In Murphree v. Hanson (1916), 72 So. 437, the Supreme Court of Alabama held that trust companies may act as guardians of the estate, but not of the person if a minor, guardianship of the person being a personal

relation.

The appointment of a trust company as guardian of an infant's estate was upheld as a proper exercise of the Surrogate's discretion in a case where two sisters filed counter petitions, and it appeared that the estate was large and that there were family disputes and differences. 251⁄2

It has been observed that good practice requires that a trust company file a duly acknowledged consent to act as a guardian, since it is not obliged to file an oath or bond, and otherwise there would be no formal evidence that it had entered upon the discharge of its duties.25% § 27. Trust Companies as Receivers and AssignThe power to act as receiver or assignee is entirely dependent upon statute. It has been held that this capacity cannot be questioned after the decree appointing the corporation has been affirmed by the court of last resort.26

ees.

In appointing a trust company as receiver, judges not only feel that they are obtaining the services of those specially trained and equipped for the work, but that the security is greater, and the element of personal favoritism will have less play. Thus it was remarked in

252. Matter of Buckler (1904), 96 N. Y. App. Div. 397, 89 N. Y. Supp. 206, and see Matter of Wyckoff (1910), 67 N. Y. Misc. 1, 124 N. Y. Supp. 625, where a trust company was appointed because of dispute between mother and son.

2534. Heaton on Surrogates' Courts, p. 499.

26. Roby v. Title Guarantee & Trust Co. (1896), 166 Ill. 336, 46 N. E. 1110.

an early case," wherein a trust company was appointed receiver, that:

"The United States' Trust Company, and several highly respectable individuals, have been nominated to discharge the trust. As no mere personal obligation can be equal to the mortgages and public stocks, to the amount of one million dollars, pledged as security by the trust company, and as that institution has been created by law, among other objects, for the express purpose of meeting such requirements, I can feel no hesitation in making a selection between the nominees. Private preferences, in this as in most other judicial acts, must yield to public considerations. No man, and the counsel of no man, has a right to complain that he or his particular friend is not appointed receiver; especially where the assets, as in these bank cases, to be entrusted to his responsibility, are counted, not by tens, but by hundreds. of thousands. There are absent parties interested as well as those who are present-minors, too, as well as adults; and those who rely, and have a right to rely, exclusively and without professional intervention, on the care and vigilance, and unbiased judgment of the court."

The spe

§ 28. Trust Companies as Sureties. cific power to act as sureties is provided in the trust company laws of some states; but generally this business. as a corporate enterprise is confined to companies organized for this special purpose. When trust companies lawfully act as sureties they are governed by the same

27. In the matter of the Empire City Bank (1855), 10 Howard's Practice (N. Y.) 498.

28. Colorado, District of Columbia, Indiana, Kansas, Michigan, Missouri, Montana, New Jersey, New Mexico, North Dakota, Pennsylvania, Utah. (This list is but illustrative and is not intended to be exhaustive.)

rules that apply to surety companies. For that reason this book does not treat of this subject but refers the reader to some of the many works on suretyships.20

§ 29. Power of Trust Companies to Act as Guarantors. The extent of a trust company's implied powers with respect to guaranty was thus summarized by the United States Supreme Court:"

30

"The purview of the words 'loan and trust' does not appear to have been defined by statute or decision in Kansas, but the declaration alleged that this company was organized 'for the purpose of transacting a general investment, loan and trust business, buying and selling commercial paper, obligations and securities,' and it must be assumed that the general rule is applicable that such companies have no implied power to lend their credit, or to bind themselves by accommodation indorsements. They may guarantee paper owned by them, or paper which they negotiate in due course of business and the proceeds of which they receive, but the naked power to guarantee the paper of one third party to another is not incidental to the powers ordinarily exercised by them. The power as exercised here was certainly not 'essential to the transaction of its ordinary affairs,' nor within 'the legitimate objects of its creation.' And so far as the question might be resolved by the usage in Kansas, the findings were adverse to plaintiff." (Italics supplied.)

An interest, which will remove the transaction from being a mere "accommodation," however, need not consist in absolute ownership. Thus it has been held that a trust company may become the guarantor of a bond

29. Stearns' "The Law of Suretyship" (1903). See notes on Suretyship in L. R. A. in Am. & Eng. Anno. Cases and in 32 Cyc. 303.

30. Ward v. Joslin (1902), 186 U. S. 142, 46 L. ed. 1093.

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31

of which it is trustee and a trust company which was interested in financing a railroad had the implied power to endorse its notes, though the court said: "It may be conceded that, under the powers conferred upon the defendant by the statutes under which it was organized, it would not be authorized to simply engage in the business of becoming a purely accommodation maker or endorser of promissory notes."

§30. Trust Companies as Underwriters. Underwriting as applied to securities, is a species of guaranty, by which the underwriter agrees that “in the event of the public not taking up the whole of them, or the number mentioned in the agreement, the underwriter will, for an agreed commission, take an allotment of such part of the shares as the public has not applied for."

The participation of a trust company in an underwriting has been condemned as ultra vires, in a case growing out of the collapse of the ship building trust.** The New York Court of Appeals characterized the trust company's act as "a reckless and most unusual and hazardous agreement," that it created “a hazard so great as to involve the very life of the defendant, and in our (the Court's) judgment it was wholly without authority. The result of such hazardous and reckless dealings and acts by the officers of trust companies is well illustrated in this case, as it appears that the defendant was organized with a large capital and paid in surplus in the spring

31. McCauley v. Ridgewood Trust Co. (1911), 81 N. J. L. 86, 79 Atl. 327.

32. First National Bank v. Guardian Trust Co. (1905), 187 Mo. 494, 86 S. W. 109, 70 L. R. A. 79.

33. In re License_Victuallers' Mut. Trading Ass'n, 42 Ch. D. 1, 58 L. J. Ch. 467, 60 L. T. Rep. N. S. 684.

34. Gause v. Commonwealth Trust Co. (1909), 196 N. Y. 134, 89 N. E. 476, affirming 124 N. Y. App. Div. 438.

of 1902, and within a few months thereafter was shorn of its surplus and compelled to reduce its stock to a small part of the original issue, and it has still upon its hands. this serious litigation. If such business methods are authorized by statute and approved by the courts the purpose of the organization of trust companies would fail and result in a trap to those invited by the legislature to submit to such corporations their fiduciary accounts."

As pointed out by the Court "The defendant (trust company) did not at any time become the owner of the bonds and stocks but the guarantor of a 'future' and in substance of the prosperity and success of the shipbuilding company." This situation is quite different, it appears to me, from where a trust company limits its participation in an underwriting to an amount and quality of security which it could lawfully purchase in its own behalf. It would then be exercising less than its full power, for its right to purchase outright must surely include the lesser power to purchase contingently.