In Re Kingston Square Associates

AMENDED OPINION DENYING MOTION OF THE CHASE MANHATTAN BANK, N.A. AND REFG INVESTOR TWO, INC. TO DISMISS THESE CHAPTER 11 CASES UNDER § 1112(b) AND GRANTING MOTION TO APPOINT CHAPTER 11 TRUSTEE

Introduction

Fashion has a role not only in the garment industry but in the legal one as well. One of the newest fashions in commercial real estate financing is so-called “mortgage backed securitization” coupled with the presence of corporate governance provisions known as “bankruptcy remote provisions” designed to make bankruptcy unavailable to a defaulting borrower without the affirmative consent of the mortgagee’s designee on the borrower’s board of directors.

Here, a group of entities owning apartment complexes was stymied by such provisions from invoking the chapter 11 process to prevent foreclosure despite the belief of their principal that the properties had value over and- above the encumbrances against them. To prevent loss of this claimed value and the potential for reorganization, the debtors’ principal paid a law firm to solicit creditors to file involuntary chapter 11 petitions. Only one' trade creditor for each debtor agreed; the other petitioning creditors came from the ranks of the debtors’ professionals — attorneys and various consultants. At issue is whether the petitions ought therefore be dismissed as bad faith filings, relief which the mortgagees seek.

By agreement of the parties, the only issue at trial was whether there was collusion mandating dismissal, for it was the mortgagee’s contention that, standing alone, collusion in their filing warranted dismissal of these petitions. The parties have not yet tried whether there is any possibility of reorganization.

I conclude that although the debtors plainly orchestrated the filing of the involuntary petitions, they had reason to believe that reorganization was possible and did not circumvent any court-ordered or statutory re *715 strictions on bankruptcy filings such that, absent any evidence of objective futility of the reorganization process, the cases ought not be dismissed now. However, because there is a strong suggestion in the record that the debtors’ boards of directors have abdicated their fiduciary responsibilities, I am directing the appointment of chapter 11 trustees, relief for which the mortgagees asked in the alternative and as to which the Debtors have consented. 1

The facts are drawn from the undisputed portion of the parties’ pretrial order and from the evidence adduced during three days of testimony.

I.

Each of the eleven debtors (the “Debtors”) is or was controlled by Morton L. Ginsberg. The Debtors represent less than one-third of the thirty-eight Ginsberg-controlled entities that were restructured in 1991 or 1993 in transactions financed by The Chase Manhattan Bank, N.A. (“Chase”) and REFG Investor Two, Inc. (“REFG”) (the “Movants”). All thirty-eight properties, both debtor and nondebtor, are in receivership, with foreclosure proceedings pending against them. In one ease, that of Lynnewood Associates, the Movants have foreclosed upon the property. The Debtors did not contest the filing of the involuntary petitions, with the result that orders for relief have been entered in all eleven cases.

Chase and REFG seek the dismissal of the chapter 11 cases of the eleven Debtors for cause pursuant to section 1112(b) of the Bankruptcy Code. The Movants maintain that Ginsberg colluded with the petitioning creditors (“Petitioning Creditors”) and their counsel, Pryor, Cashman, Sherman & Flynn (“Pryor Cashman”), to enable each Debtor to improperly avail itself of bankruptcy protection to thwart the Movants’ ongoing efforts to foreclose on each of the Debtors’ properties. Objections to the dismissal motion have been filed by the Debtors, the Petitioning Creditors, and the limited partners of the Florida Debtors 2 , Lynnewood Associates 3 , and Highland-Montgomery, L.P. 4

A. The Debtors.

The eleven Debtors can be grouped readily into three categories corresponding roughly to their geographical location — Florida, The Bronx, and Metropolitan New York.

The Florida Debtors consist of Kingston Square Associates (“Kingston Square”), Montego Associates (“Montego”), and Kings Court Associates (“Kings Court”). Involuntary petitions were filed against these entities on September 16, 1996. Each debtor owns a single parcel of multi-family real property located in Plantation, Florida. Ginsberg is the president of the corporate general partner of each Florida Debtor.

The Bronx Debtors consist of Pierson Property Corp. (“Pierson”), Kingsbridge Company, L.P. (“Kingsbridge”), Silliman Property Corp. (“Silliman”), 2440 Olinville Properties Corp. (“Olinville”) and Leland Company, L.P. (“Leland”). Their involuntary petitions were filed on October 8, 1996. Two of these Bronx Debtors, Kingsbridge and Leland, own a single parcel apartment complex. Ginsberg is the president of each *716 debtor’s corporate general partner. The other three Bronx Debtors collectively own one apartment complex, known as Winthrop Gardens. Ginsberg is the president of each of these three corporate debtors.

