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

• The Beneficiaries of two testamentary trusts sued Bank of America, the trustee, alleging mismanagement of trust assets from 1991 through 2003. They claimed the Bank invested in an unproductive commercial building contrary to trust provisions, causing loss of trust value, and engaged in self-dealing by arranging loans to the trust from its affiliates, thereby collecting loan fees and mortgage interest in breach of its duty of loyalty (paras 2-3).

Procedural History

• District Court: Found the Bank liable for multiple breaches of duty under the New Mexico Uniform Trust Code and the specific trust agreement, ordering disgorgement of profit and restoration of lost trust value, initially awarding a lump sum of net damages (para 4).
• Court of Appeals, Miller v. Bank of America, N.A., 2014-NMCA-053: Reversed the district court's decisions not to adjust for inflation and to offset income distributions against the damages award, awarding Beneficiaries $894,000 to restore the value of the Miller Trusts. It held that restoration and disgorgement were alternative remedies and did not award an additional $540,000 on a disgorgement theory to avoid double recovery (para 6).

Parties' Submissions

• Beneficiaries: Argued that the Bank's investment in an unproductive commercial building and the arrangement of loans from its affiliates constituted breaches of the Bank's duty of care and loyalty, causing loss of trust value and unjust enrichment through self-dealing (para 2).
• Bank of America: Contended that the award would provide impermissible double recovery to Plaintiffs by awarding damages to restore the trust and loan interest received by the Trustee. Asserted that recovery must be limited to the amount of the Beneficiaries' loss and that the New Mexico Uniform Trust Code does not permit an award of both restoration and disgorgement (para 5).

Legal Issues

• Whether the Bank's actions constituted a breach of its duty of care and loyalty under the New Mexico Uniform Trust Code.
• Whether the Beneficiaries are entitled to both restoration of lost trust value and disgorgement of profits made by the Bank through self-dealing.
• Whether the awarded damages constitute double recovery.

Disposition

• The Supreme Court of the State of New Mexico reversed the Court of Appeals on the issue of whether both disgorgement of profits and restoration of losses are required, holding that they are not mutually exclusive and may be awarded together if necessary to satisfy each purpose fully. The case was remanded to the district court to determine whether the mortgage interest and loan fees paid to the Bank were included in the calculation of loss to the trust principal and to enter an appropriate damages award based on this determination (para 31).

Reasons

• The Supreme Court found that both disgorgement of ill-gotten gains and restoration of losses are required by the New Mexico Uniform Trust Code. It clarified that loss to Beneficiaries and profit by the Bank are distinct harms that traditionally give rise to different types of damages: restoration and disgorgement, each with its own remedial purpose. The Court emphasized that disgorgement is not intended to compensate beneficiaries but to prevent unjust enrichment of the trustee and to deter similar misconduct. It was determined that the record did not clearly show whether the $894,000 awarded by the Court of Appeals included both restoration and disgorgement, necessitating remand to the district court for further determination (paras 21-31).