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Where debenture holder's trustee had waived a notice period for redemption, he had not improperly acted under the Trust Indenture Act of 1939 due to his pre-default conduct.
The issuer contacted the debenture holder's trustee and asked how much notice was required for a redemption. The trustee replied one week, a 42-day lapse occurred before redemption, and an interest payment was thereby avoided prior to redemption. The holder filed a complaint under the Trust Indenture Act of 1939, asserting that the trustee had breached its duty when he waived 50-day notice. The trial court dismissed the complaint and the holder appealed.
Did the trial court err by dismissing the holder's complaint?
The Act imposed no implicit duties on a trustee to limit its pre-default conduct, and the trust instrument gave the trustee the authority to waive the notice period. The court added that so long as the trustee fulfilled its obligations under the express terms of the indenture, it owed the holders no additional, implicit pre-default duties except to avoid conflicts of interest.