In re Greenley Energy Holdings of Pennsylvania

• Decision Date: 01 February 1990
• Docket Number: Bankruptcy No. 86-00056S,Adv. No. 89-0970S.
• Citation: 110 BR 173
• Parties: In re GREENLEY ENERGY HOLDINGS OF PENNSYLVANIA, INC., Debtor. PENNSYLVANIA COMPANIES, INC. and the Scardino Trust, Frank Rosenbaum, Trustee, Plaintiffs, v. Andrew L. STONE, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

110 B.R. 173 (1990)

In re GREENLEY ENERGY HOLDINGS OF PENNSYLVANIA, INC., Debtor PENNSYLVANIA COMPANIES, INC. and the Scardino Trust, Frank Rosenbaum, Trustee, Plaintiffs, v. Andrew L. STONE, Defendant.

Bankruptcy No. 86-00056S, Adv. No. 89-0970S.

United States Bankruptcy Court, E.D. Pennsylvania.

February 1, 1990.

Robert M. Greenbaum, Philadelphia, Pa., for plaintiffs.

Timothy Hurley, Cincinnati, Ohio, Joseph A. Dworetzky, Philadelphia, Pa., for defendant.

Edward J. DiDonato, Philadelphia, Pa., for trustee.

Dominic Ciarimboli, Greensburg, Pa., trustee.

Mark Packel, Philadelphia, Pa., for Creditors' Committee.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION

This Opinion is in response to a Motion filed by Andrew L. Stone, the Defendant, to Dismiss the Complaint filed by the Plaintiffs in this proceeding. We shall dismiss the Complaint and this proceeding, but on jurisdictional grounds rather than the basis urged by the Defendant, i.e., that the Plaintiffs are bound to the terms of the Trustee's confirmed Plan of Reorganization (hereinafter "the Plan"). We therefore proceed to dismiss the Complaint without prejudice solely on the ground that this court's limited post-confirmation jurisdiction to oversee the implementation of a plan permits us only to clarify patent ambiguities in a confirmed plan or interpret matters concerning the plan's operations which impact upon its effectuation. Finding no such ambiguities, nor any direct impact by the matters raised in this lawsuit on the operations of the plan confirmed in the instant proceeding, we conclude that our jurisdiction does not extend to hearing the evidence which the Plaintiffs wish to present at this time regarding latent ambiguities in the Plan.

To further explain our decision, we note specifically that we do not hold whether there are or were agreements among the Plaintiffs and the Defendant or the bankruptcy trustee outside of the Plan which address the distribution of funds that the Defendant receives under the Plan. These issues do not affect the Plan and it was not necessary that they be raised prior to confirmation. They do not involve the Debtor or its estate but merely involve the interrelationship of non-debtor individuals. They are, therefore, not within our jurisdiction to decide, causing us to dismiss the Complaint without prejudice.

B. FACTUAL AND PROCEDURAL BACKGROUND

A detailed review of the factual background of this case is set forth in our Opinion discussing the Trustee's compensation, reported at 94 B.R. 854, 855 (Bankr.E. D.Pa.1989) and in the District Court's opinion reversing our decision on that point, 102 B.R. 400, 401-02 (E.D.Pa.1989). We do not repeat the facts recited there at length herein, but we believe that a brief summary of them would be helpful.

The instant Chapter 11 case was filed on January 6, 1986. Prior to this filing, two factions of the Debtor's stockholders were engaged in litigation in the United States District Court for the Eastern District of Pennsylvania regarding stock ownership. See Syphers v. Scardino, 802 F.2d 448 (3d Cir.1986), aff'g, No. 85-3696, 1985 WL 4283 (E.D.Pa. Dec. 5, 1985). During the course of this litigation, Edward J. DiDonato, Esquire (hereinafter "DiDonato"), was appointed as receiver of the Debtor.

The dissention between the Debtor's shareholders continued post-petition, leading to an agreement of April 4, 1986, by, apparently, all interested parties, to the appointment of a trustee in the bankruptcy case. On May 12, 1986, Dominic Ciarimboli, Esquire (hereinafter "the Trustee"), was appointed as trustee. DiDonato remained active in the case as lead counsel of the law firm employed to represent the Trustee.

The Debtor is a corporation which was duly incorporated under the laws of the Commonwealth of Pennsylvania on or about September 27, 1982. The Debtor's principal business is reprocessing coal refuse. In operating its business, the Debtor accumulates refuse coal or "gob" piles, which it reprocesses. When the prices of competitive fuels decreased in the early 1980's, the Debtor's business decreased and its main asset, four large gob piles, became an environmental hazard rather than a valuable asset. In fact, the Debtor was being fined $750 per day by the Pennsylvania Department of Environmental Resources for maintaining the piles and was directed to remove the piles pursuant to a massive reclamation project which it was estimated would cost thirty million ($30,000,000) dollars. At the time that the Trustee took control of the Debtor, it had practically ceased operations.

