Court Opinion

ID: 9443637
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:26:19.358321+00
Date Added: 2024-06-11T17:29:33.462523
License: Public Domain

FRANK, Circuit Judge
(dissenting).
I -agree that (contrary to our original opinion on this appeal) the district court had jurisdiction.1 But I disagree-with my colleagues’ decision on the merits. To illuminate my reasons for dissenting, I shall first state briefly the following salient facts:
(1) The debtor company was an affiliate -of (i. e., a creature of the same company that controlled) Prudence Company, Inc., the sponsor of all the many Prudence-Bonds “series” of bonds, which the sponsor sold to investors. (2), The sponsor’s guaranty of payment of the securities deposited with the trustee for the benefit of the bondholders, (the, guaranty my colleagues call the "Secondary Guaranty’,’) expressly recites that the sponsor, haying acquired them, “is arranging .to sell .and deliver all of said Prudence-Bonds and in order to induce the, purchase thereof’’.has agreed to make that guaranty. It .is thus obvious that the sponsor, in selling these bonds to the public, used the Secondary *565Guaranty as an inducement; the ample ■solvency of the sponsor at that time gave that guaranty major importance.2 (3) The principal mortgage deposited with the State Street Trust Company, the trustee of the series before us here, was the Guyon mortgage. It constituted 85% in value of the deposited securities in the Trust Fund. This Guyon mortgage was continuously in default, as to principal, beginning in May 1930. From that time on, the trustee was keenly aware of that default, as appears from many letters, calling attention to it, written by the trustee or its counsel to the debtor or the guarantor. (4) The so-called Secondary Guaranty provided that the guarantor would pay the principal of such a defaulted mortgage within eighteen months.3 The eighteen months expired in November 1931. Since the güarantor was solvent then, and for several years thereafter, the bondholders (the beneficiaries of the trust) would have been paid in full, if the trustee had sued the guarantor with reasonable promptness. (5) But the trustee — which does not and could not possibly argue that it overlooked the default, and which has reported no reason for its conduct — deliberately, with “reckless indifference to the interest of the beneficiaries of the trust,”4 chose to take no action against the guarantor until the guarantor’s bankruptcy, some three years later, in 1935. (6) As a consequence, the bondholders suffered a huge loss. (7) There was no way by which any bondholder could have known, and no bondholder in fact did know, of the default on the Guyon mortgage, or of the resultant liability of the guarantor, until after the guarantor’s bankruptcy in 1935. Accordingly, until then — when it was too late — -none of the bondholders could possibly have demanded that the trustee sue the guarantor on the Secondary Guaranty.5
The trustee, nevertheless, denies liability. Its defense may be summarized thus:
“It is true that we alone could enforce the guaranty since, by its express terms, it ran only to us, as trustee, for the benefit of the bondholders. We maintain, however, that we were but custodians of this guaranty, with no obligation whatever to enforce it, although well aware of the happening of facts rendering the guarantor liable, because we had merely a power to sue the guarantor if we happened to feel like it, unless we were requested so to act by bondholders. Practically, of course, this idea of a request from bondholders made no sense, for the bondholders could have no information of the guarantor’s default unless we, with knowledge of it, happened to feel like advising them of it. But we did not happen to feel that way. Simply by hot telling them of a fact which we knew but which we knew they did not know, and in that way arranging that they could not ask us to act, we were able, without liability, to engage in what would otherwise have been a complete disregard of our duty as trustee.6 We had no duty to inform the bondholders. Why? Because, although we were boldly named in the bonds and the indenture as ‘Trustee,’ we assert that a carefül reading of the indenture reveals that we had been thus immunized from liability for not acting as a trustee with respect to this guaranty. For, although no clause ex*566pressly so states, we contend it is clear that, piecing together several of the clauses and relying on implication, our inaction on this guaranty gave rise to no liability on our part.”7
My colleagues sustain this defense. In arriving at their decision, they use much ingenuity in interpreting ambiguous provisions of the indenture, with (I think) marked generosity to the trustee — which (unlike the bondholders) had studied and agreed to those provisions before any bonds were issued and sold. My colleagues say that “the trustee meant to obtain a general immunity from any liability for non-feasance.” Had that been the intention, the matter would not have been left to implication, but the indenture would have provided, as many trust indentures do, that the trustee should not be liable “except for its own wilful default” or the like.8
Even if it had, the trustee here would have been liable, I think. For it is well settled that even such a clause cannot exempt a trustee from liability for inaction which amounts to “reckless indifference to the interest of the beneficiaries.” Thus the Restatement of Trusts (cited by my colleagues) says, in Section 177, “The trustee is under a duty to the beneficiary to take reasonable steps. to realize on claims which he holds in trust,” and, in Section 222(2), “A provision in the trust instrument is not effective to relieve the trustee of liability for breach of trust committed * * * with reckless indiffereno to the interest of the beneficiary. * Comment a to Section 272 states that ex culpating provisions “are strictly con strued, and the trustee is relieved of liability only to the extent to which it is clearly provided that he shall be excused”; and Comment b says that it is “contrary to public policy to give effect to” a provision purporting to exculpate a trustee from “breaches of trust committed with reckless indifference.” Scott, Trusts-(1939) is in accord; see Sections 222.2 and 222.3. The Massachusetts court, whose decisions are applicable to the liability of the trustee under this Massachusetts instrument, recently cited with approval the statements of Scott and The Restatement,9 indicating their peculiar relevance to the duties of a trust company acting as a trustee.10
Here, absent any explanation, surely the trustee’s deliberate neglect to sue the guarantor adds up to “redcless- indifference.” Yet although the express wording of the exculpatory clauses here is much narrower than “wilful default,” my colleagues,, solely by implication, construe those narrower clauses as intended to accord the trustee a wider immunity which, without saying why, my colleagues hold valid. They confer absolution on this trustee by reading into the' exculpatory clause on which they principally rely an implied reference to the Secondary Guaranty. Their-reasoning relates to the following:. Throughout the indenture (literally more-than a hundred times) there are references, to the “Trust Fund”; in each instance the-initial letters of those words are thus capitalized. In the opening recitals of the indenture, it is said that a “Trust Fund” has. been established “as provided in Article II *567hereof.” Article I bears the caption, “Concerning the Trust Fund.” And Section 1 of Article I, captioned “Contents of Trust Fund,” sets forth with precision the several kinds of securities, to be delivered to the trustee, of which “said Trust Fund shall consist.” Section 2 of Article I mentions specifically the instruments which must accompany the securities described in Section I; included in those instruments are fire insurance and title policies. Significantly, the Secondary Guaranty is not mentioned anywhere in Section 1 or Section 2. Nevertheless, my colleagues concededly base their decision on the proposition that the promise of that Guaranty was part of the Trust Fund “in precisely the same sense” as were the “promises in the policies of fire and title insurance, mentioned in Article I, Section 2” — although this court held the exact opposite in an earlier Prudence-Bond decision, President and Directors of Manhattan Co. v. Kelby, 2 Cir., 147 F.2d 465, 478.11

