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In re Cheerview Enterprises, Inc.

586 B.R. 881 (2018)

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In re Cheerview Enterprises, Inc.

United States Bankruptcy Court for the Eastern District of Michigan

586 B.R. 881 (2018)

Facts

Cheerview Enterprises, Inc. (debtor) owned a gas station and convenience store in Lansing, Michigan. In 2015, Cheerview’s new owner, Mohamad Berro, formed Mikey’s Fuel Mart, Inc. to operate the gas station and store. Berro was rarely present at Mikey’s and did not realize that employees were stealing from the business. Berro eventually discovered the theft and fired the employees. Mikey’s then hired Berro’s friend, Hassan Ouza, to help Berro address Cheerview’s problems. Although Ouza had significant gas-station experience, Berro and Ouza’s efforts to save Cheerview’s business were unsuccessful. During 2016, the gas station sold an average of 35,000 gallons of gas per month. After Mikey’s lost money and was unable to pay its creditors, Mikey’s shut down the gas station and store. Cheerview filed a chapter 11 bankruptcy petition and submitted disclosure statements and reorganization plans for approval. Cheerview’s third amended plan provided payments for creditors based on revenue that Cheerview would receive from reopening the gas station and store pursuant to agreements with gas supplier RPF Oil Company. Among other things, the RPF agreements required Cheerview to sell at least 70,000 gallons of gas per month and provided that RPF could terminate the agreements if Cheerview failed to do so. Two of Cheerview’s creditors, U.S. Oil and Stockbridge Acquisitions, LLC (creditors), objected to Cheerview’s plan. They asserted that the plan did not meet the feasibility requirement of 11 U.S.C. § 1129(a)(11) because the plan’s projections for the reopening were unrealistic. At the confirmation hearing, U.S. Oil and Stockbridge showed that Cheerview would not be able to undercut its competition’s gas prices and meet the 70,000-gallon monthly sales requirement. Cheerview’s own projections estimated monthly sales of only 54,000 gallons. Cheerview’s projections also assumed income and expenses that were internally inconsistent and inconsistent with the RPF agreements’ requirements in areas including payroll.

Rule of Law

Issue

Holding and Reasoning (Sherfferly, J.)

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