companies, with the measure of their liabilities and responsibilities fixed by the laws of their own creation, to come in here and demand as a matter of right, authority to execute such trusts, because to do so, if the position. of counsel is correct (that they have such right without complying with our statutes to enable them to do business in this state as foreign corporations), it enables them to come here and execute such trusts without obtaining permission from our state authorities, without designating any person upon whom process may be served; without maintaining any office or having an office located here; without subjecting itself to the visitorial powers or the power of control of any state department, and without safeguarding the rights of our citizens in any manner save by giving a bond, which, with doubtful authority may be ordered by the court, and when clothed with authority to act by the court, to take itself and the property of the estate committed to its care to its own domicile beyond the jurisdiction of the court."

§ 133. Mere Acceptance of Mortgage Trusteeship Without Action Under Trust Deed Not Doing Business in Foreign State; Taking Possession of Property and Operating It Might Require Qualification. In a case " before the United States Circuit Court for the Northern District of Alabama, an attempt was made to defeat an action by a New York trust company to foreclose a trust deed on an Alabama railroad, on the ground that the trust company had not qualified in Alabama as a foreign corporation. The statute in question read as follows:

11. American Loan & Trust Co. v. East & West R. Co. (1889), 37 Fed. 242. See also Continental Trust Co. v. Tallassee Falls Mfg. Co. (1915), 222 Fed. 694, and Martin v. Bankers Trust Co. (1916), Ariz., 156 Pac. 87.

"No foreign corporation shall do any business in this state without having at least one known place of business and an authorized agent or agents therein; and such corporation may be sued in any court where it does business by service of process upon an agent anywhere in this state." Of the plea seeking to defeat the action, the court said:

"This plea does not aver specifically that the American Loan and Trust Company is doing business in the state of Alabama, but avers that it is a foreign corporation, has accepted the trust from the East & West Railroad Company of Alabama, and has no known place of business nor authorized agent within the state; the inference seeming to be that the said company is doing business in this state, because it has accepted the trust under the trust deeds issued by the East & West Railroad Company. It is to be doubted much whether the transaction of its legitimate business in the city and state of New York, on the part of the American Loan & Trust Company, is doing business in Alabama, in the sense of the constitutional article, when it accepts a trust thereafter on a contingency to be executed in Alabama. The provisions of the trust deed, which is made the basis of the foreclosure suit, do not indicate that any business is to be transacted in Alabama by the trustee, unless default shall be made in the payment of interest, as provided by the trust deed. In case of default, the trust deed provides several lines of procedure upon the part of the trustee in the execution of his trust. One is that the said trustee may enter into possession of the said railway line and property, and manage and operate the same for the account of the bondholders, and apply the proceeds of such management to the payment of interest on the mortgage debt. Perhaps, if this provision of the

trust deed shall be acted upon, and the trust company shall take possession of the railway line and operate the railway, the trust company would then be doing business in Alabama, and would then be compelled, in compliance with the constitutional article, to provide at least one known place of business and one authorized agent."

The Supreme Court of Wisconsin has also decided that a trust company is not "transacting any business in that state, by passively continuing to hold a previously existing and valid lien or title. Such passivity is the negation of transaction of business."12 And in Illinois it was held that certifying to the bonds by a New York Trust Company at its home office and bringing suit for foreclosure in Illinois was not the assumption of an active trust in that state so as to come within the statute. It was said that: "The trust deed in this case provides for active duties in the execution of the trust-such as taking possession of the property, managing and operating it, collecting rent and income, and selling it; but the trustee never assumed to exercise the active trusts and powers attempted to be conferred."13

§ 134. Right to Sue Without Qualifying in Foreign State. Individual and Fiduciary Capacity. Merely prosecuting or defending suits in a foreign state do not constitute "doing business" therein, so as to bring the conventional corporate plaintiff or defendant within the penalties and prohibitions of foreign corporation laws, because this is not the "ordinary" business for which such corporations are created, nor is it a right which is dependent for its existence "upon authority to

14

12. Chicago Title & Trust Co. v. Bashford (1904), 120 Wis. 281, 97 N. W. 940.

13. Morse v. Holland Trust Co. (1900), 184 Ill. 255, 56 N. E. 369. 14. Alpena Portland Cement Co. v. Jankins & Reynolds Co. (1910), 244 Ill. 354, 91 N. E. 480. See Martin v. Bankers' Trust (1916), Ariz., 156 Pac. 87.