I

I shall, however, postpone (and kennel in Point II of this opinion) my detailed criticisms of my colleagues’ interpretations of the several clauses of the indenture, because I think that, even if those detailed criticisms are unfounded, my colleagues’ ultimate conclusion cannot stand up. For, when they get all through their discussion of particular clauses, my colleagues candidly acknowledge (1) that the instrument contains no plain words, or blanket provision, relieving the trustee of liability for not enforcing this guaranty and (2) that any provision exculpating a trustee must be “strictly construed.” I believe, then, that it will suffice to justify this dissent if I can expose (as I think I can) grave faults in my colleagues’ avowed method of “strictly” construing such a provision.
They maintain (a) that the correct method of interpreting a contract is the same as that used in interpreting a statute, and (b) that, therefore, in construing this trust agreement, the intent of the parties— whose words admittedly did not explicitly exculpate the trustee from liability as to the Secondary Guaranty — must be learned not by ascertaining what the parties actually intended but by answering the question as to how they would have dealt with this problem, which they never did consider, if they had thought of it when drafting the agreement. To these assertions I reply thus:
One may doubt — indeed many have doubted — whether all the guides to the interpretation of statutes serve adequately as aids to the interpretation of contracts.12 The doubt stems from the obvious difference between the intention of a legislature and the intention of parties to an agreement: The legislature is composed of many persons; seldom do all of them know or understand the words of a bill which becomes a statute; such knowledge often is confined to some members of a committee.13 Wigmore expressed scepticism concerning “the conventional assumption that there is a legislative will at all.”14 A Senator once said of a tax measure that “even Senators who have worked upon the bill for months do not understand it,” and another Senator remarked that “there are many sections of the bill which it is almost humanly impossible for a man who is not an expert to understand or comprehend.”15 Powell has interestingly differentiated “private” writings (such as con*568tracts, deeds and wills) and “public” writings (such as statutes, constitutions and treaties). All of the “public” genus “are alike in that commonly they are formulated by a group other than the group whose acts make them binding.” They “are not couched in words which were chosen by those whose assent gives them validity, but are in language selected by other persons whose guiding purposes are often wholly unknown and unapproved by those whose assent makes them binding.”16 On that account, even the most liberal of those judges who. rely on “legislative history” rather severely restrict the background the courts may explore to get at the legislative “intent.” As, however, the persons who prepare and sign a contract are (unlike the members of the legislature) definitely ascertainable, it is easier to determine their intent. The courts therefore usually accord themselves a wide latitude in pursuing what may be dubbed the “contractual history.”17 ■ Consequently, although the ancient (Aristotelian) precept — “Consider how the legislature would have legislated if the legislators had thought of the subject”18— has often been applied in construing statutes by courts in this country and elsewhere,19 this precept cannot be employed; safely, I think, in construing a contract— when one seeks to discover what the parties really intended. With reference to-contracts, such a precept has come to ■ be recognized as nothing but a fiction used to sugar-coat the fact that the court, entirely without regard to the parties’ intention, is-imposing on them (or one of them) an-obligation based on considerations of public policy, i. e., the court’s notion of justice, of decent, socially desirable conduct. True, at one time, under the spell of the notion that nothing but the will of the parties could determine their rights and duties, the courts, when thus importing into a contract a pretended provision- not there found, did so on the alleged ground *569that so the parties would have said if they had thought of it. But of recent years, many courts (including this court) and the leading commentators have spurned that idea 20 They have insisted that, in reality, the court in such circumstances inserts in the contract “what the court thinks the parties ought to have agreed, on the basis of what is fair and reasonable, not what as individuals they might have agreed,” because what they would have said is hut ■guesswork;21 the judicially inserted provision is now acknowledged to have been “invented by the court” - because “justice demands.”22 So we have declared several ■times.23 So Williston24 and Corbin have stated.25 I repeat that the fictitious “in-téntion” in such cases derives from judicial notions of policy, of fairness, of justice. It is, writes Williston, “better to drop any talk about the intention of the parties where they express none, and rest [such doctrines] on their fairness — a quite •sufficient basis.”26
It follows, I think, that (as pretty plainly appears from the last part of their opinion) my colleagues base their decision not ■on what the parties really meant by their words but on what my colleagues, as a matter of policy, regard as a fair, just, or socially desirable result. With that result — that policy — I do not agree. I cannot believe that, disregarding the actual intent of the parties, we foster decent, socially desirable, conduct when we hold (as my colleagues do) the following:
(1) The trustee, by not bringing a timely suit on the guaranty, has cost the beneficiaries of the trust, the bondholders, at least some $400,000.
(2) Nevertheless, the trustee is not liable for this loss. Why? Solely because (so my colleagues say) no bondholder-beneficiary notified the trustee of the guarantor’s default — despite the undeniable and undenied fact that no bondholder knew or could have known of it, and the trustee, well aware of it, did not advise the bondholders of the default.