The Metropolitan New York Debtors consist of Brandywine Associates (“Brandy-wine”), Highland-Montgomery, L.P. (“Highland”), and Lynnewood Associates (“Lynne-wood”). Ginsberg is the president of the corporate general partner of each. Like the Florida and Bronx debtors, the Metropolitan New York Debtors own multi-family apartment complexes. Their petitions were filed on October 11, November 12, and November' 21, respectively.

None of the Debtors currently has any employees.

B. The Lenders.

Chase is the trustee for the benefit of the holders of the DLJ Mortgage Acceptance Corp., Multi-Family Mortgage Pass-Through Certificates. MF Series 1991-1. The beneficial holder of these securities is REFG Investor One, Inc., all of whose outstanding shares are owned by an entity related to Donaldson, Lufkin & Jenrette Securities Corporation (“DLJ”) 5 . Chase is the mortgageholder for the properties of the Florida Debtors. Brandywine and Highland-Montgomery. Pursuant to a Pooling and Servicing Agreement dated as of August 1, 1991, Chase designated DLJ to take all acts on Chase’s behalf to enforce the mortgages.

REFG is the trustee for the benefit of the holders of the DLJ Mortgage Acceptance Corp., Multi-Family Mortgage Pass-Through Certificates, MF Series 1993-2. All of its outstanding shares are owned by DLJ. REFG is the mortgageholder for properties of the Bronx Debtors.

The MF Series 1991-1 and Series 1993-2 certificates were underwritten by DLJ. DLJ packaged these certificates in a relatively new form of real estate financing known as “commercial mortgage backed securitization” in which debt securities would be issued to investors, with repayment secured by a pool of mortgages on various real properties. Beginning in late 1994, DLJ repurchased all the certificates for both the MF Series 1991-1 and MF Series 1993-2 from investors.

C. The MLG I and MLG II Transactions.

The Debtors became indebted to the Movants pursuant to two loan transactions. In the first, known as MLG I, Chase lent slightly more than $132 million to twenty multifamily entities including the Florida and Metropolitan New York Debtors and took back a mortgage on each property. This transaction closed on August 30, 1991. Chase holds a single blanket mortgage containing crosscollateralization and cross-default provisions for fifteen of the twenty properties. Chase holds individual mortgages on the five remaining properties.

In the second loan transaction, known appropriately enough as MLG II, REFG lent nearly $145.25 million to eighteen multi-family entities including the Bronx Debtors and took back a mortgage on each property. This transaction closed on February 11,1993. All eighteen properties are covered by one blanket mortgage with cross-collateralization and cross-default provisions.

Integral to the MLG I and II transactions was the inclusion in the charters of each corporate Debtor or the corporate general partner of each limited partnership Debtor of a bylaw, commonly referred to as a “bankruptcy remote” or “bankruptcy proof’ provision, to prevent the Debtors from seeking voluntary bankruptcy protection without the unanimous consent of the board of directors of each Debtor or of its corporate general partner and the shareholders. Each board originally consisted of Ginsberg and two others 6 , one of whom was his designee and the *717 other of whom was a so-called independent director.

The independent director for each board of directors is Laurence Richardson. Richardson received his law degree from the University of Virginia in 1983 and was employed as an associate at Thacher Profitt & Wood, a New York law firm, until 1986 in the residential mortgage backed securities area. After a two-year stint at E.F. Hutton beginning in 1986, Richardson worked at DLJ from February 1988 until April 1991 as a vice president. Upon his departure, he became a consultant to DLJ for the MLG I transaction as well as others. He was paid hourly for his consulting fees and received the sum of $25,-000 per year for being a director for companies included in both the MLG I and II transactions. 7 Richardson’s director’s fees were originally paid by the management companies handling the properties and then later by the receivers. At some point, when the fees went into arrears, it was DLJ whom Richardson called to inquire about who was responsible for bringing the fees current. Richardson admits having received some of his director’s fees from REFG. which at that time he did not know was a wholly-owned subsidiary of DLJ.

Richardson serves as an independent director for three other entities at the request of DLJ, receiving $10,000 per year per transaction. Therefore, Richardson receives the aggregate amount of $55,000 annually for serving on the various boards of directors created pursuant to DLJ-structured deals.

