Builders of Arroyo Grande hotel stiffed

September 4, 2010

After a foreclosure and a bank failure the contractors who built the Hampton Inn in Arroyo Grande have been told they will not be paid for their services. [KCOY]

More than 20 contractors, sub-contractors and vendors provided labor and materials to build the hotel which is more than 90 percent completed. They said they are owed over $2 million and that the bank which currently owns the property is refusing to pay them.

For almost a year, the unfinished Hampton Inn sat idle while the developer defaulted on his loan to Imperial Capital Bank near San Diego. The bank foreclosed on the property.

Last December, the Federal Deposit Insurance Corporation shut down the insolvent bank and transferred the assets, deposits, loans and a portion of its debts to Beverly Hills- based City National Bank.

City National Bank took over ownership of the property and is planning to sell the Arroyo Grande Hotel.

Nevertheless, City National Bank is claiming they are not responsible for any obligations under the original loan including paying the contractors and material suppliers monies they are owed.

“It’s important to understand that our company did not make this loan,” City Bank said in a statement it recently released. “We obtained it when we acquired a failed bank last year. The borrower, a development company that defaulted on its loan, is responsible for paying the contractors. This is an unfortunate situation for everyone and we have made a number of good-faith efforts to help resolve it.”

Some of the contractors do not agree and said they should have lien rights that City Bank should honor.

“If they don’t pay and foreclose us out, that’s another two million they can put in their pocket when they sell the property”, said general contractor Brad Anderson to KCOY. “All the contractors on this job worked in good faith with the bank that was in question and failed. We all just wanted to be paid and go on with our lives.”



  1. FromTheCenter says:

    One item needs clarification. The builder did not default on the loan. The bank that was financing the project, Imperial Capital Bank, ran out of money to lend, thus stalling completion of the project. The builders attempted to find alternate sources of financing, but were unsuccessful.

    (3) 5 Total Votes - 4 up - 1 down
    • danika says:

      This article and others have indicated the developer defaulted on the loan. Is this not correct?

      (0) 0 Total Votes - 0 up - 0 down
  2. ososkid says:

    Hmmm this sounds like a job for government regulators, too bad conservatives have clipped the wings of regulators and unions who use to help working class Americans. Good luck going up against a large corporation. Good luck beating a bank

    (0) 14 Total Votes - 7 up - 7 down
  3. Cindy says:

    Certainly some of these contractors were “well seasoned” and knew about the necessity of filing mechanic’s liens in order to protect their interest. I would be interested to hear from those that did file lien’s. How the heck can the bank just wash the liens on a profitable asset?

    (1) 1 Total Votes - 1 up - 0 down
  4. danika says:

    I don’t see how the bank is responsible to pay the debt to the subs. Is it fair? Nope. Is it legal. Yep.
    Was a Stop Notice lein put on the project, forcing the bank to file a Release of Stop Notice Lein on the property to transfer ownership? Probably not. It’s a matter of the economy still tanking and Obama STILL raising his chin in pride. Yep, the economy is bouncing back, right??? Right??????!!

    (3) 15 Total Votes - 9 up - 6 down
  5. bulwark says:

    Finally a view into the world of today’s contractor or construction material supplier. Racket is correct, eack of the contractors or suppliers had better hope that they filed preliminary lein notices at the right time early on or didn’t miss any deadlines for mechanic lein filings after they’d been stiffed.

    As Tacoma Rose says, the little guy takes it in the shorts. And what do all of these guys and gals read in the Trib every day, another viewpoint article or letter to the editor from a state employee whining about being furloughed every other Friday or a 10% pay cut. What a contrast. The worst are the complaints that the state budget is “Being balanced on the backs of the state workers.”

    Meanwhile countless private construction workers have statistically disappeared off of the unemployment rolls because they’ve drawn the maximum amount of unemployment benefits. If there’s anything at all said about them, it’s a couple of column inches on Page 8. Just not the kind of news that this county gives a rip about.

    The public and private labor unions are gloating because their lobbyists continue to have their way with our state politicians. All of the local work from President Obama’s stimulus package shows up here as public works projects that require paying prevailing wage which is conveniently set by the unions. The goal of the unions is to eliminate the local guy.

    Remember that come November.

    (16) 30 Total Votes - 23 up - 7 down
  6. racket says:

    Were the contractors diligent about attaching the property with mechanics’ liens? My understanding is that the mechanics liens get settled before mortgage defaults do. Or did City National Bank get to wash the title somehow in the takeover of the defunct bank?

    My question is whether it is a clouded title that is non-transferable until the liens are resolved, or whether the contractors are really S.O.L.

    (12) 12 Total Votes - 12 up - 0 down
  7. TacomaRose says:

    Its always the little guys who are simply trying to put food on the table who get screwed.

    The Bankers, the Wall Street execs, the mortgage execs all get their taxpayer sponsered bailouts.
    The politicians get their perks and lavish travel bennies. The state, city and county execs get their sweet salaries and bennies ……

    …. and what does the working man get? A boot in the ass!

    Where does the working man sign up for rebellion?

    (16) 18 Total Votes - 17 up - 1 down
  8. Pizmo says:

    Wow! I’ve been searching the internet in vain wondering what the deal was with this place.

    90% complete and sitting there for years unoccupied. Amazing.

    (8) 10 Total Votes - 9 up - 1 down

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