Jury Tells Lyon to Pay Huge Judgment

In a stunning blow to one of the county’s largest home builders, an Orange County jury on Friday ordered the William Lyon Co. to pay $54.4 million to a former employee who was fired after refusing to pledge financial support to the developer during the real estate slump of the early 1990s.

The award, one of the largest in Orange County history, represents the estimated ownership share of the company’s nationwide apartment complex empire owed to former employee and partner John Markley.

Markley, 52, was fired in 1993 and sued by the company for $19 million after refusing to divert much of his ownership interest to help the company pay off several bank loans. Hired in 1983 to oversee the construction of apartments from California to Florida, Markley had bought 5% to 16% ownership interests in many of the projects built during the period.

Markley’s attorney, Herbert Hafif, said the verdict may represent the largest award for compensatory damages in state history. He said it is an appropriate payment to a man targeted for revenge simply for not following Lyon’s orders.

Lyon reigned as one of the most influential developers in Southern California in the 1980s. He was a major contributor to Republicans and hosted the nation’s political elite, including former President Regan, at his Coto de Caza estate.

“The only thing Markley did was stand up to [Lyon]. He wouldn’t pledge his 10% interest because he had worked 10 years for it,” Hafif said.

Markley, a Newport Beach resident, said the seven-year case forced him into bankruptcy and caused him untold financial hardship. His happiness with the verdict was tempered with the reality of what could happen in an appeals court.

“Today was a good day. It’s been seven years of basically legal hell by a powerful and wealthy guy” said Markley, who added a note of caution: “Lyon has a lot of wealth and power, so I don’t know that it’s over yet.”

William Lyon Co. and the other Lyon-associated defendants in the case will move to set aside the verdict, Lyon attorney Donald Morrow said in a prepared statement. If that fails, he said, they will appeal.

Last year, in an effort to reclaim his position as one of Southern California’s largest home builders, William Lyon acquired a majority interest in Presley Cos.

Though only a fraction the size of Lyon’s former empire, the combined companies rank as Orange County’s fifth-largest builder, according to the Meyers Group, an Irvine real estate research firm.

Lyon is chairman of both Newport Beach-based companies, which sold a total of 505 homes last year, the Meyers Group said. In 1993 the company changed its name to William Lyon Homes.

The Markley case began in the midst of the protracted real estate slump of the early 1990s, when William Lyon Co. almost defaulted on its loans and was forced to surrender control of much of its projects to several banks.

After Lyon filed the $19-million lawsuit against Markley, which Hafif said was eventually dismissed, Markley responded with his own lawsuit. That case was settled last year with the company agreeing to reinstate Markley’s ownership interest and to pay $4.1 million in attorney’s fees.

The current case arose when Lyon allegedly failed to comply with the terms of the settlement. Markley said in a breach-of-contract suit that Lyon again tried to make his ownership shares available to repay bank loans.

The jurors, who deliberated one day before arriving at a verdict, said they agreed with Markley’s estimate of ownership value, which was based on the income generated by more than 5,000 apartment units owned by the company.

“We couldn’t use any of [Lyon’s] numbers; they weren’t applicable,” said juror Dan Sumpter of Laguna Niguel. “We had to go off of Mr. Markley’s numbers.”

It is unclear whether the award will affect the company’s finances. Investors appeared to shrug off the news as the company’s stock rose 32% Friday to close at a 52-week high of $8.38 a share on the New York Stock Exchange.

The award is one of the largest in recent county history. Last year, a jury ordered Thrifty Payless Inc. to pay $31 million to a girl who suffered brain damage after being given a medication nearly seven times more powerful than prescribed.

Times staff writers Willoughby Mariano and Jean Pasco contributed to this report.