Citicorp Avoids Punitive Damages in Suit

After being hammered with a $41.8 million ruling for compensatory damages in June, Citicorp will not have to dig deep to pay punitive damages.

The positive ruling for the lender comes two months after a Federal Court found Citicorp guilty of fraudulently foreclosing on architects Richard and Glenn Storek’s Old Oakland project. The Storeks convinced a jury the bank had prevented them from landing tenants by denying funds for necessary construction and tenant improvement work.

While happy about the punitive damages victory – the court ruled California law bans imposition of punitive damages in this case – Citicorp has vowed to pursue a challenge to the compensatory ruling. Industry sources say the lender fully intends to put the property on the market in the near future in a bid to get it off the lender’s balance sheets.

Citicorp’s decision to foreclose on the Storeks followed the brothers’ methodical efforts to restore and redeveloping a dozen 19th century buildings in a two block area of downtown area. The Storeks efforts, albeit very expensive, began in the late ’70s. Despite their efforts, the city’s high-crime reputation made it difficult to lease space as quickly as the two had hoped.

In 1984, the city entered the picture in a bid to move the project along and issued a bond to help finance the project. They also convinced Citicorp to take approximately $30 million of the debt. When the real estate sector went south in the late ’80s, Storeks’ situation only became more bleak and the bank foreclosed on its note and took possession of the project.