MARIETTA Ga. – A state court yesterday returned a $75.4 million judgment against Delta Community CU in favor of residential developer David Pearson in a dispute over member business loans the credit union provided the local home builder.
In the dispute the homebuilder alleged the credit union prevented him from drawing on a special-purpose credit facility.
“The case involved many complicated issues, including the interpretation of a unique and specially negotiated credit facility contract and the valuation of multiple valuable properties Pearson contributed as free and clear collateral in return for the loan,” said Fred Bentley Jr., Pearson’s lawyer.
“This businessman diligently made every single payment in these most difficult business times only to have the defendant attempt to pull the rug out from under him,” Bentley said, adding he believes the judgment is the largest ever in Cobb County.
"Essentially, they cut him off in the middle of buying distressed properties from large institutions," Bentley said this morning, explaining the developer was in partnership with Delta Community.
The $4 billion credit union, originally the credit union for employees of Delta Airlines, said this morning it plans to appeal the verdict.
“We are disappointed in the award granted to the plaintiff. We believe it is unwarranted and not supported by the facts or the applicable law,” Mary Olson, vice president marketing for Delta Community CU, told the Credit Union Journal. "We will file an appeal and believe we have a strong legal basis for doing so."
She said the credit union believes the verdict will not adversely impact its ability to meet all of its obligations. Delta Community had more than $450 million in capital at year-end.
Yesterday’s judgment follows a trial in Cobb Superior Court that ran from December 14 to January 9.
The suit involves a $30 million revolving loan facility Delta Community provided in May 2008 to Pearson’s companies Gettysburg LLC and First Center Inc., which were supposed to use the funds to buy distressed properties, primarily on Florida’s Gulf Coast, from financial institutions eager to shed the properties. The aim was to pay cash and close quickly. The special loan facility had unusually favorable terms, including a 12-year revolving capability, objective underwriting criteria, and required access to cash within 10 days of the borrower’s request.
In September 2009 Pearson agreed to buy NatureWalk, a 278-unit residential development in Florida’s Panhandle. In December 2009 Delta Community refused to provide the funding until an outside appraisal of the properties could be conducted, which Pearson claims the credit union did not have the right to do under its loan agreement, and the credit union blocked its access to the funds.
