### FI LED U.S. COURT O F APP EALS ELEVENTH CIRCUIT Ap ril 16 , 2 004 THO MAS K. KAH N CL ERK [PUBLIS H] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ N o. 03- 1197 5

____ ____ ____ ____ ____ ____ D. C. Docket N o. 02-01244 -CV -JOF -1 GRAY MURRAY, SAM RAMSEY, KEN HEN SON, MA RI A M L E W IS , BU D H A RT L E Y , ind ivi dua lly a nd as r ep re se ntativ es of

aCl as s of

Ce rt if ic at e H old er s of T ri Ci ty H ospi ta l Auth or ity

Re ve nue Ce rt if

ic at es , Pl ai nti ff

s- Appe llants , JUST IN J. K

ARL , I RA LE E B ROW

N, FRE DE RICK

C. FOLLMER, SHARON R. FOLLMER, BOBB Y G. BANKSTON, RALPH B. TRUELO VE, LILL IAN A. TR UE LO VE , P HI LI P H . D AV IS, Co nsol idate d- Pl ai nti ff s- Appe llants , ve rs us U.S. BANK TRUST NAT IONAL ASSOCIATION, SOUTHTRUST BANK, f.k.a. So ut ht ru st Ban k, N.A., D ef en dants -Appe lle es , RELIANCE TRUST COMPANY, Consol idated-De fendant-Appellee.

____ ____ ____ ____ ____ ____ Appeal f rom the United State s District Court fo r the N orthe rnD istri ct

of G eo rg ia

____ ____ ____ ____ ____ ____ _ (A pr il 16, 200 4)We rec ite the fa ctual bac kg round, includingthe contentions of the pa rties, that form the 1 basis of the amended c omplaint and answe r. B y these re citations, howeve r, we neither pa ss upon no r i nti mate any

re so lut ion

of the se c on fl ic tin gc onte nti on s. We r e fe r t o th e m pu re ly to illumi nate the c ircumstance s leadingup to the dismiss al of the a mended c omplaint by

the district court. We adjudicate only the proprie ty , vel non , of the dismissal.

2 Be fo re A N D E RS O N , BL A CK

and H IL L , Ci rc uit

Jud ge s. HI LL , C ircuit Judg e: This is an appeal fr om

a district court order deny ing th e bondh older pla int if fs ’ m oti on t o c er

tif y ac la ss a ct iona nd d ism iss ing the ir c om pla int w ith out pr ej udi ce on the gr ound s th at the y , a s tr

ust be ne fi ci ar ie s, la ck

standi ng t o br ing sui t a ga ins t the thr ee tr

ust f idu ci ar y de fe ndants , or , in the a lte rn at ive , that a s to one tru st fid uc ia ry

de fen da nt , th ei r cas e is no t yet rip e. Bas edon th e fo ll owi ng , we af fi rm the j udgm en t of

the dis tr ic t c ourt. I. FA CT UA L A

ND PRO CE DU RAL HI ST ORY 1 In 1993, the Tr i-City

Hospital Authority

(the hospital auth ority ) issued $39, 140, 000 in b onds and s old the m to ove r one tho usand b ondh old er s. T he bon dThe ter m ‘trust indenture’ collectively ref ers to the Tr

ust I ndenture (date d November 1, 2 1993, betwee n the Master Trustee and the hospital authority ), the Maste r Trust Indenture (date d November

1, 1993, betwee n the Master Trustee and the medic al ce nter), the First Supplemental Master Tr ust I ndenture (date d November 1, 1993, betwee n the Master Trustee and the medic al cente r), the Promissory

Note and F orm of Promissory Note (dated Novembe r 1, 1993, betwe en the Master

Trustee and the medic al ce nter), a nd the UCC-1 Fina

ncingStatements (filed Dec ember

22, 1993). 3 issue was governed by

a trust indenture. T he bond hold ers w ere the intended th ird 2 pa rty ben efi ci ari es of t he tru st in de nt ur e. T he hos pit al auth or ity

loane d $3 9, 140, 000 in b ond pr oc ee ds t o th e So uth Fulton Medical Center, Inc. (the m edical center ) to purchase a separ ate hospital and its revenues, owned by the hospi tal authority , and to m ake necessar y capital im provem ents. I n return, a s collateral, the m edical center gave the hospi tal
au t h o r i t y as e c u r i t y i n t e r e s ti n th e h o s p i t a l ’s p e r s o n a l p r o p e rt y, mo s ts i g n i f i c a n t l y, its pa tie nt a cc ount

r ec ei vable s and i nve nto ry . U nde r the te rm s of the tr ust indentu re, a m aster trustee w as appointedto oversee the transaction and collect paym en ts a s th ey

