Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, June 25, 1993 TAG: 9306250197
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
Valley Wheel and Parts Inc. was forced to file for protection from two of its creditors under Chapter 11 of the Bankruptcy Code, saying the alternative was going out of business.
The company, founded 18 years ago by Lonza "Sonny" Kingery, has 33 employees.
The two creditors are former Adams Construction Co. workers injured when a hydraulic hose manufactured by Valley Wheel failed as they were inspecting a piece of equipment.
The men in November were awarded a total of $1.75 million by a jury. The award has not been paid.
Valley Wheel's attorney, A. Carter Magee Jr., termed the jury's finding an "excessive award." It led directly to the company's decision to reorganize, he said.
"This is our only means of saving the jobs of 33 people and keeping our customers supplied," said Kingery, whose son and daughter also work in the business.
Valley Wheel and Parts, located at 826 Shenandoah Ave., is a distributor of heavy-duty truck and off-road equipment parts. The company also has an office and warehouse in Martinsville. It serves a multistate region.
Magee said it has sales of $4 million a year.
In the bankruptcy filing, the company listed assets of about $1 million. It has unsecured liabilities of $2.9 million, which includes the judgment, and secured debts of about $1 million.
"Valley Wheel, like any small business, simply cannot afford that much money," said Magee. Nor did it carry product liability insurance to protect against this type of claim.
The company offered to settle the suit for $400,000 paid over time, he said, but the proposal was refused.
"After negotiations stalled and we failed to reach a settlement, the two men had the sheriff seize the company's assets," Magee said, "and the only viable choice to save the company now is to put it into a reorganizational bankruptcy proceeding."
Magee said the company will "struggle through Chapter 11 and hope to pay a part of it."
Kingery said customers "have been very supportive and understanding," so he hopes his company's business will continue.
Magee said the case illustrates two major problems facing small business:
"First, comprehensive insurance is required, and there should be a review of business insurance needs annually.
"Secondly, there is a crying need for tort reform. Something is wrong when excessive jury awards can put a small business into a life-or-death situation such as this."
He said few small businesses could sustain this type of award. "It's patently unfair, especially when these men have already received several hundred thousand dollars in benefits from workers' compensation insurance."
by CNB