Opinion ID: 668554
Heading Depth: 2
Heading Rank: 3

Heading: Appointment of a Liquidating Trustee

Text: 20 Appellants argue that even if dissolution of the limited partnerships was proper, the district court abused its discretion in appointing a liquidating trustee. They argue that the general partner, Westor, should be allowed to wind up the partnerships' affairs. This claim can be summarily rejected. Under Sec. 17-803 of the DRULPA: 21 the Court ..., upon cause shown, may wind up the limited partnership's affairs upon application of any partner, his legal representative or assignee, and in connection therewith, may appoint a liquidating trustee. 22 See Del.Code Ann. tit. 6, Sec. 17-803. In this case, Westor's fundamental conflict of interest as general partner constituted ample cause shown to justify the district court's decision to appoint an independent liquidating trustee. 23 From the start, the relationship between Westor, the borrower partnerships, and the PIF lender partnerships was fraught with conflicts. Westor served as general partner to both the borrower partnerships, who own the properties, and the PIF lender partnerships, who loaned the capital. Indeed, many of the amendments in the Restructuring Plan would have substantially advanced the interests of the borrower partnerships to the clear disadvantage of the PIF lender partnerships. In winding up the PIF lender partnerships' affairs, foreclosure might be in their best interests; however, the low value of the properties would likely disadvantage the borrower partnerships because any equity they acquired would be lost. This very real and manifest conflict gave the district court ample cause to appoint an independent liquidating trustee, which was confirmed by the liquidating trustee's submissions to this court to the effect that the interests of the former general partner are in conflict with those of the limited partners in such a fundamental way that only an independent third party can and should make decisions regarding the ultimate disposition of the partnerships assets.