D. The Foreclosure Proceedings.

In 1994, the Movants issued notices of default and commenced foreclosure actions against each property, Debtor and nondebt- or. With the consent of each borrower, receivers were installed at all thirty-eight properties. As of mid-1996, the Movants had obtained judgments totaling approximately $370 million and had commenced foreclosure proceedings against each of the thirty-eight properties.

Specifically with regard to the Debtors, on October 7, 1994, Chase commenced foreclosure proceedings against the Florida Debtors, Brandywine, Highland-Montgomery and Lynnewood Associates. On December 23, 1994, Bradley S. Weiss was appointed as receiver to manage all the Florida Debtors. Chase obtained judgments of foreclosure on August 13, 1996; these judgments were not appealed. The foreclosure sales of the Florida Debtors that were scheduled for September 17, 1996 were stayed by the filing the previous day of the involuntary chapter 11 petitions. This is no coincidence; these Debtors were targeted for the first involuntary filings precisely because foreclosure was imminent.

On October 6, 1994, Chase instituted a foreclosure action against Brandywine. On December 21, 1994, Kenneth A. Auerbach was appointed as receiver. Brandywine’s involuntary petition was filed on the day that its papers opposing Chase’s summary judgment motion were due.

On November 7, 1994 Chase entered a confession of judgment in its favor from Lynnewood Associates. On November 16, 1996, the property held by Lynnewood Associates was sold at foreclosure sale. Lynne-wood Associates’ involuntary petition was filed the day its brief in support of appeal of its motion to reopen the confession of judgment was due, thereby staying that appeal.

On October 6, 1994, Chase began its foreclosure action against Highland-Montgomery. By consent order dated December 14, 1994, NHP was appointed as receiver. On August 20, 1996, Chase received a judgment of foreclosure. The involuntary petition filed on November 12, 1996 against Highland-Montgomery stayed the foreclosure sale scheduled for the next day.

On November 1, 1994, REFG commenced foreclosure proceedings in New York against the Bronx Debtors. On February 16, 1995, NHP Management Company was appointed as receiver to manage the Bronx Debtors. Although REFG had obtained judgments in its favor, it had not taken any steps to en *718 force them against the Bronx Debtors prior to the involuntary bankruptcy filings. Currently, these judgments are on appeal.

E. The Debtors’ Financial Picture.

In the almost two years that the receivers have been in place, the Movants have advanced nearly $2 million to pay for repairs, taxes and insurance. No monies have been needed for salaries because the Debtors have no employees.

While no breakdown has been provided as to the number of apartment units for each of the Debtors, the thirty-eight Debtor and non-debtor properties in total aggregate nearly 11,200 units spread over approximately 41 garden apartment complexes. The only appraisal received into evidence, dated November 1, 1995 and prepared by Allen V. Trauben & Associates (“Trauben”), valued all the properties at $884 million. Ex. 65. If the values contained in the appraisal were found to be correct, equity may exist in the properties. However, the appraisal was admitted for the limited purpose of rebutting the charge that the friendly involuntary petitions were filed in bad faith. As noted at the outset of this decision, the parties agreed in their pretrial order not to treat reorganization prospects initially, as a result of which there is no developed record regarding valuation.

F. The Petitioning Creditors.

The Petitioning Creditors are:

Stelco Distributors, Inc. (“Stelco”),

Allen V. Trauben & Associates (“Trauben”),

Pasternak, Feldman & Plutnick, P.A.

(“Pasternak”),

Eugene M. Kennedy, P.A. (“Kennedy”),

Embassy Elevator, Inc. (“Embassy”),

Peri & Stewart, and

Eugene Miller & Co.

Pasternak, Feldman & Plutnick, P.A. (“Pasternak”) is a New Jersey law firm that has represented Brandywine, Highland-Montgomery and the Bronx Debtors in New Jersey foreclosure suits commenced by REFG. Pasternak’s arrangement with these Debtors was to render legal services for all of the Debtors and nondebtors located in New York, New Jersey and Pennsylvania for a flat rate of $25,000 per month. As of the petition date, the Debtors owed Pasternak the sum of $300,000. Ginsberg acknowledged the validity of this debt on September 19,1996.

Eugene Miller & Co., a real estate consulting firm, holds a claim for $75,000 against Lynnewood for real estate consultation services. According to Eugene Miller, certain of the Debtors including Lynnewood were obligated to pay him $1,000 per month representing payment of real estate commissions due from the sale of real estate to the Debtors and for other services rendered in association with the property. This arrangement was intended to be open-ended, continuing for as long as the Debtors owned the property. Trauben’s claims are held jointly and severally against the Debtors.

