City files litigation against The Grove for unpaid CDBG micro-business loan
By Peggy Kelly
Santa Paula News
Published: December 26, 2008
To beat the statute of limitations, the city has filed litigation to recover a federally funded business loan from the owners of a now-defunct restaurant.
By Peggy Kelly
Santa Paula Times
To beat the statute of limitations, the city has filed litigation to recover a federally funded business loan from the owners of a now-defunct restaurant. City Attorney Karl Berger said Monday the city was exercising the July City Council-authorized legal action after giving The Grove Inc.’s Steve and Pamela Colvard “an opportunity to pay” the $22,000 micro-business loan garnered from the HUD Community Development Block Grant program.
The Colvards, in partnership with Eric Barragan, had opened The Grove Restaurant at the Glen Tavern Inn in December 2006. Barragan later sold his interest in the eatery to the Colvards.
In January 2007, the Colvards received a $22,000 CDBG micro-business loan at 4 percent interest to create the equivalent of 2.5 jobs at the restaurant, which would allow the expansion of business hours. A year later the restaurant abruptly closed after a dispute with Rosanna and Tom Jennett, the owners of the Glen Tavern Inn, centered on rent and fixtures and furniture ownership. Prior to the closure there had been a dispute between the parties regarding the liquor license.
Santa Paula police were called to respond to the restaurant twice on the day the restaurant was vacated, and Barragan, who was living in Mexico and had been unaware The Grove was being closed, requested his attorney to also be present.
Following the closure, Berger sent the Colvards a demand letter noting caveats of the loan - such as remaining in business and subsequently providing the employment the CDBG grant had been based upon - had not been met. The city, he said Monday, “has obligations from the federal” grant that mandate the guidelines of the program be met.
Although the tolling agreement was terminated in August and litigation was authorized by the City Council, the Colvards asked that legal action await the outcome of a lawsuit against Barragan seeking monetary damages. Collected damages would then be used to repay the CDBG loan.
The Colvard’s lawsuit against Barragan, noted Berger, was never filed, and the city has “received no realistic cooperation from the parties” regarding repayment. Berger said this is the first time a city micro-business loan has gone into default.
In an earlier interview, City Manager Wally Bobkiewicz said there was one previous instance when an area business - also the recipient of a micro-business loan - had closed, “which is a default per the agreement,” but that the loan amount was repaid without resorting to litigation.
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