Property developer awarded $39 million for breach of contract, related claims from construction loan

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by John Chapman

Choung Fann Yik and his wife Ying Faung Ley came to the U.S. in the 1980s as refugees from Cambodia. They eventually built up a small fortune, including some property in the Los Angeles suburb of Rancho Cucamonga.

F&F LLC, a company owned by the couple and their four adult children set about building a mixed-use commercial development on the Rancho Cucamonga property. According to court documents, F&F’s owners alleged that East West Bank induced them to obtain a $34.8 million construction loan under the assumption that the bank would be a “trusted partner” in the development on the project. Instead, according to F&F, the bank constantly worked against their interests.

The plaintiffs alleged that bank officials convinced F&F’s owners not to include important contractual terms, like a performance bond, in the loan, and later urged them not to use a loan extension included in the contract, which ultimately led to F&F being unable to service the loan. The bank allegedly forced F&F to accommodate “unreasonable” change orders submitted by the project’s contractor, Patterson Construction, and then sided with the contractor when F&F disputed its claims in a meeting. Once the family’s funds were depleted, the bank ultimately declared the loan in default and sold the note to another developer who later completed the project.

A jury has now sided with F&F’s owners and entered a $39 million verdict against East West Bank. The jury found that the bank had breached its multimillion-dollar construction loan agreement with F & F, thus forcing the developer to default on the loan and leading to foreclosure on the commercial property. The bank was found liable to the plaintiffs for breach of contract, breach of fiduciary duty and other claims. The jury awarded $16.9 million in compensatory damages and $22 million in punitive damages to F&F LLC.

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* Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.