The following table provides, for each Debtor, the date of each Debtor’s involuntary petition together with a listing of the Petitioning Creditors who signed its involuntary petition as well as the amount and basis of the claims each Petitioning Creditor holds:

Debtor Date of Petitioning Amount Petition Creditors of Debt Type of Services Rendered

Kingston Square Associates 9/16/96 Trauben 55,000.00 Kennedy 6,489.53 Appraisal Services Legal Services

Kings Court Associates 9/16/96 Stelco • 8,685.40 Trauben 55,000.00 Kennedy 6,489.53 Sale of Air Conditioning Equipment Appraisal Services Legal Services

Montego Associates 9/16/96 Stelco 449.11 Trauben 55,000.00 Kennedy • 6,489.53 Sale of Air Conditioning Equipment Appraisal Services Legal Services

Leland Associates 10/8/96 Pasternak 300,000.00 Embassy Elevator 30,260.00 Trauben 55,000.00 Legal Services Elevator Repair Appraisal Services

Pierson Properties 10/8/96 Pasternak 300,000.00 Embassy Elevator 3,794.15 Trauben 55,000.00 Legal Services Elevator Repair Appraisal Services

*719 Debtor Date of Petitioning Petition Creditors Amount Type of Services of Debt Rendered

Silliman Properties Corp. 10/8/96 Pasternak Embassy Elevator Trauben 300.000.00 Legal Services 8,641.35 Elevator Repair 55.000.00 Appraisal Services

Kingsbridge Company 10/8/96 Pasternak Embassy Elevator Trauben 300.000.00 Legal Services 8,680.84 Elevator Repair 55.000.00 Appraisal Services

2440 Olinville Properties Corp. 10/8/96 Pasternak Embassy Elevator Trauben 300.000.00 Legal Services 3,794.15 Elevator Repair 55.000.00 Appraisal Services

Brandywine Associates 10/11/96 Pasternak Trauben 300.000.00 Legal Services 55.000.00 Appraisal Services

Highland Montgomery 11/12/96 Pasternak Trauben 300.000.00 Legal Services 55.000.00 Appraisal Services

Lynnewood Gardens 11/21/96 Trauben Eugene Miller & Co. Peri & Stewart Pasternak 55.000.00 Real Estate Consulting Services 75.000.00 Legal Services 2,988.88 Legal Services 300.000.00 Legal Services

G. Pryor, Cashman, Sherman & Flynn.

Pryor Cashman represents the Petitioning Creditors. Peter D. Wolfson, Esq., a partner in that firm, testified that Edward Weisfelner, Esq. of the firm of Berlack, Israels & Liberman (“Berlack”), which Ginsberg had consulted to possibly represent the Debtor, invited him to attend a meeting on July 25, 1996 to discuss a “fairly complicated real estate transaction, that there was [sic] some Petitioning Creditors that were interested in filing an involuntary,” and that Weisfelner had recommended Wolfson to them. R. 501 8 . This meeting, which Wolfson described as a preliminary one that ran about 45 minutes, was attended by Wolfson, Pasternak, Ginsberg, Arthur Israel (Ginsberg’s personal attorney) and Weisfelner. During this meeting, Wolfson became acquainted generally with the story of the Debtors, the MLG transactions, the foreclosure actions, and the bankruptcy remote provisions. In addition, it was related to him that involuntary petitions needed to be filed in order to salvage the Debtors, and that legal theories might exist for suit against DLJ. Wolfson advised the parties that he would require an advance of $50,000 for fees and $25,000 for expenses in the event he decided to take on the representation.

Thereafter, Wolfson commenced due diligence to verify the Debtors’ story and determine whether to accept the representation. As part of this process, Wolfson sought documents and more information regarding, inter alia, the financial and physical conditions of the properties, the state court foreclosure actions, the existence of potential third parties interested in purchasing the properties or funding a plan of reorganization, and identities of the creditors. Wolfson also researched the viability of pursuing an equitable subordination action against the Movants.

After conducting a substantial portion of his investigation and before any involuntary petition was filed, Wolfson concluded that equity existed in the properties which likely would be lost at foreclosure and that unless creditors caused the Debtors to file for bankruptcy, the “unsecured creditors and limited partners would end up getting zero ____ wiped out.” R. 559. At that point, Wolfson decided to represent the Petitioning Creditors and arranged for the opening of a client billing matter at Pryor Cashman. Two hitches remained: (1) identification of creditors willing to sign involuntary petitions, and (2) how would Pryor Cashman be paid.

