IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

GRAND ACQUISITION, LLC,

 Plaintiff,

 v.

PASSCO INDIAN SPRINGS DST,

a Delaware Statutory Trust Company,

 Defendant.

)

)

)

)

)

)

)

)

)

)

C.A. No. 12003-VCMR

OPINION

Date Submitted: June 30, 2016

Date Decided: August 26, 2016

Date Revised: September 7, 2016

R. Karl Hill, SEITZ, VAN OGTROP & GREEN, P.A., Wilmington, Delaware; 

Attorney for Plaintiff.

John L. Reed, Ethan H. Townsend, and Harrison S. Carpenter, DLA PIPER LLP, 

Wilmington, Delaware; Attorneys for Defendant.

MONTGOMERY-REEVES, Vice Chancellor.
1

In this action, a beneficial owner of a Delaware statutory trust seeks to 

inspect certain of the trust’s books and records. The beneficial owner requested 

inspection under both Section 5.3(c) of the trust’s governing agreement and 12 

Del. C. § 3819, the books and records provision of the Delaware Statutory Trust 

Act. The trust denied the beneficial owner’s request, arguing that the form of the 

request and the motivations underlying the request both were improper. The bulk 

of the parties’ dispute centers on whether the trust agreement incorporates the 

statutory requirements of 12 Del. C. § 3819 and, if so, whether the beneficial 

owner has satisfied those requirements. The parties also dispute the scope of the 

contractual books and records right and the propriety of the trust’s statutory and 

contractual affirmative defenses.

Both parties have moved for summary judgment. For the reasons stated in 

this Opinion, I grant the beneficial owner’s motion for summary judgment and 

deny the trust’s motion for summary judgment.
2

I. BACKGROUND1

A. Parties

Plaintiff Grand Acquisition, LLC (“Grand Acquisition”) is a Nevada limited 

liability company that owns 0.185874 percent of Defendant Passco Indian Springs 

DST’s (“Passco Trust” or the “Trust”) Class A interests. Passco Trust is a 

Louisville, Kentucky-based Delaware statutory trust (“DST”) that was formed on 

or around July 27, 2011. The Trust owns an apartment complex in Louisville 

called The Legends of Indian Springs Apartments and is managed administratively 

by non-party Passco Indian Springs Manager, LLC (“Passco Manager”). Passco 

Manager is owned and controlled by non-party Passco Companies, LLC (“Passco 

Parent”).

B. Facts

On September 30, 2015, Grand Acquisition sent Passco Trust a letter (the 

“Demand”) demanding to inspect and make copies of the current list of the Trust’s 

beneficial owners (the “Owners”), those Owners’ contact information, and their 

respective ownership interests in the Trust (collectively, the “Requested 

Information”).

2

 On October 28, 2015, Passco Trust denied the Demand, noting

 

1

The facts are drawn from the pleadings and the evidence submitted by the parties. 

See Ct. Ch. R. 56(c).

2

Trans. Aff. of Harrison S. Carpenter (“Carpenter Aff.”) Ex. A.
3

that it “takes its obligations to protect the confidential nature of the information 

provided by the investors and related books and records very seriously.”

3

Passco 

Trust also requested that Grand Acquisition “provide the basis for [its] request”

because “[u]nder Delaware statutory law, such information cannot be released 

unless there is a reasonable basis for such action” that is “related to the beneficial 

owner’s interest as a beneficial owner of the statutory trust.”4

On December 18, 2015, Grand Acquisition sent a follow up letter to Passco 

Trust (the “Supplemental Demand”) and maintained that the Delaware Statutory 

Trust Act (the “DST Act”)5allows a trust “unfettered freedom to modify or 

eliminate” the “reasonable basis” requirement regarding a books and records 

demand.6 According to Grand Acquisition, Section 5.3(c) of the Amended and 

Restated Trust Agreement dated and effective as of November 17, 2011 (the “Trust 

Agreement”), the Trust Agreement’s books and records provision (“Section 

5.3(c)”),

7

does just that and applies “broadly and without limitation []and 

specifically without incorporating any of the permissive preconditions under” 12 

 

3 Carpenter Aff. Ex. B.

4

Id.

5

12 Del. C. §§ 3801-3826.

6 Carpenter Aff. Ex. C.

7 Carpenter Aff. Ex. E (“Trust Agreement”) § 5.3(c).
4

Del. C. § 3819 (“Section 3819”).

8

 Nonetheless, Grand Acquisition stated that the

Owners may inspect the Trust’s books and records “for the purpose of 

communicating with other [Owners], which communications may include offering 

to acquire additional beneficial ownership interests, discussing the operations of 

Passco DST, and discussing other matters relating to the [Owners’] investment in 

Passco DST.”9 Further, Grand Acquisition contended that “[i]n both the 

alternative entity context as well as under the more stringent corporate books and 

records standard, Delaware courts uniformly have held that stockholder or member 

communications with other investors relating to the investment is a presumptively 

proper (or reasonable) purpose.”10 Passco Trust did not respond to Grand 

Acquisition’s Supplemental Demand.

C. Procedural History

On February 16, 2016, Grand Acquisition filed its verified complaint,

seeking to inspect and make copies of the Requested Information (the 

“Complaint”). Grand Acquisition asserts both a contractual demand under Section 

5.3(c) (the “Contractual Demand”) and a statutory demand under Section 3819 (the 

“Statutory Demand”). 

 

8 Carpenter Aff. Ex. C.

9

Id.

