The average investor doubtlessly relies upon the fact that some banking institution is a trustee for the bond issue in which he places his savings, and expects a degree of care commensurate with the confidence he has in that institution. The fact is, however, because of innumerable exculpatory clauses found in the corporate mortgage, the trustee's duties in regard to the protection of the bondholders' interests are practically negligible. But before proceeding further with the subject, it is necessary to distinguish two situations: first, a case where the trustee has no duty whatsoever to act; and secondly, where a duty does exist but yet the performance is excused because of exculpatory provisions. The two circumstances involve essentially different problems. In regard to the first situation, although there is authority supporting the view that the trustee's duties are solely contractual, the better opinion is that the position of the corporate trustee is somewhere between that of a mere stakeholder and that of a personal trustee. From this fiduciary relationship, courts imply duties independently of the terms of the trust instrument. Recognizing, then, that the duties of a trustee are both express and implied, the difficult problem confronting the courts is to what extent exculpatory clauses shall be given effect to relieve the trustee of liability for non-performance of acts which would otherwise be required.
Milton A. Kramer,
TRUSTS - EFFECT OF EXCULPATORY CLAUSES ON THE LIABILITY OF CORPORATE TRUSTEES,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol36/iss6/9