titles are actually trust companies within the meaning of the definition, while many institutions with the word in their titles are actually commercial banks only, or life insurance companies, or loan companies, or even disreputable promoters. At the present time, with the national banks coming into the field, the presence of the word "trust" in the title is still less indicative. Of the 2,103 national banks in the United States granted the power to perform trust functions up to Dec. 31, 1926, there were only 102 which had incorporated the word "trust" in their titles. 1 3 In the state of Georgia there are 97 state banks which do not have the word "trust" in their titles and yet do a trust business; whereas out of 24 trust companies (by title) only 7 do a trust business. The state banks (without indicative titles) have nearly two-thirds of the trust business of the state.2 In the state of West Virginia, there are 39 state banks with the word "trust" in their titles, of which only 9 have trust fund accounts. By examination of the reports of the state banking departments, a similar situation is found to exist in many other states, among which are Vermont, Maine, Connecticut, Massachusetts, Colorado, Utah, South Dakota, Missouri, Iowa, Arkansas, North Carolina, Illinois, Idaho, Montana, Oregon, Kentucky, Arizona, and in the cases of most of the rest it is impossible to tell one way or the other because of entire lack of information as to the amount of trust business done. There are a few states where the reports of the banking departments give more adequate information as to the amount of fiduciary business done, prominent among which is Pennsylvania. Thus, while the definition of a trust company has been given in order to get at the primary meaning of the term, and to get a firm footing for the remaining discussion, it is seen that in practice the use of the term "trust company" is hopelessly confused. Most institutions which are now trust companies within 1 Annual Report of the Federal Reserve Board for 1926, counted from pp. 538-57. 2 Department of Banking Report, Georgia, 1924, figures compiled from individual statements of banks. 22d Annual Report of the State Commission of Banking, West Virginia (1922), passim. the meaning of the definition are performing many other types of services as well; and they are banks or insurance companies, in addition to being trust companies, to the extent that they perform those other functions. The ideal concept of what a trust company is must therefore be kept distinctly in mind as different from the popular misuse of the term. Summary. The trust company is therefore defined as “a corporation, created by a sovereign state, and empowered thereby to perform specified fiduciary services which it would be lawful for a natural person to perform." As a corporation it has immortality and individuality before the law. Its powers are specifically granted by the state in which it is incorporated, and as a creature of the particular state it is subject to the supervision of that state. Compensation for certain fiduciary services is fixed by law whether performed by an individual or a trust company. The real trust company in practice is either 1. A trust company by name and intent, the word "trust" being contained in the title. To the extent that such companies exercise general banking powers they are banks as well as trust companies, and their titles should be "bank and trust company." 2. The trust department of a national bank under the provisions of Section 11(k) of the Federal Reserve Act. Such a national bank becomes a quasi-state institution. They should be compelled to incorporate the word "trust" in their titles. 3.-The trust department of a state bank in states where it is lawful for state banks to exercise fiduciary powers. State banks exercising fiduciary powers should be compelled to incorporate the word "trust" in their titles. CHAPTER II ORGANIZATION OF TRUST COMPANIES AND CLASSIFICATION OF SERVICES Departments of Service. The method of organization into departments of service adopted by a particular trust company depends upon three factors: first, the scope of service permitted by the state law under which the company is doing business; second, the scope of service required by the community which is served; and third, the organization ideas of the officials and directors of the trust company. The first and second are objective and more or less stable criteria, while the third is subjective and variable. In other words, two trust companies located in the same state and in similar communities are quite as likely as not to be so differently organized that the layman may not realize that they are similar institutions. Thus one St. Louis trust company never advertises separate departments, but indicates that it performs the following services: Banking Executor or administrator Trustee under wills Guardian and curator of minors Guardian of persons of unsound mind Trustee under trusts of every character whereas another trust company of St. Louis advertises the following departments of service: Trust Department Savings Department Bond Department Real Estate Department It is not possible, therefore, to give a chart or outline of departmental organization of trust companies which could be said to be the uniform or standard organization plan of trust companies of the United States; but it might be feasible to give an organization plan which is representative or characteristic. The way to do this is to study a large number of individual cases and try to locate the typical plan of organization. An experienced trust company official should be able to do this better than anyone else, although he would have to guard against being prejudiced by conditions existing in his own community. Thus the experienced trust company official from Ohio would be likely to look upon the prevailing organization plan of Ohio trust companies as representative of the United States, whereas the experienced official of St. Louis would be likely to look upon the prevailing plan of his community as representative of the country as a whole. Nevertheless, an excellent attempt has been made by a trust company official, after careful analysis of a number of localities, to establish such a representative or characteristic plan of organization. He found that "the functions of the most highly developed trust company can be included" under the following departmental heads:1 1.-Financial Department In some cases this department is a complete banking unit, while in other instances the banking business is restricted in certain particulars by law or otherwise. 2.-Trust Department Executor, administrator, trustee (either for a corporation or for an individual), guardian, curator, transfer agent and registrar of stocks and bonds, etc. 3.-Bond Department Buys and sells securities in the open market. 4.-Real Estate Department Manages, rents and buys or sells real property, and, as an auxiliary business, makes loans on farm mortgages (in some cases the farm loan department is a separate department of service.) 5.-Savings Department 6.-Safe Deposit Department 1 Martin, Wm. McChesney, "Modern Banking and Trust Company Methods." Banking Law Journal, Vol. 29 (April, 1912), pp. 340-9; Vol. 33 (September, 1916), p. 696. In an earlier attempt by a trust company official farther east, the following departments were listed as representative of a fully developed trust company:1 1.--Loans and Investments 2.-Banking 3.-Trust Department-Corporations 4.-Trust Department-Estates 5.-Real Estate Department 6.-Safe Deposit Department 7.-Bond Department The first classification of departments is probably representative for the largest geographical area of the United States (the Middle-West, the West and parts of the South), but it is not characteristic of the large trust companies of the East to have one department handle all of the trust work. Rather, it is characteristic to have at least two trust departments, one for corporate trust work and the other for personal or estate trust work, as the second classification indicates.2 While such departmental plans as the above may be taken broadly as representative or characteristic, individual cases of trust companies which for many reasons should be considered as characteristic American trust companies differ considerably from these types. This difference is principally in two respects: first as to the title of the department and second as to the scope of the departments. Two or three examples will illustrate this: First Example One of the large trust companies of Detroit, Michigan, performs corporate trust services through The Corporation Department. Such a department is designated the corporate trust department in most organizations. This same Detroit trust company receives deposits on certificate of deposit and loans money on real estate mortgages or approved collateral through The Financial Department. It is probable that this department is called the financial department rather than 1 Herrick, Clay, Trust Companies, Their Organization, Growth and Management (1909). Chart on p. 164. 2 Another departmental classification intended to be representative or a "model" is that contained in Conyngton, Wills, Estates & Trusts, pp. 54752 and 742-75. |