10 Id.
5

Passco Trust filed its Answer and Defenses to the Complaint on March 22, 

2016, challenging Grand Acquisition’s right to inspect the Requested Information 

under Section 3819 or the Trust Agreement (the “Answer”).11 The parties then 

performed discovery, agreed to resolve this case through cross motions for 

summary judgment, and filed simultaneous opening and answering briefs. On June 

30, 2016, I heard oral argument on the cross motions for summary judgment. This 

Opinion contains my ruling on those cross motions.

D. Parties’ Contentions

Grand Acquisition makes two alternative arguments as to why it is entitled 

to the Requested Information. First, under its Contractual Demand, Grand 

Acquisition contends that Section 5.3(c) grants the Owners access to the Trust’s 

books and records—including the Requested Information—without application of 

any of Section 3819’s statutory preconditions and defenses. Second, under its 

Statutory Demand, Grand Acquisition contends that it has satisfied Section 3819’s 

preconditions to accessing the Trust’s books and records and that Passco Trust’s 

statutory defenses under Section 3819 are meritless.

Passco Trust responds that although the Trust Agreement does not mention 

Section 3819’s preconditions and defenses, it has not affirmatively disavowed 

 

11 Answer at 9.
6

them, and therefore, they still apply. Thus, Passco Trust contends that Grand 

Acquisition is not entitled to the Requested Information because (1) Grand 

Acquisition has not complied with Section 3819’s procedural requirements, (2) 

Grand Acquisition’s stated purpose is not a proper purpose, (3) the Requested 

Information is subject to third-party confidentiality agreements, and (4) Passco

Manager has a good faith belief that revealing the Requested Information to Grand 

Acquisition is not in Passco Trust’s best interests. Alternatively, if the Trust 

Agreement eliminates Section 3819’s preconditions and defenses, then Passco 

Trust asserts an “improper purpose defense,” arguing that Grand Acquisition seeks 

the Requested Information for a personal purpose that is adverse to Passco Trust’s 

interests. Passco Trust also maintains that because the Trust Agreement includes 

the Requested Information in the defined term “Ownership Records,” and because 

such Ownership Records are not included in Section 5.3(c), the Owners plainly are 

not entitled to the Requested Information under Section 5.3(c).

II. ANALYSIS

A. Standard of Review

Under Court of Chancery Rule 56(h),

[w]here the parties have filed cross motions for summary 

judgment and have not presented argument to the Court 

that there is an issue of fact material to the disposition of 

either motion, the Court shall deem the motions to be the 
7

equivalent of a stipulation for decision on the merits 

based on the record submitted with the motions.12

In such situations, “the usual standard of drawing inferences in favor of the 

nonmoving party does not apply.”13 Because there are no disputes of material fact 

and the parties have agreed that this case should be resolved at the summary 

judgment stage,14 I treat their cross motions as a stipulation for decision on the 

merits on the record submitted.15 The “preponderance of the evidence” standard, 

therefore, applies to Grand Acquisition’s claims and Passco Trust’s affirmative 

defenses.16 “Proof by a preponderance of the evidence means proof that something 

is more likely than not. It means that certain evidence, when compared to the 

 

12 Ct. Ch. R. 56(h).

13 See Am. Legacy Found. v. Lorillard Tobacco Co., 886 A.2d 1, 18 (Del. Ch. 2005) 

(citing Ct. Ch. R. 56(h)), aff’d, 903 A.2d 728 (Del. 2006). 

14 See Amended Stipulation & Order to Govern Case Schedule, Docket Item No. 14.

15 See Am. Legacy Found., 886 A.2d at 18 (“[U]nder Court of Chancery Rule 56(h), 

since neither party argues that there is a disputed material issue of fact, the court 

deems the cross-motions to be the equivalent of a stipulation for decision on the 

merits on the record submitted.”).

16 Mooney v. Echo Therapeutics, Inc., 2015 WL 3413272, at *2 (Del. Ch. May 28, 

2015) (“After a trial, the party seeking relief generally has the burden of showing 

entitlement to that relief by a preponderance of the evidence. Here, the ‘trial’

effectively consisted of oral argument based upon a stipulated record. In that

sense, this case procedurally is more analogous to a matter submitted on cross 

motions for summary judgment.”).
8

evidence opposed to it, has the more convincing force and makes you believe that 

something is more likely true than not.”

17

B. Grand Acquisition Is Entitled to the Requested Information 

Under Its Contractual Demand

Grand Acquisition is entitled to the Requested Information under its 

Contractual Demand for the following three reasons: (1) the Owners’ contractual 

right to the Trust’s books and records under Section 5.3(c) is not subject to Section 

3819’s preconditions and defenses; (2) Section 5.3(c) does not exclude Ownership 

Records—which encompass the Requested Information—from the books and 

records to which the Owners are entitled; and (3) Passco Trust has failed to prove

its improper purpose defense. 

1. The Owners’ right to books and records under the Trust 

Agreement is not subject to the DST Act’s preconditions 

and defenses

This Court consistently has treated a contractual books and records right 

provided in a limited liability company’s (“LLC”) or a limited partnership’s (“LP”)

governing instrument as independent from the relevant default statutory right.18 As 

 

17 Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 

2010) (quoting Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *17 

(Del. Ch. Oct. 23, 2002)).

