In re Erie Hilton Joint Venture, Bankruptcy No. 89-00571E
| Decision Date | 06 March 1992 |
| Docket Number | Adv. No. 91-0091.,Bankruptcy No. 89-00571E |
| Citation | 137 BR 165 |
| Parties | In re ERIE HILTON JOINT VENTURE, a Pennsylvania Limited Partnership doing business as the Quality Hotel Plaza, Debtor. OFFICIAL UNSECURED CREDITORS' COMMITTEE OF ERIE HILTON JOINT VENTURE, Plaintiff, v. William SISKIND; Consolidated Management, Inc.; Leon Levitsky; Henry Fensterwald; Arvin E. Rosen; Herman Rubin; Bernice Hutzler; and Maurice Wyatt, Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
Lawrence C. Bolla, Erie, Pa., for Official Unsecured Creditors' Committee.
Guy C. Fustine, Erie, Pa., for Herman Rubin.
Gary V. Skiba, Erie, Pa., for William Siskind and Consolidated Management, Inc.
Charles D. Agresti, Erie, Pa., for Arvin S. Rosen, Leon Levitsky and Maurice Wyatt.
James H. Richardson, and Harry D. Martin, Erie, Pa., for debtor.
Philip B. Friedman, Erie, Pa., for Bernice Hutzler.
John Martin Klein, Baltimore, Md., for Henry Fensterwald.
The Official Unsecured Creditors' Committee ("Creditors' Committee" or "Committee") of the Erie Hilton Joint Venture ("Debtor") filed the within Complaint to Compel Turnover of Property of the Estate ("Complaint"). The Committee demands judgment against Consolidated Management, Inc., the Debtor's corporate general partner; William Siskind, President of the corporate general partner; and the Debtor's limited partners — Herman Rubin, Maurice Wyatt, Arvin Rosen, Leon Levitsky, Henry Fensterwald, and Bernice Hutzler (collectively, the "Defendants"). The Committee demands judgment in the amount of $1,000,000 against the Defendants, not in their capacity as general and limited partners, but rather, as individuals who agreed to invest an amount sufficient to fund the Debtor's Second Amended Plan of Reorganization ("Second Amended Plan" or "Confirmed Plan") which was confirmed by this Court on October 3, 1990. Without the required funding, the Confirmed Plan cannot be consummated.
All parties have subsequently agreed that Defendants Fensterwald and Hutzler made no commitment to provide funds; that the documents reflect no such agreement; and that Defendants Fensterwald and Hutzler should be dismissed as Defendants to the Complaint.
Presently before the Court are Motions to Dismiss the Complaint on behalf of all other Defendants. The issues raised by the Defendants are that this Court lacks jurisdiction; that the Committee lacks standing; and that the Complaint fails to state a claim on which relief can be granted. Defendant Siskind further asserts that he is in the same category as Fensterwald and Hutzler, as he made no agreement to provide funds and there are no documents which reflect such an agreement.
The Debtor filed its voluntary Petition under Chapter 11 of the Bankruptcy Code on October 12, 1989 on the eve of foreclosure by the Prudential Insurance Company of America ("Prudential") on the Debtor's single asset, a hotel known as the Quality Hotel Plaza (formerly a "Hilton" hotel) in Erie, Pennsylvania (the "Hotel").
On April 26, 1990, the Debtor filed its original Plan of Reorganization ("Original Plan") and Disclosure Statement. Under the Original Plan, the Debtor was to continue to own and operate the Hotel, and Prudential's allowed secured claim was to be amortized over a thirty year period. Unsecured creditors were to be paid a twenty percent dividend, payable over a period of six years after confirmation. At the Debtor's option, a certain percentage of the unsecured claims could be paid within thirty days of the Effective Date of the Original Plan.