To my mind, such a decision is most regrettable. It debases the noble word “trustee,” allows it to become a tricky decoy to catch and injure innocent investors. “There’s no equity stirring,” 27 I think, in such a judicial policy. In another Prudence-Bonds case, involving an identically-worded trust indenture, we replied to the trustee’s asserted interpretation of a different provision of the instrument, that so to construe it “would he to impute to the Corporation [the debtor] and the Bank [the trustee] an intention which verges on dishonesty, and it is therefore an interpretation not to be adopted unless (as is not the case here) no other is possible.”28 Much the same can and should be said in *570the instant case. To call a prostitute a virgin would, I think, be no more strange than to permit the trust company here successfully to avoid one of its major fiduciary obligations and yet call itself a “trustee.”
II
The foregoing, if correct, will alone suffice to refute my colleagues’ arguments. In addition, I think their reasoning as to specific exculpatory provisions is unsound.
1. They say (as noted above) that their decision depends and must depend, on this proposition: The indenture, by necessary implication, made the so-called Secondary Guaranty a part of the “Trust Fund” described in Article I. With this proposition I disagree for these reasons:
Article I is entitled “Concerning The Trust Fund.” Section 1 of this Article states that the “Trust Fund shall consist of the following,” and then goes on to refer specifically to (a) bonds and mortgages made by corporations other than the debtor or the guarantor; (b) bonds, notes or other evidences similarly made, other than those described in (a) and of a stated character; (c) bonds of the debtor and shares of bonds and mortgages; (d) bonds and other securities legal for investment by banks; (e) cash (or the equivalent). Section 2 of Article I calls for instruments which must accompany “bonds and mortgages delivered to the Trustee” under Section 1 — viz., fire insurance and title guaranty policies.
There is not a syllable in Article I— the sole Article purporting to describe the Trust Fund — which—although it specifically refers to the fire and title insurance policies — in any way refers to the so-called “Secondary Guaranty.” That Guaranty is described in, and required by, a distinct Article, i. e.j Article III, Sec. 1(f).29 The fact that this Guaranty is not described in Article I — which quite carefully' enumerates the contents of the Trust Fund, including, in Section 2 the fire and title policies — would seem clearly to defeat the argument that that Guaranty was meant to be included in Article I: If such was the parties’ purpose, it would have been so easy to say so explicitly. Nevertheless, my colleagues include that Guaranty in Article I by mere implication — and, remarkably, as a part of their purported “strict” interpretation.
My colleagues obviously feel called upon to explain why, if that Guaranty was intended to be part of the Trust Fund, it was not explicitly named in Article I. This they do thus: They say that the Secondary Guaranty was not executed until “more than a year after the Indenture” and that “the fact that it was not in existence at the time may well account for the failure to recite it as part of the mortgaged property in Sections 1 and 2, Article I.” Surely that attempted explanation won’t wash, since there was nothing whatever to prevent the guarantor, the sponsor of the trust, from executing this Guaranty and delivering it to the Trustee on the very day the indenture and the Primary Guaranty were executed.
Moreover, as above noted, this court— in a case not mentioned by my colleagues— has already decided this issue. President & Directors of Manhattan Co. v. Kelby, 2 Cir., 147 F.2d 465, 478, related to the liability of a trustee under an indenture, securing another Prudence-Bonds “series,” worded precisely as is the indenture here. There the trustee, before authenticating the debtors’ bonds, had not obtained what we have here called the Secondary Guaranty. Rejecting a suggestion that this failure made the trustee liable, we said (147 F.2d at page 478): “Appellees also suggest that the Bank [the trustee] improperly authenticated the Corporation’s [debtor’s] bonds because, before authentication, there was not in its possession, the guarantee of *571(a), (b), and (c) collateral in the trust fund. But neither Article I, § 1, which describes the required contents of the trust fund, nor the associated Article I, § 2, which describes the instruments which must accompany mortgage collateral, refers to that guarantee.”
As, then, there exists no foundation for their reasoning, I see no warrant for my colleagues’ assertions (1) that, within Section 5 of Article I — the very Article which, in its sections 1 and 2, specifically enumerates the contents of the “Trust Fund” but does not include in that ■enumeration the Secondary Guaranty — this Guaranty is an agreement “contained” in some of the “securities constituting the trust fund” fully as much as a “fire, or title, insurance policy,” and (2) that a breach of the guaranty was a “default * * * hereunder,” within Article V, Section 1. For, according to my colleagues’ opinion, both those assertions are necessarily grounded on the untenable proposition that this Guaranty was part of the Trust Fund.
2. My colleagues say, however, that they cannot understand why there should ■be any distinction between the “Trust Fund” and the “trust res.” I experience no difficulty in seeing such a distinction, especially as the instrument itself observes it, as when, in the sixth paragraph of Article V, Section 1, it speaks of “the trust estate,” whereas elsewhere there are repeated references to the “Trust Fund.” I think the parties labelled a portion of the trust estate (or trust res or trust assets) by a distinctive term — i. e., the Trust Fund — for the purpose of restricting the liability of the trustee with respect to such assets, while not thus relieving the trustee as to the particular asset, the Secondary Guaranty, not included in that part of the trust estate labelled the “Trust Fund.” 30
