Benjamin Hirsch

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UNITED STATES BANKRUPTCY COURT
FASTERN DISTRICT OF NEW YORK

Inre: Chapter 11
BENJAMIN HIRSCH, Case No:1-02-17966-dem

DECISION ON HEARINGS HELD ONJANUARY 4, 2007
APPEARANCES:

Beth E. Spickler, Esq.

Stein Riso Mantel, LLP

Attomeys for Debtor/Plaintiff

405 Lexington Avenue, 42nd Floor
New Y ork, New Y ork 10174

Joseph J. Haspel, Esquire
Attomey for Debtor/Plaintiff
AO Matthews Street, Suite 201
Goshen, NY 10924

Bonni J. Perlin, Esq.

Tnial Attomey, U. S. Department of Justice, Tax Division
Attomeys for Defendant

Civil Trial Section, Northem Region

P.O. Box 55

Ben Franklin Station

Washington, D.C. 20044

Gary Kushner, Esquire

Forchelli, Curto, Schwartz, Mineo, Carino & Cohn, LLP
Attomeys for Nachama Hirsch

330 Old Country Road

P.O. Box 31

Mineola, NY 11501

Brian J. Hufnagel, Esq.

Trial Attomey

Office of the U.S. Trustee

271 Cadman Plaza East, Suite 4925
Brooklyn, NY 11201

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Paul I. Krohn, Esquire
Attorney for Receiver Douglas Rosenberg
40 Clinton Street
Brooklyn, NY 11202
Mark L. Cortegiano, Esq.
Attorney for Maspeth Federal Savings & Loan Association
65-23 69th Place
Middle Village, New York 11379
David Carlebach, Esq.
Attorney for the Torah Academy High School of Brooklyn
40 Exchange Place, Suite 306
New York, New York 10005
DENNIS E. MILTON
United States Bankruptcy Judge
On January 4, 2007, the Court conducted hearings on the outstanding issues in
this case. Specifically, the Court heard the application of the debtor for an order pursuant to
Section 363 of the Bankruptcy Code to permit the sales of certain real estate to go forward free
and clear of all liens and outside the debtor’s proposed plan of reorganization (the “Sales
Application”); the application of the debtor for approval of the debtor’s Fifth Amended
Disclosure Statement and Third Amended Plan of Reorganization; the application of creditor
Nachama Hirsch for approval of her Disclosure Statement and Plan of Reorganization; the
application of creditor Maspeth Federal Savings and Loan Association for an order granting
relief from the automatic stay; the application filed by counsel for the debtor for an order
approving the payment of compensation to the Gabriele Appraisal Company, for professional
services rendered; the application of the creditor Nachama Hirsch for an order converting the
case from a chapter 11 case to a chapter 7 case; the application of the United States of America
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(Internal Revenue Service) for an order granting relief from the automatic stay; and the
application of the debtor for an order quashing a subpoena and directing the creditor Nachama
Hirsch from the use of certain documents.
For the reasons set forth below, the applications are determined as follows. The
Sales Application is denied because the debtor failed to meet the showing required pursuant to
the holding in In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983). The application of
creditor Maspeth Federal Savings and Loan Association for an order granting relief from the
automatic stay is denied because Maspeth is adequately protected. 	The application filed by
counsel for the debtor for an order approving the payment of compensation to the Gabriele
Appraisal Company for professional services rendered is denied without prejudice to renew upon
a showing that there are funds in the debtor’s estate not subject to a pre-existing lien which are
available to make the payment of professional fees. 	The application of the debtor for approval
of the debtor’s Fifth Amended Disclosure Statement and Third Amended Plan of Reorganization
is denied on the grounds that the debtor has failed to meet the disclosure requirements and has
presented a plan which is not confirmable. The application of creditor Nachama Hirsch for
approval of her Disclosure Statement and Plan of Reorganization is denied for substantially the
same reasons. 	The application of the creditor Nachama Hirsch for an order converting the case
from a chapter 11 case to a chapter 7 case is granted; the debtor in this case has failed for more
than four years to develop a confirmable plan, provide adequate disclosure concerning projected
income to support payments called for under the plan and to market the properties proposed for
sale in an expeditious manner. 	The application of the United States of America (Internal
Revenue Service) for an order abandoning certain real property and granting relief from the
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automatic stay and the application of the debtor for an order quashing a subpoena and directing