Article IV of the Original Plan, entitled "Means of Execution of the Plan," states that a new corporation would be formed to take over the position of general partner. The new corporation would contract with a professional management company, secure a nationally-recognized hotel franchise, and raise additional capital to carry out the debt service provided by the Original Plan. A hearing was held on May 29, 1990 to consider approval of the Debtor's Original Disclosure Statement. In attendance were counsel for the Debtor, counsel for the Committee, counsel for Prudential, the United States Trustee, Mr. William Siskind and Mr. Herman Rubin. Numerous objections were raised, including an objection that the Debtor failed to adequately disclose the identity and the financial wherewithal of the proposed investors.
In response to comments made on May 29, 1990, the Debtor filed an Amended Plan of Reorganization (the "First Amended Plan") and an Amended Disclosure Statement on June 1, 1990. The First Amended Plan changed Prudential's treatment to provide that the secured claim of Prudential be fully due and payable by means of a "balloon payment" on the seventh anniversary of the Effective Date of the Plan. As with the Original Plan, Article IV of the First Amended Plan provided that a new corporation would raise additional capital in the amount of $1,000,000 by the Effective Date of the Plan.
On June 4, 1990, the Court entered an order approving the Amended Disclosure Statement, and set a hearing on confirmation of the First Amended Plan for July 9, 1990.
On June 5, 1990, the Debtor filed a Combined Summary of Plan for Reorganization and Disclosure Statement ("Combined Summary"). The Combined Summary states in pertinent part:
On June 7, 1990, the Debtor served upon all creditors and equity holders the Combined Summary, the Order Approving Disclosure Statement and a Ballot for Accepting or Rejecting the First Amended Plan. Defendants, Levitsky, Rubin, Wyatt, Rosen, and Consolidated Management, Inc., filed Ballots accepting the First Amended Plan.
At the confirmation hearing held on July 9, 1990, in response to questions by the United States Trustee and Prudential as to the ability of the investors to fund the First Amended Plan, counsel for the Debtor stated:
Transcript of Hearing at 33-34, Bankr. No. 89-00571E, Mtn. No. 90-496, July 9, 1990.
Not all impaired classes of claims accepted the First Amended Plan. The Debtor requested that the Plan be confirmed under the "cram down" provisions and the Court scheduled an evidentiary hearing on confirmation for August 1, 1990.
On July 31, 1990, the Debtor filed a Petition (sic) to Modify Plan of Reorganization ("Petition"). The Petition summarized a transaction whereby Prudential was to be given control of the Hotel, and the Debtor was to acquire another property in exchange for the Hotel in order to effectuate a "like kind" exchange under Section 1031 of the Internal Revenue Code, 26 U.S.C. § 1031 (1988). The Petition stated that all other creditors would be treated as provided in the Original Plan and First Amended Plan. On page 4 of the Petition, it is stated that "Debtor intends to pay the cash equivalent of the payments provided under the Original Plan in order to assure these creditors payment without concern for the success of this Revised Plan of Reorganization."
On August 23, 1990, the Debtor filed a Second Amended Plan of Reorganization. The Second Amended Plan states that "the Plan as originally filed is incorporated herein by reference with the following changes:". An Exchange Agreement is attached to the Second Amended Plan, providing that the Debtor would convey the Hotel to New Enterprise Title Group, Inc. ("New Enterprise"), and in return, the Debtor was to acquire "like kind" property as defined by Section 1031 of the Internal Revenue Code.
On September 5, 1990, the Debtor filed a "Combined Summary of Seconded sic Amended Plan for Reorganization and Disclosure Statement" (the "Second Combined Summary"). The first page of the Second Combined Summary provides:
A Plan has been proposed on behalf of Debtor by a New Corporation which would be funded with cash for all sums required by this Plan. The New Corporation is owned 60% by Herman Rubin and 40% by Leon Levitsky. The cash is being provided by the following individuals: Herman Rubin, Leon Levitsky, Consolidated Management, Inc., Arvin E. Rosen, Maurice Wyatt.
On the same date, September 5, 1990, the Court held a status conference. The Debtor and the Committee advised the Court that the Second Amended Plan provided the same treatment to all parties, except that Prudential was given control of the Hotel and it provided for a tax-free exchange under § 1031 of the Internal Revenue Code to enable the Debtor's limited partners to maintain their tax benefits. It was understood that the same parties who were to fund the previous plans were also...
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