18 See, e.g., Bond Purchase, L.L.C. v. Patriot Tax Credit Props., L.P., 746 A.2d 842, 

853 (Del. Ch. 1999) (concluding that an LP’s partnership agreement entitled 

limited partners to a contractual books and records right that “is in addition to and 

separate from the right to obtain information from the Partnership pursuant to 
9

then-Vice Chancellor Steele held in Bond Purchase, L.L.C. v. Patriot Tax Credit 

Properties, L.P.,

it is not necessary for . . . partnership provisions to 

include explicit language that they are creating 

contractual rights separate and independent of statutory 

rights in order for those provisions to in fact create a 

separate and independent contractual right. Rather, 

where a provision in a partnership agreement appears on 

its face to create a right separate and independent from a 

statutory right or a right granted in another section of the 

partnership agreement, the partnership agreement must 

explicitly state that the provision is merely clarifying or 

placing additional conditions on the other statutory or 

contractual right if in fact that is the provision’s intended 

purpose. Otherwise, this Court will conclude that the 

parties intended the provision to create the separate and 

independent contractual right that the provision on its 

face purports to create.19

 

Section 17-305”—i.e., the statutory right); see also Madison Real Estate 

Immobilien-Anlagegesellschaft Beschrankt Haftende KG v. Kanam USA XIX Ltd. 

P’ship, 2008 WL 1913237, at *4 n.33 (Del. Ch. May 1, 2008) (“The statutory and 

contract claims could have been interdependent, if the contract had specifically 

invoked § 17-305, but [the relevant contractual provision] does not mention § 17-

305. In any event, a partnership agreement can create a contractual inspection 

right ‘in addition to and separate from’ the statutory inspection right.” (quoting 

Bond Purchase, 746 A.2d at 853)); Arbor Place, L.P. v. Encore Opportunity Fund, 

L.L.C., 2002 WL 205681, at *4 n.9 (Del. Ch. Jan. 29, 2002) (extending the holding 

in Bond Purchase to the LLC context); In re Paine Webber Ltd. P’ships, 1996 WL 

535403, at *1 (Del. Ch. Sept. 17, 1996) (“Paine Webber I”) (“The Court concludes 

that, in these particular circumstances, (1) the plaintiffs do not have a statutory 

right to the lists, because they have not established a proper statutory purpose as 

required by 6 Del. C. § 17-305; and (2) the plaintiffs do have a contractual right to 

the lists under the applicable Partnership Agreements.”).

19 746 A.2d at 855.
10

Similarly, this Court has indicated that providing an entity’s owners with an 

unconditional contractual right to inspect that entity’s books and records has the 

practical impact of rendering the relevant statutory preconditions and defenses 

inapplicable to that independent contractual right.20 Although no such cases have 

been decided regarding a DST, this Court’s decisions involving LLCs and LPs 

often cite one another on the basis that “[t]he Delaware [LLC] Act has been 

modeled on the popular Delaware LP Act.”21 That same principle applies to 

 

20 See, e.g., Arbor Place, 2002 WL 205681, at *4 n.9 (“Although the statute provides 

for a good faith defense to a statutory claim for production of books and records, 

this does not appear to be the proper standard to apply in response to a contractual 

claim to inspect books and records.” (citation omitted)); Bond Purchase, 746 A.2d 

at 850-64 (applying the Delaware LP Act’s proper purpose requirement and good 

faith defense to the statutory books and records right, but not to the contractual 

books and records right); In re Paine Webber Qualified Plan Prop. Fund Three, 

L.P. Litig., 698 A.2d 389, 392 (Del. Ch. 1997) (“Paine Webber II”) (“[P]laintiffs 

are not required to demonstrate a proper purpose to enforce their contractual rights 

to the partnership lists because the partnership agreements of these four 

partnerships do not contain an express requirement concerning purpose.”); Paine 

Webber I, 1996 WL 535403, at *5-6 (“[T]his Court should not read [the Delaware 

LP Act’s statutory requirement of a proper purpose] into a partnership agreement 

that grants a limited partner access to partnership information without requiring a 

demonstration of proper purpose.”); Schwartzberg v. CRITEF Assocs. Ltd. P’ship, 

685 A.2d 365, 375 (Del. Ch. 1996) (“It is to be noted that . . . the partnership 

agreements . . . [do not] contain an express limit concerning ‘purpose’ and thus in 

each instance one must begin with the recognition that a partner has no obligation 

to prove that it has a ‘proper purpose’ in order to enforce one of these rights to 

the prescribed access.”). 

21 Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 290 (Del. 1999); see also Arbor 

Place, 2002 WL 205681, at *4 n.9 (“Reliance on a limited partnership case is 

appropriate because Delaware’s LLC Act was ‘modeled on the popular LP Act. In 

fact, its architecture and much of its wording is almost identical to that of the 

Delaware LP Act.’” (quoting Elf Atochem, 727 A.2d at 290)).
11

DSTs,22 making it appropriate to apply the holdings in LLC and LP cases to DSTs, 

at least in this context. Hence, the relevant question is whether the Trust 

Agreement grants the Owners an independent books and records inspection right

that does not incorporate any of the preconditions or defenses in Section 3819. 

Section 5.3(c) expressly entitles the Owners to “inspect, examine and copy 

the Trust’s books and records,” subject only to the condition that such inspection, 

examination, and copying be done “during normal business hours.”23 Because 

Section 5.3(c) does not expressly include Section 3819’s preconditions and 

defenses, the LLC- and LP-related case law24 suggests that the Trust Agreement 

grants the Owners an unconditional right to inspect Passco Trust’s books and 

records.

 

22 See Feeley v. NHAOCG, LLC, 62 A.3d 649, 669 (Del. Ch. 2012) (“[T]he LP Act 

declares as public policy the goal of granting the broadest freedom of contract 

possible. Other Delaware alternative entity statutes, including the LLC Act and 

the Delaware Statutory Trust[] Act, are modeled on the LP Act . . . and adopt the 

same policy of maximizing freedom of contract.” (emphasis added) (footnotes 

omitted)); Cargill, Inc. v. JWH Special Circumstance LLC, 959 A.2d 1096, 1111 

n.60 (Del. Ch. 2008) (“[T]he policy regarding statutory trusts [giving maximum 

effect to the principle of freedom of contract and to the enforceability of governing 

instruments] is consistent with that for other alternative business entities. This can 

be seen in the Delaware Revised Uniform Limited Partnership Act (‘DRULPA’). 

