
    BNP Paribas (Suisse) S.A., Appellant, v Chase Manhattan Bank, Respondent.
    [748 NYS2d 358]
   —Order, Supreme Court, New York County (Charles Ramos, J.), entered February 7, 2002, which denied the motion of plaintiff BNP Paribas (Suisse) S.A. (BNP) for partial summary judgment dismissing the counterclaims of defendant Chase Manhattan Bank (Chase) as barred by collateral estoppel and judicial estoppel, unanimously affirmed, without costs.

Under the custody agreement between the parties, Chase is precluded from seeking indemnification from BNP for liability imposed in connection with Chase’s performance of the custody agreement if that performance was negligent. Accordingly, because it was not necessarily decided in the prior Fifth Circuit action whether Chase had, in fact, been negligent in the performance of the custody agreement duties in question, Chase is not collaterally estopped in the instant action from denying its negligence and seeking indemnification.

In the prior diversity jurisdiction action, the Fifth Circuit, applying Texas law, determined that Chase had converted certain shares of stock (see 50-Off Stores, Inc. v Banques Paribas (Suisse), S.A., 180 F3d 247, cert denied sub nom. LOT$OFF Corp. v Chase Manhattan Bank, N.A., 528 US 1078). Under Texas law, the failure to observe reasonable standards of care is not an element of the tort of conversion (see Specialty Retailers, Inc. v Fuqua, 29 SW3d 140, 147-148 [Tex Ct App, 14th Dist, petition denied]; Schwartz v Pinnacle Communications, 944 SW2d 427, 433 [Tex Ct App, 14th Dist, no writ]), and thus any findings that Chase had acted unreasonably or was negligent would not be necessary to the determination. Moreover, none of the Fifth Circuit’s comments indicate a finding of what the reasonable commercial standards would have entailed, whether Chase failed to observe those standards, or whether Chase was negligent. Indeed, the Fifth Circuit merely stated that, at most there were “errors in judgment and technical flaws in Chase’s procedures that left them exposed to a cunning criminal” (see 50-Off Stores, Inc., 180 F3d, supra at 257), not that those errors and flaws violated customary business practices or constituted negligence.

Although the jury and the Fifth Circuit rejected Chase’s affirmative defense to conversion, that it had acted in good faith and observed reasonable commercial standards, under Texas law, at least as charged to the jury and considered by the Fifth Circuit, the affirmative defense requires proof that the defendant both acted in good faith and observed reasonable commercial standards. Since it is impossible to determine the basis for the rejection of Chase’s affirmative defense, i.e., whether it was solely for lack of good faith, or failure to observe reasonable commercial standards, or both, collateral estoppel does not apply (see Matter of Schwager v Fallas, 121 F3d 177, 181-183 [5th Cir] [applying Texas law]). The Fifth Circuit’s determination that Chase had not evinced the high degree of culpability required to sustain an award of punitive damages (50-Off Stores, Inc., 180 F3d, supra at 256-257) is not equivalent to a finding that Chase had acted in good faith, which would then indicate that the affirmative defense had been rejected solely on the basis of Chase’s failure to observe reasonable commercial standards.

Chase has not taken any inconsistent positions with respect to BNP, and the doctrine of judicial estoppel is therefore inapplicable.

The parties’ submissions, including conflicting affidavits and testimony of various experts, raise triable issues of fact concerning the nature and extent of Chase’s commercial obligations and the reasonableness of its actions. Concur — Andrias, J.P., Saxe, Buckley and Lerner, JJ.  