the creditor Nachama Hirsch from the use of certain documents are adjourned to the status
conference in this case scheduled for January 18, 2007.
JURISDICTION
This Court has subject matter jurisdiction over this controversy pursuant to 28
U.S.C. §§1334(b) and 157(b)(2) and the Eastern District of New York standing Order of
reference dated August 28, 1986. This decision constitutes the Court’s findings of facts and
conclusions of law to the extent Fed. R. Bank. P. 7052 requires.
FACTUAL BACKGROUND
Familiarity with the facts underlying these applications is assumed, as this case,
which is now more than four and one half years old, has been the subject of numerous
applications which have resulted in written decisions and orders. 	In prior decisions, this Court
has kept Douglas Rosenberg, the state court appointed receiver, in place and denied the
application of Maspeth Federal Savings & Loan Association in the Entity Debtors’ cases for
relief from the automatic stay. The facts set forth below are those which the Court deems
relevant to the hearings held on January 4, 2007.
On June 12, 1997, Mrs. Hirsch commenced divorce proceedings against Hirsch in
the Supreme Court of New York (the “State Court”). On October 30, 2000, the Honorable
Virginia E. Yancey (“Justice Yancey”) granted the application for divorce but stayed entry of the
judgment of divorce pending resolution of ancillary issues, including the equitable distribution of
marital property. On May 22, 2001, Justice Yancey found Hirsch in contempt of Court for
repeated violations of court orders to preserve the marital properties. By Order dated May 31,
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(1) Twenty-four cooperative Apartments at 2265 Gerritsen Avenue, Brooklyn, New York, part of
the Digby Apartments, Inc. estate.
(2) 900-902 Coney Island Avenue, Brooklyn, New York, part of the Coney Island Avenue, LLC
estate.
(3) 2098 East 7th Street, Brooklyn, New York, part of the Fiduciary Holdings, LLC (“Fiduciary”)
estate.
(4) 945 East 7th Street, Brooklyn, New York, part of the Fiduciary estate.
(5) 976 East 29th Street, Brooklyn, New York, part of the Fiduciary estate.
(6) Cooperative unit Apartments 1-F and 2-J at 1350 Ocean Parkway, Brooklyn, New York.
(7) 2513 Avenue I, Brooklyn, New York, titled in Mrs. Hirsch’s name, but for which Hirsch
claimed an equitable marital interest in the property on his schedules.
(8) 2115 Avenue I, Brooklyn, New York, titled in Hirsch’s name.
(9) 941 East 27th Street, Brooklyn, New York, titled in Mrs. Hirsch’s name, but for which Hirsch
claimed an equitable marital interest in the property on his schedules.
See Justice Yancey Order dated December 21, 2002.
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2001, the State Court appointed Jeffrey Goldstein as temporary receiver for the marital
properties. On December 21, 2001, the temporary receivership ended and the State Court
appointed Douglas Rosenberg (“Rosenberg”) as the Receiver.1 On October 16, 2001, a trial
commenced on the outstanding issues. On May 10, 2002, the state court issued a Decision After
Trial (the “state court decision”). 	On June 21, 2002, before the state court entered any
judgment, the debtor Hirsch and Coney Island Land Co., LLC, Fiduciary Holdings, LLC, Digby
Apartments, Inc., and Sheldrake Holding Company, LP (collectively, the “Entity Debtors”) filed
separate chapter 11 petitions.
On January 20, 2005, this Court issued an Order fixing the claim of Nachama
Hirsch (“Mrs. Hirsch”), the debtor’s spouse, as an unsecured claim in the amount of
$2,220,558.92. On March 31, 2005, this Court issued a Decision and Order clarifying a
Decision and Order dated December 23, 2004, in which it struck certain paragraphs from a
proposed judgment which Mrs. Hirsch sought to have entered in the state court, finding that
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those terms violated the automatic stay (the “Lift Stay Order”). Mrs. Hirsch filed a notice of
appeal from each of these Decisions and Orders.
In a Memorandum and Order dated March 10, 2006 (the “Memorandum
Decision”), United States District Judge Carol Bagley Amon (“Judge Amon”) found that the
bankruptcy court erred in its mathematical calculation of Mrs. Hirsch’s claim, vacated the
bankruptcy court’s order determining the amount of Mrs. Hirsch’s claim and remanded the
matter to the bankruptcy court for further proceedings consistent with its decision.
Memorandum Decision at 24. 	On October 31, 2006, this Court issued its Response to the
Remand. Pursuant to the District Court’s direction, the Court fixed the claim of Nachama Hirsch
against the debtor in this case as an unsecured claim in the amount of $2,343,707.94, set forth its
