CHAPTER VI

Extension of Functions of Statutory Trust Companies, Banks, Agents, Guardians and Committees, Receivers and Assignees, Sureties, Guarantors and Underwriters.

§ 20. Corporation Limited to Charter Powers. The well settled theory that an artificial being like a corporation is strictly limited in its powers has a seeming exception in the principle of acts done or abided by from which benefit is derived or presumed. But as shown above,' this exception is more strictly applied to corporations of a merely private nature and for business purposes. Often, however, corporations, whose business is publici juris and subject to regulation as such and not merely because their charters submit them to regulation, are ruled to be precluded from invoking the doctrine of ultra vires notwithstanding their acts or negligences may in the liabilities they reap seriously interfere with the performance of their public duties or the rights of their stockholders to fair remuneration upon invested capital, so often held by our supreme court to be a constitutional right.

This exception also has sometimes been applied as

1. Sec. 19.

to governmental agencies, such as cities, counties and school districts, the usual test of validity being that a contract has been executed and the status quo cannot be restored. All of this, however, is but incidental to my present purpose, it being assumed that just as a charter is the limit of power, so generally by specific grant, it may confer power.

§ 21. Principles of Construction of Trust Company Charters. Maxims of construction are applied to the powers and rights of fiduciary companies in the same way as to other corporations for profit. They ask for their charters, and hence, when the language or intent is doubtful, it is construed against them, in conformance with the principle that ambiguity or doubt is decided against the proponent (verba fortius accipiuntur contra proferentem.) Legislative intent is sought.2 Construction in the state from which an act is copied will be followed. The express enumeration of powers excludes all others. (Expressio unius est exclusio alterius.) Powers may be implied in so far as they are incident to express powers" (the principle carries with it its incidents); but not so as to include distinctly unauthorized activities."

§ 22. Organization Under General and Special Laws. It has been held' that a corporation may be

2. Steppacher v. McClure (1898), 75 Mo. App. 135.

3. State ex rel. Crow v. Lincoln Trust Co. (1898), 144 Mo. 562, 46 S. W. 593.

4. State ex rel. Hadley v. Bankers' Trust Co. (1911), 157 Mo. App. 557, 138 S. W. 669.

5. Killingsworth v. Portland Trust Co. (1890), 18 Ore. 351, 23 Pac. 66, 17 Am. St. 737, 7 L. R. A. 638.

6. Kavanaugh v. Commonwealth Trust Co. (1906), 64 N. Y. Misc. 303, 118 N. Y. Supp. 758.

7. State ex rel. Higby v. Higby Co. (1906), 130 Iowa 69, 106 N. W.

organized "with power to act as trustee," under general statutes authorizing incorporation for "any lawful purpose," but it was conceded that it requires an express statute to empower a corporation to act as "guardian, administrator or executor." Nearly all states now provide special acts under which fiduciary companies may be incorporated. Where this has been done, it is not permissible to organize under the general corporation laws for these special purposes." In fact, a court will take a judicial notice that a domestic incorporated trust company is such only as provided by the special laws of the state governing trust companies.10

§ 23. Trust Companies as Having Varied Powers. The trust company in America generally is organized under the banking laws of a state, but in its banking feature it has more restricted rights than are accorded to a corporate bank or to an individual banker. For example, while a bank might issue bills, notes or other evidences of debt for circulation as money, receive deposits and commercial paper and make loans thereon, discount bills, notes or other commercial paper and buy and sell gold or silver bullion, foreign coins and bills of exchange, a trust company may receive deposits of money and other personal property, issue its obligations therefor and loan money on real or personal securities. This is the distinction found in New York law," which I think is generally the case as to other state statutes.

8. On this latter point see Continental Trust Co. v. Peterson (1906) (Neb.), 107 N. W. 786.

9. State v. Nichols (1905), 40 Wash. 437, 82 Pac. 741. See, also, McCarter v. Imperial Trustee Co. (1905), 72 N. J. L. 42, 62 Atl. 223.

10. Wycoff v. Epworth Hotel Const. & Real Estate Co. (1910), 146 Mo. App. 554, 125 S. W. 550.

11. Jenkins v. Neff (1902), 186 U. S. 230, 46 L. Ed. 1140; but banking powers of trust companies in New York have been extended since this decision, see Appendix, page 286.

In New York a trust company also may buy and sell stocks, bonds, mortgages and bills of exchange.

But the business necessities of our civilization have called them into existence for various other things not of a banking nature. The enumeration of these things is of great particularity. The New York statute provides in substance as follows: (1) To act as fiscal or transfer agent of any state, municipality body politic or corporation; (2) To receive deposits of trust moneys, securities and other personal property; (3) To act as trustee under any mortgage issued by any body politic and generally to accept and execute any municipal or corporate trust; (4) To accept trusts of married women as to their separate property and manage same as their agent; (5) To accept judicial appointments as guardian, receiver or trustee of the estate of any minor and to become the depositary of moneys paid into court for the benefit of any person or corporation; (6) To accept and execute all legal trusts confided to it by any court of record, person or corporation whether by grant, assignment, devise, bequest or other authority; (7) To be appointed executor or trustee under a will, administrator with or without will annexed and committee of estates of lunatics, idiots, persons of unsound mind and habitual drunkards, it being provided that no official oath shall be required in the premises. It is also provided generally that no security shall be given by such trustee, unless a court so orders in a particular case, and all debts due by the company in these appointments are regarded as trust fund debts and to have preference over its other debts. Some state laws provide for deposit with a state officer of securities as to these funds or this property.

It is seen from the above enumeration that none of the things pertain to banking and all of them are of a trust nature, except the first, and that is so very much. associated with the others in the usual statute, that it will receive discussion hereinafter.

It becomes apparent from reading the above enumeration that a trust company entitled to exercise all of the conferred powers needs all of the implied powers, which go with their grant, that is to say, everything reasonably necessary to effectuate the purpose of the grant. There may be a limitation on power in an instrument creating a trust which would apply in the same way as were the trustee an individual and in the same way, where the company is appointed to a statutory office, it is bound as an individual is bound. Also under the general principles of equity marks may be set to discretion. With these, however, it would seem that a trust company is to be like an individual except that, under New York law, and possibly under the law where securities are given, there is to be no tracing of trust funds in the hands of the trustee or of that in which it may be invested. This question I will advert to in another part of this work.

Though the charter or statutory powers of trust companies must be wide enough to enable them to perform the many special services for which they are equipped, public consideration may rightfully demand that they be (a) confined within powers properly exercisable by an organized impersonal entity; (b) that they be kept from speculative enterprises apt to impair their responsibility (c) and within powers that are conformable to public supervision and regulation.