Jury Tells Cathay to Pay Garden Grove Developers $11.6 MillionTuesday, September 4, 2012
Cathay General Bancorp. said in a regulatory filing Tuesday that an Orange County Superior Court jury awarded $11.6 million in damages to Garden Grove Galleria LLC, which had sued the bank over a disputed construction loan.
The Garden Grove Galleria is a stalled mixed-use project in Garden Grove’s Korean Business District that fell prey to declining property values during the recession. In early 2010, the Los Angeles bank claimed that Galleria’s investors had defaulted on a $42.5 million loan from Cathay and two other banks.
The project’s developers sued the bank, claiming it had breached the loan agreement. A 2010 report in the Garden Grove Journal said the developer accused Cathay of improperly refusing to release the full amount promised – causing construction to halt – after requiring the developers to put more money into the deal when a reappraisal of the property in 2009 lowered the value of the land being used as collateral.
The Los Angeles holding company for Cathy Bank, which declined to comment, did note in its filing that the trial judge in the case has yet to rule on several portions of the case, including Cathay’s cross complaint against the development partnership for the $19 million unpaid balance on the loan. Cathay had a 50 percent participation interest in the initial loan, and said its potential liability in the case is expected to be proportional.