Car Dealers Sued Over Grand Bankruptcy Case : Autos: The trustee for Glendora-based Grand Chevrolet and Grand Motors claims some firms got preferred treatment over other creditors.
About 270 Southern California auto dealers who sold cars to Grand Chevrolet and its affiliates before the huge operation declared bankruptcy two years ago are being sued by the companies’ bankruptcy trustee.
The dealers all sold cars to Grand Chevrolet or Grand Motors, a dealership-brokerage affiliate, within 90 days of their Chapter 11 bankruptcy filing in August, 1988. According to the lawsuits filed last month in federal court in Los Angeles, the trustee believes that dealers who received payment in the 90 days before the filing got preferential treatment over other creditors and therefore should return the money.
Trustee Irving Sulmeyer is seeking more than $1 million, according to his attorney, Jayne Kaplan. Sulmeyer decided to sue the auto dealers after he and a team of auditors reviewed every transaction and check issued by the Glendora-based companies, Kaplan said.
Grand Chevrolet, once ranked third largest in the country, collapsed along with its affiliates--Grand Motors Inc., Grand Wilshire Finance Corp., Grand Rizal Finance Corp. and Grand Wilshire Capital Inc.--amid allegations that their owner defrauded customers, investors and banks out of about $200 million.
“Our belief is that these suits were brought on normal, everyday, dealer-to-dealer transactions and as a result there are substantial defenses to the claims of the trustee,” said Steven M. Spector, a Century City attorney representing about a dozen of the defendants.
“Some of the dealers are being sued in the six figures,” said Peter Welch, director of government and legal affairs for the Motor Car Dealers Assn. of Southern California. “If they have to pay, it could destroy some dealers.”
Welch, a lawyer who is familiar with the case, said he believes that most dealers will be able to prove to the bankruptcy court that the transactions were made during the normal course of business and the money should not have to be returned.
“I think by and large, most of them are going to beat these actions,” said Welch.
Eminiano (Jun) Reodica, founder of the vast auto network, catered to recent Asian immigrants and prided himself on helping newcomers buy cars. In its heyday, the operation had about 25 locations, employed 500 and was believed to be the largest minority-owned business in California.
Reodica, a Filipino immigrant, vanished shortly after his business empire collapsed. Investigators believe he has returned to his native country.
Meanwhile, dealers who have been sued are questioning the validity of the lawsuits because it is common practice for dealers to sell cars to each other to meet customer demands.
“This transaction was as normal as they come,” said Carrel Wilson, business manager for Mike Smith Honda in San Diego, referring to a deal cited in one of the lawsuits. “I do 40 of these kind of sales to other dealers each month.”
The trustee is seeking $15,450 plus interest from June 9, 1988, the day Mike Smith Honda sold Grand Chevrolet a Honda Accord. Wilson said he sold Grand a few other cars but was not a regular supplier.