be cam e due
. T he hos pit al auth or ity ple dge d it s se curi ty

int er es t to th e m as te r trus te e. In 2002, indiv idual bo ndho lders filed a seventy -seven page am ended
com plaint against three c orporate defendants: (1) U . S . B ank Trust N ational A sso ci at ion( U
. S
. Bank) , the m as te r tr ust ee of the bon ds f

ro m N ove m be r 4, 199 9, to the pr es en t; (2 ) So uth T ru st B an k ( So uth T ru st) , the f orm er m as te r tr ust ee of theThe sec urity interest wa s perf

ecte d when the or igina l UCC-1 financingstatement wa s 3 filed on De cembe r 22, 1993. O.C.G.A. § 11- 9-302(1) . I t was ef fec tive for a

five-year period. O. C.G .A . § 11 -9 -4 03 (2 ). Un de r G e or g ia law, on c e a

se c ur ity int e re st h a s b e e n p e rf

e c te d, it mus t be maintained by

the filingof a U CC-3 continuation statement, within six months prior to the expiration of the five year period be g inning on the date the orig inal financ ing statement was filed. O.C.G.A. § 11- 9-515. In this case, the U CC-3 was due to be f iled any time from J une 22, 1998, to and includingDec ember 22, 1998. 4 bond s f ro m O ct obe r 28, 199 6, thr oughN ove m be r 4, 199 9; and ( 3) Re lianc e T ru st Co m pany ( Re lianc e) , the f

orm er se rv ic ing a ge nt f

or the bon ds f

ro m N ove m be r 1, 1993 , unt il Marc h 16 , 199 9. T he bon dhol de rs sou ght c la ss c er tif ic at ionund er

F ed
. R. Ci v. P
. 23( b) (3 ) or

23( b) (1 ) an d de cl ar at or

y r el ie f ag ai nst

the de fe ndants , on be ha lf of the m se lve s, and a

pr opos ed c la ss o f ove r one tho usand b ondh old er s, f or vio la tio ns o f the F ed er al T ru st I nde nture A ct ( FT IA ), br ea chof

c ontra ct , f

ra ud and
m is rep res en ta ti on , bre ach of f id uc ia ry du ty, an d n eg li ge nc e. A t the c or e of

the ir a m en de d c om

pla int , the bon dhol de rs a lle ge that, a s to the ir se cure d in te re st i n th e hosp ita l’ s pe rs ona l pr ope rty , the de fe ndants f ai le d to fi le aU CC -3 c ont inu at ionstate m en t onD ec em be r 22, 199 8. I t i s a lle ge d th at , on

3 that date , the pe rf

ec te d se curi ty

int er es t tha t the bon dhol de rs he ld i n th ei r bond s la pse d and the y

be cam e unse cure d c re dit or s, e xpe ct ing to re ce ive onl y 30% of the fa ce va lue of

the ir bon ds. When U. S. Bank assum ed its fiduciary duties, it claim s that it was unaw are that the bon dhol de rs ’ pe rf ec te d se curi ty

int er es t ha d la

pse d. I n f

ac t, U
. S
. BankU. S. Ba nk later dismissed its case pe nding in state court a nd ref iled that case with the 4 fede ral district cour

t. Ex penses a

nd attorney s’ fe es ar e to be pa id by the bondholders unde r the terms of the trust indenture
. 5 furthe r cl ai m s th at , pr ior

to takin g c ontro l, w hil e pe rf orm ing it s f

ina l audi t, both SouthTrust and Reliance had expressly warranted and re presented to it that they ha d d on e ev erythi ng ne ces sa ry to m ai nt ai n t he pe rfec ti on . Fr om N ove m be r 1999 , to Apr il 2000 , the m ed ic al c en te r ha d c ont inu ed to
m ake paym ents against th e prom issory note. I n April 2000, however, it filed
vo lu nt ary pe ti ti on s fo r ba nk rupt cy un de r Ch ap te r 11 of t he Ban krup tc y Co de
. T his w as c onsi de re d an e ve nt o f de fa ult und er S ec tio n 80 1 of

the bon d tr

ust in de nt ur e, he nc e v oi di ng th e b on dh ol de rs ’ se cu rit y in te res t i n t he co ll at eral
. InO ct obe r 2001 , U
. S
. Bank, a s su cc es sor tr ust ee , ha d f

ile d su it on b eh al f of the bond hold ers in the Superior Court of F ulton County , G eorgia, alleging breach of f idu ci ar y duty and n eg lig en ce a ga ins t S outhT ru st and R el ianc e, f or f ai lin g to file the U CC-3 continuation statem ents. I t soug ht dam ages for the diffe rence be tw ee n th e va lue of

