LJ Apparel LLC is asking to go forward with a foreclosure sale that a bank called a sham.
The public foreclosure sale of the assets of Lauren James Enterprises Inc. of Fayetteville is set for 9 a.m. Tuesday at the women’s clothing company’s office in Fayetteville. But First Security Bank asked a Washington County Circuit Court judge on Tuesday to stop the sale.
The Searcy bank claims it is entitled to take immediate possession of Lauren James’ collateral to repay a $338,720 business loan that is allegedly in default.
On Friday, the newly-formed LJ Apparel said in a court filing that it is entitled to hold a nonjudicial foreclosure sale because it paid $650,000 on July 27 to Legacy National Bank for Lauren James’ promissory note, which included Legacy Bank’s interest in Lauren James’ collateral.
Both First Security and LJ Apparel say they both hold perfected security interest on Lauren James’ collateral.
Lauren James was in default on the Legacy loan but the bank had been working with the apparel company “to resolve its debts and allow the business to continue as a going concern,” LJ Apparel said in its filing.
The Searcy bank, however, alleged that the foreclosure sale of all Lauren James’ assets being conducted by LJ Apparel Inc. “is a sham foreclosure being conducted by an insider of Lauren James … “
LJ Apparel denies the allegation.
“LJ Apparel is a Nevada Limited Liability Company, organized by Michael Chung,” LJ’s filing said. “While this entity was formed for the sole reason of acquiring Lauren James, that does not invalidate it as a third-party purchaser.”
The only shareholder of LJ Apparel, which was formed on May 31, is a California corporation, which is a wholly owned subsidiary of an overseas manufacturing company, the LJ filing said.
And it was not formed to bypass Lauren James’ creditors.
“LJ Apparel is a legitimate third-party buyer with plans to insert new ownership and management at Lauren James in the event they succeed [in selling] the assets at the foreclosure sale,” the filing said.
As of noon Friday, a ruling had not been filed in connection with First Security’s request to stop the sale.
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