The Trustee utilized his business connections in the coal industry to salvage the Debtor's business by negotiating five interrelated agreements with Babcock and Wilcox (hereinafter "B & W") pursuant to which the Debtor would supply its coal refuse to a newly-formed B & W subsidiary, the Ebensburg Power Company ("EPC"), on a long-term basis. B & W intends to utilize the refuse coal in an innovative plan to convert bituminous waste coal into power. The district court termed Mr. Ciarimboli's accomplishments for the Debtor as a "small miracle." 102 B.R. at 401.¹

A Plan of Reorganization featuring the five agreements with EPC and proposing to pay secured and unsecured creditors one hundred (100%) percent of their claims according to a negotiated schedule and to provide shareholders a return on their investment was supported by both factions of the Debtor's shareholders and its creditors, and was ultimately confirmed in a modified version on July 14, 1988.

On October 20, 1989, over fifteen (15) months after the Plan was confirmed, the Pennsylvania Companies, Inc. ("PCI") and the Scardino Trust; by Frank Rosenbaum as its trustee ("the Trust") (PCI and the Trust are collectively referred to as "the Plaintiffs"), filed the Complaint precipitating the instant proceeding and this Opinion. PCI is a Pennsylvania corporation and the Trust is a Pennsylvania trust established by Frank G. Scardino on behalf of his children, Meredith, Kimberly and Karen. The only Defendant named in the Complaint is Andrew L. Stone, an individual residing in Cincinnati, Ohio, and a stockholder and creditor of the Debtor.

The Complaint, filed pursuant to Bankruptcy Rules 7001(2) and (9), asks this court to determine the Plaintiffs' interests in stock of the Debtor and entitlement to distributions, corporation representation on the Debtor's Board of Directors, and corporate voting under the confirmed Plan of Reorganization. Before discussing the allegations of the Plaintiff in detail, and in order for them to be understood, a review of certain provisions of the Disclosure Statement and Plan of Reorganization presented to and confirmed by this court, respectively, are necessary. On May 2, 1988, the Trustee filed a Modified Disclosure Statement representing that fifty-five (55%) percent of the Debtor's stock was held by Andrew L. Stone ("Stone") with the remaining shares of stock held by a group of equity investors headed by Vance Syphers and Stephen Dunn (hereinafter "the Syphers-Dunn Group"). No objections were filed with regard to these or any other representations in the Modified Disclosure Statement.

The Plan, also proposed by the Trustee on May 2, 1988, provides for, inter alia, distributions to the Debtor's stockholders, and sets forth the procedure pursuant to which directors of the Debtor are to be selected in the future. The Plan defines certain shareholders and groups of shareholders who will receive distributions thereunder. Section 2.26 of the Plan defines the Syphers-Dunn Group as

that group of equity security holders comprised of Vance Syphers, Stephen Dunn and those included on the list attached hereto as an Exhibit, having a minority ownership interest in outstanding stock of Greenley.

Pursuant to an Exhibit attached to the Plan, in addition to Messrs. Syphers and Dunn, nineteen (19) other members of the Syphers-Dunn Group are identified.

Section 2.27 of the Plan defines Andrew Stone as an "equity security holder having a majority ownership interest in outstanding stock of Greenley and holder of Claims against the Debtor."

With respect to the selection of directors, Section IV of the Plan provides, in pertinent part, as follows:

Upon the Effective Date, the Corporate Charter, Articles of Incorporation and/or By-Laws are hereby amended to provide as follows: For the longer of ten (10) years or when the cumulative distribution to the Syphers-Dunn Group (without regard to present value) shall equal no less than $4,123,714.00 ("Balanced Director Period"), the Board of Directors shall be composed of two (2) directors to be selected by the Syphers-Dunn Group of shareholders and two (2) directors to be selected by Andrew Stone, with the fifth director to be chosen by the remaining directors, or, in the event they cannot agree, by a Court of competent jurisdiction. Upon the expiration of the Balanced Director Period, the shareholders shall elect the directors.

With respect to distributions to be made to the Debtor's shareholders from the estate, Section V, paragraph F of the Plan provides, in pertinent part, as follows:

F. Class IV — Class of Equity Security Holders

All interests of Class IV Equity Security Holders will continue in existence. On the Shareholder Distribution Date, the Equity Security Holders shall become entitled to payments of the Net Income Available for Distribution to Shareholders. The Syphers-Dunn Group will be entitled to eighty (80%) percent, and Stone shall be entitled to twenty (20%) percent of Net Income Available for Distribution to Shareholders from the Shareholder Distribution Date and continually for nine (9) years thereafter. Commencing ten (10) years after the Shareholder Distribution Date and continuing for fourteen (14) years thereafter, Stone will be entitled to sixty (60%) percent of all Net Income from Operations, and the Syphers-Dunn Group will be entitled to the balance of

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