Judge Voids Recommended $52.4-Million Settlement

Writing that he was less swayed by “emotional argument,” a judge Friday voided a jury’s recommended $52.4-million damage verdict for an elderly couple’s heirs who claimed that a bank mishandled the couple’s trust property.

Orange County Superior Court Judge Lloyd E. Blanpied Jr. found that employees of Security Pacific National Bank were “conscientious people acting in good faith” who did nothing wrong in administering the trust.

“We are absolutely elated,” said Andrew J. Guilford, lawyer for the bank. “We were confident that the judge would make the correct ruling.”

In the lawsuit, Robert Obarr, 30, claimed that the bank, acting as trustee for his late grandparents, arranged a 60-year lease in 1959 of their 10 acres of land in Westminster.

The rent was $1,000 per month. According to conservative estimates at the four-week trial, the rental value today would be $450,000 per year.

Claimed Interest Conflict

Arthur N. Hews, Obarr’s lawyer, argued that the bank’s representation of the tenant, a financially troubled dairy, placed Security Pacific in a conflict of interest.

Hews claimed that the bank was more concerned about helping the dairy remain afloat and repay a loan it owed to Security Pacific than with making a good deal for the Obarrs. The bank had ignored several opportunities to renegotiate the lease, Hews said.

Blanpied’s ruling left Obarr with $300,000 in damages, the current value of a settlement he entered into with the present tenants. They agreed earlier this year to a doubling of the rent to $2,000 per month in addition to adjustments for inflation until the lease expires in 2019.

Neither Hews nor Obarr, an assistant manager at a fast-food restaurant, could be reached for comment.

Guilford had argued that bank employees were only following the express direction of the Obarrs, a retired couple who experienced the Depression and who preferred the security of a long-term lease of their only asset to the uncertainly of repeated renegotiations.

“It is too easy to hindsight a situation and criticize the reasonable and prudent conduct of conscientious people acting in good faith at the time in question,” Blanpied wrote in his opinion.

He said there was “no question” that accepting the Obarr trust placed the bank in a conflict of interest.

‘Bad Judgment’

“Accepting the trust was an exercise in bad judgment,” Blanpied wrote. “However, the existence of a conflict of interest by itself does not create liability.”

The jury’s recommendation in the Obarr case was the largest verdict returned in Orange County since Hews won a $127.8-million verdict on behalf of a man who was critically burned after an accident in a Ford Motor Co. Pinto. The 1978 award was later reduced to $6.6 million.

The Obarr verdict, which included $48 million in punitive damages, was among the largest in the nation in the last five years, according to an expert with the American Bar Assn. Foundation.

Blanpied impaneled an advisory jury after denying Hews’ request for a jury trial. The judge decided that California law does not require juries in cases involving trusts, but he did decide that he wanted a jury’s advice.