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August 31, 1971

In the Matter of SPECTRUM ARENA, INC., Debtor

Higginbotham, District Judge.

The opinion of the court was delivered by: HIGGINBOTHAM

HIGGINBOTHAM, District Judge.


 On May 1, 1968, the Spectrum Arena, Inc. (hereinafter referred to as the "Debtor" or the "Spectrum") was involuntarily placed in reorganization under the Bankruptcy Act of July 1, 1898, Chapter X (11 U.S.C. 501, et seq.). Now three years later, after having handled more than $13,000,000.00 in gross receipts, Trustees Harvey N. Schmidt, Esquire and William David Webb, Esquire have so revitalized the Arena's business that there is now a reorganization plan whereby after reorganization all secured and unsecured creditors *fn1" could be paid 100% and the Arena could become a viable financial entity. *fn2" To turn around this complex enterprise so that even unsecured creditors can be paid 100% is a spectacular management performance in light of most bankruptcy and corporate reorganization proceedings; for it is indeed rare when unsecured creditors are able to get any substantial payment for their just debts.

 Three plans of reorganization have been filed, two of which have been supported with detailed financial data, extensive evidence, stipulations of fact, and legal arguments.

 The plan filed, endorsed and preferred by the Trustees was proposed by Earl M. Foreman and Edward M. Snider. (This plan will hereinafter be referred to as the "Foreman-Snider Plan", or the "Trustees' Plan".) Earl M. Foreman and his wife, Phyllis, are the holders of a fourth mortgage on the Spectrum's leasehold interest, which mortgage had a book value as of April 30, 1971, of $1,481,969.76.

 A second plan has been filed by Philip P. Kalodner, Esquire (hereinafter referred to as "Kalodner"). He appears in a triple-star role: first, as a proponent of a corporate reorganization plan; second, as a creditor with a claim against the Debtor for approximately $3,000.00 for past legal services; and third, as the present holder of 92% of the issued stock of the Debtor. *fn3" In all of these roles, Kalodner has acted as his own counsel.

 By agreement of April 22, 1971, Kalodner obtained the 920 shares of stock of which Jerry Wolman was the registered holder, and 40 shares of which Kalodner was purportedly the beneficial owner. For the transfer of these securities, Kalodner made no payment in cash and will be obligated to pay Wolman at most $220,000 only if Kalodner receives any "cash proceeds . . . by virtue of the ownership of such shares of stock in the form of dividends or by virtue of the sale of such shares." (Kalodner's Exhibit 1, hereinafter referred to as "K-1". In Wolman's own proceedings for an arrangement under Chapter XI of the Bankruptcy Act, in the United States District Court for the District of Maryland (Case No. 13072), on December 8, 1969, a stipulation was filed by and among Debtors, Creditors' Committee and the Fidelity Bank which provided, inter alia, as follows:

" Debtors and the Committee hereby agree that Spectrum is insolvent and consent to a finding that the stock of Spectrum owned by the Debtors is valueless. Furthermore, Debtors and Committee agree that the Debtors have no other interest of any kind in Spectrum or the proceeds thereof." (Emphasis added.)
(Docket Entry No. 166, Exhibit L, p. 2, hereinafter referred to as D.E. 166, Ex. L, p. 2.)

 A third plan was proposed by A.R.A. Services, Inc. (hereinafter referred to as "ARA"), holder of a third mortgage on the Debtor's leasehold interest, but that plan is not being presently considered since it does not provide for any payment to unsecured creditors.

 To understand either plan requires an analysis of events during the last five years which have been as dramatic, complex and intriguing as any spectator sport or spectacular ever observed within the walls of the Spectrum.

 The central figure in this financial drama necessarily is Jerry Wolman; accompanying him on stage as major parties are Earl Foreman, Esquire, and Philip Kalodner, Esquire, both of whom at various times served both as Wolman's lawyer and business associate; his former business partner, Edward M. Snider; and the spouses of Snider and Foreman. The financial intrigue encompasses multiple transactions between the Philadelphia Eagles and Jerry Wolman, the Spectrum and Jerry Wolman, various banks and Jerry Wolman, the City of Philadelphia and Jerry Wolman, Edward Snider and Jerry Wolman, and Earl Foreman and Jerry Wolman. Particularly in view of some of the subsequent findings which are necessarily critical of Wolman's financial conduct from 1965 to 1968, as a matter of fairness it should also be noted that in many ways Jerry Wolman was an individual of excessive generosity to his colleagues and to individuals whom he thought were his friends; he was also generous to the City of Philadelphia in building at his own expense a new modern arena, giving full title to the building to the City, thus saving the taxpayers from any expense for its construction (see earlier Opinion in this case, filed August 9, 1971, 330 F. Supp. 125.) However, the scenario of the last five years also reveals that when Wolman's once apparently substantial financial empire started to crumble, to save those enterprises Wolman for his personal use made several withdrawals involving more than two million dollars from corporations (the Spectrum and the Eagles) which he owned or controlled as a majority stockholder.

