In re Kingston Square Associates

214 B.R. 713 (1997)

From our private database of 46,200+ case briefs, written and edited by humans—never with AI.

In re Kingston Square Associates

United States Bankruptcy Court for the Southern District of New York
214 B.R. 713 (1997)

Facts

Morton L. Ginsberg controlled 38 real estate entities (Ginsberg entities) that were restructured via a 1991 mortgage from the Chase Manhattan Bank, N.A. (Chase) (creditor) and a 1993 mortgage from REFG Investor Two, Inc. (REFG) (creditor), a wholly owned subsidiary of DLJ, an investment bank. Both loans prohibited a voluntary bankruptcy filing by the Ginsberg entities without unanimous director approval (for corporations) or unanimous general and limited-partner approval (for limited partnerships). The Ginsberg entities had three-member boards: Ginsberg, a Ginsberg designee, and Laurence Richardson, a putatively independent director who was a DLJ consultant and former DLJ employee. In 1994, Chase and REFG issued notices of default and began foreclosing against the mortgaged properties. By mid-1996, Chase and REFG had won $370 million in judgments against the Ginsberg entities. Unable to petition for voluntary bankruptcy, Ginsberg arranged for a Ginsberg-entity trade creditor and several Ginsberg-entity professionals (collectively, petitioning creditors) to file involuntary-bankruptcy petitions against 11 Ginsberg entities (bankrupt entities) (debtors). Chase and REFG moved to dismiss the petitions under § 1112 of the Bankruptcy Code, arguing that the petitions were filed in bad faith because they were collusive. The bankruptcy court conducted a trial limited to bad faith. The trial evidence showed that, among other things, (1) the mortgaged properties might be worth more than the outstanding debt; (2) the Ginsberg entities never held director meetings, largely due to Ginsberg and his designee’s view that Richardson was DLJ’s pawn; (3) Richardson knew about the foreclosure proceedings but did nothing; (4) Richardson had a limited and incorrect understanding of the scope of his fiduciary duties to creditors and limited partners; (5) DLJ wound up as both a lender and shareholder after foreclosing on Ginsberg’s equity interests, putting DLJ in the position of owing fiduciary duties to creditors and limited partners while at the same time limiting the Ginsberg entities’ options; (6) the mortgaged properties were not adequately maintained or marketed, limiting their sale value; and (7) the petitioning creditors found at least one potential buyer for the mortgaged properties.

Rule of Law

Issue

Holding and Reasoning (Brozman, C.J.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 798,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.

    Unlock this case briefRead our student testimonials
  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.

    Learn about our approachRead more about Quimbee

Here's why 798,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 46,200 briefs, keyed to 988 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.

Access this case brief for FREE

With a 7-day free trial membership
Here's why 798,000 law students have relied on our case briefs:
  • Reliable - written by law professors and practitioners, not other law students
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents
  • Access in your class - works on your mobile and tablet
  • 46,200 briefs - keyed to 988 casebooks
  • Uniform format for every case brief
  • Written in plain English - not in legalese and not just repeating the court's language
  • Massive library of related video lessons - and practice questions
  • Top-notch customer support

Access this case brief for FREE

With a 7-day free trial membership