You are here: / / ALTHOUGH THE DEFENDANT INDENTURE TRUSTEE DID NOT OWE PLAINTIFFS A FIDUCIARY...
, , ,

ALTHOUGH THE DEFENDANT INDENTURE TRUSTEE DID NOT OWE PLAINTIFFS A FIDUCIARY DUTY, THE TRUSTEE DID OWE PLAINTIFFS A DUTY OF CARE AS DESCRIBED IN THE TRUST AGREEMENT, THE BREACH OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, in a full-fledged opinion by Justice Gische, determined that defendant’-trustee’s motion to dismiss the breach of contract cause of action should not have been granted. Although the defendant indenture trustee did not owe the plaintiffs a fiduciary duty with regard to the sale of securities, the trustee still owed plaintiffs a duty of care as described in the trust agreement, including a duty to avoid conflicts of interest. Here the plaintiffs alleged the trustee sold the securities below market price and then sold them for a profit, thereby depriving plaintiffs of the equity in the securities:

​

This appeal concerns the rights and obligations of the parties with respect to the termination of certain REMIC (real estate mortgage investment conduit) trusts. The assets held by the trusts were mortgage loans. The trusts originally sold securities to outside investors, representing two classes of holders, i.e., regular security holders and residual security holders. Plaintiffs … are holders of the residual security interests in those trusts. While the holders of regular securities were entitled to receive regular payments on distribution dates, the residual security holders had no such right. Instead, they were entitled to receive the proceeds of the disposition of any asset remaining in the trust REMICs upon their termination, but only after each class of regular security holder had been paid. Plaintiffs’ interest is referred to as the trust “equity.” The residual holder interest was the riskiest tranche of ownership and any right to payment was subordinate to payment in full of amounts due to the regular interest holders.

… The trustee argues that under the trust documents, it had the right to purchase trust assets at below market, even though it could resell them within days of acquiring them, allowing the trustee to realize millions of dollars in personal profit. The trustee is alleged to have kept for itself the profit it realized on the forward sale, which was in excess of $3,000,000.

… Even if the sale of assets to the trustee had been conclusively established by documentary evidence, there is still a valid claim that the trustee’s actions create a conflict of interest prohibited under the operative trust agreements and in violation of the trustee’s contractual obligations. The trust documents do not give the trustee the express right to purchase the trust assets for its own financial benefit at less than market value and to thereby diminish, let alone extinguish, plaintiffs’ interest as residual security holders. NMC Residual Ownership L.L.C. v U.S. Bank N.A., 2017 NY Slip Op 05923, First Dept 8-1-17

​

​

Similar issues and result in Cece & Co. Ltd. v U.S. Bank N.A., 2017 NY Slip Op 05924, First Dept 8-1-17 (Gische, J)

 

SECURITIES (ALTHOUGH THE DEFENDANT INDENTURE TRUSTEE DID NOT OWE PLAINTIFFS A FIDUCIARY DUTY, THE TRUSTEE DID OWE PLAINTIFFS A DUTY OF CARE AS DESCRIBED IN THE TRUST AGREEMENT, THE BREACH OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT))/TRUSTS AND ESTATES (REAL ESTATE MORTGAGE INVESTMENT CONDUIT TRUSTS, ALTHOUGH THE DEFENDANT INDENTURE TRUSTEE DID NOT OWE PLAINTIFFS A FIDUCIARY DUTY, THE TRUSTEE DID OWE PLAINTIFFS A DUTY OF CARE AS DESCRIBED IN THE TRUST AGREEMENT, THE BREACH OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT))/REAL ESTATE MORTGAGE INVESTMENT CONDUIT TRUSTS (ALTHOUGH THE DEFENDANT INDENTURE TRUSTEE DID NOT OWE PLAINTIFFS A FIDUCIARY DUTY, THE TRUSTEE DID OWE PLAINTIFFS A DUTY OF CARE AS DESCRIBED IN THE TRUST AGREEMENT, THE BREACH OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT))/CONTRACT LAW (REAL ESTATE MORTGAGE INVESTMENT CONDUIT TRUSTS, ALTHOUGH THE DEFENDANT INDENTURE TRUSTEE DID NOT OWE PLAINTIFFS A FIDUCIARY DUTY, THE TRUSTEE DID OWE PLAINTIFFS A DUTY OF CARE AS DESCRIBED IN THE TRUST AGREEMENT, THE BREACH OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT))