Pryor Cashman tried to deal with both issues simultaneously. According to its time records 9 , during the period from mid-September through early mid-November, Pryor Cashman personnel spoke, or attempted to speak, with Ginsberg or his agents on 49 occasions, while conversing with the Petition *720 ing Creditors on 12 occasions. Wolfson denied that he had any agreements with Ginsberg as to future payments of fees, or actions to take or to avoid. Wolfson conceded that he and other personnel at Pryor Cashman were in frequent communication with Ginsberg, ostensibly so as to obtain documents and information necessary to assist Wolfson in deciding to take on the cases and later, after making that decision, to obtain information to locate other available petitioning creditors.

Wolfson admitted that part of the problem with the early stages of Pryor Cashman’s due diligence was determining which creditors actually constituted its client, and just as importantly, who would be footing the bill for his firm’s services. Wolfson believed that Ginsberg would be one of the Petitioning Creditors, but he “never stepped up to the plate.” R. 615. Wolfson believed that Arthur Israel would also join or at least pay the initial retainer of $75,000. But Israel never returned the proposed retainer letter, so Wolfson turned to Pasternak, R. 615, who was reluctant to sign on because of (i) his concern under the New Jersey attorney disciplinary rules as to the propriety of being a Petitioning Creditor and (ii) his unwillingness to commit another $75,000 after he was already owed $300,000, a debt which was of a sufficient magnitude that it caused him to have to take out a second mortgage on his house and draw down a credit line.

On September 18, 1996, Pryor Cashman started a campaign to locate potential creditors to file involuntary petitions by circulating a letter to creditors of the Bronx Debtors. Later, letters were also sent to approximately ten trade creditors of the other Debtors. The letters exhorted each recipient to join as a Petitioning Creditor by highlighting the fact that Pryor Cash-man’s fees would be paid by an undisclosed entity so that there would be no out-of-pocket cost to the Petitioning Creditors.

As it turned out, the “undisclosed entity” mentioned in the letter was Homestead Associates, Ltd., an entity controlled by Ginsberg, which advanced $75,000 to Pryor Cashman to cover its fees and expenses for pursuing the involuntary petitions. Later, David Lichtenstein, a stranger to the MLG transactions who was first introduced to these cases by Ginsberg and appeared as a party interested in funding a plan, paid $25,000 to Pryor Cashman. 10

H. Inaction by the Boards of Directors.

As each director, Kazarnovsky, Ginsberg and Richardson, testified, no meetings were held after the closing of the MLG I and II restructurings until December 16, 1996. At no other time was any meeting ever called, special or regular, to discuss the business activities of the Debtors, the defaults called by the Movants, or the commencement of the foreclosure actions. The directors conducted no business except to approve the $2.4 million loan to the Debtors to provide maintenance for the properties in June 1993. Other than this minor matter, they had little communication with each other, either by telephone or by letter, until this motion was filed. No financial reports were circulated, nor were reports or updates on the legal proceedings distributed either by counsel or by Ginsberg, as president, to the other directors.

The directors testified as to the reasons for such inactivity, even in the face of the foreclosure actions, the installation of receivers and the filing of the involuntary petitions. Both Ginsberg and Kazarnovsky believed that involving Richardson in such meetings would prove fruitless because of their belief that Richardson was simply a pawn of DLJ and would not approve any course of action that would interfere with DLJ’s plans. R. 311-12. Because both Kazarnovsky and Ginsberg believed that Richardson was DLJ’s agent on the board, they purposely ignored him. 11 Significantly, the boards took *721 no action in the face of foreclosure actions being commenced or receivers being installed. Although Ginsberg did retain counsel to contest the foreclosure proceedings in the state courts on behalf of the Debtors, there is no indication that the attorneys ever reported to anyone other than Ginsberg. Richardson learned in 1995 that the properties were being foreclosed, R. 341, yet he took no action and did not seek any information from anyone as to what was happening although he assumed judgments would be entered against the properties. R. 345-46. In any event, he never initiated communication with Ginsberg regarding these events nor did he ask for a directors’ meeting. Id.

Richardson’s overall testimony at trial was enlightening on a number of topics including his perception of his fiduciary duty as a director, the purpose of the bankruptcy proof provision and his understanding of DLJ’s status. Richardson seems not to have taken any interest at all in the properties. He testified that as a director he never reviewed any documents regarding any of the Debtors including rent rolls, judgments, or state court decisions. R. 402. While apparently unaware of the foreclosure actions against all the properties until 1995, Richardson did acknowledge that he was certainly aware of the status of his directors’ fees and made a number of inquiries of DLJ when his fees were in arrears. R. 328-31.

