A local bank feared that a young couple would never make good on a $2 million loan, prompting it to ask a judge for permission to raid The W Gallery last Friday and seize collateral such as designer diamond rings and expensive handmade china.
“(The W Gallery and owners Chad and Lindsay Wolford) have failed to meet their financial obligations,” according to a lawsuit filed Friday by Chattanooga’s Cornerstone Community Bank. “Cornerstone believes that its collateral is in jeopardy of being lost forever by the concealment (and) sale” of the merchandise.
The lawsuit and its resulting surprise raid left The W Gallery — which bills itself as “Chattanooga’s finest and most elegant jewelry store, art gallery and gift boutique” — evicted from the premises and essentially stripped of its luxury goods with a collective retail value of about $2.3 million.
* Opened May, 2008, at 412 Georgia Ave. in the Brabson Place building.
* Owners Chad and Lindsay Wolford being sued for failure to repay business loan.
* Sold high-end designer diamond jewelry, fine art, crystal and china.
* Had approximately $2.3 million worth of merchandise at time of raid.
* Store closed and Wolfords evicted Friday by the Hamilton County Sheriff’s Office.
* Owners related to prominent Chattanooga developer Bucky Wolford.
The store remained shuttered Monday with yellow police tape and a sign apologizing to customers for the “inconvenience.”
Mr. and Mrs. Wolford are accused in Hamilton County Chancery Court of defaulting on the loan that helped buy the gallery’s merchandise, and Cornerstone Community Bank is demanding that it be repaid.
The lawsuit seeks a total award of $1.9 million to compensate for the nonpayment of the loan, as well as the “permanent possession” of the merchandise.
Mr. Wolford on Monday said the raid came “without warning” and was the result of a “knee-jerk reaction” by Cornerstone that left customers stranded who had planned on picking up gifts for Valentine’s Day. Mr. Wolford said he and his wife made all the payments on the loan and were actually in negotiations to renew it despite the bank’s insistence that they provide more collateral.
“To force the closing of a new and growing business merely because the bank wished to increase its collateral is certainly discouraging to any new business enterprise that desires to open in Chattanooga,” Mr. Wolford said in a written statement.
Mr. Wolford also said that the bank’s claim that he and his wife might have sold or hid their merchandise in retaliation is “reckless and irresponsible.”
“We never would have resorted to such conduct,” Mr. Wolford said.
The lawsuit indicates that the couple could be contemplating Chapter 7 bankruptcy, although no papers have yet been filed in U.S. Bankruptcy Court.
If Mr. Wolford, the son of Chattanooga developer Bucky Wolford, and his wife go the bankruptcy route, they would join a growing number of Chattanoogans and North Georgians who have recently filed for protection from debts.
Area bankruptcies rose 25 percent last year and experts expect the number of cases to rise in 2009 as the national economic crisis continues.
Mr. Wolford said he and his wife will decide whether to reopen The W Gallery in the coming weeks.
Attorney Jeffrey Norwood, who represents Cornerstone Community Bank, declined to comment on the pending litigation.
According to the lawsuit, the bank granted the Wolfords a $2 million line of revolving credit in late 2007, all of which had to be repaid by Dec. 10, 2008. The promissory note indicated that the couple was to pay all accrued interest by the second day of each month beginning in January 2008.
But by the first of 2009, the lawsuit states, no money had been repaid, and a letter demanding all money by Feb. 6 apparently went unanswered.