The opinion of the court was delivered by: JED RAKOFF, District Judge
Plaintiff Societe Generale, a French bank with an office in New
York, brings this action against U.S. Bank National Association
("U.S. Bank") for (1) allegedly breaching a contract involving
the sale of various investment securities and (2) unjust
enrichment. Pending before the Court are cross-motions by which
each party seeks summary judgment in its favor on both claims.
The pertinent facts, either undisputed or, where disputed,
taken most favorably to the applicable respondent, are as
follows. In 1986 and, again, in 1993, the Industrial Development
Authority of the County of Pinal, Arizona issued revenue bonds
pursuant to bond indentures that it had entered into with the
Arizona Bank, a predecessor of U.S. Bank. See Deposition of
Bradford A. Stevenson, September 30, 2003 ("Stevenson Dep."), Ex.
1 (Original Indenture Agreement); Ex. 2 (Supplemental Indenture
Agreement). Pursuant to the indenture agreements, most of the
bond proceeds were loaned directly to the Casa Grande Community
Hospital (the "Hospital"), see Original Indenture Agreement at
1; Supplemental Indenture Agreement at 1, but a portion of the
bond proceeds were placed into a "Reserve Fund," to be used to
repay bondholders in the event that, inter alia, the Hospital
defaulted on its repayment obligations. See Original Indenture
Agreement at 36-38.
The indenture agreements required the trustee to invest the
Reserve Fund monies pursuant to instructions from the Hospital,
see Original Indenture Agreement at 39, and, accordingly, Bank
of America Arizona, which had succeeded the Arizona Bank as
trustee, invested in certain United States Government Treasury
securities (the "investment securities"). See Affidavit of
Dudley Roski sworn to October 20, 2003 ("Roski Aff."), Ex. D
(Reserve Fund Agreement). Subsequently, in June of 1993, Bank of
America Arizona entered into an agreement with Societe Generale
(the "Reserve Fund Agreement"), whereby Societe Generale, in
exchange for certain semiannual fees, promised to purchase the
investment securities at a specified price (the "Purchase Price")
at a specified time in the future. See id.; Roski Aff. at ¶
12. In essence, the Reserve Fund Agreement functioned as a kind
of "put": if the securities' market value declined, Societe
Generale would still be obligated to purchase the securities at
the higher Purchase Price; but if the market price of the
securities rose, Societe Generale would be able to purchase the
securities at the lower Purchase Price and realize a profit.
See id.; Reserve Fund Agreement § 2.1.
From June 1993 until May 2001, Bank of America Arizona and its
successor banks,*fn1 including, ultimately, defendant U.S.
Bank, paid the semiannual fees due under the Reserve Fund
Agreement to Societe Generale. See Affidavit of Laurie Edelman
sworn to on October 20, 2003 ("Edelman Aff."), ¶¶ 4-5. However,
on or about November 15, 2001, Societe Generale learned that U.S.
Bank had, on July 23, 2001, in violation of the Reserve Fund
Agreement, sold the investment securities to a third-party, see
id. at ¶ 10, for a total of $1,237,076.43, which was
$175,657.88 more than the Purchase Price that Societe Generale
would have paid under the Reserve Fund Agreement. See id. at
¶ 11.*fn2 Accordingly, Societe Generale brought this action
against U.S. Bank, alleging breach of contract and unjust
enrichment, and seeking recompense of the $175,657.88.
As to the breach of contract claim, the parties agree that U.S.
Bank (including its predecessors) breached the Reserve Fund
Agreement; but they disagree as to the capacity in which U.S.
Bank was acting when it so acted. Specifically, Societe Generale
seeks relief from U.S. Bank in its individual capacity and has
filed suit accordingly, while U.S. Bank contends that it entered
into the Reserve Fund Agreement solely in its capacity as a
trustee. Not coincidentally, the latter approach would
effectively deprive plaintiff of any remedy for the breach, as
the bonds have been defeased, and no funds remain in the trust
account. See transcript, 11/12/03 at 10-11.