Similarly, the Delaware Limited Liability Company Act explicitly embodies a 

policy of giving ‘the maximum effect . . . to the enforceability of limited liability 

company agreements.’” (citations omitted) (citing 6 Del. C. § 17-1101(c)) 

(quoting 6 Del. C. § 18-1101(b))).

23 Trust Agreement § 5.3(c).

24 See supra note 20.
12

According to Passco Trust, however, Cargill, Inc. v. JWH Special 

Circumstance LLC25 indicates that a DST’s governing instrument must expressly 

disclaim Section 3819’s preconditions and defenses for them to be rendered 

inapplicable.26 In Cargill, Vice Chancellor Parsons held that the prefatory phrase 

“[e]xcept to the extent otherwise provided in the governing instrument”—which 

also appears in Section 3819—indicates that “in the absence of language in the 

governing instrument . . . to the contrary,” the DST Act’s default provisions 

apply.

27

 Passco Trust contends, therefore, that Grand Acquisition’s position that 

“the general ‘books and records’ provision of the Trust Agreement overrides the 

Act because it addresses the subject matter of books and records and does not 

mention a proper purpose requirement, confidentiality, or grant certain powers to 

the manager . . . is flat wrong.”28 From Passco Trust’s standpoint, the Owners’ 

broad books and records right under Section 5.3(c) is tantamount to “silence”

 

25 959 A.2d 1096.

26 Def.’s Opening Br. 37 (“Indeed, whereas the remainder of Section 5.3(c) defines 

such parameters, the sentence on which Grand Acquisition relies emphasizes only 

when members can carry out an inspection; it does not provide for the wholesale 

elimination of Section 3819’s demand requirements. Nothing in the Trust 

Agreement is expressly ‘contrary’ to the Act, per Cargill.”).

27 959 A.2d at 1116 (citing 12 Del. C. § 3809).

28 Def.’s Opening Br. 6.
13

regarding Sections 3819(a)29 and (c),30 which does not, as a matter of law, 

constitute “contrary” language.31 

Yet, Passco Trust ignores the context in which the holding in Cargill arose. 

In Cargill, a DST’s representative brought fiduciary duty claims against the trust’s 

managing owner.32 The representative also brought fiduciary duty claims against 

the managing owner’s parent and grandparent companies “based on a line of 

partnership cases beginning with In re USACafes, L.P. Litigation,” which “deal 

with the fiduciary duties owed by those that control a fiduciary of an underlying 

 

29 12 Del. C. § 3819(a) (stating that “[e]xcept to the extent otherwise provided in the 

governing instrument,” a beneficial owner must have a “purpose reasonably 

related to the beneficial owner’s interest as a beneficial owner of the statutory 

trust” to inspect the trust’s books and records).

30 Id. § 3819(c) (providing that “[e]xcept to the extent otherwise provided in the 

governing instrument, the trustees or other persons who have authority to manage 

the business and affairs of the statutory trust” may withhold any information from 

the trust’s beneficial owners “the disclosure of which such persons in good faith 

believe is not in the best interest of the statutory trust or could damage the 

statutory trust or its business or which the statutory trust is required by law or by 

agreement with a third party to keep confidential”).

31 Def.’s Opening Br. 7 (“In Grand Acquisition’s view, silence equates to ‘otherwise 

provided,’ but the Trust’s view is the view shared by this Court. That is, 

‘otherwise provided’ means ‘otherwise provided’: ‘[I]n the absence of language in 

the governing instrument or the Act itself to the contrary, this Court must apply 

the statutory and common law relating to trusts.’ Cargill, Inc. v. JWH Special 

Circumstances LLC, 959 A.2d 1096, 1116 (Del. Ch. 2008) (emphasis added). 

There is nothing in the Trust Agreement that is ‘to the contrary’ of what is 

provided for in Sections 3819(a) and (c). The Cargill case ends Grand 

Acquisition’s case as a matter of law.”).

32 Cargill, 959 A.2d at 1099.
14

entity.”33 In response, the managing owner, its parent, and its grandparent argued 

that “the [DST] Act creates a kind of sui generis entity for which virtually no 

default duties are implied by the Act or the common law,” and “in the absence of 

any positive statement in the Trust Agreement explicitly attributing fiduciary 

duties to a corporate parent of a fiduciary, such a corporate parent would not owe 

any duty to the statutory trust whatsoever.”34 In rejecting that contention, Vice 

Chancellor Parsons noted as follows:

[T]he [DST] Act generally does not create duties or 

specify mandatory standards of review or liability, but 

rather references certain default principles, such as: 

“Except to the extent otherwise provided in the 

governing instrument of a statutory trust or in this 

subchapter, the laws of this State pertaining to trusts are 

hereby made applicable to statutory trusts . . . .” Thus, in 

the absence of language in the governing instrument or 

the Act itself to the contrary, this Court must apply the 

statutory and common law relating to trusts.35

Vice Chancellor Parsons further noted that rather than addressing the scope of the 

applicable fiduciary duties, the relevant provision in the trust agreement addressed 

only the circumstances under which the managing owner and its affiliates could be 

 

33 Id. at 1110.

34 Id.

35 Id. at 1116 (footnote omitted) (quoting 12 Del. C. § 3809).
15

exculpated from liability for a fiduciary breach.36 As a result, Vice Chancellor 

Parsons held that the default fiduciary duties apply because the trust agreement 

“simply does not address whether [the managing owner’s parent and grandparent] 

owed any fiduciary duty to the Trust.”37

The Trust Agreement here, however, is not silent as to the Owners’ books 

and records inspection right in the same way that the trust agreement in Cargill 

was silent as to the managing owner’s fiduciary duties. A more apt analogy would 

be if the Trust Agreement did not create a books and records inspection right at all 

and, based on that absence, Grand Acquisition contended that because Section 

3819’s preconditions and defenses were not included, the Trust Agreement 

eliminated them. That is not the situation here. Section 5.3(c) provides the 

Owners with an unqualified contractual right to the Trust’s books and records, 

which is contrary to Section 3819’s qualified statutory right. This case, therefore, 

is distinguishable from Cargill.

