$10.7 Million Awarded in Fraud Lawsuit

An Orange County Superior Court jury Thursday awarded $10.7 million to a group of investors who accused a Costa Mesa developer of fraud and breach of contract stemming from a land deal in northern San Diego County.

The investors, four doctors and their wives, a computer industry executive and a dentist, won the judgment against Richard Browne and his company, Carlton Browne and Co. Inc., from a jury that deliberated two days after a trial that lasted more than eight weeks.

R. Richard Farnell, one of the attorneys for the plaintiffs, said his clients bought 333 acres of land next to Palomar Airport in northern San Diego County in 1978 and hired Browne a year later to prepare the land to the point where construction could begin.

Terms of Deal

Farnell said the investors, all from Orange County, agreed that Browne would be a general partner in the group, would invest $200,000 and would spend one or two years dealing with zoning issues and other requirements in the land-preparation process. Then another developer would be brought into the deal.

But the attorney said court testimony showed that Browne contacted the Signal Landmark development company two months after he joined the investors’ group and sold to Signal Landmark 50% of the investors’ interest in in the property and 50% of his own interest.

Farnell said the investors learned of Signal Landmark’s entry into the agreement soon after but did not find out for more than a year that the company also had been given an option to buy the land.

“The effect of (Browne’s actions) was he had no money in the project and he got out hundreds of thousands of dollars cash and still had 25% interest in the property,” Farnell said.

The property eventually was sold against the wishes of his clients, Farnell said. The investors paid $2.7 million for it and wound up sharing 25% of the $18.2-million sale price. Signal--which was not a defendant in the trial--got 50% of the sale price. The attorney said Browne’s 25% of the sale was frozen by the court after the lawsuit was filed in February of 1981.

Greater Return Expected

Farnell said that had the investors been able to hang onto the land, “which they wanted,” they could have gotten far more for it.

The investors “contemplated (the property) would be quite similar to the (John Wayne) Orange County airport area as time went by,” the attorney said. The area already has some light industry and research and development businesses, Farnell said.

Browne and his attorneys could not be reached for comment, but Farnell said Browne told one of the plaintiffs during the trial that he would appeal the verdict if it went against him.

The plaintiffs are Robert and Estelle Beiner; Armando and Mirta Hernandez; Jaime and Charne Dora Borovinsky; Barton J. and Roberta Blinder; Robert Hinnenkamp and John Burhoe. Farnell said Hinnenkamp is a dentist, Burhoe is in the computer business and the other plaintiffs are doctors or their wives.