fire, but on a grand scale. If someone experienced these weird haunting symptoms and decided to look into it, the trickery would eventually come out. Speakers, trick mirrors, and motors all have tell-tale elements that would eventually be revealed to a real investigator. People coming to the distillery were either coming for a good meal, or a good scare, and the distillery clearly treated this as entertainment and not a serious matter to be dealt with. I have a hard time seeing this as being anything but a good business person providing some fun to people who desire to play out a ghost story.
*I've noted before that I am a professional archaeologist. Basically, when someone is doing environmental review to get permits or government money, they hire me to help keep them in compliance with federal and state historic preservation laws. In this particular case, we were dealing with hundreds of historic-era archaeological sites that consisted entirely of broken glass and early 20th-century cans. It was amazingly boring. Oh, and the tempuratures were usually well over 100 degrees fahrenheit before noon.
Sources: Wikipedia, Wikipedia, again, Moss Beach Distillery Website, Mindreader.com