Friendly Ford Approves Pact to Sell Dealership : Sale: A consumer fraud lawsuit filed in March slowed the proposed deal. Now the car dealer must seek permission from bankruptcy court to complete the transaction.

Friendly Ford has reached an agreement to sell the troubled dealership to an Encino auto dealer and is seeking bankruptcy court approval to complete the sale, officials said Monday.

The action comes about 2 1/2 months after Friendly was sued for consumer fraud in a $3-million lawsuit brought by the state attorney general’s office. Friendly filed for bankruptcy three days after the fraud suit was filed.

A June 29 hearing has been scheduled to consider terms of the deal between Friendly and York Enterprises South, a company established by Rolls-Royce and Dodge dealer Terry York. The terms could not be determined.

If approved by Bankruptcy Court Judge John Ryan, the sale could be completed as early as mid-July.

And if the sale occurs, York would obtain title to the assets free and clear of any liens. Friendly would continue to exist as a corporate entity in bankruptcy, and proceeds of the sale would be used to help pay Friendly’s debts.

Ed Coscuella, general manger of Terry York Motor Cars in Encino, said York had begun negotiating to acquire Friendly’s assets several months ago before the consumer complaint was filed March 29 by the state.

“We were in escrow when the suit was filed and they went into bankruptcy,” Coscuella said. “That changed things and slowed them down because now everything has to be approved in court.”

The sales agreement calls for York to acquire all of the dealership-related assets of Friendly Ford, including assumption of the lease for the dealership facility on Beach Boulevard in Huntington Beach, Coscuella said.

If York then receives final approval from Ford Motor Co. to operate a Ford franchise, he said, the dealership would remain in operation under a new name.

York currently operates Valencia Dodge, is part owner of a Chevrolet dealership in Valencia and owns Terry York Motor Cars, a luxury British auto dealership selling Rolls-Royce, Jaguar, Range Rover and Sterling models. York previously operated Terry York Chevrolet in Encino but sold the property several years ago.

Bray would not disclose terms of the deal but said the lawsuit filed by the state in March “chilled the sale.” Following the bankruptcy filing, York was able to renegotiate and obtain a reduced price for the dealership, he said.

Rock Armstrong, Friendly’s vice president, confirmed that an agreement has been reached but referred all questions to the dealership’s bankruptcy attorney, Gregory A. Bray.

Friendly filed for protection from creditors under Chapter 11 of the federal bankruptcy code on April 2, citing the potential liability to the state in the civil case as a principal reason for its insolvency. At the time, the dealership said it had assets of $8.9 million and liabilities of $9.1 million.

Friendly had operated for years as Wilson Ford before changing its name after a highly publicized raid in August, 1989, by state and local law enforcement officials seeking documentary evidence of consumer fraud.

The state alleges that Friendly systematically used misleading, high-pressure sales practices to persuade customers to sign contracts requiring them to pay far more money than the low prices at which cars were advertised.

Defendants in the state’s consumer fraud suit include Richard Wilson, a principal shareholder and president of the dealership, Vice President Rock Armstrong, former principal shareholder Carl Wescott--a Texas auto dealer--and Ralph Williams, Friendly’s general manager and one-time chief television pitchman.

Williams, a Dallas resident for several years despite his position at Friendly, is well known to local late-night television watchers for his fast-talking commercials, both for Wilson Ford and, in the 1960s, for his own Ford dealership.

He also has run afoul of the Department of Motor Vehicles, which regulates car dealers, on several occasions. He has twice had his California auto dealer’s license revoked and, shortly after becoming Wilson Ford’s general manager, was refused a salesman’s license--an action he successfully appealed.

The state’s suit against Friendly was removed from Superior Court and placed under the jurisdiction of the bankruptcy court at Friendly’s request, Bray said. Under bankruptcy law, such an action is automatic at the request of the debtor unless challenged.

Bray said no challenges have yet been filed. And Michael R. Botwin, the deputy attorney general handling the case, declined to comment on his office’s plans.

There are numerous procedural reasons for moving the suit into bankruptcy court, bankruptcy specialists said, including a possibility that it will be handled faster than in Superior Court. But there is little likelihood that the transfer would give Friendly an advantage in litigation.

Bray declined to discuss the strategy behind moving the suit into bankruptcy court.