TRUST MORTGAGES -- CONSTRUCTION OF NO-ACTION CLAUSE

Authors

William J. Isaacson, University of Michigan Law SchoolFollow

Abstract

Plaintiff, a trustee under a trust indenture securing two issues of defendant company's bonds, sought to recover a partial summary judgment for interest, premiums, and principal on the series of bonds then due. Defendant company conceded that the sums claimed were overdue and unpaid, but contended that the real right of action on the bonds was vested in the bondholders. The bonds on their face made a reference to the trust indenture for a description of the rights of the holders. The bonds further contained a stipulation that, except as otherwise provided for in the trust indenture, all rights of action on the bonds were "vested exclusively in the trustee." The trust indenture contained a provision that no action was to be maintained by the bondholders unless certain conditions were complied with. Held, the bonds gave sufficient notice that all rights of action were vested in the trustee. The trust indenture, to which adequate reference was made, explicitly provided that defendant was to be liable in suits by the trustees on the bonds, and that the bondholders might sue only under certain limited circumstances. Central Hanover Bank & Trust Co. v. Siemens & Halske Aktiengesellschaft, (D. C. N. Y. 1936) 15 F. Supp. 927.

Recommended Citation

William J. Isaacson, TRUST MORTGAGES -- CONSTRUCTION OF NO-ACTION CLAUSE, 35 Mich. L. Rev. 1200 (1937).
Available at: https://repository.law.umich.edu/mlr/vol35/iss7/26