In re Morgan Guaranty Trust Co.

Summary

In an accounting proceeding involving a common trust fund, the court considered objections to Morgan Guaranty Trust Company's purchase, sale, and retention of various securities, as well as objections to administrative and legal fees. The court held that the trustee's investment decisions were evaluated under a conduct-based prudent-person standard and that the record disclosed no triable issues of fact or imprudence. The court granted summary judgment for the trustee, denied the cross-motion, dismissed the objections, and ratified or approved the challenged fees.

Holdings

1. Summary judgment was appropriate because the complete record disclosed no triable issue of fact concerning the prudence of the trustee's investment decisions.
2. A trustee's prudence is judged primarily by conduct at the time of the investment decision, not solely by subsequent performance or hindsight.
3. Overall gains in the common trust fund do not insulate the trustee from surcharge for imprudence in an individual investment, although overall portfolio performance may be considered with other factors.
4. The trustee complied with Banking Law § 100-c and 3 NYCRR 22.10 concerning approval and documentation of purchases and sales for the common trust fund.
5. A decree settling a trustee's account binds all persons over whom the court obtained jurisdiction and bars a later surcharge claim based on acts or omissions occurring during the settled period and disclosed in that accounting.
6. The objections based on yield, retention, and bond ratings did not establish imprudence on the record, and those objections were dismissed.
7. The trustee was not required to reimburse the withdrawing trusts for the small amounts resulting from the administrative error because the loss was de minimis and reimbursement expenses would substantially exceed the amounts at issue.
8. The fees paid to counsel and Ernst & Ernst were reasonable, proper, and required, and were approved and ratified; the related objections were dismissed.

Questions Presented

1. Whether the trustee was entitled to summary judgment on objections alleging that its purchases, sales, and retention of individual securities were imprudent.
2. Whether overall gains in the common trust fund insulated the trustee from liability for imprudence in individual investments.
3. Whether the trustee complied with Banking Law § 100-c and 3 NYCRR 22.10 requiring committee approval and minutes for common-trust-fund investment transactions.
4. Whether prior decrees settling earlier accounts barred objections to securities purchased in prior accounting periods and previously approved by decree.
5. Whether the record established imprudence based on investment yield, bond ratings, or retention of particular securities.
6. Whether the trustee was required to reimburse withdrawing trusts for de minimis amounts resulting from an administrative error in accruing stock dividends.
7. Whether legal and accounting fees paid in connection with the accounting should be approved and ratified.

Disposition

other