Court Referee Plans Hearing on Interest Due Irvine Heiress

Joan Irvine Smith says the meter is running to the tune of $180 million in interest on the $150 million she has been awarded for selling her shares in the Irvine Co.

But the big Newport Beach landowner and developer says that Smith is entitled to roughly half that amount, or $96 million, according to recent court filings.

It’s the last big issue in a case that has dragged on since 1983, when Irvine Co. Chairman Donald L. Bren offered to buy Smith’s 11% of the company for $110 million. Smith agreed to sell but said the offer was ridiculously low and forced the company to ask the courts to set a price for the stock.

The case pitted two of the county’s richest and best-known citizens against each other: Bren, who is reserved, unflappable, one of the nation’s two dozen or so richest men, and Smith, a feisty, old-money heiress to the family ranch that the Irvine Co. once was.

Last summer, nearly three years after the case went to trial in 1987, a state court referee in Michigan--where the company is incorporated--awarded Smith $149 million for her stock. (That has since been upped to $150.5 million to correct a math error made by the referee.) That amount was more than Bren’s offer but far less than the $330 million that Smith had asked.

The amount of interest owed has become a major question, one that referee Robert B. Webster may decide at a Dec. 13 hearing. The interest rate in such cases is determined by a Michigan law that sets it at the average rate charged the company by its lenders.

The law, however, allows ample room for lawyers from both sides to maneuver, based on the sizable briefs filed last week.

Smith’s lawyers are asking Webster to consider several approaches to calculating the company’s average borrowing rate. Smith is asking a top interest rate of 11.25%, attorney Howard I. Friedman said Wednesday. Compounded monthly, that comes to $178.5 million on the $150 million over the seven years that the case has dragged on.

Not surprisingly, the company says interest shouldn’t be compounded. And what’s more, it says, its average borrowing rate is only 9.16%. That comes to $96 million in simple interest.

Both sides’ figures are calculated until the end of October. For every day thereafter until Smith finally collects her money, the interest will be $37,764, said Donald L. Morrow, a lawyer for the Irvine Co.

Smith is also asking Webster to award her $17 million to cover the costs of holding the trial in Michigan, lawyers and expert witness fees, and her share of the bill for hiring Webster as the court referee.