the se cure d c oll at er al a nd the a m ount a ct ua lly r ec ei ve d by

the bondhol de rs upo n adis tr ibu tio n by the bankr

upt cy e state . T ha t c as e is n ow pe ndi ng i n f

ed er al dis tr ic t c ourt. 4In April 2002, one set of bondholders filed a

class ac tion. I n May

2002, another

set of 5 bondholders filed a

class ac tion. The two lawsuits, comprised of thirte en individual bondholder pla int if fs , w e re c on so lid ate d b y

or de r o f t he dis tr ic t c ourt . The bondholder s claim that SouthTrust and Reliance g reatly pref er U . S. Bank a s the 6 proper party plaintiff in the ac tion filed ag ainst them. The bondholder s claim there may be substantial affir

mative def

enses a vailable to South Trust and Reliance , i.e., compar ative ne g lig e nc e , avo ida

nc e and pr oximate c a

us e , a g a ins t U . S. B ank , th at w ou ld n ot b e oth e rw ise available ag ainst the bondholders. Se e als o note 13 inf ra . U. S. Ba nk contends that, e ven if a ffirmative defe nses ar e asse rted a g ainst it by 6 In July 2002 , the pre sent class action was f iled. H ere the bond hold ers, as tr ust be ne fi ci ar ie s, se ek

c la ss c er tif ic at ionin ane ff

ort t o r ep la ce U
. S
. Bank a s th e pr ope r pla int if

f ag ai nst S outhT ru st and R el ianc e in p ur sui ng the ir la pse d se curi ty interest claim s. T hey

also seek to add U. S. Bank as a negligent and conflicted de fe ndant, c la im ing that i t ha d aduty dur ing the thi rt ee n m onths p ri or to the bankrupt cy

filing to di scover that the UC C-3 continuatio n statem ents had no t been filed, and to eith er c ure or m itigate the situatio n. T he bond hold ers claim that U. S. Bank lacks the incentive to prosecute South Tr ust and Reliance as rigorously as the y w oul d. 5 Inr eb utt al , U
. S
. Bank c ont en ds tha t, a s th e se curi ty int er es t di d no t l ap se on its watch, it has no conflict of interest. F urther, U. S. bank argues that, as SouthTrust and Reliance ce rtified that all necessar y filings had b een done, it re lied on those c er

tif ic at ion s and w as und er

no d uty to do m or e. U
. S
. Bank c la im s to have no liabili ty

as a j oint to rtfea sor. 6SouthTrust and Reliance, it still has ever y incentive to maximi ze a full rec overy for the bo nd ho lde rs in i ts s uit

a g a ins t So uth Tr

us t and Re lia nc e . T o th e c ontr ary , th e bo nd ho lde rs c la im that U. S. Ba

nk has eve ry

incentive to downplay

the amount of damag es sustained whe n the secur ity interest lapse d beca

use, it too, may

be liable f

or such losses. How ever , U. S. Ba nk admits that if it does not rece ive a f ull recove ry , in all likelihood, they will be liable to the bondholders for

the shortfa ll. Under the trust indenture, twe nty -five pe rce nt (25%) of the bondholders c ould demand that U. S. Ba

nk be re place d as trustee . As a pra ctical matter , the bondholders c ontend that there is n ot a ba nk in t he c ountr y that w ou ld v olu

nta ri ly c ho os e to g e t invo lve d w iththe sc e na ri o prese nted her e, bankr

uptcy , lapsed sec urity

interests and multiple litigation. 7 T he dis tr ic t c ourt de nie d c la ss c er tif ic at iona nd d ism iss ed

the a ct ionby

the bondhol de rs a ga ins t S outhT ru st and R el ianc e. I t f ound that ge ne ra l pr inc ipl es of trust law and the term s of the trust indent ure itself expressly provide that U. S. Bank i s th e pr ope r party

w ithstandi ng t o a sse rt

c la im s a ga ins t thir d part ie s on be ha lf o f th e trus t b en efi ci ari es . As to the suit by

the bond hold ers against U. S. Bank, the district court de nie d c la ss c er

tif ic at ionand d ism iss ed

on the gr ound s th at

the y la ck ed standi ng to s ue U
. S
. Bank. I n th e al te rn at ive , in a fo otn ote , the dis tr ic t c ourt he ld tha t the ir cl ai m s w er e unr ipe unt il suc h ti m e as it is de te rm ine d w he the r or not the a ct ion filed by U . S . B ank against South Tr ust and Reliance would m ake the bondh olders whole. T he bon dhol de rs appe al the j udgm en t of the dis tr ic t c ourt. II. STANDARD OF REVIEWAs artf ully explained in Prado-Steiman : 7 Thus , it is w e ll- se ttl e d th at pr ior

