A dispute between majority and minority owners over the sale of Mac Churchill Acura in Fort Worth, Texas, has led the store to file for Chapter 11 bankruptcy reorganization.
In petitions filed Monday, the dealership asked the court to authorize an expedited sale of the store to Hiley Automotive Group, of Arlington, Texas. The agreement on the sale was solidified March 14, the motion says.
"The debtor [Mac Churchill Acura] does not foresee obtaining a higher or better offer from a competing purchaser which could close in a time under which the debtor could remain operating," the filing states. "An expeditious closing of the sale is essential to enable the debtor to expeditiously complete its Chapter 11 restructuring without incurring additional operating expenses at a time when the debtor has minimal cash on hand."
Mac Churchill is the store's majority owner; Sharbel Latouff owns a minority 15 percent stake, the Star-Telegram said in a report Tuesday.
In addition, Latouff and Ihmud Hamud together own 49 percent of Mac Churchill Auto Mall, of Bedford, Texas, a used-car outlet that Churchill co-owns with his wife, Lu Jo Churchill, the Star-Telegram said.
Dismissed managers
Latouff began working at the Acura dealership in 2000 and eventually served as general manager, the Star-Telegram reported. Hamud started working at the Acura store in 2008 and served as general manager of the auto mall starting in 2014.
According to the suit obtained by the Star-Telegram, Churchill dismissed the two in January 2017, along with 20 more employees.
That February, the two filed a civil lawsuit against Churchill for breach of contract, defamation and more, the Star-Telegram reported, in which they sought to recover their investments, which could amount to more than $1 million.
Latouff and Hamud allege in the suit that Churchill's behavior toward them "became increasingly hostile and erratic in recent years," according to the local news report, and they allege Churchill "often made crude racial and ethnic slurs against minority employees."
On May 9, almost two weeks before Churchill asked the court to expedite the sale, Latouff and Hamud asked the court to appoint a receiver to manage the proceeds from the sale, Churchill's attorney, John Bonds III, told Automotive News.
Bonds said his client "disputes everything that's being said" and that the motion to appoint the receiver is nothing more than a ploy to "screw up the sale to Hiley Automotive Group."
Bonds said requests and demands were made by another attorney for Churchill, Hugh Connor of Kelly Hart & Hallman law firm, "over and over again" to set a hearing and provide the order for the motion to appoint the receiver, but they were not met.
As a result, Bonds said, his client had no choice but to file for bankruptcy.
Few potential buyers
The Chapter 11 filing, signed by Mac Churchill and Kent Churchill as members of the board of Mac Churchill Inc., says, "Few potential purchasers are able to satisfy the stringent operational and financial criteria to be approved" by American Honda Motor Co. "In fact, the car dealer 'world' at this level is a rather small group. Therefore, marketing efforts focus on individual phone calls to parties known to be able to meet the strict criteria."
It adds that Mac Churchill Acura "contacted numerous potential buyers and entertained inquiries from potential purchasers introduced by Honda." By the middle of March, the dealership had received two letters of intent, including one from Hiley Automotive Group.
The steps toward bankruptcy apparently began early this year, when "It became clear that [Mac Churchill Acura] was in danger of being out of terms with respect to its floor plan financier, Ally," the filing states. The dealership contacted Ally Financial Inc. regarding those concerns, and "It was agreed upon by the parties that a sale was in the best interests of all parties," court documents say. "Ally is familiar with" and "supports" the proposed sale, the filing states.
The creditors that hold the 20 largest unsecured claims against the store, as listed in the bankruptcy filing, are owed approximately $690,265. Though not connected to the bankruptcy filing, Mac Churchill Auto Mall is listed as the largest creditor, owed just over $250,000.
The number of estimated creditors falls between 100 and 199, the filing shows. It estimates Mac Churchill Acura's assets at between $10 million and $50 million, and liabilities within the same range.