Passco Trust also asserts that its argument that the Trust Agreement must 

expressly disclaim Section 3819 to avoid its preconditions and defenses “is 

buttressed by considering” the differences between Section 3819 and the LLC and 

 

36 Id. at 1115-16.

37 Id.
16

LP Acts.38 Passco Trust highlights the fact that Section 3819’s language is nearly 

identical to the language in 6 Del. C. § 18-305 (“Section 18-305”) and 6 Del. C. § 

17-305 (“Section 17-305”), the LLC and LP analogs of Section 3819, 

respectively.39 The major difference between those three sections is the prefatory 

phrase in subsections (a) and (c) of Section 3819,40 which is absent from both 

Sections 18-30541 and 17-305.42 On the basis of that distinction, and to avoid 

“render[ing] the prefatory clause meaningless,” Passco Trust asserts that “unlike 

the LLC Act and DRULPA, the [DST] Act does provide a series of default 

 

38 Def.’s Opening Br. 34.

39 See id. at 35.

40 See 12 Del. C. § 3819(a) (“Except to the extent otherwise provided in the 

governing instrument of a statutory trust, each beneficial owner of a statutory trust, 

in person or by attorney or other agent, has the right . . . .”), (c) (“Except to the 

extent otherwise provided in the governing instrument of a statutory trust, the 

trustees or other persons who have authority to manage the business and affairs of 

the statutory trust shall have the right to keep confidential from the beneficial 

owners . . . .”).

41 6 Del. C. § 18-305(a) (“Each member of a limited liability company, in person or 

by attorney or other agent, has the right . . . .”), (c) (“The manager of a limited 

liability company shall have the right to keep confidential from the members 

. . . .”).

42 6 Del. C. § 17-305(a) (“Each limited partner, in person or by attorney or other 

agent, has the right . . . .”), (b) (“A general partner shall have the right to keep 

confidential from limited partners . . . .”).
17

provisions for a books and records action, each of which the governing document 

must expressly alter.”43 

Although Passco Trust would have me read the prefatory clause to mean that 

the Trust Agreement must affirmatively disclaim Section 3819’s preconditions and 

defenses in order to avoid them, I interpret that clause differently. Sections 18-305 

and 17-305 both have nearly identical subsections allowing an LLC’s or LP’s 

governing document to restrict the inspection rights granted under that section.44 

 

43 Def.’s Opening Br. 36 (citing Lukk v. State Farm Mut. Auto. Ins. Co., 2014 WL 

4247767, at *4 (Del. Super. Aug. 27, 2014), corrected by (Del. Super. Aug. 29, 

2014) (“When different words are used in two clauses like this it must be 

presumed different meanings are intended.”); States Roofing Corp. v. Winter, 587 

F.3d 1364, 1370-72 (Fed. Cir. 2009) (applying the canon of statutory 

interpretation: “different terms are presumed to have different meanings”)). This 

Court’s 1998 decision Nakahara v. The NS 1991 American Trust, 739 A.2d 770 

(Del. Ch. 1998), confirms that because the DST Act, the LLC Act, and the LP Act 

are related statutory schemes modeled on one another, it is appropriate to compare 

Section 3819 to Sections 18-305 and 17-305.

In Nakahara, the Court declined to draw any inferences regarding the Delaware 

General Assembly’s intent in drafting the DST Act based on differences between 

that Act and the Delaware General Corporation Law (the “DGCL”) because “the 

two statutes are simply too different to draw any conclusions from a comparison 

of their various provisions.” Id. at 781. The Court noted, however, that “[h]ad the 

General Assembly, in crafting the [DST Act], instead adopted wholesale the 

headings and format of the [DGCL]—or even of the [DGCL’s] indemnification 

provision—I might be more persuaded that the dissimilarity between the 

indemnification provisions of the [DST Act] and the [DGCL] was meaningful.” 

Id. at 782. In other words, “[w]ith all else the same, a single difference would 

have more meaning.” Id.

44 See 6 Del. C. § 18-305(g) (“The rights of a member or manager to obtain 

information as provided in this section may be restricted in an original limited 

liability company agreement or in any subsequent amendment approved or 
18

Section 3819 has no equivalent subsection. Instead, the prefatory clause in Section 

3819 is what indicates that a DST’s governing document may restrict the 

inspection rights granted under that section. To the extent that Sections 3819, 18-

305, and 17-305 mirror each other, the prefatory clause in Sections 3819(a) and (c) 

serves the same purpose as Sections 18-305(g) and 17-305(f).

Thus, there is no basis on which I can conclude that because of the prefatory 

clause, the Trust Agreement must expressly disclaim Section 3819’s preconditions 

and defenses for them to be rendered inapplicable. I conclude, therefore, that 

under the Trust Agreement, (1) the Owners can inspect the Trust’s books and 

records without complying with Section 3819’s procedural and proper purpose 

requirements and (2) Passco Trust cannot withhold its books and records on the 

basis that the Requested Information is subject to third-party confidentiality 

agreements or that Passco Manager has a good faith belief that revealing the 

Requested Information to Grand Acquisition is not in Passco Trust’s best interests.

