Delaware Court of Chancery Rules Beneficial Owner Entitled to Books and Records of Delaware Statutory Trust

In Grand Acquisition, LLC, v. Passco Indian Springs DST, the Plaintiff sought to inspect the books and records of a Kentucky-based Delaware statutory trust, in its capacity as a beneficial owner of the trust.  The Plaintiff pursued this books and records request both contractually, under Section 5.3(c) of the Trust Agreement, and statutorily, under 12 Del. C. § 3819.  The Plaintiff claimed that Section 5.3(c) allowed owners to access the books and records without applying Section 3819’s statutory preconditions and defenses.  Contrarily, the Defendant claimed that it does not need to comply with the books and records request because: 1) the Plaintiff had not complied with Section 3819’s procedural requirements, 2) the Plaintiff did not state a proper purpose, 3) the books and records were subject to third-party confidentiality agreements, and 4) the Defendant had a good faith believe that revealing the books and records were not in the trust’s best interests.  After analyzing both arguments, Vice Chancellor Montgomery-Reeves granted summary judgment in favor of the Plaintiff.

The Court began its analysis by stating three reasons why the Plaintiff is entitled to the books and records: “1) the Owner’s 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 defense.” 

Addressing the first reason in favor of the Plaintiff’s summary judgment, Vice Chancellor Montgomery-Reeves stated that Trust Agreement was not subject to the Delaware Statutory Trust Act’s preconditions and defenses.  Concluding this, she stated that books and records requests for Delaware Statutory Trusts should be analyzed in the same manner as Delaware LLCs and LPs: that the governing instrument is independent from the relevant default statutory right.  In this case, the Trust Agreement expressly entitled owners to inspect, examine and copy the trust’s books and records as long as it was conducted during normal business hours.  Since the Trust Agreement contained language specifically allowing owners to inspect the books and records of the trust, the contract trumped the default provisions of the Delaware Statutory Trust Act.[1]  Therefore, Vice Chancellor Montgomery-Reeves concluded that the Plaintiff did not need to comply with Section 3819's preconditions and defenses.

Second, Vice Chancellor Montgomery-Reeves concluded that the Trust Agreement included the Plaintiff’s right to books and records included the Requested Information is sought.  The Court rejected the Defendant’s argument that the Requested Information sought was not within the scope of the owner’s rights.  This is because Section 5.3(c) indicated that “books and records” should include its customary reading, which included the name of owners and trustees.  Further, the Court stated that if the Defendant did not want owners to access this information, they could have done so explicitly in the Trust Agreement.  Therefore, the Court agreed with the Plaintiff.

Lastly, the Court stated that the Defendant failed to prove its improper purpose defense.  Vice Chancellor Montgomery-Reeves concluded this since the Defendant did not prove that releasing the information to the Plaintiff would actually harm the Trust.  The Court stated that the Plaintiff’s affiliation with another trust was not enough proof that there would cause harm to the trust, and therefore, they failed to establish an improper purpose defense.

Key Points of Law:

  • “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 in applicable to that independent contractual right.  Although no such cases have been decided regarding a Delaware Statutory Trust, this Court’s decisions involving LLCs and LPs often cite one another on the basis that ‘the Delaware LLC Act has been modeled on the popular Delaware LP Act.”
  • “The same principle (as quote above) applies to Delaware Statutory Trusts, making it appropriate to apply the holdings in LLC and LP cases to Delaware Statutory Trusts, at least in this context.”
  • “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.”
  • “No Delaware court has addressed whether the improper purpose defense applies in the Delaware Statutory Trust context [and] I need not decide whether the improper purpose defense applies here…”

Special thanks to Matthew Arnold for preparing this summary. 



[1] Distinguishing from Cargill, Inc. v. JWH Special Circumstance LLC, 959 A.2d 1096 (Del. Ch. 2008).

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