My colleagues argue that the parties could not have intended such a differentiation, as it would have the result (1) of exculpating the trustee for failure to foreclose the mortgages deposited with it, and specifically described as constituting part of the Trust Fund, but (2) of leaving the trustee liable for not enforcing the Secondary Guaranty. This result my colleagues deem irrational. But I think they have overlooked this fact: From the evidence in this case and other Prudence Bonds cases decided by us, it is easily in-ferable that the several trustees were grossly negligent in discharging their duties because they considered the guarantor — the sponsor of all these trusts — so amply solvent that any losses on deposited mortgages were unimportant. (A fact noted above lends strong support to this inference, i. e., that the sponsor declared, in the Secondary Guaranty itself, that it was using that Guaranty to induce investors to purchase the bonds. If, however, there were doubt about this inference, we should, I think, remand to give appellants an opportunity to offer evidence on that score.) Presumably, then, the most important asset securing the bonds was the *572potential liability of the guarantor on the Secondary Guaranty. Here it should be noted that a default in payment of the principal of a deposited mortgage might take place — as here it did — without the knowledge of the bondholders and long before a default in payment of the debtor’s own bonds; that is precisely why prompt enforcement of the Secondary Guaranty had great value to the bondholders — and why, explicably, the exculpatory clauses did not excuse the failure to sue in that Guaranty.
3. Section 7 of Article I provides that the debtor “shall have the right,” with the consent of the guarantor, “to alter, or modify the terms of any bond, mortgage, or other security or instrument, constituting a part of the Trust Fund” (provided an officer of the debtor certifies that the. value of the remaining security is adequate to secure the outstanding debt). My colleagues’ basic premise (i. e., that the Secondary Guaranty is a security included in the Trust Fund described in Article I) leads to the unreasonable conclusion that that Guaranty could thus have been altered or modified by the guarantor and its affiliate, the debtor.
4. That my colleagues are compelled to strain the indenture’s language to reach' their conclusion shows up in their discussion of. the first sentence of Section 1 of Article V which, for convenience,- I quote in, the. footnote.31 As this long:winded sentence is divided into two parts, Separated by a semicolon, I think it will help to print it as follows, with no change in wording or punctuation,32 so as to bring out its logical structure:
“The Trustee and its successor or successors in the trust hereby created accept the trust herein created upon the distinct understanding and agreement that
(A) the Trustee shall be under no obligation to take any action
to enforce any of the provisions contained in any of the securities deposited in the Trust Fund
or
toward the execution or enforcement of the trust hereby created
which, in its opinion, shall be likely to involve it in expense or liability,
unless the Corporation or one or more of the holders of Prudence-Bonds issued hereunder shall, as often as required by the Trustee, furnish indemnity satisfactory to the Trustee against such expense or liability;
(B) nor shall the Trustee be required to take notice of
any default or ‘event of defaulf hereunder, and it may, for all purposes,
conclusively assume that there has been
no'default or ‘event of defaulf hereunder, unless and until *573notified in writing thereof by the holders of at least twenty-five percentum in principal amount of the Prudence-Bonds issued hereunder and then outstanding, distinctly specifying such default,
nor shall the Trustee take any action in respect to
any default or 'event of defatilf unless
requested to take action in respect thereto by a writing signed by the holders of not less than twenty-five percentum in principal amount of the Prudence-Bonds issued hereunder and then otustanding,
and
upon being tendered indemnity as hereinbefore provided.”
The second part of this sentence — beginning with the symbol (B) — deals exclusively with “a default or ‘event of default.’ ” The first part covers much more; it includes “enforcement of the trust hereby created.” To the extent, then, that “enforcement of the trust” goes beyond action as to a “default” or “event of default,” it plainly is not covered by the second part. The second part, however, provides that the trustee is excused from taking action on a “default” or “event of default” unless both (a) indemnified on its demand for indemnity, and (b) requested by bondholders to take action; but in the first part, as to “enforcement of the trust,” the trustee is excused only if not indemnified when it demands indemnity. If, then, the failure of the guarantor to comply with the Secondary Guaranty was not a “default” or “event of default,” the trustee had no excuse for not suing the guarantor, since the trustee never asked for indemnity. My colleagues concede that the guarantor’s failure so to comply was not an “event of default.” But they treat it as a “default.” This they do by equating the trustee’s action on a “default” with “enforcement of the trust.” Only by thus curiously merging the first and second part of this sentence, which the draftsmen carefully kept asunder, are they able to excuse the trustee for non-action here on the ground that no bondholders requested a suit against the guarantor.