 

adopted by all of the members or in compliance with any applicable requirements 

of the limited liability company agreement.”); 6 Del. C. § 17-305(f) (“The rights 

of a limited partner to obtain information as provided in this section may be 

restricted in an original partnership agreement or in any subsequent amendment 

approved or adopted by all of the partners or in compliance with any applicable 

requirements of the partnership agreement.”).
19

2. The Owners’ right to books and records under the Trust 

Agreement includes the Requested Information

Because Grand Acquisition’s right to inspect Passco Trust’s books and 

records under Section 5.3(c) is contractual, the Trust Agreement establishes the 

scope of the books and records to which Grand Acquisition is entitled.45 The Trust 

Agreement does not define the term “books and records,” but it defines the term 

“Ownership Records” to include “the name, mailing address and Percentage Share 

of each Owner,”

46 which is the information that Grand Acquisition seeks here. 

Section 5.3(c), however, does not expressly state that Owners may inspect 

Ownership Records. Instead, the Trust Agreement only mentions Ownership 

Records in Section 5.3(i), which obligates Passco Manager to “provide to the 

Trustee a copy of the Ownership Records promptly after each revision thereto.”47 

According to Passco Trust, therefore, the doctrine of expressio unius dictates that 

because “Ownership Records” is a defined term that includes the Requested 

Information and because Section 5.3(c) does not include Ownership Records 

among the “books and records” that Owners are entitled to inspect, the Trust 

 

45 See Bond Purchase, 746 A.2d at 855 (“Having concluded that Section 14.1 grants 

. . . a contractual right to inspect, examine and copy the Partnership’s ‘books and

records’ at all times, I must determine whether the term ‘books and records’ 

encompasses the Investor List.”).

46 Trust Agreement § 1.1.

47 Id. § 5.3(i).
20

Agreement intentionally excluded the Requested Information from the scope of the 

Owners’ contractual inspection right. Passco Trust maintains that under Section 

5.3(i), only the Trustee may inspect the Ownership Records. And, Passco Trust

asserts that Section 5.3(c)’s other clauses regarding Passco Manager’s obligations 

as to the books and records48 “show[] that the ‘books and records’ contemplated 

thereby relate to financial information about the Trust (not its Owners).”49

Although Passco Trust’s argument does have some logical appeal, I disagree 

that the Trust Agreement excludes the Requested Information from the contractual 

inspection right in Section 5.3(c). A plain reading of Section 5.3(i) indicates that it 

requires Passco Manager to “provide to the Trustee a copy of the Ownership 

Records promptly after each revision thereto” rather than creating an exclusive 

inspection right in favor of the Trustee.50 In addition, the definition of Ownership 

Records indicates that Passco Manager is obligated to revise those Records and 

 

48 Id. § 5.3(c) (requiring the Manager to “keep customary and appropriate books and 

records relating to the Trust and the Trust Estate,” “obtain annual audited financial 

reports for the Trust,” “keep customary and appropriate books and records of 

account for the Trust,” and “maintain appropriate books and records in order to 

provide reports of income and expenses with respect to the Trust Estate”).

49 Def.’s Opening Br. 48-49.

50 Trust Agreement § 5.3(i).
21

maintain them in accordance with Exhibit C to the Trust Agreement.

51

 Both 

Section 5.3(i) and the defined term “Ownership Records,” therefore, seem wholly 

unrelated to the Owners’ inspection right in Section 5.3(c). They simply impose 

affirmative obligations on Passco Manager regarding the maintenance and revision 

of the Ownership Records. 

Similarly, rather than defining the scope of the Owners’ inspection right, the 

other provisions in Section 5.3(c)52 impose affirmative obligations on Passco 

Manager regarding the maintenance of certain specific books and records. In fact, 

the opening sentence of Section 5.3(c) indicates that “books and records” should be 

defined by their “customary” meaning.53 Certainly, a DST’s customary “books 

and records” include the Requested Information, as Section 3819 expressly 

includes “[a] current list of the name and last known business, residence or mailing 

address of each beneficial owner and trustee.”54 “If [Passco Trust] wished to bar 

 

51 Id. § 1.1 (“‘Ownership Records’ means the records maintained by the Manager, 

substantially in the form as set forth on Exhibit C, indicating from time to time the 

name, mailing address and Percentage Share of each Owner, which records shall 

be revised by the Manager contemporaneously . . . .”).

52 See supra note 48.

53 Trust Agreement § 5.3(c) (“The Manager shall keep customary and appropriate 

books and records relating to the Trust and the Trust Estate . . . .” (emphasis 

added)).

54 12 Del. C. § 3819(a)(2); see also Arbor Place, 2002 WL 205681, at *3 & n.6 

(holding that the “LLCs’ member lists fall within the broad language of [the LLC 
22

access to the names and addresses of [Owners], it could have done so explicitly in 

the” Trust Agreement.

55 Simply creating affirmative obligations to maintain, 

revise, or provide certain documents that may be considered “books and records” 

does not, without more, operate to limit the Owner’s contractual inspection right 

under Section 5.3(c).56 I conclude, therefore, that Grand Acquisition’s contractual 

inspection right under the Trust Agreement includes the Requested Information.

3. Passco Trust has failed to prove its implied improper 

purpose defense

Passco Trust asserts an implied “improper purpose defense” as its final basis 

for denying Grand Acquisition’s demand to inspect the Requested Information. 

