Boxer v. Husky Oil Company

Delaware Court of Chancery · 1981 · Corporations

429 A.2d 995 (1981)

Updated August 22, 2026

CorporationsLimited partnershipsFiduciary dutyEquitable jurisdictionAccountingIndispensable partiesgeneral partnerlimited partner

Facts

Husky Exploration Limited was a Colorado limited partnership whose limited partners sued Husky Petroleum Corporation, the general partner, and Husky Oil Company, the owner of the general partner. The complaint alleged that the general partner breached fiduciary duties and the partnership agreement by causing the sale of the limited partners' interests at prices it knew or should have known were totally inadequate. Under the partnership agreement, the general partner had an option to purchase the limited partners' interests and could assign that option. On the partnership's termination date, the general partner assigned partnership interests in Husky Canadian Exploration Company and Husky Minerals Ltd. to affiliated entities at valuations plaintiffs claimed were far below actual value, while Husky Oil Company stood on both sides of the transactions.

Issue

Whether the Court of Chancery had subject matter jurisdiction over claims by limited partners alleging that a general partner breached fiduciary duties and seeking an accounting and damages, notwithstanding the availability of monetary relief at law. Also, whether the assignee of the options was an indispensable party when plaintiffs sought accounting and damages rather than rescission.

Rule

When the Uniform Limited Partnership Act and Uniform Partnership Act are read together, a general partner in a limited partnership owes fiduciary duties to limited partners. An alleged breach of fiduciary duty and a claim for an accounting against a fiduciary fall within the historical jurisdiction of equity, and 10 Del. C. § 342 does not divest Chancery of that jurisdiction absent a statute making the legal remedy exclusive. A holder of a contractual benefit may be indispensable in an action seeking relief relating to the contract, but where plaintiffs seek only accounting and damages and complete relief can be afforded among the parties before the court, the absent holder need not be joined.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Red Mesa Drilling Fund, a Colorado limited partnership, is managed by its general partner, Summit Basin Management, Inc. Limited partners in Phoenix sue in Delaware Chancery alleging Summit Basin caused partnership assets to be sold to an affiliate at unfairly low prices and seek an accounting plus compensatory damages.

Summit Basin moves to dismiss for lack of subject matter jurisdiction, arguing the investors ultimately want money and therefore have an adequate remedy at law. How should the court rule?

Explanation. The majority held that a general partner in a limited partnership owes limited partners fiduciary duties of utmost good faith, fairness, and loyalty. A claim alleging breach of that fiduciary duty and seeking an accounting is historically equitable, so Chancery has jurisdiction even though damages are also requested.