According to his testimony, only long after the filing of the involuntary petitions did he become aware that a director has fiduciary duty not only to a corporation’s shareholders but to its creditors when the corporation becomes insolvent. 12 Nor did he comprehend his obligations to limited partners in those entities where he was on the board of directors of the corporate general partners. Richardson candidly admitted that from his appointment as a director to the Debtors’ boards in 1993 until December 1996 he believed that his duty was to the shareholders whom he identified as Ginsberg. R. 352. But Richardson’s statement does not quite square with his later testimony when he described seeking DLJ’s advice about resigning from the boards sometime in 1995. Richardson sought an answer from DLJ because he was under the impression that because DLJ had become the shareholder by virtue of its foreclosure of Ginsberg’s equity interests and DLJ was now the owner of all the securities, “they became the investor who relied upon my independence to avoid a bankruptcy.” R. 397. In any event, Richardson had no idea until well into the midst of these eases that he had a fiduciary duty to anyone other than shareholders.

Richardson also testified that he had no knowledge of the involuntary bankruptcy proceedings until the board meetings of December 16-17 at which time he learned about the recent activity from Ginsberg and Wolf-son. R. 354. This is an astounding statement to make in light of Richardson’s filing an affidavit in this case at least two weeks earlier that was prepared by the Movants’ counsel regarding the lack of board meetings during the preceding years. Ex. 93. On direct examination by Debtors’ counsel, this court learned that Richardson, an attorney who has been involved in substantial financial transactions and admits to reading “carefully” formal documents presented to him, R. 356, somehow failed to understand or recognize the fact that a two page affidavit, drawn up with a typical bankruptcy caption and referring to “debtors” throughout, related to a bankruptcy case. 13 Richardson did not seem to question the fact that he was being asked to sign an affidavit, an action which he *722 admits to having done “very rarely.” R. 359. He failed to question what the proposed use of the affidavit was or why the Movants were seeking a sworn statement from him regarding corporate governance issues. There is no question that he read the affidavit because he suggested changes in it to Movants’ counsel. R. 357-58. The average person would certainly inquire as to what was being signed; I would hazard a guess that an attorney not in the habit of executing affidavits would scrutinize such a document even more carefully.

Only after my strong suggestion, voiced during a December 5, 1996 hearing 14 , was a directors’ meeting convened. Over the course of two days, December 16 and 17, 1996, the board met telephonically and in person. The board heard from counsel representing the Petitioning Creditors and the Movants as to the legal issues involved in the various state proceedings, the instant motion, and the ramifications of voting in favor of filing voluntary petitions and authorizing the appointment of a chapter 11 trustee.

Richardson’s actions at the two-day board meeting in mid-December 1996 were also somewhat peculiar. Admittedly, all the parties present were at pains to apologize for not having met sooner, and there was a need for Richardson especially to be brought up to speed regarding the overall status of both the Debtors and nondebtors. Debtors’ counsel was present to advise the board and Pryor Cashman presented the Petitioning Creditors’ position on the first day. At Richardson’s insistence, Movants’ counsel was invited into the board meeting on the second day to answer a number of questions from him. After mulling over the presentations and cursorily reviewing the papers he had been sent, Richardson refused to vote on the question as to whether the Debtors should ratify the filing of the involuntary petitions until he received answers from the parties to questions he had. Ex. 96 at 254.

Two votes were taken during the board meetings. On the first, the question of filing for bankruptcy, Richardson abstained while Ginsberg and Kazarnovsky voted in favor of ratifying the involuntary filings. Given the unanimity requirement for a bankruptcy filing, an abstention was a pocket veto. In the discussion on this issue, Richardson advised his fellow board members that he would request information from the parties before deciding on how to vote. It took him five weeks to make his request, at which time he circulated an eleven page letter to counsel for the Petitioning Creditors, the Debtors, the Highland Limited Partners and the Movants, asking extensive questions regarding the issues brought up in the documents provided to him by the parties at the directors’ meetings. Ex. 94. This was a transparent stalling tactic, the effect of which was to prevent ratification of the filings. As to the second vote, the three directors voted unanimously in favor of the appointment of a chapter 11 trustee or trustees for these cases.

