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A San Francisco jury last week awarded more than $40 million to the owners of a Milpitas, Calif., office building in their breach of contract suit against a financial subsidiary of General Motors Corp. The dispute began after the anchor tenant at 1601 McCarthy Blvd. couldn’t make the rent payment and asked to be released from the lease. The tenant paid the building owners a lease termination fee of $7.2 million, which was then deposited into a trust account at GMAC Commercial Mortgage Corp., a GM subsidiary that serviced a loan to the office building. The money was to be released to the owners once they found a new tenant. But when the owners did so, GMAC refused to give them the $7.2 million. Keker & Van Nest partner Jon Streeter, who represented the building owners, said GMAC first tried to renegotiate the language in the underlying loan agreement. When the owners refused to do so, GMAC claimed there had been a materially adverse change in their financial condition from the time they took the loan, and they were thus in technical default. Streeter said GMAC ignored the $7.2 million it was holding and didn’t consider it a financial asset of the owners. Streeter said he was able to persuade the jury that GMAC wanted to force the owners, a former San Francisco firefighter and his wife, into foreclosure. He also argued that GMAC’s investment in a loan pool — which included the defendants’ loan — was a factor in its actions. “The jury reacted understandably with fury about this,” Streeter said. It awarded $33 million in punitive damages on top of a liability award of $7.8 million. “Only through cases like this can we clean up what happens in corporate culture,” Streeter said. GMAC attorney Thomas Robins III, of Los Angeles-based Frandzel Robins Bloom & Csato, said he could not comment on the case since San Francisco Superior Court Judge David Ballati has yet to rule on a pending claim by the owners that GMAC also violated California’s unfair business practices law, Business & Professional Code �17200. The case is 1601 McCarthy Blvd. LLC v. GMAC Commercial Mortgage Corp., 03-425848.

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