5. In support of their interpretation, my colleagues refer to Article III, Section 1 (i), which provides that the-debtor shall furnish the trustee with monthly .written statements showing the amount of principal— not interest — collected on each mortgage in the Trust Fund. It also provides, “The Trustee shall be under no duty to take action upon any such statement or see to the receipt thereof by it.” Now this provision —not mentioned in the briefs filed by the trustee — must be matched with the Secondary Guaranty which covers two separate items: The Guarantor guarantees
(a) payment, when due, of the interest on all securities in the trust fund;
(b) payment of the principal of those securities not when due (as in the case of interest) but eighteen months after due date.
Wherefore, if my colleagues correctly interpret Article III, Section 1 (i), then, curiously, it absolves the Trustee of any duty to enforce the guaranty as to principal but not as to interest, i. e., the trustee would be liable, because of non-enforcement of the Guaranty, to make good defaulted interest on, but not a default as to principal, of a deposited mortgage. The queerness of this result, I think, goes to show that that interpretation is untenable. It is, I think, more reasonable to construe the words “The Trustee shall be under no duty, etc.” (a) as not requiring the trustee to take action to bring about payment by the Guarantor of the principal of a deposited mortgage when it fell due, but (b) as not relieving the trustee of the duty (1) to take action against the guarantor as to interest on such a mortgage when due, and (2) to take such action eighteen months after principal on such a mortgage came due.
But let us assume, arguendo, that this sentence did absolve the trustee of the duty to ascertain whether a pledged mortgage defaulted as to principal and remained in default for eighteen months. On that basis, without such knowledge, the trustee was not obligated to sue the guarantor for non-payment of such principal. I submit *574that, even so, this sentence did not relieve the trustee of its duty to enforce the guaranty when, as here, it actually knew that a deposited mortgage was in default for •eighteen months. It was said in 1928: “If a situation arises which to the knowledge of the trustee directly imperils the integrity •of the trust estate; it is fair to assume that a duty of protection would be implied regardless of express covenants or clauses relieving the trustee of liability for inaction. ■Certain events by their very nature do not become known to bondholders, and this fact, as well as the character of the event, must be taken into consideration in determining whether a situation is of such consequence as to demand action on the part of the trustee.” 33 The same article, referring to a provision that the trustee, even when apprised of a default, is not obligated to take action unless requested by bondholders, also says that, if the trustee “has actual knowledge of a default going directly to the integrity of the security, whether because it has been informed by the bondholders or ■otherwise, the trustee would be ill-advised if it failed to exercise at least ordinary •care in protecting the res. This would be particularly true if the nature of the default is such that the' bondholders may be unaware of its existence.”34 The same author, • writing in 1937,35 described such a provision as the “ostrich” clause, and remarked, “It may be doubted” whether it “will protect the trustee in the presence of .actual knowledge of default, where inaction results in loss to the bondholder.” He further said: “Manifestly, notice from bondholders is impossible unless they know ■of the default, and the usual indenture provisions impose upon the trustee no duty to impart such knowledge. The absurd result reached is that the trustee is conclusively presumed not to know of’ a condition which in most situations it is the first to learn. It by no means follows, however^ that the trustee in the absence of such a duty may safely remain quiescent; for the very necessity for notice and demand implies that at some point in the course of the transaction there will be imposed upon the trustee, as an inherent incident of its relationship, the implied duty to notify bondholders in order that they may act for their own protection if the trustee does not.” 36
I find it difficult to interpret the sentence in Article III, Section 1 (i) as my colleagues do, since the result of their interpretation would be that the guaranty as to the deposited mortgages would have no practical value as security for the debtor’s bondholders. For, as they would not — as they did not — learn of the non-performance of that guaranty until the guarantor failed to perform its “Primary Guaranty” (i. e., to pay the bonds themselves), my colleagues’ interpretation of this sentence would have the effect, practically, of converting into window-dressing, deceptive of the purchasers of bonds, the guaranty of payment of the deposited securities.
6. My colleagues’ discussion of the exculpatory provisions reveals those provisions as being (to say the least) somewhat ambiguous. It is, then, pertinent that the bondholders had nothing to do with drafting the indenture but that it was prepared by the trustee, the debtor, and the guarantor, before any bonds were issued and sold to investors. Applicable here is the familiar rule (well stated in a case my colleagues cite) 37 that, when a contractual provision is ambiguous, it should be most strongly construed against the person who prepared it.38
Perhaps by way of an anticipatory replication my colleagues say that “indentures containing such [exculpatory] clauses have been uniform up to the present time,” without judicial interference. I believe that *575statement unjustified: As above stated, many indentures contain a blanket exculpatory provision (i. e., no liability except for “wilful default,” or the like), and such a provision would not have protected the trustee here, since its conduct amounted to “reckless indifference.” I have found no cases, other than our previous Prudence-Bond cases,39 interpreting clauses worded as are those before us here. To construe those clauses liberally, in order to save the trustee harmless is, I think, without precedent. More, it is against the precedents.40