This

transact or engage in any particular business." reasoning would apply to a trust company when suing or defending in its own behalf, but when it brings or defends litigation for others, it is transacting business for which it is created, though this may not be regarded as "ordinary" business. It is the performance of service for which it may charge. It is exercising rights dependent upon its special powers, since the ordinary corporation could not bring or defend litigation for cestui que trustent.

However, the very fact that the trust company was acting for others, i. e., individual bondholders, who were themselves not subject to the disqualification imposed by the foreign corporation law, was regarded as sufficient to excuse the corporate trustee from qualifying in a Texas foreclosure suit.15 The court said: "It cannot be successfully contended that the bondholders would not be permitted to bring this action in their names. And, this being true, we know of no sound reason which would prevent their bringing it in the name of the trustee for their benefit." The Supreme Court of Wisconsin16 has held that the "mere commencement and prosecution" of a mortgage foreclosure suit is not the transacting of business in the forbidden sense. But the process of reasoning by which this conclusion is reached does not appear outside of the citation of cases holding that litigation in its own behalf is not the "doing of business" by corporations generally.

When trust companies sue as statutory assignees,'

17

15. Commercial Telephone Co. v. Territorial Bank & Trust Co. (1905), 38 Tex. Civ. App. 192, 86 S. W. 66.

16. Chicago Title & Trust Co. v. Bashford (1904), 120 Wis. 281, 97 N. W. 940. See also American Loan & Trust Co. v. East & West R. Co. (1889), 37 Fed. 242, and Morse v. Holland Trust Co. (1900), 184 Ill., 255, 56 N. E. 369.

17. Royal Trust Co. v. Harding (1912), 78 N. Y. Misc. 309.

they are entirely dependent upon the comity of the courts in which they appear, but in this regard they are not different from individuals acting in like capacities.

§ 135. Complying with Local Laws. Deposit of Securities. The Illinois supreme court ruled that when The Farmers' Loan & Trust Company of New York proposed to act in that state as a trustee with active duties to perform, it must comply with the local act requiring the deposit of securities.18 The effect of

this decision, as I understand it, is that even where a trust company may act in another state, though in a purely fiduciary capacity, it will be held to be doing business in the latter state because the law of its own. state regards this as doing business and the local statute must exact for its own citizens the same measure of security as would be required thereunder. There would be security demanded from an individual offering himself as trustee and comity extends recognition to the foreign statute. The co-trustee of the Farmers' Loan & Trust Company was an Illinois corporation bearing title, "American Trust and Savings Bank," and the laws of Illinois are spoken of as those "in relation to trust companies."

As perhaps sufficient on this subject is a case by the Supreme court of the District of Columbia.19 The court speaks of an act of Congress in regard to "trust, loan, mortgage and certain other corporations within the District of Columbia" and their becoming executors, administrators, guardians or trustees, without the execu

18. Farmers' Loan & Trust Co. v. Lake St. El. R. Co. (1898), 173 Ill. 439, 51 N. E. 55, reversed in 177 U. S. 51, 44 Law Ed. 667, 20 S. Ct. 564, because jurisdiction had first attached in the federal court. See also Penn. Co. for Insurance on Lives v. Bauerle (1892), 143 Ill. 459, 33 N. E.

19. Re Margaret Turley (1891), 9 Mackey (20 D. C. Reps.) 315.