You might also like
ALTHOUGH THE RECORDS OF TRAFFIC INFRACTIONS ARE SEALED PURSUANT TO CPL 160.55, THE RECORDS OF A VIOLATION OF NYC ADMINISTRATIVE CODE 19-190(b), AN UNCLASSIFIED MISDEMEANOR WHICH CRIMINALIZES STRIKING A PEDESTRIAN WHO HAS THE RIGHT OF WAY, ARE NOT SEALED; THEREFORE PLAINTIFF IS ENTITLED TO DISCOVERY OF THOSE RECORDS IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE (FIRST DEPT).
PURSUANT TO THE NEW YORK CITY HUMAN RIGHTS LAW, PROPERTY OWNERS (LANDLORDS) MAY BE HELD VICARIOUSLY LIABLE FOR THE DISCRIMINATORY CONDUCT OF THEIR AGENTS IN DEALING WITH PROSPECTIVE TENANTS (FIRST DEPT).
LOADING LADDERS ONTO A TRUCK DID NOT CREATE AN ELEVATION-RELATED RISK, PLAINTIFF’S NEGLIGENCE WAS THE SOLE PROXIMATE CAUSE OF HIS INJURY.
THE TRIAL COURT PROPERLY PRECLUDED DEFENDANTS FROM CALLING PLAINTIFF’S TREATING PHYSICIANS AS WITNESSES IN THIS POLICE EXCESSIVE FORCE CASE BECAUSE OF INADEQUATE NOTICE AND THE TRIAL COURT PROPERLY ACCEPTED PLAINTIFF’S REDACTIONS OF THE MEDICAL RECORDS BECAUSE DEFENDANTS FAILED TO SUGGEST THEIR OWN REDACTIONS (FIRST DEPT).
Property Owner Responsible for Defect in Sidewalk that Did Not Directly “Abut” Owner’s Property (Liability Based On New York City Ordinance)
DEFENDANT IN THIS GRAND LARCENY CASE WAS DETAINED BY STORE SECURITY GUARDS; DEFENSE COUNSEL FIRST LEARNED THE IDENTITY OF ONE OF THE STORE’S SECURITY PERSONNEL ON THE EVE OF THE HEARING TO DETERMINE WHETHER THE SECURITY GUARDS WERE LICENSED TO EXERCISE POLICE POWERS OR WERE AGENTS OF THE POLICE; THEREFORE DEFENSE COUNSEL’S REQUEST FOR AN ADJOURNMENT TO SUBPOENA THE STORE’S EMPLOYMENT POLICIES AND OTHER EMPLOYMENT INFORMATION SHOULD HAVE BEEN GRANTED (FIRST DEPT).
PRENUPTIAL AGREEMENT INTERPRETED TO WAIVE TEMPORARY MAINTENANCE DESPITE ABSENCE OF THE PRECISE TERM.
DEFENSE COUNSEL TOLD THE COURT DURING THE PRE-TRIAL SUPPRESSION HEARING THAT DEFENDANT WAS NOT CONTESTING HIS CONSENT TO THE INTOXILYZER BREATH TEST; SUPREME COURT PROPERLY DENIED DEFENDANT’S ATTEMPT TO RAISE THAT SAME SUPPRESSION ISSUE DURING TRIAL; THE DISSENT DISAGREED (FIRST DEPT).

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy

PURSUANT TO THE INDEPENDENT SOURCE RULE, THE ILLEGAL SEARCH OF DEFENDANT’S... DEFENDANT ATTORNEY COULD NOT ACT AS BOTH BROKER AND ATTORNEY IN THE SALE OF...