Imágenes de páginas
PDF
EPUB

CHAPTER VII

Trust Companies as Trustees

§ 31. Trust Companies Generally Like Individual Trustees. Trust companies in their general rights, duties and liabilities, as to trust funds in their hands in a fiduciary capacity are like individual trustees.1 It is said in the Colorado statute regarding trust companies: "In the exercise by said company of the powers herein authorized as guardian, executor, administrator, committee or conservator of lunatics, or of any office or duty imposed by any court, said company shall be subject to the same responsibilities, shall have the same powers and shall receive the same compensation as fixed by law with relation to individuals holding similar offices or trusts, except as hereinafter specially provided. The exercise of other powers and the performance of other duties may be as to compensation and otherwise matters of contract with the parties interested."

1. Matter of Long Island Loan and Trust Co. (1904), 92 N. Y. App. Div. 1, 87 N. Y. Supp. 65, affirmed on opinion below in 179 N. Y. 520, 71 N. E. 1133, holding that a trust company acts against public policy in transferring its own securities to a trust fund, and must make the fund good with six per cent interest. See, also, Indiana Trust Co. v. Griffith (1911), 176 Ind. 643, 95 N. E. 573, 44 L. R. A. (N. S.) 873, holding trust company as guardian to same rules of investment as an individual guardian.

2. Colo. Anno. Stats. 1912, Sec. 290.

In Vermont it is specifically provided that a trust company may act as executor, administrator, guardian, assignee or trustee "under the same circumstances, in the same manner and subject to the same control by the court having jurisdiction, as a natural person." Such provisions as these are inserted, so to speak, ex industria, for the fact that these companies merely are authorized by statute to serve like individual trustees carries the inference that they would be bound generally in the same way and have the same rights and duties as individual trustees. A trust, or an office in the nature of a trust, loses or acquires nothing according to the quality of the trustee. He or it is merely the executive of a trust and is continued, removed or discharged according to exigencies expressed in the trust or its termination. In the handling of the corpus or funds of a trust, however, statutes have introduced, by specific enactment, some changes applicable only to trust companies. These differences, however, are not supposed to affect the integrity and general management of trust funds and are more directory than otherwise.

§ 32. Specific Provisions as to Integrity of Trust Funds. There are provisions in many codes and rulings in many cases in regard to mingling of trust property by a trustee with his own, such a practice being

3. Vt. Pub. Laws 1910, Sec. 73.

4. Cal. Code 1906, Sec. 2236; Line v. Lawder (1889), 122 Ind. 548, 23 N. E. 758; McIntire v. Bailey (1907), 133 Ia. 418, 110 N. W. 588; Clay v. Clay (1861), 60 Ky. 548; Bangor v. Beal (1892), 85 Me. 129, 26 Atl. 1112; Bobb v. Bobb (1886), 89 Mo. 411, 4 S. W. 511; Yellowstone County v. First Trust & Savings Bank (1912), 46 Mont. 439, 128 Pac. 596; Stark v. Gamble (1862), 43 N. H. 465; Hill v. Hill (1911), 79 N. J. Eq. 521, 82 Atl. 338; McEachern v. Stewart (1894), 114 N. C. 370, 19 S. E. 702; Erie School Dist. v. Griffith (1902), 203 Pa. 123, 53 Atl. 34; Mason v. Whitthorne (1865), 2 Coldw. (Tenn.) 242; In re Hodge's Estate (1893), 66 Vt. 70, 28 Atl. 663, 44 Am. St. Rep. 820; Davis v. Harmon (1871), 62 Va. 194.

generally condemned, and something in the way of a penalty being sometimes imposed.