Finally, Richardson gave his interpretation of what the bankruptcy proof provision was all about. R. 333, 393-98. As he read the bylaw, its purpose was to place an “independent” director on the corporate boards of directors to prevent, in the event that Ginsberg filed for personal bankruptcy, Ginsberg’s filing from “suck[ing] all of these properties into that proceeding,” R. 333, 393, in order that, as Richardson further explained, “a creditor of Mort Ginsberg would not be able to say that somehow there was a corporate sham and therefore be able to pull these assets in.” R. 395. Interestingly, Richardson claims not to have known that DLJ had foreclosed on Ginsberg’s equity interests, (at odds with other of his testimony; see R. 397) thereby making itself shareholder, but he did inquire as to whether he should resign as director after learning that DLJ had purchased all the bonds and was now foreclosing upon the properties. R. 397-99. Obviously, Richardson clearly be-

*723 lieved that the reason for his presence, as DLJ’s guardian of the properties, had been mooted because DLJ was in complete control, having installed receivers at the properties and having started to foreclose on them,

II.

The Movants argue that each of the eleven involuntary petitions was filed in bad faith and should be dismissed pursuant to section 1112(b) of the Bankruptcy Code. 15 This conclusion is said to be warranted because Ginsberg, acting on behalf of the Debtors, initiated, funded and identified seven friendly creditors to prosecute the involuntary petitions so each Debtor could obtain improper leverage against the Movants by gaining access to the bankruptcy court without violating the bankruptcy restrictions in the bylaws of the various Debtors or their corporate general partners. The Movants point out that the filing of each petition was timed either to stay a scheduled foreclosure sale or to coincide with a particular Debtor’s deadline to file an appellate pleading, which resulted, the Movants claim, in the frustration of their attempts to enforce their rights against each property. The Movants dismiss the Debtors’ attempts to excuse such behavior by countering that there is no such doctrine as “justifiable collusion.”

The Movants have centered their case around the Second Circuit decision, Federal Deposit Ins. Corp. v. Cortez, 96 F.3d 50 (2d Cir.1996), which held that, in certain circumstances, a collusive filing of a bankruptcy case is a fraud upon the jurisdiction of the Bankruptcy Court and therefore susceptible to immediate dismissal. Because the Movants believe that the Cortez case is controlling, they did not offer initially any evidence regarding any of the Debtors’ financial situations, their equity (or lack thereof) in the properties or their ability to reorganize. In other words, the Movants are of the opinion that if I were to find that collusion did occur, under Cortez I am bound to dismiss cases. As an alternative, the Movants suggest that the facts warrant conversion of the cases to chapter 7 or appointment of a chapter 11 trustee.

The Debtors and Petitioning Creditors (collectively, the “Respondents”) filed a joint post-trial brief in opposition to the Movants’ motion. The Respondents deny that the Debtors colluded with the Petitioning Creditors to file, or orchestrate the filing of, these eases. While conceding that Ginsberg did facilitate .the filing by supplying information to the Petitioning Creditors and advancing funds to their counsel, Pryor Cashman, the Respondents contend that Ginsberg acted in his individual capacity and that the Debtors took no action. They point out that any restriction contained in the Debtors’ bylaws regarding the filing of voluntary petitions in bankruptcy did not extend to prevent Ginsberg or creditors of the Debtors from taking independent action such as filing an involuntary petition. In any event, the Respondents argue, the Petitioning Creditors hold valid claims against the Debtors, which the Movants never contested, and filed these cases for legitimate reasons on the careful advice of counsel, and only after counsel had performed extensive due diligence. The Respondents posit that seeking bankruptcy protection for the Debtors was the best and only method available to (i) preserve any chance of recovery on their claims (as well as those of the limited partners) before the Movants foreclosed on the assets of each Debtor, (ii) challenge the validity of the Movants’ claims, and (iii) find a third party to fund a plan of reorganization or purchase the properties, which would result in a greater recovery to all parties than would be obtained from the pending foreclosures.

Moreover, the Respondents say, any aid Ginsberg gave to the Petitioning Creditors regarding the filing of the petitions was in response to the bankruptcy-remote provision contained in the bylaws of each entity that *724 prevented the Debtors from filing voluntary petitions in bankruptcy absent a unanimous vote by the board of directors and shareholders. • The Respondents argue that attempting to obtain such a vote, in light of their contention that the so-called independent director actually was beholden to DLJ, would have been an exercise in futility, a contention which subsequent events seem to have borne out. The Respondents emphasize that the bankruptcy remote provisions notwithstanding, the boards of directors had fiduciary obligations to creditors and limited partners which had to be carried out, even if to do so would have frustrated the mortgagee’s efforts to foreclose. Finally, the Debtors claim that the alleged failure of the Movants to file deficiency motions in the state courts has left certain Debtors with unencumbered assets which could be used to fund a plan.