basis for denial of a motion for abstention it deemed was neither properly made nor warranted in
law or fact, and provided a statement concerning its position that Mrs. Hirsch’s Third Proposed
Judgment violated the terms of this Court’s previously entered Lift Stay Order.
By notice of Motion dated July 28, 2005, counsel for the debtor moved for an
Order precluding the presentation of evidence by the creditor Nachama Hirsch of evidence
which she allegedly obtained pursuant to a subpoena dated April 11, 2005 addressed to Signature
Bank. 	On March 22, 2006, Nachama Hirsch, the debtor’s former wife and a
creditor in this case, filed a First Amended Disclosure Statement in connection with a liquidating
plan which was filed on December 2, 2005.
By Notice of Motion dated June 5, 2006, counsel for the debtor moved for an
Order approving the fees of the Gabriele Appraisal Company and thereafter authorizing the
debtor to pay the Gabriele Appraisal company a total award of $15,062.50.
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On August 31, 2006, the debtor filed his Third Amended Chapter 11 Plan and
Fifth Amended Disclosure Statement.
By Notice of Motion dated December 6, 2006, Maspeth Federal Savings and Loan
Association moved for an order granting relief from the automatic stay to permit it to sell two of
the properties which were the subject of the debtor’s Sales Application.
By Notice of Motion dated December 10, 2006, the debtor moved for an Order
pursuant to Section 363 of the Bankruptcy Code approving a procedure for the sale of three real
property parcels which he owns (the “Sales Application”).
DISCUSSION
A. The Sales Application Must be Denied.
As noted above, by Notice of Motion dated December 10, 2006, the debtor filed
the Sales Application, seeking an Order pursuant to Section 363 of the Bankruptcy Code
approving a procedure for the sale of three real property parcels which he owns. On December
28, 2006, counsel for Nachama Hirsch filed papers in opposition to the Sales Application. On
December 29, 2006, the Office of the United States Trustee filed an Objection to the Sales
Application. 	On January 3, 2007, counsel for the debtor filed a reply to the opposition papers.
Counsel for Nachama Hirsch argued that the granting of the application, filed on
the eve of the hearings for approval of the debtor’s disclosure statement and her disclosure
statement, would effectively thwart the advancement of her plan. The United States Trustees
Office objected to the proposed sale on the ground that the debtor failed to meet the required
showing pursuant to the holding in In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983), of
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the existence of “a good business reason to grant such an application.” In addition, the United
States Trustees Office objected to the proposed sale without any advertising, found the required
financial disclosure too cumbersome and the bidding increments too large for prospective
bidding and the location of the auction sale in Rockland County inappropriate for the Brooklyn
properties.
In his reply papers and at the hearing, counsel for the debtor indicated a
willingness to address the objections of the United States Trustee’s Office. However, at the
hearing, counsel acknowledged that he was not familiar with the advertising requirements for the
sale of real estate in a case such as this. Counsel for the debtor argued that the requirements of
the In re Lionel Corp decision should not apply in individual as opposed to corporate chapter 11
cases, a distinction which this Courts finds to be truly a distinction without a difference. As
proposed the Sales Application does not present an auction procedure which is targeted to
maximize the value of the properties in question and is not in the best interest of the debtor’s
estate. 	Given counsel’s lack of familiarity with the procedures of real estate sales, the lateness
in the filing of this application and the failure to meet the Lionel standard, the Sales Application
must be denied.
B. The Application of creditor Maspeth Federal Savings and Loan
Association for an order granting relief from the automatic stay
is denied because Maspeth is adequately protected.
By Notice of Motion dated December 6, 2006, Maspeth Federal Savings and
Loan Association moved for an order granting relief from the automatic stay to permit it to sell
two of the properties which were the subject of the debtor’s Sales Application. Maspeth had
previously filed an application in the Entity Debtors’ cases for relief from the automatic stay,
