In re Feldman, Bankruptcy No. 84 B 11085 (PBA).

• Decision Date: 26 September 1985
• Docket Number: Bankruptcy No. 84 B 11085 (PBA).
• Citation: 53 BR 355
• Parties: In re Nathan FELDMAN, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

53 B.R. 355 (1985)

In re Nathan FELDMAN, Debtor.

Bankruptcy No. 84 B 11085 (PBA).

United States Bankruptcy Court, S.D. New York.

September 26, 1985.

Harris & Zeichner, New York City, for Lauro Deutsch and Joseph Shubin.

Garrity, Connolly, Lewis, Lowry & Grimes, New York City, for debtor.

MEMORANDUM DECISION AND ORDER DISAPPROVING PROPOSED DISCLOSURE STATEMENT

PRUDENCE B. ABRAM, Bankruptcy Judge:

On July 27, 1984, Nathan Feldman ("Feldman" or "Debtor") filed a petition for reorganization under Chapter 11. Odd Couple Restaurant Corp. d/b/a Gefens Kosher Dairy Restaurant ("Odd Couple"), a corporation of which Feldman is president, filed a Chapter 11 petition on the same day. Odd Couple operates a kosher dairy restaurant in the garment district in New York City. Feldman owns 100% of the stock of Odd Couple. His Odd Couple stock is being held under a purchase escrow agreement dated May 11, 1983 to secure an indebtedness to Lauro Deutsch ("Deutsch") in the present amount of about $45,000 according to the Debtor's schedules filed August 15, 1984. The Debtor's schedules also state that Feldman is the owner of 80% of the stock of Odd Couple Restaurant of Broadway Corp. ("Dairy Planet"), which operates a kosher dairy restaurant in the financial district of New York City. The amount of Feldman's stock ownership in Dairy Planet is in dispute. Deutsch has asserted that Feldman is not a stockholder of Dairy Planet and that Deutsch and one Anthony Naydich each own 50% of the stock.

On December 28, 1984, Deutsch and Joseph Shubin ("Shubin") as assignee of Situation Ventures Corp. ("Situation") and holding as agent for Lauro Deutsch filed a plan of reorganization in this case. Thereafter, and on February 13, 1985, Deutsch and Shubin filed an amended plan (the "Deutsch/Shubin Plan") and also filed a disclosure statement. Both the U.S. Trustee and the Debtor filed objections to the disclosure statement. A modified disclosure statement making a number of enlargements and changes was filed on July 25, 1985. Settlement discussions between Deutsch and Feldman not having reached a conclusion satisfactory to Deutsch, Deutsch has requested that the court approve the modified disclosure statement filed on July 25, 1985 so that solicitation of acceptances can occur and a confirmation hearing can be held. Feldman has objected to the modified disclosure statement. At this stage, the court is concerned only with whether the proposed modified disclosure statement contains "adequate information" within the meaning of Code § 1125. For the reasons which follow, the court finds that the modified disclosure statement does not contain adequate information and the court therefore disapproves the disclosure statement.

This case is unique in having a non-debtor plan proponent in an individual Chapter 11 case. The Deutsch/Shubin Plan divides claims into five classes. Class 1, administration claims, are to be paid in full on the date of confirmation. Class 2, tax claims, are to be paid in full in cash, either on confirmation or under such terms as are permitted by Code § 1129(a)(9)(C). Class 3, which consists of all unsecured claims other than those of Deutsch and Shubin are to be "paid 100% of his legitimate claim on confirmation."¹ Classes 1-3 are stated to be not impaired classes.

There are two impaired classes, Classes 4 and 5. Class 4 consists of the claims of Deutsch and Shubin, as assignee of Ventures and holdings as agent for Deutsch. The plan provides

"The claim of Lauro Deutsch is secured by the Debtor\'s stock in Odd Couple * *. Lauro Deutsch shall receive all of the assets of the Debtor, with the exception of exempt property claimable under applicable law. The assets received by Deutsch will include, among other things, all the outstanding shares in the Odd Couple * * * owned by the Debtor and any interest the Debtor may have in the Odd Couple Restaurant of Broadway (`Dairy Planet\')."² Plan at Article 4.

The Debtor position of Feldman is classified as Class 5. The plan provides that

"All Feldman assets will be surrendered to Deutsch with the exception of exempt property claimable under applicable law."

The plan is to be funded by assets provided by Deutsch. In plain English, if the Deutsch-Shubin plan were confirmed, Deutsch would end up with all of the stock of Odd Couple and any interest of Feldman in Dairy Planet and thereby own both restaurants. Feldman would end up owning no interest in either restaurant.

Feldman has objected to approval of the disclosure statement on a number of grounds, ranging from incomplete, inadequate and inaccurate information to the failure of Shubin to sign the plan or disclosure statement. The core of the objections center around the lack of disclosures about the nature of the disputes existing between Feldman and Deutsch and about the value of Dairy Planet, the restaurant now operated exclusively by Deutsch. Feldman also points to the lack of quantification of the amount of claims to be paid, the lack of full disclosure about Shubin's relationship with Deutsch and his employment by the Internal Revenue Service, a major creditor of Odd Couple, as well as the absence of any information about the amount or source of monies to be provided by Deutsch. Feldman also objects that the plan would effectively be one of involuntary servitude of the Debtor if it in any respect

"unilaterally requires Feldman * * * in any way to be liable for any portion of the debt to be satisfied under its

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