Both the Kingston Square Limited Partners and the Highland Montgomery Limited Partners state that because they have filed joinders in support of certain of the involuntary petitions, their acts ratify those filings and immunize the petitions from claims of bad faith or collusion. In addition, echoing what the Petitioning Creditors have maintained throughout these cases, these limited partners state that parties exist with the financial means available to effectuate a joint plan or individual plans of reorganization which would produce some recovery to them that would otherwise be denied by virtue of the foreclosures the Movants are pursuing. Finally, the limited partners ask that, at a minimum, I deny the Movants’ motion and appoint chapter 11 trustees because, they say, the receivers have mismanaged the properties and the Debtors’ individual boards of directors have breached their fiduciary duties to the Debtors, creditors and limited partners.

III.

A. Dismissal of Involuntary Cases.

At first blush, these cases seem ripe for dismissal. The Debtors are single asset entities with no employees whose involuntary petitions were filed at the behest of their principal to circumvent what effectively were prohibitions on the filing of voluntary petitions. The petitions were filed while the Debtors were embroiled in a dispute with their secured creditor and were facing foreclosure. See, e.g., Matter of Little Creek Development Co., 779 F.2d 1068 (5th Cir.1986) (citing examples in cases); In re Colmes Indus. Terminal, Inc., 931 F.2d 222, 227 (2d Cir.1991); In re 9281 Shore Road Owners Corp., 187 B.R. 837 (E.D.N.Y.1995); In re Con Am Grandview Assocs., L.P., 179 B.R. 29 (S.D.N.Y.1995), but see Carolin Corp. v. Miller, 886 F.2d 693, 701 (4th Cir.1989) (warning of the dangers of forcing particular facts into previously identified patterns).

As the Movants, Chase and REFG have the burden of producing evidence that there is “cause” for relief under § 1112(b). Thereafter, if that burden is met, the Debtor must show that relief is not warranted. In re Lizeric Realty Corp., 188 B.R. 499, 503 (Bankr.S.D.N.Y.1995). Although the term “cause” is not defined, section 1112(b) sets forth a list, which is not exhaustive, of ten factors that can constitute cause for dismissal or conversion. In re Gucci, 174 B.R. 401, 409 (Bankr.S.D.N.Y.1994); In re Cardi Ventures, Inc., 59 B.R. 18, 21 (Bankr.S.D.N.Y.1985). As a result, within the boundaries of well-settled principles, a bankruptcy judge has wide discretion to determine if cause exists and how ultimately to dispose of the case.

Even though the Bankruptcy Code does not explicitly require that a chapter 11 petition be filed in good faith, many of the circuit courts have opined as to when a bankruptcy court may dismiss a voluntary chapter 11 petition at the inception of the case. See, e.g., Carolin Corp., 886 F.2d 693 (collecting cases); Little Creek Development Co., 779 F.2d at 1072 & n. 2 (collecting cases). Their theory is that if a petition is not filed in good faith, it is an abuse of judicial process or of the jurisdiction of the bankruptcy court. Carolin Corp., 886 F.2d at 699; In re Garsal Realty, Inc., 98 B.R. 140, 150 (Bankr.N.D.N.Y.1989).

*725 The inquiry into whether a bankruptcy petition was filed in good faith does not change even if the petitions under scrutiny are involuntary ones. See e.g., Federal Deposit Ins. Corp. v. Cortez, 96 F.3d 50 (2d Cir.1996); In re Winn, 49 B.R. 237, 239 (Bankr.M.D.Fla.1985) (involuntary filing does not prevent court from inquiring into the presence or absence of good faith, especially to the extent of the debtor’s involvement and role in the instigation of the involuntary ease); In re G-2 Realty Trust, 6 B.R. 549, 552-53 (Bankr.D.Mass.1980) (if an involuntary petition insulated a debtor from an examination into the good faith of the filing, this would encourage collusion by a debtor seeking to fraudulently procure bankruptcy court jurisdiction).

Determining whether a petition has been filed in good faith is difficult because the very term itself, “good faith,” is an amorphous notion that is largely defined by factual inquiry. In re Laguna Assocs., L.P., 30 F.3d 734 (6th Cir.1994); In re Albany Partners, Ltd., 749 F.2d 670 (11th Cir.1984). Because no single factor is determinative of good faith, I must examine the facts and circumstances of each case in light of several established guidelines or indicia, essentially conducting an “on-the-spot evaluation of the Debtor’s financial condition [and] motives,” Laguna Assocs.,