. I’-would not, however, limit the jurisdiction to the claim based on bonds purchased before May 28, 1930, because I think the New York courts would not apply the unique New York doctrine even as to bonds transferred in New Yox-k, where, as here, the trustee is a trust company incorporated and authorized to do business in Massachusetts, the trust was there accepted, and the bonds were there issued and payable.

. See, infra, Point II, 2, for further discussion.

. This guaranty provides that “The Guarantor hereby agrees to guarantee' and does hereby unconditionally guarantee the payment of interest accruing on all said securities now or at any future time deposited in the Trust Fund, under and pursuant to Article I, Section I, paragraph (a), (b) and (c) of said Trust Agreement, when due and payable, and also guarantees the payment of the principal thereof ■within eighteen months after the same shall have become due according to their respective terms.”

. See, infra, for discussion of the Restatement Of Trusts.

. The bondholders would learn promptly of a default on the so-called Primary Guaranty, i. e., to pay the debtor’s bonds themselves when in default. But no such default occurred Until 1935.

. See discussion, Point II, 5, infra.

. My use of quotation marks does not mean that I am literally quoting the trustee. I am paraphrasing its arguments.

. See, e. g., New England Trust Co. v. Paine, 317 Mass. 542, 548-551, 59 N.E.2d 263, 158 A.L.R. 262; Milbank v. J. C. Littlefield, Inc., 310 Mass. 55, 62, 36 N.E.2d 833; Peterson v. Hopson, 306 Mass. 597, 608-610, 29 N.E.2d 140, 132 A.L.R. 1; Digney v. Blanchard, 226 Mass. 335, 337, 115 N.E. 424; Warren v. Pazolt, 203 Mass. 328, 347, 89 N.E.2d 381.

. See New England Trust Co. v. Paine, 317 Mass. 542, 550, 551, 59 N.E.2d 263, 158 A.L.E. 262.
See also Posner, Liability of the Trustee under the Corporate Indenture, 42 Harv.L.Rev. (1928) 198, 244-245; 37 Col.L.Rev. (1937) 130, 131-132.

