Opinion ID: 3020094
Heading Depth: 4
Heading Rank: 1

Heading: Contractual Duty

Text: Peak alleges U.S. Bank breached two pre-default duties. The first, in an argument it makes for the first time on appeal, is a duty allegedly found in the Indenture. Regardless of the occurrence of an event of default, under section 6.1(c) of the Indenture, U.S. Bank “may not be relieved from liability for its own negligent action, [or] its own negligent failure to act . . . except that . . . [it] shall not be liable for any error of judgment made in good faith . . . unless it is proved that [it] was negligent in ascertaining the pertinent facts.” (App. 215.) Limiting this duty, however, is section 6.2(a), which grants U.S. Bank the right to “rely on any document believed by it to be genuine,” without the need to “investigate any fact or matter stated in the document.” 8 (App. 216.) Similarly, section 6.1(b)(ii) provides that U.S. Bank can in good faith conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon the certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; however, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. 8 Under New York rules of contract interpretation, where a contract “employs contradictory language, specific provisions control over general provisions” and it “should be interpreted in a way which reconciles all its provisions if possible.” Green Harbour Homeowners’ Ass’n v. G.H. Dev. & Constr., Inc., 789 N.Y.S.2d 319, 321 (N.Y. App. Div. 2005). 11 (App. 215.) Peak contends that U.S. Bank had a duty under section 6.1(b)(ii) to “examine” the form of Republic’s Servicer Certificate before relying on its erroneous information by comparing it to an example certificate attached as an exhibit to the SSA. Because that exhibit was never produced by U.S. Bank, and because U.S. Bank never demonstrated that it satisfied this alleged duty, Peak believes that summary judgment was inappropriate. Peak asserts that U.S. Bank’s contractual right to rely on the Servicer Certificate was contingent on its “examin[ing]” the certificate, and absent that right, it was “negligent in ascertaining the pertinent facts,” in violation of section 6.1(c). Peak waived this argument by failing to raise it before the District Court. See, e.g., Gass v. Virgin Islands Tel. Corp., 311 F.3d 237, 246 (3d Cir. 2002) (“It is well established that failure to raise an issue in the district court constitutes a waiver of the argument.”). Not only did Peak not argue before the District Court that U.S. Bank breached a duty grounded in section 6.1(b)(ii) of the Indenture, but it conceded at oral argument that “under the [Indenture] agreement, [U.S. Bank] could rely on the servicer certificate.” (App. 2106.) Peak only contended, first, that under the Indenture, “U.S. Bank cannot be relieved from the liability for its own negligent action.” (App. 2028.) Even if construed as a general duty not to be negligent, that duty is limited, as explained above, by U.S. Bank’s right to “rely on any document believed by it to be genuine,” which Peak conceded includes the Servicer Certificate. Second, in an argument we 12 address further below, Peak maintained that U.S. Bank had an implied duty to perform the allegedly ministerial task of independently verifying how much money was in the collection account. As a result, it was uncontested before the District Court that U.S. Bank was not negligent in its reliance on Republic’s Servicer Certificate.9 Peak cannot now claim that summary judgment was in error because U.S. Bank failed to demonstrate that it “examine[d]” the Servicer Certificates, and failed to produce the example certificate attached to the SSA. The waiver rule “applies with added force where the timely raising of the issue would have permitted the parties to develop a factual record.” Gass, 311 F.3d at 246. We will not penalize U.S. Bank for not offering evidence in anticipation of an argument not yet raised.