The opinion of the court was delivered by: ROBERT W. SWEET
Plaintiff The Swan Brewery ("Swan") has moved for partial summary judgment pursuant to Rule 56, Fed. R. Civ. P., on its seventh cause of action for conversion against United States Trust Company of New York ("U.S. Trust"). For the reasons set forth below, the motion is denied.
The parties and facts relevant to this motion have been described fully in prior opinions. See Swan Brewery Co. v. United States Trust Co., 143 F.R.D. 36 (S.D.N.Y.), on reconsideration, 145 F.R.D. 40 (S.D.N.Y. 1992). Familiarity with these opinions is assumed.
This action arose out of an indenture with Swan dated as of December 15, 1983 (the "Indenture") under which U.S. Trust was trustee. Swan is a corporation organized under the laws of the Commonwealth of Australia with its principal place of business in Canning Vale, Western Australia. U.S. Trust is a trust company organized under the laws of New York.
Pursuant to the Indenture, Swan issued $ 135,000,000 in principal amount of 14 7/8% Limited Subordinated Debentures due December 15, 1998 (the "Debentures"). Section 7.07 of the Indenture provides, in pertinent part, that:
The Company [Swan] shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
However, § 7.07 further provides that "the Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it through its negligence or bad faith."
U.S. Trust sent another statement on April 19, 1990, claiming fees and expenses in the amount of $ 171,680.56 (the "April Bill"). On May 23, 1990, Swan filed a complaint against U.S. Trust, alleging claims for breach of contract, and for money had and received in the amounts paid on the February Bill, and seeking an injunction against further collection efforts with respect to the April Bill, a declaratory judgment that U.S. Trust was not entitled to reimbursement of the amounts claimed in the April Bill, and a declaratory judgment that U.S. Trust was not entitled under the Indenture to any of the fees and expenses it allegedly had incurred or would incur in defending the instant lawsuit.
On May 23, 1990, U.S. Trust sent a Notice of Default relating to the April Bill, stating that it would accelerate the outstanding indebtedness on the Debentures. In response, Swan remitted $ 50,000, reserving the right to claim a refund. From May 23, 1990 to December of 1990, U.S. Trust sent eight additional bills for payment of purported fees and expenses related to this litigation, in the amount of $ 304,125.19. This figure did not include the amounts claimed in the February and April Bills. Swan contests U.S. Trust's entitlement to these fees, as well as those previously claimed.
On November 28, 1990, Swan wired $ 130,562,906 to U.S. Trust with instructions to satisfy and discharge all of the outstanding Debentures. This sum included an alleged $ 969,796.62 in excess of the amount necessary to pay the Debentures in full (the "Overpayment"). By letter of the same date (the "November 28 Letter"), Swan advised U.S. Trust that the sole purpose of the transfer and deposit was to fulfill Swan's obligation to discharge the Debentures and that Swan did not thereby authorize the deduction of any amounts owing to the trustee. The November 28 Letter further stated that:
subject to the payment of the Satisfaction Amount [calculated to be $ 129,683,109.38] as authorized above, the balance of the Payment Amount [the $ 130,652,906] is to be held in trust for Swan and invested in an interest-bearing account pending its return to Swan and is to be promptly returned to ...