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ments for its general purposes. In other words, the claimed use of the funds consisted solely in this, that the trustee allowed the estate the regular rate of interest, depositing its receipts as trustee in its ordinary bank accounts. But it affirmatively appears that such bank accounts continually showed a large balance of the title (trust) company and what is more important still, it is affirmatively established that that balance at all times. exceeded the balance of the trust funds belonging to the McComb estate and that at no time was any draft made upon the account which required the use of any part of those funds to meet it. It, therefore, is clear that the judgment appealed from, cannot be sustained upon the theory that the trustee had made use of the trust funds, had failed to separate the profits therefrom from its ordinary profits and, therefore, should be charged with the full legal rate of interest."

A very interesting case decided by a California District Court of Appeal1 shows that where a fund is deposited with a trust company as a fiduciary, its use by the latter in its business does not take away from it the security afforded by special deposit required to be made.

There a will provided for a fund to be deposited in a trust company for certain minors and to be paid over to them "with the accumulated interest on arriving at the age of majority," the deposit to be made in its savings department. The Court said: "The direction that it be deposited in the savings department is only significant as indicating that the trust company might use the money and pay the usual interest thereon. But this is allowed by the very terms of the act. * * The pay

19. People v. California Safe Deposit & Trust Co. (1913), 22 Cal. App. 69, 133 Pac. 324.

ment of interest directly by the corporation for the use of the money does not militate against the theory that the money was held in a trust capacity under the act. * * * The trust company was thus appointed trustee to take and hold this money until the beneficiary should reach majority. It seems to be just such a trust as the act intended should be protected by the securities required to be deposited with the state treasurer."

The deposit of trust funds by a trust company in its own banking department was forcibly approved in a recent decision in New York.19% Here the Court said: "When we consider the nature of a trust company, the statutory authorization to act as a bank of deposit and as an executor, and the legal obligations protective of the fund, imposed by statute upon such an institution, it is unreasonable, unjust, and discordant with the statute law to require it to deposit in another banking institution, upon the assets of which it has no more security than any other creditor, the money received by it as a fiduciary, or to show that such deposit did not contribute in any degree to its profits as a banking institution."

§ 35. Trust Company Statutes Respecting Investments Variant From Individual Trustee Rules. I have adduced as authority cases so far as to the general rule of individual trustees mingling trust funds with their own property is concerned and deduced the conclusion, that, unless there is specific provision to the contrary, trust companies are bound in the same way. A Minnesota case" is quite instructive on this point.

19. In re People's Trust Co. et al. (1915), N. Y. App. Div. 155 N. Y. Supp. 639.

20. St. Paul Trust Co. v. Strong (1901), 85 Minn. 1, 88 N. W. 256.

The court after quoting from the trust company statute that: "The directors of any such corporation shall have discretionary power to invest all moneys received by it on deposit or in trust, in any such personal securities as are not hereinafter expressly prohibited; and it shall be held responsible to the owner or 'cestui que trust' of such moneys for the validity, regularity, quality, value and genuineness of all such investments and securities at the time the said investments are so made and for the safe-keeping of the evidences and securities thereof," said: (Italics supplied.) "These are among the safeguards thrown about the business by the legislature, and, taking them together, it is argued that self-interest on the part of the trust company has been wholly removed; that nothing impedes the proper discharge of its duties with trust funds; that because it is responsible under the statute for the validity, regularity, quality, value and genuineness of notes and mortgages at the time the investments are made, it has been excepted from the general rule, and may transfer its own. proper securities to any trust estate-in other words, deal with itself."21

The rule to which the Court referred was that: "A trustee cannot legally purchase on his own account that which his duty or trust requires him to sell on account of another, nor purchase on account of another that which he sells on his own account. He is not allowed to unite the two opposite characters of buyer and seller." After pointing out "the hazards which might surround and endanger trust funds" should this rule be not observed, it was said: "There was no intention to set aside well

21. But see Matter of Long Island Loan & Trust Co., supra, under

settled rules for the conduct of private trustees, but, upon the other hand, it was the object and purpose to insure a rigid observance of such rules by statutory restrictions and regulations. The design of this legislation was to promote and insure strict business principles in the management of these companies, and thus to protect the people."

But this statute as thus construed was shown merely to have its limitations in application and not as taking away "the discretionary power" expressly vested in the directors. This decision, however, is merely valuable for its reasoning, because now the Minnesota statute22 confines investment of trust funds "in authorized securities," there being the same responsibility as to their validity, regularity, quality, value and genuineness as before.

This statute, however, even in its amended form seems to place on trust companies a more stringent liability than exists against an individual trustee. It makes them guarantee "validity, regularity, quality, value and genuineness" of the securities in which a trust fund is invested.23 The rule, I think, as to an individual trustee is, that he must act in good faith and that is all he is bound to, along with the exercise of the same care as in managing his own property, a sound discretion being required to be exercised, but he is not an insurer." Thus it was ruled in a Missouri case," reviewing a great

22. Gen. Stats. 1913, Sec. 6412.

24

23. A similar provision is found in the Statutes of Indiana, Sec. 4953, Burns, 1908. Indiana Trust Co. v. Griffith (1911), 176 Ind. 643, 95 N. E. 573, 44 L. R. A. (N. S.) 873.

24. Moore v. Eure (1888), 101 N. C. 11, S. E. 471, 9 Am. St. Rep. 17; In re Roach (1907), 50 Or. 179, 92 Pac. 118; In re Chapman (1896), 2 Ch. 763, 65 L. J. Ch. 892, 75 L. 7, N. S. 196.

25. State v. Meagher (1869), 44 Mo. 356, 100 Am. Dec. 298.

number of cases regarding the robbery of trust funds in the hands of an executor, and of his being, in equity, exonerated from accountability, and agreeing with them, that: "Besides, the holding of trustees to responsibility for trust funds in a plain case of theft or robbery, against which the watchfulness of a prudent man could not guard, would have a tendency to deter men of prudence and care from assuming such relations and responsibilities-thus leaving these funds to fall into the hands of less careful and scrupulous persons and to a consequently increased hazard." It is hard to imagine reasoning of this kind were a statutory trust company seeking exoneration.

I imagine, but I can find no case directly in point, that, if an individual trustee were to invest trust funds in bonds that were forgeries and he took all reasonable precautions to ascertain their genuineness, he would be exonerated. I know he has been exonerated, in some cases for investment in Confederate bonds, 26 while in others he was held upon the ground that such an investment contributed to the financial resources of the Confederate government and was in aid of its cause.27 But even this principle was held not to forbid a reinvestment of Confederate currency by the purchase of Confederate bonds.28 In Lamar v. Micou,27 the Court said Confederate notes and bonds "had no legal value as money or property" they could "never be regarded * ** as securities in which trust funds might be lawfully in

26. Cobb v. Taylor (1869), 64 N. C. 193; Waller v. Catlett (1887), 83 Va. 200, 2 S. E. 280.

27. Horn v. Lockhart (1873), 17 Wall 570, 2 L. Ed. 657; Lamar v. Micou (1884), 112 U. S. 452, 28 L. Ed. 751.

28. Baldy v. Hunter (1898), 171 U. S. 388, 43 L. Ed. 208.

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