to t he c e rt if ic atio n o f a

c la ss, and

te c hn ic a lly speakingbefor e under

takingany

formal ty picality or commonality

revie w, the district court must determine that at least one na med class r epre sentative ha s Ar tic le I I Ista

nd ingto r a ise e a c h c la ss s ub c la im. “ [A]ny ana ly sis of

c la ss cer tification must beg in with the issue of standing .” Griffin v. Dugger , 823 F.2d 14 76 , 1 48 2 ( 11 Cir . 1 98 7) ; see also Brown v. Sibley , 650 F.2d 760, 771 ( 5 Cir. th th Unit A, J uly

1981)(statingthat the “c onstitut ional threshold [of standing] must be met befor e any

consideration of the ty

picality of cla ims or commonality of issues require d for pr ocedur al re asons by Fe d.R.Civ.P . 23. “Only

afte r the c ourt de te rm ine s th e iss ue s f

or wh ic h th e name d p la int if fs have sta

nd ingsh ou ld i t addre ss the question whether the named pla intiffs have r epre sentative c apac ity , as define d by

Rule 23(a) , to assert the r ights of othe rs.” Gr iff in , 8 2 3 F
. 2 d

at1 4 8 2
. It is not enoug h that a name d plaintiff ca n establish a ca se or c ontroversy betwee n him se lf and the de fe nd ant b y

vir tue of havin gsta

nd inga s to on e of

many c la ims he wi sh e s to a sse rt . Rathe r, “ e a c h c la im mus t be ana ly zed se pa rate ly , a nd a c la im cannot be asser

ted on beha lf of a c lass unless at least one named plaintiff ha s suffe red the injury

that g ives rise to that cla im.” Id. at 1483. Prado-Steiman , 2 21 F .3 d at 12 80 . T hu s, jus t a s a pla int if f c ann ot p ur su e an in div idu a l c la im unless he prove s standing, a plaintiff ca

nnot repre sent a c lass unless he has standingto raise the claims of the c lass he see ks to repre sent. Id. 8 W e rev ie w ord ers de nyin g c la ss cert ifi cat io n fo r ab us e o f di sc ret io n. See W oode n v . B d. of R eg en ts o f the U niv
. Sy s. , 247 F. 3d 12 62, 1271 (11 Cir. 2001 ), th ci tin g P rado -S

te im an v . B ush , 221 F
. 3d 1 266, 127 8 ( 11 Ci r. 200 0)
. N one the le ss, th 7

“ [w ] he the r the dis tr ic t c ourt a ppl ie d th e co rr ec t l eg al standard in re ac hin g it s de ci si on on cla ss cert ifi cat io n . . . is a le ga l q ue st io n t ha t we re vi ew de novo .” See London v. W

al-Mart Stores, Inc. , 340 F
. 3d 1 246, 125 1 ( 11 Ci r. 200 3) , c iti ng th Ja m es v . Ci tyof D allas , 254 F. 3d 55 1, 562 (5 Cir. 2001 ) (f or the proposi tion th at th a district court’ s decision to deny certification of a class shall only be rever sedSe c tio n 8 05 re a ds in f ull : 8 No owne r o f a

ny of the [bon ds ] sha ll h ave any ri g ht t o in sti tut e any

su it, action or pr ocee ding in e quity or at lawfor the e x ecution of a ny trust here under, or for any other re medy

here under or

on the [bonds] unless (a) such owne r previously

shall have g iven to the Trustee written notice of an eve nt of defa

ult as here inabove pr ovided [in S ection 801;] (b) the owne r, or owne rs, of 25% of the outstanding pr incipal amount of the [bonds] s hall have ma de wr itten reque st of the Tr us te e a ft e r t

he ri g ht t o e xer c ise su c h p ow e rs or ri g ht o f a c tio n, a s th e c a se may be , s ha ll h ave a c c ru e d, and sh a ll h ave a ff

or de d th e Tr

us te e a re a so na ble op po rt un ity e ith e r t o p ro c e e d to e xer c ise the po we rs he re ina bo ve g ra nte d, or to institute such a ction, suit, or proce edingin its name; (c) the re sha ll have bee n of fe re d to the Tr

us te e se c ur ity

and ind e mni ty

satis fa c tor

y to i t a g a ins t th e c os ts, expenses and liabilities which may be incur red the rein or the reby ; and (d) the Trustee shall have r efuse d or neg lected to c omply with such reque st within a rea sonable pe riod of time; and such notification, request, off er of indemnity

and ref usal or neg lect ar e her eby decla red in e very

such ca se, at the option of the Trustee , to be conditions prec edent to the e x ecution of the power s and trusts of this I ndenture or for