The principle of the non-mingling of trust funds is found specifically declared in many of the statutes authorizing the incorporation of trust companies. For example the Colorado statute provides that: "The said company shall keep all trust funds and investments separate and apart from the assets of the company, and all investments made by said company as fiduciary shall be so designated that the trust to which such investments belong shall be clearly shown." There is a similar provision in the Iowa Trust Company law," in Massachusetts,' in Pennsylvania, in Vermont," in West Virginia,10 and in Wisconsin." There are provisions in the trust company statutes of other states which strongly imply that there shall be no mingling of trust funds with the general assets of a company. As for example it is said by Louisiana law12 that: "None of the funds or the property held by such a bank as agent or trustee shall be counted among the assets or liabilities of such bank in making the statements required by law to be published of the affairs of such bank." And in Maine1 it is provided that: "All the property or money held in trust by such company shall constitute a special deposit, and the accounts thereof of said trust department shall be kept separate, and such funds and the investment or loans of them shall be specially appropriated to the security and

5. Colo. Anno. Stat. 1912, Sec. 400.

6. Iowa Pub. Sess. Acts, 1913, Ch. 152, Sec. 3.

7. Mass. Laws, 1910, Ch. 411, Sec. 24.

8. Purdais Stats., p. 4832, Sec. 25.

9. Pub. Laws, 1910, Ch. 158, Sec. 77.

10. W. Va. Code, 1913, Sec. 3179.

11. Stats. 1911, Ch. 94, Sec. 2024, p. 77-M.

12. Rev. Laws La., 1904, p. 96, Sec. 8.

13. Me. Laws of 1907, Ch. 96, Sec. 14.

payment of such deposits and not be subject to any other liabilities of the company."

[ocr errors]

§ 33. Integrity of Trust Funds-Participating Mortgages. A participating mortgage is a mortgage taken by a trust company in its own name, as trustee and from time to time allotted in undivided portions to various trusts. "Whenever any such allotment is made the trust company makes fair and precise records and entries in its books, clearly demonstrating as to each mortgage the parts thereof which have been distributed to the various trusts concerned, and it faithfully conveys notice to the beneficiaries of the disposition of the fund." The Surrogate upheld this kind of an investment, in the case cited, because he believed that disapproval would be contrary to the decisions by higher courts in New York and elsewhere. But he did not consider that the question was settled, nor that it could be settled "until it is settled right." He believed that such investments violate the law against the mingling of trust funds. Another objection in the instant case was that the mortgage was taken in the trust company's name individually. This, of course, could be easily remedied, by adding the description, "as trustee."

Removal of doubt as to the legality of this form of investment has been effected by statute in at least one state.15 Similar legislation in other states has been advocated in "Trust Companies Magazine: Wisconsin has provided that trust companies may transfer to trust estates without incurring other legal liability

9916

14. Matter of Union Trust Co. (1914), 86 N. Y. Misc. 392, 149 N. Y. Supp. 324. See review of unreported cases in "Trust Companies Magazine," July, 1914, pp. 7-12.

15. California.

16. "Trust Companies Magazine" for July, 1914, pp. 7-12.

than as if such transfer were made to a third person any mortgages or securities owned by it which are legal investments for trust funds.10%

§ 34. Deposit of Trust Funds in Company's Own Banking Department or With Company's Own Deposits in Other Banks-Interest Rates. The mingling of trust funds with the general funds on deposit with a trust company have presented new questions as to what rate of interest is chargeable against the trustee. In a Pennsylvania case," it was held that where a trust. company did not keep the money arising from the trust fund in its trust department, "but commingled the funds with the general deposits in the said institution, in the form of a general checking account, *** it should pay the same interest thereon that it would pay to a third party who carried with it a deposit of a like character; that is, an account subject to check." The New York courts have decided18 that a trust company was chargeable with interest at the regular trust company rate of 3 per cent, and not with the legal rate of 6 per cent, where it deposited trust income in its ordinary bank accounts in other institutions and kept no separate account of the earnings. But the Court said: "This mingling of the trust income with the trustee's own money, consisted solely in depositing for collection the checks received for rent in one or more banks in which the trustee kept an ordinary deposit account in its own corporate name, and by checks on which accounts it made payments of the said trust income as well as pay

162. Ch. 186 Laws of 1909, p. 882.

17. Reid v. Reid (1912), 237 Pa. St. 176, 85 Atl. 85.

18. Herzog. Title Guarantee & Trust Co. (1911), 148 N. Y. App Div. 234, 132 N. Y. Supp. 1114, modified in other respects, but approve as to above point in 210 N. Y. 531.

« AnteriorContinuar »