Court Opinion

ID: 9581926
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:20:36.330984+00
Date Added: 2024-06-11T13:37:20.890954
License: Public Domain

VAN CISE, Judge,
concurring in part and dissenting in part:
I agree with the majority as to Parts III and IV. The probate court order did not discharge the underlying obligation running from Good Shepherd to Montclair. Also, Montclair and, through it, the limited partners received adequate and timely notice of the hearing on the trustee’s petition. Also, I agree with the majority’s conclusion in Part I that the probate court has subject matter jurisdiction in this action.
The primary issue on this appeal, however, is not whether the probate court had jurisdiction. It is whether it was correct in cancelling the B bonds.
I disagree with the majority’s conclusion in Part II that “[t]he probate court’s determination to allow the refinancing was within its authority.”
“There is no firmer principle in the common law of trusts than that requiring the trustees to act only in accordance with the terms of the trust.” Sinai Hospital of Baltimore v. National Benefit Fund, 697 F.2d 562 (4th Cir.1982). See also Matter of Will of Killin, 703 P.2d 1323 (Colo.App. 1985); Burch & Cracchiolo, P.A. v. Pugliani, 144 Ariz. 281, 697 P.2d 674 (1985). As stated in Restatement (Second) of Trusts § 186 (1959):
“[A] trustee can properly exercise only such powers as (a) are conferred upon him in specific words by the terms of the trust, or (b) are necessary or appropriate to carry out the purposes of the trust and are not forbidden by the terms of the trust,” (emphasis supplied)
The trustee may not alter the terms of the trust instrument to the detriment of a *798beneficiary without his consent. Hoffa v. Fitzsimmons, 673 F.2d 1345 (D.C.Cir.1982).
The rights and remedies of the parties in the event of a default on the bonds are spelled out in § 8.02 of the indenture. These are that, upon default, the trustee shall have the following rights and remedies: (a) to accelerate payment of the principal and outstanding interest due on the bonds, (b) to require Good Shepherd to surrender to the trustee actual possession of the physical facilities, (c) to file for appointment of a receiver, (d) to foreclose on all or any portion of the land and building and to exercise all the rights and remedies of a secured party under the Colorado Uniform Commercial Code, and (e) to sue for and recover judgment on the bonds. The trustee may also proceed under existing legal, statutory, or equitable remedies, but there are no such theories which would support the “remedy” granted by the court here.
The indenture also provides, on pages 3 and 4 and pages 10 and 11, that no additional bonds or indebtedness on a parity with the A bonds shall be issued prior to the full payment or defeasance of the B bonds unless such additional bonds or indebtedness are incurred to pay or defease the B bonds. The proposed HUD guaranteed refinancing, the proceeds of which will not be used to pay off the outstanding B bonds is, therefore, impermissible.
The indenture further specifies, in § 10.02, that:
“[Wjithout the consent of the holders of all the bonds at the time outstanding, nothing herein contained shall permit, or be construed as permitting:
“(a) ... [A] reduction of the principal amount of ... any bond;
“(b) The deprivation of the holder of any bond then outstanding of the lien created by this indenture....”
It also states, on pages 6 and 13, that no modification or amendment of the indenture “shall be made which will affect the terms of payment of the principal of ... any of the bonds ... unless consented to by all bondholders.”
The express provisions of the trust indenture here preclude the entry of the order of the probate court insofar as it directs the release of all security held by the trustee under the mortgage and loan agreement, the discharge of that agreement, and the cancellation of the B bonds. The order should be reversed.