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which the Court denied because it found that Maspeth was adequately protected. See Decision
and Order dated September 23, 2004. The same result is warranted on this application. Here,
the debtor’s schedules and exhibits have established that a large equity cushion exists for each
property. Although continuing non-payment of the mortgage and real estate taxes would
diminish this equity cushion, the properties should be sold promptly upon conversion of this
case. This Court is also mindful that a receiver has been in charge of one of the properties and
that Maspeth refused to join a stipulation that would have explicitly allowed the receiver to make
payments. Thus, the Court finds that the large equity cushion, coupled with the relatively small
monthly payments, and prospects of a relatively quick sale resulting in payment in full
adequately protects Maspeth’s secured interest. See In re Elmira Litho, Inc., 174 B.R. 892, 902-
03 (Bankr. S.D.N.Y. 1994).
C. The Application for an order approving the payment of compensation to the
Gabriele Appraisal Company for professional services rendered is denied.
By Notice of Motion dated June 5, 2006, counsel for the debtor moved for an
Order approving the fees of the Gabriele Appraisal Company and thereafter authorizing the
debtor to pay the Gabriele Appraisal company a total award of $15,062.50. At the hearing,
counsel for the debtor was unable to establish that there were presently sufficient funds in the
debtor’s estate to fund the payment of these fees, if such payment were awarded. It appears that
the funds in the debtor’s DIP account are completely subject to the lien of the Internal Revenue
Service and thus unavailable for this purpose. Accordingly, the application filed by counsel for
the debtor for an order approving the payment of compensation to the Gabriele Appraisal
Company for professional services rendered is denied without prejudice to renew upon a
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showing that there are funds in the debtor’s estate not subject to a pre-existing lien which are
available to make the payment of these professional fees.
D. The application of the debtor for approval of the debtor’s Fifth
Amended Disclosure Statement and Third Amended Plan of
Reorganization is denied on the grounds that the debtor has failed
to meet disclosure requirements and has presented a plan which
is not confirmable.
On August 31, 2006, the debtor filed his Third Amended Chapter 11 Plan and
Fifth Amended Disclosure Statement. On September 15, 2006, the Office of the United States
Trustee filed an Objection to the debtor’s 	Third Amended Chapter 11 Plan and Fifth Amended
Disclosure Statement. On September 18, 2006, counsel for the Internal Revenue Service filed an
Objection to the debtor’s Third Amended Chapter 11 Plan and Fifth Amended Disclosure
Statement. On September 18, 2006, counsel for Nachama Hirsch filed an Objection to the
debtor’s Third Amended Chapter 11 Plan and Fifth Amended Disclosure Statement. On
September 28, 2006, counsel for the debtor filed a reply to the Objections. At the hearing on
January 4, 2007, several issues raised by the Objections remained unresolved: the classification
and treatment of Nachama Hirsch with regard to other unsecured creditors; the debtor’s
agreement regarding payment of fees to his counsel; and the sale of the properties without
marketing. In addition, counsel for Mrs. Hirsch stated that she would not vote in favor of the
plan as presently constituted, rendering the plan non-confirmable.
Under all the circumstances, the Courts feels that the debtor has had sufficient
time to present and implement a confirmable plan, and, having failed to do so, the case should be
converted to a chapter 7 case, and a chapter 7 case trustee appointed to conduct such sales of the
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property of the estate as appropriate. See Loop Corp. v. U.S. Trustee, 379 F.3d 511,514-18 (8th
Cir. 2004) (the bankruptcy court did not abuse its discretion when it converted a chapter 11
liquidating case because of the debtor’s failure to effectuate a plan); In re Tiana Queen Motel
Inc., 749 F.2d 146,151-52 (2d Cir. 1984), cert. denied, 471 U.S.1388 (1985) (the bankruptcy
court did not abuse its discretion when it converted a chapter 11 case where the debtors lacked
the wherewithal necessary to market their properties expeditiously and devise a realistic
reorganization plan); In re Axcess Global Communications Corp., 2003 WL 21714994, at *2
(E.D. La. July 18, 2003)(the bankruptcy court did not abuse its discretion when it converted a
chapter 11 case after the debtor failed to develop a confirmable plan after twenty-two months);
