Jury Again Rules Against Fullerton Lender

The operator of a lake resort near Paso Robles has once again won a large jury verdict--this one for $5.7 million--in a fraud and lender liability case against a Fullerton mortgage company and its operator.

Eugene Lawrence “Larry” Gold, president of now-defunct Bear State Mortgage, was found last week to have made false representations, broken contracts, fraudulently concealed information and breached his fiduciary obligations in his dealings with Water World Resorts Inc. and its owner, Daniel G. Heath.

Heath had won a $7.6-million verdict against Gold four years ago, but a state appellate court reversed the decision, ruling that damages weren’t proven sufficiently. The appellate court sent the case back for retrial.

“The jury verdicts were almost identical to those of the first trial,” said Michael W. McCann of Santa Barbara, Heath’s attorney.

Neither Gold, of San Juan Capistrano, nor his lawyer, John A. Montevideo of Santa Ana, could be reached for comment.

Gold filed for bankruptcy protection in September 1992, two months after the verdict in the first trial, and closed his finance company.

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The case stemmed from a series of loans and business arrangements that Gold made with Water World, which has operated the resort, including a marina, rental cabins, campgrounds and other recreational facilities around Lake Nacimiento, since 1972.

Heath had sought help from Gold with financing for the resort and for construction of a hotel and golf course overlooking the lake, McCann said. In September 1988, Gold loaned Water World $3 million and formed a partnership with Heath to operate Lake Nacimiento Resort and assist with future development.

But the promises of future financing never were fulfilled, the lawyer said, and Heath lost the right to build the hotel and golf course project. Gold tried to foreclose on the resort in 1990, precipitating the lawsuit.

Gold had asserted that Heath fell behind in repaying the loan and that Gold instead took a 10% interest in the resort and extended payment deadlines.

But after 20 days of trial and six days of deliberation, the San Luis Obispo County jury found that Gold wrongly attempted to maneuver himself into a position to take over ownership of the resort.

The jury verdict Thursday against Gold and Bear State Mortgage consists of $4.2 million in compensatory damages and $1.5 million in interest. The jury decided on Friday not to award punitive damages after Gold argued that he now is insolvent.

Heath continues to operate his resort.