FarWest Hit With $23-Million Judgment

FarWest Savings & Loan, already weakened by the slumping junk bond market, has been hit with a $23-million verdict in a major lender liability lawsuit heard in a Colorado state district court.

The judgment is one of the largest ever in a lender liability case. The damages were assessed by a Denver jury, which ruled that the Newport Beach-based thrift unfairly withdrew a line of credit three years ago from Alpert Cos., a Colorado builder and developer.

The builders contended during a 10-day trial that ended late Thursday that it lost a chance to pick up 1,000 acres of prime land when the S&L; prematurely cut off its line of credit in 1987.

While most large verdicts include punitive damages, the judgment against FarWest--whose parent is majority-owned by the wealthy Belzberg brothers in Canada--consists of compensatory damages only.

“They left Alpert high and dry,” said Michael Sheldon, Alpert’s trial lawyer. “We felt they were carpetbaggers. They came in from out of state in 1984 and made long-term commitments. When the market turned, they pulled out and didn’t care who they hurt.”

The jury’s decision will be appealed, said Kurt C. Kemper, general counsel for the S&L;’s parent firm, FarWest Financial Corp. in Beverly Hills.

“We took a pasting. It was horrendous,” Kemper said. “But we believe the verdict was incorrect in fact and in law.”

Alpert had a five-year line of credit that was to be renewed automatically each year, Sheldon said. The company had an option to purchase land each year and needed the funding to do that, he said. The loan was renewed in 1985 and 1986, but the S&L; decided to pull out of the slumping Denver and Texas markets in 1987, he said.

FarWest claims it determined that it was too risky to continue to lend money to Alpert. Kemper said the only issue before the court was the proper procedure for approving or denying the annual renewal option. It is uncertain if FarWest or its parent will have to set any money aside while it appeals the decision.

At the end of September, the company had 13.9% of its $4.7 billion in assets in high-yield, high-risk junk bonds. The new federal thrift law adopted by Congress last August requires thrifts to sell their junk bond portfolios within five years.

The junk bond market, meantime, has been taking a beating and has led to the collapse of Drexel.