The improper purpose defense was first articulated in Chancellor Allen’s 1996 

 

agreements’ books and records provisions] as they are clearly understood to be 

‘records’ of the company” based, in part, on the fact that “one item on the list of 

records in § 18-305 is ‘[a] current list of the name and last known business, 

residence or mailing address of each member and manager’”); Def.’s Answering 

Br. 24 (“The Trust does not disagree that, under Section 3819, a trust’s ‘books and 

records’ would generally include a list of investors. Indeed, the same is true under 

the LLC Act and the DRULPA.”).

55 Parkcentral Global, L.P. v. Brown Inv. Mgmt., L.P., 1 A.3d 291, 296 (Del. Ch. 

2010). 

56 See RED Capital Inv. L.P. v. RED Parent LLC, 2016 WL 612772, at *3 (Del. Ch. 

Feb. 11, 2016) (“Section 10.2(d) provides, in turn, that Company officers shall 

prepare and deliver to Managers monthly management reports and an annual 

audited balance sheet, income statement, and cash flow statement. This latter 

provision does not, contrary to RED Parent’s position, restrict a Manager’s access 

to information; requiring officers to prepare and deliver certain information to 

Managers does not, without more, limit a Manager’s access to additional 

information.” (footnotes omitted)).
23

decision Schwartzberg v. CRITEF Associates Limited Partnership.

57

 In 

Schwartzberg, Chancellor Allen stated, in the context of a limited partner’s request 

to inspect a list of the partnership’s partners, as follows:

In the absence of an explicit contractual provision or 

statutory language to the contrary, and in circumstances 

in which, as here, a partner denying another partner 

access to partnership business records can show that the 

partner seeking access is doing so for a purpose personal 

to that partner and adverse to the interests of the 

partnership considered jointly, the court is warranted in 

denying the request for access.

58

 

Therefore, Passco Trust must prove by a preponderance of the evidence that (1) no 

provision in the Trust Agreement explicitly negates the proper purpose 

requirement, (2) Grand Acquisition seeks the Requested Information for a personal 

purpose, and (3) granting Grand Acquisition the right to inspect the Requested 

Information actually would be adverse to the Trust’s interests.59 

As an initial matter, there is an open issue as to whether the improper 

purpose defense applies here. Although Passco Trust argues that the improper 

 

57 685 A.2d 365 (Del. Ch. 1996).

58 Id. at 377.

59 See Bond Purchase, 746 A.2d at 857 (“Under the ‘improper purpose defense,’ this 

court is warranted in denying a partner’s request for access to a partnership’s 

records when (i) neither an explicit contractual provision in a partnership 

agreement nor statutory language negate the notion that partner must have a proper 

purpose and (ii) the partner denying another partner access to partnership business 

records can show that the partner seeking access is doing so for a purpose personal 

to that partner and adverse to the interest of the partnership considered jointly.”).
24

purpose defense should apply to DSTs as it does to LLCs and LPs,

60 it 

acknowledges that “no Delaware court has addressed [whether the improper 

purpose defense applies] in the Delaware Statutory Trust context.”61 And, Grand 

Acquisition contends that because “the Trust Agreement contains a controlling 

provision that entitles it to the information requested with no condition,” “there is 

no basis to imply an improper purpose defense.”62 In any event, I need not decide 

whether the improper purpose defense applies here because even if it did, Passco 

Trust has failed to prove that releasing the Requested Information to Grand 

Acquisition actually would harm the Trust. 

Passco Trust’s improper purpose defense is based on its belief that Grand 

Acquisition is affiliated with Maxus Realty Trust, LLC (“Maxus”). Grand 

Acquisition’s affiliation with Maxus is demonstrated by “several publicly-available 

documents.”63 First, a news article on Maxus’s website announces Maxus and 

Grand Acquisition’s joint acquisition of an apartment community, the Reserve at 

Tranquility Lake, and states that Grand Acquisition’s owners are related parties of 

 

60 Def.’s Opening Br. 54 (citing Bond Purchase, 746 A.2d at 857 (applying the 

improper purpose defense in the LP context)); see also Arbor Place, 2002 WL 

205681, at *4 n.9 (applying the improper purpose defense in the LLC context).

61 Def.’s Opening Br. 54.

62 Pl.’s Answering Br. 28.

63 Def.’s Opening Br. 12.
25

MRTI, a Maxus subsidiary.64 Second, one of Grand Acquisition’s two members, 

GMG Real Estate, LLC,65 is owned by Greg Orman, a member of the Maxus

board.66 Third, Grand Acquisition’s operating agreement states that David 

Johnson, Maxus’s CEO, is a guarantor of certain Grand Acquisition debt and 

grants Johnson the power to serve as Grand Acquisition’s “Special Manager” and 

“break any deadlocked vote” between the company’s managers if Grand 

Acquisition defaults on any of that guaranteed debt.67 Grand Acquisition, for its 

part, denies that it is a “subsidiary or affiliate of any Maxus entity” and states that 

Maxus and its affiliates “do not have any ownership or membership interest in . . . 

and do not have direct or indirect control of” Grand Acquisition.68

According to Passco Trust, Grand Acquisition’s relationship with Maxus is 

problematic because of Passco Parent’s “long history of painful dealings with 

Maxus.”69 Alan Clifton, Passco Parent’s Senior Vice President of Investments & 

 

64 Carpenter Aff. Ex. H, at PASSCO000010.

65 Carpenter Aff. Ex. J, at GA400-01.

66 Carpenter Aff. Ex. K, at PASSCO000002-04.

67 Carpenter Aff. Ex. J, at GA387-88.

68 Pl.’s Resps. to Def.’s Req. for Produc. & Interrogs., at 5.

69 Def.’s Opening Br. 14.
26

Operations, detailed three of those “painful dealings” in an affidavit.70 In each of 

those instances, a Passco Parent affiliate managed a real estate asset in which a 

Maxus affiliate was invested.

