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July 12, 1985


The opinion of the court was delivered by: ACKERMAN

 In this complex and prolonged liquidation proceeding of Investors Economic Systems (IES) Management Group, Inc., (Management Group), Michael R. Griffinger is the appointed Trustee. Management Group, a Delaware Corporation wholly owned by IES which itself has sought relief under Chapter XI of the Bankruptcy Act, was a registered broker-dealer with the Securities and Exchange Commission. As such, it provided financial services to some 1,600 customers who, upon liquidation, filed claims with the Trustee. Pursuant to court order and to his obligations under the Securities Investor Protection Act of 1970 (SIPA), 15 U.S.C. § 78aaa, et seq. (1976), the Trustee has engaged in rendering his determinations on these claims. Pursuant to this Court's Order dated November 18, 1977, certain claimants (limited partners in a real estate syndication known as Stoneybrook Apartments and Townhouses, Ltd.) having received an adverse determination from the Trustee, filed objections with this Court. The matter is presently before me on cross-motions for summary judgment, in essence seeking affirmance or reversal of the Trustee's determination. The Stoneybrook claimants and the Trustee agree that there are no genuine issues of material fact in this regard precluding summary judgment. See Rule 56 of the Federal Rules of Civil Procedure; Sames v. Gable, 732 F.2d 49, 51 (3d Cir. 1984). I agree and for the reasons which follow I have decided to affirm the Trustee's denial of the claims filed by the Stoneybrook limited partners and thus to grant judgment in favor of the Trustee with respect to the instant claims.

 The undisputed facts pertinent to the pending motions are as follows. The Stoneybrook claimants are 26 investors who together paid $466,000 in cash for ten Class "A" shares in the Stoneybrook limited partnership. The investment was made in reliance on the offering memorandum Exhibit A to claimants' Statement of Facts Not In Dispute (hereinafter "PPM" or Private Placement Memorandum). The memorandum authorized payment by the limited partners in two phases. On or about December 13, 1976 payments totalling $366,000 were made. Subscription Agreements were entered into at this time and this was the date the Certificate of Limited Partnership was filed with the Essex County Clerk. See Exhibit C to Affidavit of Patricia Jacobs. On January 15, 1977 a final payment totalling $100,000 was made. The PPM authorized the use of the proceeds of these payments for the purchase of partnership property, in particular a 113 unit garden apartment complex in Houston, Texas, then owned by a Mr. Joseph Durst. The property was encumbered by a $2,000 mortgage and consisted of leased rental units. Revenue from the leases was to cover management expenses and distributions to the limited partners. The PPM further stated that "it is understood and represented that the Partnership shall not become effective until such time as the said improvements are conveyed to the Partnership." PPM.

 The PPM further set forth the general partner's fiduciary responsibilities, its relationship to Management Group, its general responsibilities and the requirements for removal of Westwood as general partner. The PPM also stated that:

. . . although the General Partner has undertaken certain obligations to the Partnership, the fulfillment of these obligations is dependent upon the General Partner's financial strength . . . .

 Affidavit of Patricia Jacobs, Exhibit B at 26.

 It is undisputed that the partnership was organized with the purpose of acquiring and operating the Stoneybrook properties described supra. The PPM thus further provided that "Westwood, Inc. will purchase from Joseph Durst the property and garden apartment complex constructed thereon which is the subject matter of this private placement. Subsequent to its purchase, Westwood, Inc. shall convey the property to the partnership at which time the partnership shall take title in the name of the partnership." Exhibit B to Affidavit of Patricia Jacobs at 19.

 Pursuant to his responsibilities in this regard, on August 4, 1976, Joseph Durst contracted to sell the properties in question to "a limited partnership to be formed of which Westwood, Inc. will be the general partner." See Exhibit E to Claimants' Reply to Trustees' Opposition (Letter to Terry Madden, President of IES dated August 4, 1976, signed by Joseph Durst). This Agreement was further "agreed and accepted" by signature of Terry Madden, President of Westwood, Inc. The Agreement to sell provided for a purchase price of $2,370,000 to be paid as follows:

A. By Purchaser taking subject to a "Wrap-Around" Note and Deed of Trust in the amount of $2,000,000, payable as follows:
It shall bear interest at the rate of 9%: Be for a term of 32 years bearing constant annual payments (payable monthly) in the amount of $191,000.
B. By the payment of cash at the closing in the amount of $250,000.
C. By the payment of $80,000 on February 15, 1977 and by an additional payment of $40,000 on February 15, 1978.

 Id. In partial fulfillment of the purchase price as described in this Agreement, an unsecured promissory note in the amount of $120,000 was executed on December 1, 1976. The note provided for the payment by Westwood to Durst of $80,000 on February 15, 1977 and $40,000.00 on February 15, 1978. See Id. at Exhibit B. The execution of this note was not specifically authorized by the PPM and was never disclosed to the limited partners herein. Further, on December 1, Joseph Durst, pursuant to the Agreement of Sale described above, conveyed the Stoneybrook properties to John J. Szerszen, Vice President of Westwood. See ...

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