any other re medy

here under. The parties he reto intend that no one or more owner s of the [bonds] shall have a ny rig ht in any

manner whateve r by his or their ac tion to affec t, disturb or prejudice the sec urity of this Indenture , or to enfor ce a

ny rig ht here under, e x cept in the manne r her ein provided, a nd that all proce eding s at law or in e quity shall be instituted, had and maintained in the manner here in provided and f

or the e qual bene fit of all owner s of the outstanding [b o n d s ]. Nothing in this Article c ontained shall, howe ver, a ffe ct or impair the r ight 9 upon a showing that the court abused its discretion or that it appliedincorrect le gal standards in reaching its d ecision). III. DISC USSION A. T he Tr

ust Indentu re 1. S ec tio n 80 5 T he c ontro lli ng s ec tio n of the tr ust ind en tur e is S ec tio n 80 5, e nti tle d “ Ri ght of [ Bo ndho lde rs ] to In sti tut e Su it. ” S ec tio n 80 5 pr ohi bit s bo ndho lde rs f ro m sui ng 8of any owner of a [bond], which is absolute and unconditional, to enfor ce the pay ment of the princ ipal of and inter est on such owne r’s [bonds] out of the mon e y s p ro vid e d f

or su c h p ay me nt, or the ob lig atio n o f t

he [hos pit a l a

uth or ity] to pay the same out of the source s pledg ed her eto, at the time and pla ce e x presse d here in. Clauses such as se t forth in Section 805 of the trust indenture are ref err ed to as ‘no- 9 action cla uses.’ Se e Cru de n v . B an k of N e w York, 957 F.2d 961, 967- 969 (2d Cir. 1992). As trust indentures commonly vest exclusive power in the inde nture trustee to enforc e re medial provisions in the event of a defa ult, ‘no-ac tion’ clauses ty pically bar bondholde rs from instituting any judicial proce eding s ag ainst the obligor unless the indenture trustee r efuse s to act af ter be ing instructed by

the re quisite number of bondholder s specifie d in the trust indenture, or, if the indenture truste e ac ts in bad faith, or, ha s an adve rse inter est conflictingwith its responsibili ties under the trust indenture. Id.; se e also W atts v. Missouri-Kansas-Texas R. Co. , 383 F.2d 571 ( 5 th Cir. 1967). Such ‘no-a ction’cla uses have g ener ally

been uphe ld by

the cour ts in order to avoid a mul tip lic ity

of laws uit s and

to e ns ur e that any

lit ig atio n w ill inu

re fo r t he e qu a l and

rata ble benef it of all bondholders. See F riedman v. Chesape ake & O.R.Co. , 395 F.2d 663 ( 2d Cir.1968). 10 thi rd part ie s un le ss: ( 1) the y

have pr ovi de d w ri tte n no tic e to the T ru ste e; ( 2) 25% of the bon dhol de rs have m ad e suc h ar eque st; ( 3) the bon dhol de rs have of fe re d to ind em nif y the T ru ste e; and ( 4) the T ru ste e none the le ss r ef use s th e re que st. T he thr ee f idu ci ar y de fe ndants arg ue that the bon dhol de rs la ck standi ng t o br ing sui t against them

because these four c ondi tions have not been m et, and therefore, that they m ust await the outcom e of the ac tion filed on their behalf. If a full re covery is m ad e, the bon dhol de rs ’ a lle ge d c la im s w oul d be m oot . 9

2. Se ct ion902 Inr eb utt al , the bon dhol de rs c la im that S ec tio n 90 2 of

the tr ust ind en tur e, in
es se nc e, tr

um ps S ec tio n 80 5, w he n th e curr en t tru ste e is a lso ne gli ge nt. A lth oughThe bondholder s try to buttress this argument by contendingthat, in addition to S ection 10 902 of the trust indenture , Geor g ia law spe cifica lly and indepe ndently

authorizes a ca

use of a c tio n a g a ins t a

tr us te e wh os e a c ts a

nd omi ssi on s r e su lt i n in

jur y to a no the r p e rs on : “ Whe n tr

us t or c on fi de nc e is r e po se d in

a pe rs on in c on sid e ra

tio n o f a pa y me nt o r p ro mis e of

a re wa rd to h im, neg lige nce in the pe rson trusted which r esults in injury to the other pe rson shall g ive the injured party a right of ac tion.” O.C.G.A. § 51-1- 19. 11 Se ct ion902 is ove r thr ee pa ge s lo ng, the bon dhol de rs c ite onl y the f oll ow ing language: “No provision of this Indenture shall be cons trued to relieve the T rustee fr om li ab ili ty f or it s own ne gli ge nt a ct ion , it s own ne gli ge nt f ai lur e to a ct , or

