Citizens Business Bank of Ontario, Calif., has been ordered to pay $3.7 million in damages to a San Diego development firm that defaulted on a 1992 mortgage on an 88-bed retirement home.

Citizens, a $1.3 billion-asset subsidiary of CVB Financial Corp., was found guilty of fraud, deceit, and negligence in connection with a $2.7 million loan made to Tri-National Development Corp. The judgment would reduce the bank's 1997 earnings by $2.2 million, or 14 cents a share. CVB had reported earning $17.4 million, or $1.16 a share, last year.

The dispute stems from the sale of the retirement home to Tri-National in March 1992. Citizens, which had foreclosed on a previous developer, sold the property for $6.27 million, financing $2.7 million. But a lack of tenants left Tri-National unable to meet its mortgage payments, forcing Citizens to foreclose in 1993.

Tri-National said it defaulted because it did not have enough parking for its residents, and claimed that Citizens had misled it by saying an adjacent parking lot could be purchased.

A jury in Superior Court of San Bernardino agreed. Tri-National said the judgment vindicated its management and shareholders.

"None of this ever should have happened, and justice has been served," said Michael Sunstein, president and chief executive officer at Tri- National.

Linn Wiley, president and chief executive officer of CVB, said he was "shocked, disappointed, and confused" by the jury's verdict. He said CVB intends to file a motion in June with the court to set aside the verdict or grant a new trial.

"We believe the verdict will be overturned," he said. "If there are any damages, they will be substantially less than $3.7 million."

Mr. Sunstein said that the retirement home needed 40 more parking spaces to operate successfully. He said the bank made no attempt to help Tri- National buy an adjacent lot, even after the lot owner defaulted on his own loan.

Mr. Wiley disputed Mr. Sunstein's claim. The retirement home "was sold to Tri-National on an as-is condition, and it was all spelled out in the purchase agreement," Mr. Wiley said. He added that the home was sold in 1993 to another company that has since operated it successfully.

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