. See 20 Minn.L.Rev. (1935) 210, 215: “Where the trustee is a corporation that ; holds itself out as peculiarly well qualified to assume the duties of the trust relationship, it will probably be held to a. higher standard of care than would be-required of an individual.” See alsoShinn, Exoneration Clauses in Trust Instruments, 42 Yale L.J. (1933) 359, 374— 376.

. This caso will be discussed in Point II, infra.

. See, e. g., Silving, A Plea For a Law of Interpretation, 98 U. of Pa.L.Rev. (1950) 499, 505.
This is true despite the fact that a contract is sometimes considered a sort of “private statute” made by the parties and binding them, as to which see, e. g., Lawson, The Rational Strength of English Law (1951) 56-57; The French Civil Code, Art. 1134.

. See, e. g., Wigmore, The Judicial Function, Editorial Preface to Science of Legal Method (1921) xxxiii et seq.; cf. S. E. CV. v. Robert Collier & Co., 2 Cir., 76 F.2d 939, 941.

. Wigmore, loc. cit.

. Eisensteiu, Some Iconoclastic Reflections on Tax Administration, 58 Harv.L. Rev. (1945) 477, 519, note 240.

. Powell, Construction of Written Instruments, 14 Ind.L.J. (1939) 199, 204-206.
Powell refers to a New York statute, dealing with “cross-remainders,” which he drafted, and tells this story:. “While the bill was pending an inquiring member of the committee to which the bill had been referred met another legislator who was a lawyer and said:- ‘Tom, what’s this bill about cross-remainders?’ The answer came back: ‘Jack, I wouldn’t know a cross-remainder if I met one on the street!’ The bill was passed despite this legislative unawareness of its import. Every volume of the Session ' Laws of this or any other state bears eloquent and frequent witness to like acts of faith.”
Powell does remark (pp. 208-9) that a “private” writing is often drafted by a lawyer serving as a ghost-writer. But such ghost-writers liave usually consulted with, and have tried to carry out the purposes of, the persons who sign those “private” writings.
We should not succumb to the temptation to work out a monistic theory of interpretation. (1) The several kinds of “private” writings should not be similarly interpreted: There are good reasons for dealing somewhat differently with wills and contracts; and constitutions call for treatment not entirely like that applied to statutes. (2) Nor should courts construe earlier judicial opinions just as they do statutes; see, e. g., Burrows, Interpretation of Documents (1943) 36 note 1; Lawson, The Rational Strength of English Law (1951) 16-17. In one important respect, the difference-is obvious: a statute is not abrogated by disuse, but a precedent does become-obsolete. See Eder, Comparative Survey-of Anglo-American and Latin-American-Law (1950) 21-22; cf. Gray, Nature and Sources of Law (2d ed 1921) 193-196;. Allen, Law in the Making (5th ed. 1951)-454-457; Lenhoff, Comments, etc., on. Legislation (1949) 849 et seq.

. See, e. g., 3 Corbin, Contracts (1951) §§ 536, 537, 543, 549, 555; Powell, loccit., 231-233.

. Aristotle, Nicomachean Ethics, Bk. V, Ch. 10, 1137b, quoted in Usatorre v. Victoria, 2 Cir., 172 F.2d 434, 439, note-12.

. See, e. g., Usatorre v. Victoria, 172 F.2d 434, notes 12 to 16; Tobin v. Edwards, Wagner Co. Inc., 2 Cir., 187 F.2d 977; Guiseppi v. Walling, 2 Cir., 144 F.2d 608, 615 et seq., 155 A.L.R. 761; N. L. R. B. v. National Maritime Union, 2 Cir., 175 F.2d 686, 690; cf. State Tax Commission v. Aldrich, 316 U.S. 174, 202, note 23, 62 S.Ct. 1008, 86 L.Ed. 1358; Cardozo, The Nature of The Judicial Process (1921) 140.

. The eases cited by my colleagues, with one exception, do not voice the old fiction. The one exception, Rudy-Patrick Seed Co. v. Kokusai, etc., Kaisha, 2 Cir., 85 F.2d 17, 20, contains a dictum which is directly contrary to statements in this court’s subsequent opinions cited in note 19, infra.

. Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour, Ltd., [1943] A. C. 32, 70, 71.

. Denny, Mott & Dickson, Ltd. v. James B. Fraser & Co. Ltd., [1944] A.C. 265, 275.

. Parev Products Co. v. I. Rokeach & Sons, 2 Cir., 124 F.2d 147; United States v. Forness, 2 Cir., 125 F.2d 928, note 25; Kulukundis Shipping Co. v. Amtorg Trading Corp., 2 Cir., 126 F.2d 978, 990-991; Beidler & Bookmyer v. Universal Insurance Co., 2 Cir., 134 F.2d 828, 829-830; Guttmann v. Illinois Central R. Co., 2 Cir., 189 F.2d 927, 929, 27 A.L.R.2d 1066; cf. Martin v. Campanaro, 2 Cir., 156 F.2d 126, 130 note 5; Sperbeck v. A. L. Burbank & Co., Inc., 2 Cir., 190 F.2d 449, 451.