it s own wil lfu l m is co nd uc t . . . .” 10 II. The B ankruptcy

Court Or der T he bon dhol de rs arg ue that the tr ust ind en tur e w as te rm inate d by the D ec em be r 20, 200 1, or de r of

the bankr

upt cy c ourt. T he y

c la im , the re fo re , that any lim itatio n inS ec tio n 80 5 inthe tr ust ind en tur e, suc h a s th e 25% r ule , on the ir

r igh t to s ue thi rd

part ie s ha s be enr em ove d. T he or de r pr ovi de s inpe rt ine nt p ar t: The M ast er I nde ntu re , the Ce rt if

ic at e In de nture a nd the [ bond s] issued th ereunder shal l t erm ina te as o f th e eff ect iv e d at e . . . ex ce

pt a s ne cessa ryto adm ini

ste r th e rig

hts , c lai m s, li en s, and

int er es ts o

f the M a s t e r T r u s t e e, th e C

e r t i f i c a t e T r u s t e e a n d

th e [ b o n d h o ld e r s ], e xc ep t [the y ] sha ll co nti nue in ef fe ct to the e xte nt n ec es sary

to al lowthe Ma ste r T ru ste e an d th e Ce rt if ic at e T ru ste es to re ce ive dis tr ibu tio ns pur suant t o th e Pl an. . . and to t he e xt en t ne cessa ryto fac ili tat e the M ast er T rus te e’ s pr ose cu tio n fo r se ttl em en t of tha t c er tai n ac tio n ve nue d in the Sup er ior

Co urt of F ulton C ount y, G eo rgi a an d Ca pti one d U

. S. B ank T rus t, Na tio nal

A sso ci ati on v . Sou thT

rus t B ank et al
. . . .Th e bo nd ho lde r g e t th e ‘n ic e tr

y of the we e k’ awa

rd wh e n th e y

c la im that th e tr

us t 11 ind e ntu re ha s b e e n f

ull y te rm inate d a s th e ba

nk ru ptc y c ourt or de r o nly

re fe re nc e s U. S. Ba nk’s state a ction, not its l ater , remove d, fede ral a ction. 12 (E m phasis add ed). T he dis tr ic t c ourt f

ound that the tr

ust ind en tur e w as onl y

part ia lly te rm inate d by

the bankr

upt cy c ourt. I t he ld i t w as sti ll ef fe ct ive to adm ini ste r “ the ri ght s, c la im s, li en s, and i nte re sts of the tr ust ee a nd the bon dhol de rs ” an d “ to fa ci lit at e U
. S. Bank’ s su it ag ai nst S outhT ru st and R el ianc e on b eh al f of the tr ust be ne fic ia rie s, t he bo nd ho ld ers .” W e ag ree. 11 III
. Ge orgia Tr

ust Law 1. The Turner

Ca se T his c as e is g ove rn ed

by G eo rg ialaw . I n Tu rne r v . T rus t C o. of G eo rgi a , 105 S. E
. 2d 2 2 ( 1958 ), the c ur re nt tru ste e fi le d su it ag ai nst af orm er tr ust ee f or
m al feas an ce. The tru st be ne fic ia rie s at te m pt edto su e th e fo rm er t ru st ee d ire ct ly. T he y c la im ed that the a dvoc ac y

e spou se d by

the c ur re nt tru ste e w as de fi ci en t i n that he wasn’ t pursuin g their case a gainst th e third party tortfeasor in the m anner th atful ly repre se nt edth ei r in te res t i n t he tru st est at e. T he S upr em e Co urt of

G eo rg iain Tu rne r af

fi rm ed the r es tr ai nt o f the tr

ust be ne fi ci ar ie s f

ro m pr oc ee din g f

urthe r w iththe ir

sui t. I t he ld tha t, w he re theThe Tur ne r court illustrated its rationale using a hy pothetical trust with four 12 benef iciarie s, eac h demandinga diffe rent c ourse of action. Turner , 105 S.E.2d at 28. The trustee is b ound to c on sid e r what e ff

e c t e a c h o f t

he fo ur c ours e s o f a c tio n w ill have up on the tr us t e state and use its best judg ment. Id . I t would be intolerable if multipl e bene ficiar ies wer e ea ch trying to do the job give n the trustee in the tr ust indenture. 13 ins tr um en ts c re at ing the tr

ust c onf er upo n th e tr

ust ee dis cr et ion ar

y pow er to be
ex er ci se d a cc or din g to it s j udgm en t, ac ourt of e qui ty w ill not int er fe re to co ntr ol th e trus te e, act in g b on a fi de , in th e rea so nabl e ex erci se of i ts di sc ret io n. Turner , 105 S.E .2d at 26 (citations om itted). T he court also found th at the beneficiar ies 12
w er e boun d by

