§ 24. Trust Companies as Banks. Generally the legal questions applicable to trust companies as banks are the same as those pertaining to state and national banks.11% For that reason they are sufficiently treated in works devoted to banking law. There is no occasion to amplify these pages with discussion of purely banking matters, and we will, therefore, content ourselves with a brief consideration of what activities constitute "banking" by trust companies and what implications are raised with respect to their manner of exercising banking functions.

It was held by the United States Supreme Court12 that a trust company was not doing a "banking" business, within the meaning of the revenue laws, where its "only business has been and is the investing of its own capital in mortgage securities on real estate, and selling such mortgage securities with the company's guaranty." In this case the court said:

"In no proper sense can it be understood that one receives his own stocks and bonds, or bills, or notes, for discount or for sale. He receives the bonds, bills or notes belonging to him, as evidences of debt, though he may sell them afterwards. Nobody would understand that to be banking business. But when a corporation or natural person receives from another person, for discount, bills of exchange or promissory notes belonging to the other, he is acting as a banker; and when a customer brings bonds, bullion or stocks for sale, and they are re

11. A trust company authorized to do a general banking business has "every implied power that any bank would have so far as not prohibited by the express terms of the Act governing trust companies." It may take over the business of a debtor to save the debt. Union Savings & Trust Co. v. Krumm (1915), 88 Wash. 20, 152 Pac. 681.

12. Selden v. Equitable Trust Co. (1877), 94 U. S. 419, 24 Law Ed. 249. See, also, note on "Acts Constituting Doing 'Banking' Business" in 18 Am. & Eng. Anno. Cas. 829.

ceived for the purpose for which they are bought, that is, to be sold, the case is presented which we think was contemplated by the statute. In common understanding, he who receives goods for sale is one who receives them as an agent for a principal who is the owner. He is not one who buys and sells for his own account.

The Equitable Trust Company lent its own money, taking bonds and mortgages therefor. Those bonds it sold with a guaranty. It sold its own property, not that received from others for sale. Such a business, in our opinion, did not constitute the corporation a banker, as defined by the revenue laws."

13

In a Missouri case13 it was held that: "An examination of the authorities will, we think, demonstrate that the mere fact that a corporation is authorized to exercise some of the functions of a bank does not, in law and in fact, create it a bank." The court then cites a federal decision1 wherein an express company having many banking powers was held technically not to be a bank. But, however this may be with reference to particular acts and particular laws more or less restricted to banks, the better rule appears to be that trust companies will be reregarded as coming under banking regulations and supervision for the maintenance of their solvency.15

The implied power of a trust company to operate a savings department, with pass books and rules similar to a savings bank, was gone into at great length in a New York case.18 The court decided that this was a lawful

13. State v. Reid (1894), 125 Mo. 43, 28 S. W. 172. See, also, Dunn v. State (1913), 13 Ga. App. 361, 79 S. E. 170.

14. Wells Fargo & Co. v. Northern Pacific Railway Co. (1884), 23 Fed. 469.

15.

See Section 138 of this book and cases there cited.

16. People v. Binghamton Trust Co. (1893), 139 N. Y. 185, 34 N. E.

exercise of detail in its banking functions. The formulation of the rules by which what would be an ordinary deposit was made subject to withdrawal on certain conditions, with addition of interest, was merely "A reasonable and prudential agreement as the basis of its relations with a depositor."

Similarly the issuance of certificates of deposit is but a detail incident to a trust company's general power to receive deposits."