 From this five year financial milieu two competing detailed reorganization plans have evolved -- the Foreman-Snider Plan and the Kalodner Plan. Each Plan starts with significantly different financial assumptions as to the amount of the debt owed by the Debtor corporation. The Foreman-Snider Plan assumes that the Foreman fourth mortgage (of which book value was $1,481,969.76 as of April 30, 1971) is valid and provides as follows:

"1. Fourth Mortgage Class (5). The fourth mortgage on the property of the Debtor shall either be satisfied in consideration of the issuance to the assignee of the holder thereof of shares of stock in the new company, or be wholly subordinated to all debt incurred in financing the Plan and the needs of the new company." (Docket Entry 145 at p. 5.)

 The Kalodner Plan makes no financial provision for the fourth mortgage, for Kalodner has filed a petition to strike and disallow said fourth mortgage. Kalodner stated: ". . . there will be nothing before you as to a plan from me if his [Foreman's] claim is not stricken." (N.T., Aug. 19, 1971, p. 93).

 After two days of extensive arguments on August 20, 1971, I ruled that the Foreman fourth mortgage is valid and I thereby denied Kalodner's petition to strike and disallow the mortgage. Consequently, since the Kalodner Plan is not adequate to finance the present debt structure, its relative merits need not be discussed. Therefore, as to the Foreman-Snider Plan, the sole issue posed is whether it is "worthy of consideration" for submission to the Securities and Exchange Commission pursuant to Section 172 of Chapter X (11 U.S.C. 572).

 Subsequent to my ruling of August 20, 1971, on August 27, 1971, I received a letter from Kalodner (Docket Entry No. 191), providing as follows:

"At our conference late Friday afternoon, I was unable to answer your question with respect to when I might be in the position to file an Amended Plan providing for the payment of the Fourth mortgage in the event my appeal of your ruling is ultimately unsuccessful.
"Since our meeting, I have been engaged in efforts to obtain additional financing which would enable me to provide for the payment of the Fourth mortgage if necessary. As a result of those efforts, I now believe that I will have made such arrangements or have conclusively failed to do so as to the persons with whom I am now working before the end of next week.
"I would, therefore, suggest that I report to the Court on Tuesday, September 7, either by filing an amended plan providing for the payment of the Fourth mortgage, if required, or by advising the Court that I am not in a position to do so.
"In the meantime, I would respectfully suggest that it might be appropriate for the Court to withhold any ruling or opinion with regard to the Plans of Reorganization." *fn4"

 All parties have been granted great liberality in amending their proposals, since my primary concern has been the desire to see all creditors including unsecured creditors paid 100% of their fully valid claims. However, even litigation in corporate reorganization should not be an endless tunnel for the continuous depositing of amended plans. In their commitment letter providing $7,000,000 in financing for the Foreman-Snider Plan, the First Pennsylvania Company warranted no time period for this commitment. ARA has expressly limited its offer wherein a third mortgage and certain debts totaling 1.4 million dollars are subordinated and refinanced for the Foreman-Snider Plan. ARA expressly conditioned its agreement upon (1) the Trustees consummating the reorganization plan by December 31, 1971, including payment in full of the debt owed by Spectrum Arena to the Fidelity Bank, and upon (2) the commitment of the First Pennsylvania Company not being cancelled. (Foreman-Snider Exhibit 3, hereinafter referred to as "F-S 3"). Thus, I am faced with the reality of a present plan wherein secured and unsecured creditors could be paid in full -- as opposed to a request that I defer consideration of the Foreman-Snider Plan so that Kalodner may ascertain whether he can produce a viable amended plan with an additional 1.5 million dollars. In fairness to the creditors, I will not defer my adjudication since the present record has already been closed with all parties having had ample time to present their cases. For certainly Kalodner could have long ago anticipated that he might be in error as to his challenge of the Foreman mortgage, and in such a case, he should have made previous efforts to prepare an alternative plan which would provide an additional one and one-half million dollars financing. Accordingly, as to Kalodner's potential future amendment, I make no judgment as to whether at this stage further amendments should be permitted or considered.

 This opinion, filed pursuant to Rule 52(a) of the Federal Rules of Civil Procedures (28 U.S.C. Rule 52(a)), constitutes the prerequisite findings of fact and conclusions of law for my prior Order denying and dismissing the petition to strike and disallow the Foremans' fourth mortgage claim, and for my finding that the Foreman-Snider Plan ...

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