AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• Three remainder beneficiaries of their father's two testamentary trusts sought damages from the trustee, Bank of America, for breaches of fiduciary duty and duty of loyalty, alleging mismanagement of the trusts' assets. Initially, the trusts were valued at $669,996.07 and included real property in Virginia, Hawaii, and New Mexico. By the end of the trustee's administration in 2003, the trusts' value had significantly diminished, primarily consisting of one depreciated property, leading to the beneficiaries' action for recovery (paras 2-3).

Procedural History

• Appeal from the District Court of Bernalillo County, Beatrice Brickhouse, District Judge.
• Certiorari Granted, May 1, 2014, No. 34,554. Released for Publication June 10, 2014.

Parties' Submissions

• Beneficiaries: Argued that the trustee, Bank of America, breached its fiduciary duty and duty of loyalty by mismanaging the trusts' assets, leading to a significant loss in their value. They sought damages for the mismanagement and the restoration of the trusts' value (para 3).
• Bank of America: Cross-appealed, challenging the court’s determination of liability and the calculation of certain compensatory damages. The bank contended that it did not breach its fiduciary duties and that the beneficiaries were not entitled to the damages claimed (para 1).

Legal Issues

• Whether the Bank of America, as trustee, breached its fiduciary duty and duty of loyalty to the beneficiaries by mismanaging the trusts' assets.
• How to properly calculate compensatory damages for the mismanagement of the trusts' assets.

Disposition

• The court denied the Bank’s cross-appeal but partially agreed with the Beneficiaries regarding the calculation of certain compensatory damages. As a result, the court affirmed in part and reversed in part (para 1).

Reasons

• The court found that the Bank had breached its fiduciary duty by continuing to invest in an unproductive property (the Building) despite its status as a wasting asset, which led to the significant depletion of the trusts' assets. The court rejected the Bank's argument that the beneficiaries consented to the investment strategy, finding that the beneficiaries were not fully informed of the material facts or their legal rights regarding the Building. The court also determined that the Bank failed to keep adequate accounting records, which contributed to its liability for the decline in the trusts' value. On the issue of damages, the court concluded that the beneficiaries were entitled to an inflation adjustment to restore the real value of the trusts' assets from 1991 through 2004, which the district court had initially found necessary but later excluded from the damages award. The court also found that the district court had erred in allowing an offset for income distributions made from the trusts to the beneficiaries against the damages awarded for the depletion of the trusts' principal value. However, the court agreed with the district court's decision not to award additional disgorgement damages for self-dealing by the Bank, as this would constitute a double recovery (paras 5-46).