An Arlington County jury has ordered the Northern Virginia-based American Realty Trust (ART) to pay $2 million to the Chase Manhattan Bancorp., finding that ART defrauded the bank holding company by withholding information about sensitive loans and financial problems.
The damages, believed the largest ever by an Arlington Circuit Court jury were assessed against ART on the New York bank's claim that it lost money on an ART luxury condominium project that overlooks the Pentagon and downtown Washington. The trial lasted four weeks.
ART is headed by Thomas J. Broyhill, a cousin of former Northern Virginia Republican Rep. Joel T. Broyhill. who helped build the controversial 206-unit project, The Representaitve, and once lived in a penthouse there.
Many of the allegations and documents of Chase Manhattan's damage suit were the same as those cited last month by the 4th Circuit Court of Appeals, which ruled that ART also violated Securities and Exchange Commission regulations and defrauded investors by withholding information.
The Chase suit claimed that Thomas Broyhill and ART failed to tell a bank subsidiary that Joel Broyhill and a business partner, John DeLuca, were not personally liable for a $10 million construction loan made to their Arlington Ridge Roads Associates partnership to build The Representative.
The Broyhill cousins and DeLuca had formed the partnership in 1971, and ART had promised to lend $10.8 million to it with the understanding that neither Joel Broyhill nor DeLuca were to have any personal liability for repayment of the funds.
Chase Manhattan Realty, the bank's subsidiary, later agreed to make its loan after ART had trouble raising the funds. But the bank insisted on having personal guarantees for repayment from Joel Broyhill, DeLuca and their wives.
Still later, when Thomas Broyhill for ART agreed to guarantee his cousin and DeLuca against any losses resulting from the bank loan, court documents show there was never any disclosure to the bank and ART investors that the partners were no longer responsible for repayment.
Grayson Hanes, the Fairfax attorney who handled the suit for Chase Manhattan, said yesterday that Joel Broyhill, DeLuca and ART were to receive $1 million each of the profits from the condominium sales.
Hanesa said Chase Manhattan , which foreclosed on its loan in 1976 and took control of the development, eventually learned that funds for the project were diverted to another ART development in Williamsburg. It also learned later that ART, not Joel Broyhill and DeLuca, was responsible for repayment of the loan, Hanes said.
In the subsequent legal battle over the repayment, Joel Broyhill and DeLuca sued Chase Manhattan-and vice versa-but later both parties dropped their actions. The jury's judgement applies only to ART.
James Thompson, the Alexandria lawyer who represented ART in the suit, could not be reached for comment on the jury's decision.
An employee at ART said late yesterday that the firm had not decided whether to appeal.
Northern Virginia lawyers involved in the case said yesterday that the jury's verdict, reached after five days of deliberations was probably a record for the Arlington Court.