To resolve this issue, the Court looks solely to the language
of the Reserve Fund Agreement, as parole evidence of the parties'
intent cannot exempt U.S. Bank from personal liability if the
contractual language has "not limited [U.S. Bank's] liabilities
in a manner which would make them enforceable only out of the
trust estate." East River Savings Bank v. 245 Broadway Corp.,
284 N.Y. 470, 478 (1940).*fn3 In other words, New York law
presumes that in a contract between a trustee and a third party,
personal liability on behalf of the trustee attaches unless the
contracting parties have clearly agreed otherwise. See, e.g.,
O'Brien v. Jackson, 167 N.Y. 31, 33-34 (1901); East River
Savings Bank v. 245 Broadway Corp., 284 N.Y. at 477; Heisler v.
Nole, 84 N.Y.S.2d 70, 71 (N.Y.Sup.Ct. 1948). This arises from
the long-standing rule that a trustee cannot, through contract,
directly bind the trust estate or its beneficiary. See, e.g.,
Taylor v. Davis' Adm'x, 110 U.S. 330, 335 (1884) ("The trust
estate cannot promise; the contract is therefore the personal
undertaking of the trustee. As a trustee holds the estate,
although only with the power and for the purpose of managing it,
he is personally bound by the contracts he makes as trustee, even
when designating himself as such."). See also Smith v.
Peyrot, 201 N.Y. 210, 214 (1911). Accordingly, while a trustee
may, under certain circumstances, be indemnified for contracts
made in his capacity as trustee,*fn4 see, e.g., In re
Estate of Ziegler, 11 N.Y.S.2d 212, 215 (N.Y. Sur. Ct. 1939),
liability will ordinary lie against him in his individual
As noted, the presumption can be overcome by contractual
language making clear that personal liability was not intended.
However, although an express disclaimer of personal liability is
not necessarily required, some clearly limiting language must be
present: for example, a proviso that a contract is entered "not
in [the trustee's] individual capacity, but solely as owner
trustee." See Jet Star Enters., Ltd. v. CS Aviation Servs.,
2004 U.S. Dist. LEXIS 2760, *21 (S.D.N.Y. Feb. 25, 2004). See
also, e.g., East River Savings Bank v. 245 Broadway Corp.,
284 N.Y. 470, 478 (N.Y. 1940) (no individual liability where the
contract made reference to the underlying trust instrument and
stated that the "trustees were acting  as a class and not
individually or jointly and severally"); Sisler v. Security
Pacific Business Credit, Inc., 614 N.Y.S.2d 985, 987-88 (N.Y.
App. Div., 1st Dep't, 1994) (no individual liability where
contract refers to the trust entities, rather than the individual
trustees, as parties to the agreement, and states that the trusts
are "acting through" their trustees).
Here, the language of the Reserve Fund Agreement, while making
repeated reference to the "Trustee," includes no such limiting
language and is therefore insufficient to overcome the
presumption of individual liability. Under New York law, the mere
"fact that [a] party describes himself as trustee . . . does not
relieve him from personal liability, or change the effect of his
engagement." Pumpelly v. Phelps, 40 N.Y. 59, 67 (1869). See
also 106 N.Y. Jur 2d, Trusts, § 343 ("[T]he mere circumstance
that in the body of the contract, reference is made to the fact
that one of the parties is a trustee . . . does not negative the
implication of personal liability which arises from the making of
Accordingly, summary judgment for breach of contract in the
amount of $175,657.88 must be granted to Societe
Generale.*fn5 Under New York law, moreover, Society Generale
is also entitled to 9% simple interest on this figure from the
date of breach (i.e. July 23, 2001) to the date of judgment,
(i.e. July 20, 2004), after the entry of which federal interest
rates apply. Accordingly, the Clerk of the Court is directed to
enter judgment in favor of Societe Generale in the total amount