The James Family Charitable Foundation v. State Street Bank & Trust Company

80 Mass. App. Ct. 720 (2011)

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The James Family Charitable Foundation v. State Street Bank & Trust Company

Massachusetts Appeals Court
80 Mass. App. Ct. 720 (2011)

  • Written by Tammy Boggs, JD

Facts

In April 2002, Hamilton James entered into an agreement with State Street Bank & Trust Company (State Street) (defendant) under which, for a monthly fee, State Street would serve as custodian of James’s assets and would “transfer [the assets] out upon receipt of authorized instructions.” State Street was also responsible for collecting income and investment proceeds, providing account statements, making authorized wire transfers, and engaging in other activities pursuant to James’s instructions. The agreement continued indefinitely until one party gave notice of termination. James was allowed to turn over assets he chose to State Street “from time to time,” and the agreement did not contain any specific investment or transfer instructions. Rather, State Street was obligated to carry out instructions that would be received in the future. Between 2002 and 2007, James occasionally instructed State Street to transfer shares of stock to the account of the James Family Charitable Foundation (the foundation) (plaintiff). State Street complied with these instructions without incident. However, on February 13, 2007, James instructed State Street to transfer over 800,000 shares of Vanguard Emerging Markets Stock Index Fund (VEIEX) to the foundation for the explicitly stated purpose of making a charitable gift. James also instructed the foundation to sell the shares upon receipt. At the time of James’s instructions, each VEIEX share was worth over $25. Due to mistakes made by State Street, the shares were not transferred until March 1, 2007, at which time the share price had dropped. The foundation sold the VEIEX shares and received $1.6 million less than it would have received had it sold the shares in mid-February. The foundation sued State Street for breach of contract. State Street filed a motion for summary judgment, arguing that the foundation was not an intended beneficiary of the custodial agreement and therefore lacked standing to sue. The trial court granted State Street’s motion, and the foundation appealed.

Rule of Law

Issue

Holding and Reasoning (Wolohojian, J.)

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