the r es ult of the sui t i nst itu te d by

the tr ust ee f or the be ne fi t of

the tru st est at e. Id

. a t 27 (c itatio ns o m itt ed ). T he ir r em edy lay a ga ins t the c ur

re nt tru st ee i f th ere was a lo ss . Id
. W e fi nd Turner applies on all fours here. Bo th p ar tie s a gr ee that Turner

c ontro ls the dis posi tio n of thi s c as e, but

f or differe nt reasons. Both parties cite to the sam e para graph of Tu rne r as ind ic at ive of the ir pos iti on: Whe re the ti tle to pr ope rty is put in one pe rs on f

or the be ne fi t of others, the latter

take cu m one re . T he ski ll, abil ity , a nd s olv en cy of th e trus te e o pe rat e to th ei r ad va nt ag e. B ut a s to ac ts w ith in t he sc ope of his express o r implied powers, they m ust su ffer the consequences wh en th ey u lt ima te ly pr ov e d etri men ta l t o t he be ne

fi ci ar ie s. T he re m edy in suc h ac as e is n ot t o un do wha t ha s law fu lly be endon e, but to pro ceed against

the trustee , . . . whose personal and financial fi tne ss w er e pa sse d up on b y the gr an tor

w he n gi vin g th e land. T he ve ry ins tr um en t w hic h c re at ed

the e state put

f or w ar d th e tr

ust ee a s th e p e r s o n w h o w a s t o r e p r e s e n tth o s e i n t e r e s t e dth e r e i n w h e n i tb e c a me ne ce ssary to de al w iththi rd

pe rs ons.We have f ound no case law as to whe ther or not c erta in affir mative def

enses, suc h as 13 avoidanc e, compa

rative ne g lige nce a

nd proxi mate ca

use, potentially

available ag ainst the trustee and not the bondholder s, would be suffic ient cause to cre ate a n exception to the Tur

ne r ru le
. 14 Turner , 105 S. E. 2d at 27 (em phasis add ed).
a. T he Co nte nti ons of

U
. S
. Bank a s to Turner U
. S
. Bank r el ie s onke y

langua ge in the para gr ap h th at state s th at

“ they
m ust suf fe r th e co nse que nc es wh en the y ult im ate lypro ve de tri m en tal to the be ne fic iar ies. ” It c laim s that the consequ ences here have not, as y et, been ‘u l t i m at el y p ro v ed d et ri m en t al .’ It is undi sput ed

that U
. S
. Bank h as the auth or ity to sue it s pr ed ec es sor trustee for a

harm done to th e trust estate. T herefor e, under Turner , w he n it is
ac tin g w ith in the sc ope of it s auth or ity , it

m ust be a llo w ed

to co m ple te that a ct ion
. If that a ct ionsho uld ult im ate lyprove detrim ental to the beneficiaries, then, at that poi nt i n ti m e, the be ne fi ci ar ie s m igh t have a ca use of action, but not before. 13 b. T he Co nte nti on o f the Bo ndho lde rs a s to Turner The bondhold ers re ly

on the langu age in the Turner paragra ph that states that the ir r em edy is “ to pro ceed against

the trustee .” T hey

interpret that to m ean directly and im m ediately
. They

argue that, as the Tu rne r tr ust ee ha d no c onf

lic t of interest, and, as U . S . B ank in thi s case does have a c onflict of interest, an15

ex ce pti on t o th e ‘ ult im at e’ langua ge in Turner is cr eate d, a nd Tu rne r m ust be read in co nju nc ti on wit h c as e la w dea li ng wit h c on fli ct edtru st ees .

2. Whe n th e T ru ste e ha s aCo nf lic t of I nte re st
a. T he Tate ca se In F ulton N at’ l B ank v . T ate , 363 F. 2d 56 2, 570 (5 Cir. 1966 ), the trustee th
w as a lle ge dly

inv olv ed in se lf -d ea lin g, both onhis ow n be ha lf a nd i n hi s c ap ac ity
as tr ust ee , w ithathi rd

party pur ch as er . T he tr

ust ee w as a lle ge dly

se lli ng tru st pr ope rty a t a dis co unt in or de r to g ar

ne r a be tte r pr ic e fo r his ow n pr ope rty . T he Fi fth C ir cu it fo und that the re w as suc h su bst an tia l c onf

lic t of int er es t onthe tr ust ee ’ s part

a s, und er G eo rg ialaw , to shi ft

the bur de n of

pr oof to the tr ust ee to de m onstrate to the c ourt tha t se lf -d ea lin g w as not

