In a case of breach of contract, a judge has awarded a real estate developer $75.4 million judgment against Delta Community Credit Union.
According to the attorneys, their client, David R. Pearson, alleged he sustained damages to several of his companies due to the failure of the $4 billion Delta Community in Atlanta to perform under a loan commitment, attempts to prevent Pearson from drawing on a special purpose credit facility and the breach of the contracts.
One of Pearson's attorneys, Fred Bentley Jr., said one of the issues involved the interpretation of negotiated credit facility contract and the valuation of multiple, valuable properties Pearson contributed "as free and clear collateral in return for the loan." Bentley added that Pearson made all of his payments.
Delta Community is planning to appeal and believes the judgment is not supported by facts or the law, said J.D. Humphries, an attorney with Stites and Harbison in Atlanta.
"We are surprised and disappointed with the judgment and we don't think the law and facts support it," Humphries told Credit Union Times. "We are conferring with Delta Community and we are planning to appeal."
Humphries said there is a 30-day period from when the judgment is entered to start the appeal. He said the judgment contains 130 pages.
"We're still going through it," Humphries said.
According to the suit filed by Pearson in 2010, Delta Community backed out of a $30 million deal that would have allowed the real estate developer to purchase several properties along Florida's Gulf Coast from lenders that wanted to sell them.
Pearson said the credit union's breach came about when it deprived him of funds to finalize the acquisition of two properties, according to the lawsuit. He said $100 million had already been invested in NatureWalk, a Florida community of 278 single-family lots. According to the suit, 220 of those lots had been developed. Through a negotiation, Pearson agreed to buy the property's note for nearly $8 million. He claimed Delta Community blocked the transaction. Superior Court Judge Robert Flournoy agreed, according to the judgment.
For his losses, Flournoy said Pearson was entitled to $54.9 million on NatureWalk and nearly $20 million for other properties and attorney fees.
Rather than a jury trial, Pearson and Delta Community agreed to a bench trial, which took place Dec. 14 to Jan. 9, according to the judgment and Pearson's attorney.
Delta Community had been involved in this litigation for more than a year, said Mary Olson, vice president of marketing. The credit union learned of the judgment on Jan. 31, she noted.
"We feel [the judgment] is unwarranted. We do plan to file an appeal, and we feel we have a strong case to do so," Olson said.
Rick Foley, CEO of Delta Community, offered more assurance that the financial institution has a strong legal basis to appeal in the case. This statement came from a Feb. 1 internal letter to Delta Community employees obtained by Credit Union Times.
"We're obviously upset that any amount was granted to the plaintiff, but we are particularly upset by an award of this size. We think it's unwarranted and contrary to the facts or applicable law. We will file an appeal and believe we have a strong legal basis for doing so," Foley wrote.
"I continue to believe we acted appropriately and in good faith in this matter. It's important for us to not get distracted or speculate beyond what we know right now," Foley wrote. "We believe the judgment will not impact the credit union's ability to continue to meet all of its obligations. Our credit union is well-capitalized and has sufficient reserves to cover the cost of the award, if necessary."
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