In re Sunflower Racing Inc., 221 B.R. 940, 943(D. Kan. 1998) (the bankruptcy court found that
the debtor's failure to develop a confirmable plan despite three opportunities and over two years
was sufficient cause to convert the case); Halvajian v. The Bank of New York, 216 B.R.
502,512-14 (D. N.J. 1998)(the bankruptcy court did not abuse its discretion when it converted a
chapter 11 case after the debtor failed to develop a confirmable plan after twenty-two months
and where the debtor's projected income was speculative); 	Faden v. Faden, 1990 W.L. 181861,
at*3-5 (D. N.J. November 5, 1990) (the bankruptcy court did not abuse its discretion when it
converted a chapter 11 case after the debtor failed to develop a confirmable plan after four and
one half years).
The Court shall enter a separate Order converting this case to a chapter 7 case and
recommending the appointment of a chapter 7 case trustee other than Paul Krohn, Esq.
D. 	Applications of Nachama Hirsch
On March 22, 2006, counsel for Nachama Hirsch, the debtor’s former wife and a
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creditor in this case, filed a First Amended Disclosure Statement in connection with a liquidating
plan which was filed on December 2, 2005. 	On March 27, 2006, counsel for the debtor filed an
Objection to the adequacy of the Disclosure Statement. The Office of the United States Trustee
had not filed any papers on this aspect of the case at the time of the hearing on January 4, 2007,
and counsel for Nachama Hirsch had not filed a written response to the debtor’s Objection. The
case was not ready to proceed to a hearing for approval of the disclosure statement at that time.
Under all the circumstances, the Courts finds that Nachama Hirsch, having had sufficient time to
present and implement a confirmable plan, and not only having failed to do so but also having
filed an application to convert the case to a chapter 7 case, it is appropriate to convert this case to
a chapter 7 case, and have a chapter 7 case trustee appointed, as noted above.
E. Other Applications
In light of the resolution of the above applications, the application of the United
States of America (Internal Revenue Service) for an order granting relief from the automatic
stay; the application of the debtor for an order quashing a subpoena and directing the creditor
Nachama Hirsch from the use of certain documents are adjourned to the status conference in this
case scheduled for January 18, 2007.
CONCLUSION
The Sales Application is denied because the debtor failed to meet the showing
required pursuant to the holding in In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983). The
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application of creditor Maspeth Federal Savings and Loan Association for an order granting
relief from the automatic stay is denied because Maspeth is adequately protected. 	The
application filed by counsel for the debtor for an order approving the payment of compensation
to the Gabriele Appraisal Company for professional services rendered is denied without
prejudice to renew upon a showing that there are funds in the debtor’s estate not subject to a pre-
existing lien which are available to make the payment of professional fees. 	The application of
the debtor for approval of the debtor’s Fifth Amended Disclosure Statement and Third Amended
Plan of Reorganization is denied on the grounds that the debtor has failed to meet the disclosure
requirements and has presented a plan which is not confirmable. The application of creditor
Nachama Hirsch for approval of her Disclosure Statement and Plan of Reorganization is denied
for substantially the same reasons. 	The application of the creditor Nachama Hirsch for an order
converting the case from a chapter 11 case to a chapter 7 case is granted; the debtor in this case
has failed for more than four years to develop a confirmable plan, provide adequate disclosure
concerning projected income to support payments called for under the plan and to market the
properties proposed for sale in an expeditious manner. 	The application of the United States of
America (Internal Revenue Service) for an order abandoning certain real property and granting
relief from the automatic stay and the application of the debtor for an order quashing a subpoena
and directing the creditor Nachama Hirsch from the use of certain documents are adjourned to
the status conference in this case scheduled for January 18, 2007.
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Dated: 	Brooklyn, New York
January 5, 2007
s/Dennis E. Milton
DENNIS E. MILTON
United States Bankruptcy Judge
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