Ke Property Management Inc. v.

275 MADISON MANAGEMENT CORP. 1993 WL 285900 (Del. Ch. 1993)

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Nature of the Case

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Facts

Ke (P), one of the general partners of 275 Madison Associates, L.P. sought a declaratory judgment if the removal of 275 Madison Management (D) as the managing general partner was proper. The Partnership was formed to own a building and a ground lease at 275 Madison Ave. There were three general partners. Additional partners were then added. KJ Capital invested $4 million and was admitted as a limited partner. Its affiliate KE Property became a general partner. RAJN and Belmor invested $6 million and became limited partners. In 1989, the Partnership borrowed $70 million to refinance existing obligations. That same month D was formed to serve as managing general partner in lieu of Harry Skydell, the original managing general partner. The partnership agreement was revised, and Hudson Park, an entity owned by Skydell would continue to manage the building. Between January and May of 1990, Skydell misappropriated $2 million of Partnership funds. By 1991 the Partnership was in financial difficulty. It was notified that foreclosure was pending. D took the position that bankruptcy was appropriate. P disagreed. An affiliate of P then removed D as the managing general partner as per the Partnership agreement related to fraud and willful misconduct. D contends that P used Skydell’s fraud as a pretext to stop bankruptcy. Two days later D filed a bankruptcy petition. P then brought its declaratory relief action. D argues that P acted in bad faith.