. Williston, Contracts (Rev.ed. 1932) §§ 806, 825, 896, cf. 615.

. See, e. g., Corbin, Contracts (1951) §§ 550, 561, 565, 622, 632, 653, 654, 1331.

. Thus “many so-called contractual obligations may be viewed as to some extent quasi-eontractual”; Sperbeck v. Burbank & Co., Inc., 2 Cir., 190 F.2d 449, 451; Martin v. Campanaro, 2 Cir., 156 F.2d 126, 127, 130.

. Shakespeare, I Henry IV, Act II, scene 2. See Phelps, Falstaff and Equity (1901) 10ff. Cf. Isaiah 59:14.

. President and Directors of Manhattan Co. v. Kelby, 2 Cir., 147 F.2d 465 at page 470.

. Section 1 of that , Article — entitled “Covenants of the Corporation” (the debtor) — provides that the debtor “covenants and agrees * * * (f) that it will deposit with the Trustee a guaranty of the Prudence Co,, Inc., guaranteeing payment of interest semi-annually when due, and of principal within eighteen months after the same becomes due, according to the terms of each bond, mortgage and other security in the Trust Fund under paragraphs (a), (b) and (0), Section 1 hereof.”

. Of course, an unsecured claim against a third person can be a trust res or trust asset, its enforcement being a duty of the trustee. See Brooklyn Trust Company v. Kelby, 2 Cir., 134 F.2d 105, 116; York v. Guaranty Trust Company of New York, 2 Cir., 143 F.2d 503, 512.
As this conrt has said, the use of the Latin word “res,” instead of the English word “thing,” sometimes leads to confusion. See Brooklyn Trust Company v. Kelby, 2 Cir., 134 F.2d 105, 116.
My colleagues speak confusingly (to mo) when they say that they need not consider whether “the Primary Guaranty was a part of the res,” since “it was a promise to the bondholders to pay the Debtor’s obligations, and had nothing to do with the res.”
In President & Directors of Manhattan Co. v. Kelby, 2 Cir., 147 F.2d 465, 478, in passing on the jurisdiction of the court over a claim against the trustee for failing to enforce the debtor’s covenant to deposit what we here call the Secondary Guaranty, we said that that claim was not one “for restoration of the fund” within the peculiar New York decisions as to who may sue where a technical “restoration-of-the-fund” is not involved. That jurisdictional decision, under that unique New York doctrine, is not pertinent here on the substantive issue whether the Secondary Guaranty was part of the “trust estate” administered by the trustee.

. “The Trustee and its successor or successors in the trust hereby .created accept the trust herein created .upon the distinct understanding and. agreement that the Trustee shall be under no obligation to take any action to enforce any of the provisions contained in any of the securities deposited in the Trust Fund or toward the execution or enforcement of the trust hereby created which, in its opinion, shall "be likely to involve it in expense or liability, unless the Corporation or one or more of the holders of Prudence-Bonds issued hereunder shall, as often as required by the Trustee, furnish indemnity satisfactory to the Trustee against such expense or liability: nor shall the Trustee be required to take notice of any default or ‘event of default’ hereunder, and it may, for all purposes, conclusively assume that there has been» no default or ‘event of default’ hereunder, unless and until notified in writing thereof by the holders of at least twenty-five-per centum in principal amount of the-Prudence-Bonds' issued hereunder and. then outstanding, distinctly specifying - such default, nor shall the Trustee take-any action in respect to any default or ‘event of default’ unless requested to take action in respect thereto by a writing-signed by the holders of not less than twenty-five per centum in principal' amount of the Prudence-Bonds issued hereunder and then outstanding, and upon being tendered indemnity as herein-before provided.”

. I have italicized some words, and added the symbols (A) and (B) to indicate the two parts of the sentence.

. Posner, Liability of The Trustee Under the Corporate Indenture, 42 Harv.L.Rev. (1928) 198, 222.

. Ibid., 245. See also 37 Col.L.Rev. (1937) 130, 131-132.

. Posner, The Trustee and The Trust Indenture: A Further Study, 46 Tale L. J. 737, 783 (1937).
See also 36 Mich.L.Rev. (1938) 996, 999-1000; Seelig v. First National Bank, D.C., 20 F.Supp. 60, 68.

. Ibid., 763.

. Sternberg v. Drainage Dist. No. 17, 8 Cir., 44 F.2d 560, 580.

. See, e. g., Corbin, 3 Contracts (1951) § 559.

. Including President & Directors of Manhattan Co. v. Kelby, 2 Cir., 147 F.2d 465, 478, discussed supra.

. See the Restatement of Trusts, Scott, and the Massachusetts cases cited supra.