71

 In one instance, the Maxus affiliate sued the 

Passco Parent affiliate for not acknowledging its investment in the real estate 

asset.

72 In the other two instances, the Maxus affiliate exercised its right to dissent 

to a sale of the real estate asset.73 Passco Trust also points to the following

statements made by the District Court of Douglas County, Nebraska, in an action 

captioned Institutional Bond Investors II L.L.C. v. America First Tax Exempt 

Investors, L.P., regarding an entity that Johnson controlled:

[Johnson’s entity] employs a business strategy wherein it 

purchases a small fraction of a company or partnership in 

order to gain a toehold in the enterprise . . . to gain access 

to sensitive business information which, if successful, is 

then used for exploitation of either the business, its less 

sophisticated shareholders, or both.74

“In sum,” the Trust’s improper purpose defense is based on its view that Grand 

Acquisition, as a Maxus affiliate, will use the Requested Information “to be 

 

70 Carpenter Aff. Ex. D (“Clifton Aff.”).

71 Id. ¶ 4.

72 See id. ¶ 4(a).

73 See id. ¶ 4(b)-(c).

74 Carpenter Aff. Ex. M, at PASSCO000042.
27

disruptive and cause stress upon passive investors in order to make financial gains 

at others [sic] expense.”75

Although Passco Trust’s evidence may suffice to establish that Passco

Manager has a good faith belief that revealing the Requested Information to Grand 

Acquisition is not in Passco Trust’s best interests, it does not suffice to prove that 

revealing the Requested Information to Grand Acquisition actually would harm the 

Trust.76 In Bond Purchase, then-Vice Chancellor Steele discussed, in the context 

of an LP, the distinction between a statutory good faith defense and a contractual 

improper purpose defense:

In order to establish the improper purpose defense for 

purpose of denying a partner its contractual right to a list 

of partners, a partnership must prove that disclosure of a 

list of partners . . . would in fact be adverse to the 

Partnership. That is, the partnership must prove that the 

adverse effect it believes disclosure of the list would have 

on the partnership is more likely than not to occur if the 

 

75 Clifton Aff. ¶ 6.

76 See Bond Purchase, 746 A.2d at 859 (“While the Partnership proved by a 

preponderance of the evidence that the General Partner in good faith believes that 

disclosing the Investor List to Bond is not in the best interest of the Partnership, it 

failed to prove by a preponderance of the evidence that disclosing the Investor List 

to Bond would in fact be adverse to the interests of the Partnership.”). It is worth 

noting Grand Acquisition’s representation, both in its opening brief and at oral 

argument, that it “will agree that only [Grand Acquisition] will utilize the 

[Requested Information], and will not disclose such information to persons outside 

the company.” Pl.’s Opening Br. 19; accord Oral Arg. Tr. 30-31. Such an 

agreement may help to assuage Passco Manager’s concerns, to the extent they are 

well-founded.
28

partnership discloses the list to the partner. Under 17-

305(b), on the other hand, the general partner of a 

partnership needs to prove by a preponderance of the 

evidence only that there is a basis for it in good faith to 

believe that providing a partner with a list of partners 

would not be in the best interest of the partnership or 

would damage the partnership. The partnership does not 

need to prove that it is more likely than not that actual 

damage would occur if the partnership were to disclose 

the list. The distinction in proof between Section 17-

305(b)’s defense to a statutory claim and the “improper 

purpose defense” to a claim of contractual right is 

appropriate because in the case of a contractual right 

parties to the partnership may bargain for language in the 

partnership agreement designed to give partners access to 

information under terms less restrictive and in addition to 

that granted by statute.77

The evidence that Passco Trust has adduced is vague and speculative, and Passco 

Trust fails to satisfy its burden of demonstrating that releasing the Requested 

Information to Grand Acquisition actually would be adverse to the Trust. 

Notably absent from each of the three instances that Clifton describes in his 

affidavit is any allegation of damage to the “value of the joint investment.”78 

Instead, Clifton merely describes run-of-the-mill business conflicts between an 

investor in a real estate asset and that asset’s manager.

79

 As then-Vice Chancellor 

 

77 Id. (footnotes omitted) (citing Paine Webber I, 1996 WL 535403, at *7).

78 Madison Real Estate, 2008 WL 1913237, at *13 (quoting Paine Webber I, 1996 

WL 535403, at *7).

79 See Clifton Aff. ¶ 4. 
29

Jacobs held in In re Paine Webber Limited Partnerships, a “claim that the limited 

partners could be harmed by the plaintiffs’ aggressive sales tactics” does not 

suffice to establish an improper purpose defense.80 Instead, defendants must prove 

that the plaintiff’s “conduct would adversely affect (in an economic sense) the 

defendant limited partnerships as a whole, as distinguished from the limited 

partners as individuals.”81 Passco Trust has not proved, by a preponderance of the 

evidence, that Grand Acquisition’s inspection of the Requested Information would 

adversely affect the Trust in an economic sense. Thus, while Passco Trust likely 

could refuse Grand Acquisition’s Statutory Demand under the good faith defense 

in Section 3819, Passco Trust may not refuse Grand Acquisition’s Contractual 

Demand under the improper purpose defense. Grand Acquisition, therefore, is 

entitled to inspect, examine, and copy the Requested Information.

III. CONCLUSION

For the foregoing reasons, I grant Grand Acquisition’s motion for summary 

judgment and deny Passco Trust’s motion for summary judgment. 

IT IS SO ORDERED.

 

80 Paine Webber I, 1996 WL 535403, at *8.

81 Id.