pr es en t. b. T he B ooth ca se In B ooth v
. Se c. M

ut. L ife I ns. Co
. , 155 F
. S upp. 755 ( D
. N
. J. 195 7) , the trustee conspired with third parties to loo t the trust estate. I t actively participated in the w ro ngdo ing by

thi rd part ie s. T he dis tr ic t c ourt f ound that the tr

ust be ne fi ci ar ie s, and n ot tru ste e, w er e the pr ope r cl as s pl ai nti ff s inac la ss a ct ion ag ai nst a n in sur an ce c om

pany f or a lle ge d br ea ch es of

tr ust a nd d ive rs ion s of

tr ust funds in c onne ct ionw ithw ri tin g of gr oup ins ur an ce f

or the tr ust f und.
c. T he Conflict of Intere st Alleged H ereU. S. Ba nk claims it has ever

y incentive to exonerate itself by makinga full re cover

y 14 ag ainst SouthTrust and Reliance. To the contra ry , the bondholders a lleg e that U. S. B ank has e ve ry inc e nti ve to d ownp lay

the amou nt o f d ama g e s in c ur

re d a s it too ma y be lia ble . T he y c la im that U. S. Ba

nk is seekingonly

two milli on dollars in damag es, whe n in fac t, they claim that the amou nt i s at le a st s ix mill ion

do lla rs . T he iss ue of

the pr op e r c a lc ulatio n o f d ama g e s is pr e se ntl y befor e the district cour

t on a motion for par

tial summary

judgme nt. 16 T he bon dhol de rs a ve r that U
. S
. Bank h as ac onf lic t of int er es t i n it s su it against South Tr

ust and Reliance because it shouldhave discovered that the UCC
3 statem ents wer en’ t filed, c ured the problem by filing a new ones, and m itigated the dam ag e . W e disagree. What is alleged to have taken place here is not the self-dealing, conspiracy
or c or ru pti on tha t w er e pr es en t i n Tate or B ooth
. T he a lle ga tio n m ad e by the bondhol de rs he re is of

ase parate w ro ng b y

U
. S
. Bank, ind ep en de nt o f an y a ct ion
orin act io n o n t he pa rt o f So ut hTru st an d R el ia nc e. Clear ly , U . S . B ank is not a j oint to rtfea sor. W e conclude that any conflict of int er es t a lle ge d he re is not sig nif ic an t e noug h f

or us t o c ar ve out a n e xc ep tio n to the rule of Tu rne r, under the auspices of either Ta te or B ooth
. 14

3. S tanding to Sue SouthTrust and Reliance T he re fo re , und er

G eo rg iatr

ust law , pur suant t o th e te rm s of the tr ust ind en tur e, ke pt a liv e in f

ull by the bankr

upt cy plan of r eo rg an iz at ion , U
. S
. Bank i s the party w ithstandi ng t o purs ue the c la im s a ga ins t S outhT ru st and R el ianc e on17

be ha lf o f th e trus t b en efi ci ari es . See Turner , 105 S
. E
. 2d at 26
. T he iss ue of the duty of U
. S
. Bank t o a ct

to cure a nd m iti ga te w ill ne ve r be a dj udi cate d if it
rece iv es a fu ll reco ve ry

fro m th e th ird pa rty tor tfe as or s. Id
. T he bon dhol de rs w ill be bound b y

the r es ult and the ir r em edy w ill the n be a ga ins t U
. S
. Bank i f the re is a lo ss . Id
. a t 27
. 4. R ipe ne ss and the S ta tut e of L im itatio ns a s to U
. S
. Bank If and whe n U
. S
. Bank r ec ei ve s le ss than af ull r ec ove ry , the n and o nly the n, w ill any

pot en tia l c au se of

a ct iona ga ins t i t by

the bon dhol de rs r ipe n and
accrue . See Turner , 105 S
. E
. 2d at 27
. A t tha t t im e, the statut e of li m itatio ns w ill be gin , a nd the bon dhol de rs w ill have the ir c la im , a s th e ac tio ns t ak enby the tru st ee, wit hi n t he sco pe of i ts ex pr es s o r im pl ie d p owe rs , have ultimately proved detrimental to them, the trust beneficiaries
. Id
. T he m er its of

the iss ue pr es en te d,
w he the r or

not U
. S
. Bank h ad

aduty to ac t t o c ur e an d m iti ga te , w ill the n be be fo re adif

fe re nt c ourt. IV. CONCLUSION Ba se d up on the f

or eg oin g, w e af

fi rm the j udgm en t of

the dis tr ic t c ourt. AFFIR MED.18