The opinion of the court was delivered by: STEWART
Plaintiffs, partners of J & W Seligman & Co. ("Seligman"), bring this action to recover losses incurred in connection with the redemption of certain debentures issued by the Florida Gas Company ("Florida Gas"). Defendants Continental Resources Company ("Continental") and Florida Exploration Co., Inc. ("Florida Exploration"), the sucesssors to Florida Gas, as well as Citibank, N.A. ("Citibank"), third party defendant, now move for summary judgment.
The undisputed facts are as follows. Florida Gas issued a series of 5-3/4% convertible, subordinated debentures ("the debentures") pursuant to the terms of a prospectus dated April 1, 1969. Citibank agreed to act as trustee for the debenture holders, and Florida Gas entered into a trust indenture agreement with Citibank dated April 1, 1969 ("the indenture"). Three customers of Seligman's brokerage firm purchased a total of $42,000 in principal amount of the debentures which were held by Seligman as agent for their customers. In June of 1979, defendant third party plaintiff Continental entered into a merger agreement with Florida Gas, pursuant to which Continental acquired Florida Gas. In connection with the merger, Florida Gas decided to call for redemption the remaining outstanding debentures. The Notice of Redemption, which Citibank asserts was mailed on July 16, 1979, provided that the debentures had to be converted into Florida Gas common stock by August 20, 1979 or the debentures would be considered redeemed at their face value as established under the indenture. It is fair to say that the conversion price was very attractive.
The debentures held by Seligman as agent for three of its clients were not converted, and Seligman asserts that they did not receive any notice of the July 16, 1979 call until after the August 20 deadline had passed. Seligman voluntarily credited its customers' accounts with an amount calculated as the damages incurred by reason of the failure to convert.
The plaintiffs' claims, while arising under a variety of statutes, are all based on the question of the adequacy of the notice to the debenture holders with respect to the redemption. Plaintiffs seek damages in the amount of either $43,102.92 or $46,694.76, plus interest and attorneys' fees, as well as an accounting from Florida Exploration, alleging that the defendant was unjustly enriched in the amount of $1,388 per debenture not redeemed.
Continental brought in Citibank as third party defendant, asserting that Citibank would be ultimately liable if Continental were held to be legally responsible for the alleged losses. Citibank's motion for summary judgment, which we will address first, presents two main arguments: 1) the notice sent was in accordance with the terms of the indenture and was sufficient as a matter of law; and 2) Seligman's own actions were the proximate cause of the claimed injury.
We grant Citibank's motion on the grounds that the notice it sent fulfilled the requirements of the indenture. Under the Trust Indenture Act, an indenture can limit the duties of a trustee to those specifically articulated in the indenture. 15 U.S.C. 77ooo(a)(1).
The indenture in this case did just that in Paragraph 6.01:
(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this indenture, and no implied covenant or obligation shall be read into this Indenture against the Trustee. (emphasis added)
The case law also supports the proposition that an indenture trustee's obligations can extend no further than those contained in the indenture. Hazzard v. The Chase National Bank of the City of New York, 159 Misc. 57, 287 N.Y.S. 541, 570 (Sup. Ct. N.Y. City. 1936), aff'd, 257 App. Div. 950, 14 N.Y.S.2d 147, aff'd, 282 N.Y. 652, 26 N.E.2d 801, reh'g denied, 283 N.Y. 682, 28 N.E.2d 406, cert. denied, 311 U.S. 708, 85 L. Ed. 460, 61 S. Ct. 319 (1940); Broad v. Rockwell International Corp., 614 F.2d 418, 431 (5th Cir. 1980), aff'd on reh'g 642 F.2d 929 (5th Cir.), cert. denied, 454 U.S. 965, 102 S. Ct. 506, 70 L. Ed. 2d 380 (1981). Citibank's duty to provide notice is clearly set out in the indenture. Article 11 of the Indenture, § 1105 provides for notice by "first class mail, postage prepaid."
The back of the debenture itself states that notice would be "by mail."
Contrary to plaintiffs' arguments, those two terms are entirely consistent and unambiguous.
As to whether Citibank fulfilled its obligations under the Indenture, plaintiffs offer no evidence nor make any allegations that would contradict the proof of mailing offered by Citibank on this motion. The operation of the evidentiary presumption with respect to mailing has been summarized as follows in the insurance context:
Denial of receipt by the insureds, standing alone, is insufficient to rebut the presumption.In addition to a claim of no receipt, there must be a showing that routine office practice was not followed or was so careless that it would be unreasonable to assume that the notice was mailed. We would hasten to add, however, that in order for the presumption to arise, office practice must be geared so as to ensure the likelihood that a notice of cancellation is always properly addressed and mailed.
Nassau Insurance Company v. Murray, 46 N.Y.2d 828, 414 N.Y.S.2d 117, 118, 386 N.E.2d 1085 (1978) (citations omitted). An affidavit by Gloria Spraggins, a Citibank employee, executed the day after the mailing, states that the notice was mailed to all holders of record. The fact that Ms. Spraggins could not recall the specific mailing at her deposition four years later is hardly surprising, and her testimony cannot be said to contradict her affidavit. The procedures of Citibank with respect to notices of this type were testified to by Mr. Brennan in deposition, as well as summarized by him in affidavit form. In sum, there are four internal checks to make sure that the number of labels, envelopes, stuffed envelopes and stamped envelopes conform to the initial count of holders as of the record date.
On a motion for summary judgment, we must "resolve all ambiguities and draw all reasonable inferences in favor of the party against whom summary judgment is sought." Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317 (2d Cir. 1975). The only support for a finding that there are issues of fact with respect to whether the notice was mailed in this record are any inferences that can be drawn from the relatively low number of holders who converted and an unsigned list of fourteen individual debenture holders, half of whom are described as stating that they never received notice and half of whom are described as stating that they have no recollection of receiving notice. Plaintiffs make no substantive arguments with respect to the adequacy of Citibank's office procedures, and the above-mentioned evidence of lack of receipt is, under the circumstances, insufficient to support an inference ...