20

§ 25. Trust Companies as Agents. The business of agency is a lawful purpose for corporations organized under general laws,18 though certain kinds of agency are frequently confined to corporations organized under acts solely applicable to fiduciary companies.10 The agency powers of trust companies have been accepted, without question, except the point raised in an Oregon case. There it was argued that a trust company empowered by its articles of incorporation "to act as the general or special agent, or attorney in fact, for any public or private corporation or person in the management and control of real estate or other property, its purchase, sale or conveyance," etc., could not execute a deed of conveyance of real property as the attorney in fact for another, because a corporation can only act through agents, and the power of attorney gave no authority for substitution. Of this contention the court

17. Bank of Saginaw v. Title & Trust Co. (1900), 105 Fed. 491; a seemingly contrary decision was under a statute specifically prohibiting all corporations except banks from issuing evidences of debt upon loans. New York Life Insurance & Trust Co. v. Beebe (1852), 7 N. Y. (3 Seld.) 364.

18. State v. Michel (1904), 113 La. 4, 36 So. 869.

19. See New York Law Appendix, page 286.

20. Killingsworth v. Portland Trust Co. (1890), 18 Ore. 351, 23 Pac. 66, 7 L. R. A. 638.

said: "When a corporation is invested with a power of attorney to sell and convey real property, the person conferring the power knows that the corporation cannot act personally in the matter, but that in performing the engagement it will act through its agents, who for that purpose are its faculties, and whose acts in the discharge of that duty are the acts of the corporation, and as such must be considered to be included in the artificial person, as instrumentalities authorized by him to do the act conferred upon it by his it by his power of attorney. In this view, the argument that the corporation cannot do such act, under the power of attorney, without a delegation of authority to its agents, and that the grantor of the power has given no such power of substitution, cannot be sustained."

In addition to acting as attorneys in fact, trust companies act as transfer agents," fiscal agents and agents for reorganizations. Its status as a reorganizing agent will depend upon the terms of the agreement under which it is appointed. This frequently consists of acting merely as a depositary," or it sometimes assumes obligations of a combined trusteeship and agency with express provisions limiting its liability.23

§ 26. Trust Companies as Guardians and Committees. Trust company laws usually provide specifically for these powers, but in the absence thereof, it has been held that the general power to execute trusts of

21. See Chapter X of this book.

22. See Sections 79-80 of this book.

23. Gernsheim v. Central Trust Co. (1891), 16 N. Y. Supp. 127. For construction of clauses in reorganization agreements for protection of committee, etc., see, also, Van Sicklen v. Bartol (1899), 95 Fed. 793, and Mawhinney v. Converse (1907), 117 N. Y. App. Div. 255, 102 N. Y. Supp. 279, affirmed without opinion in 189 N. Y. 501, 81 N. E. 1169.

any description include the power of guardianship and committee.24

In Brown v. Threlkeld's Guardian (1913), 154 Ky. 833, 159 S. W. 595, where a corporation amended its articles so as to provide: "The nature of the business carried on and conducted shall be a general banking and trust business, as provided by chapter 32 of the Kentucky Statute 1903, relating to corporations, banks, trust companies, and combined banks and trust companies, or such parts thereof as shall apply to corporations of that character," it was authorized to act as guardian as the statutes referred to provided for this power.

The constitutionality of laws providing for corporate guardianship was passed upon in Minnesota" as follows:

"The contention of counsel seems to be that the Legislature has no right to grant to any corporation the power to act in any such fiduciary capacity. His argument deals in much criticism and denunciation of the statute, some of which might have some weight if addressed to the Legislature; but he entirely fails to point out any provision of the constitution with which it conflicts. The sum of his argument is that such a statute is derogation of the common law, or conflicts with prior statutes, and is impolitic. But none of these considerations goes to the question of the validity of the act. With our preconceived ideas on the subject, it might seem somewhat inappropriate to intrust the person of a minor to the custody of a corporation; but perhaps experience will prove that the objections to this are largely artificial and imaginary."

24. Equitable Trust Co. v. Garis (1899), 190 Pa. St. 544, 42 Atl. 1022, 70 Am. St. Rep. 644; Glaser v. Priest (1888), 29 Mo. App. 1.

25. Minnesota Loan & Trust Co. v. Beebe (1889), 40 Minn. 7, 41 N. W. 232, 2 L. R. A. 418.