institution. "But," said the court, "the profits of the savings department of such an institution go into and become a part of the general assets just as much as the profits of the general banking business. Consequently, since 'natural justice' requires that those who help create a fund and those for whose benefit it is created should share in its distribution, the legislature must have intended that the depositors in the savings department of a trust company should share in the distribution of the general assets, in the same way and to the same extent as the company's other creditors." I think it is impossible not to see that this reasoning applies to funds in the fiduciary department of a trust company.

It is debatable whether the New York law, or those of its type generally, would assure more certainty in the full payment of fiduciary obligations than do statutes like that of Missouri.

It is true that back of the individual trustee is his bond, and generally speaking the trust company trustee does not give a bond. In a conventional trust where no bond, is required for a trustee qualifying, or where an executor is named, the rule of safety would seem too clear to admit of dispute. But even in case of a bond it would seem that a personal debt with a merely personal obligation back of it, neither carrying any lien for its security, ought not to be deemed as safe as a primary demand upon a corporation's general assets under regulation of law or a primary demand upon a special fund maintained by law.

It is to be observed that Missouri law creates the same primary demand on bonds that a trust company signs as surety, and in such case it would be difficult to say that a trustee going on such a bond, a trust fund

would be any less safe than were the company itself the trustee. It might be that where statutes permit the trustee to charge the cost of such a bond to the estate this might be deemed an unnecessary expense.

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§ 37. Following of Trust Property and Its Proceeds. It is familiar law, that trust property, however changed in form will, whenever it can be traced and identified, be subjected to the trust, and the cestuis que trust may have the benefit of all accretions in the hands of any person with notice of its character." The application of this principle extends over beyond the trustee's death so as to make his estate liable.42 A cestui is not bound to pursue this remedy, but he has an election to do so or enforce against a trustee a personal liability,** and there arises against the cestuis the rule of estoppel where he exercises his option."

This trust fund doctrine, where the trustee is an individual, looked so strictly to the trustee as the owner, that at common law if there were several trustees they were deemed to hold as joint tenants and upon the death of one the title passed to his survivor." When the sur

40. Central Nat'l Bank v. Conn. Life Ins. Co. (1881), 104 U. S. 54, 26 L. ed. 693; Holmes v. Gilman (1893); 138 N. Y. 369, 34 N. E. 205, 34 Am. St. Rep. 463, 20 L. R. A. 566.

41. Hopkins v. Burr (1898), 24 Colo. 502, 52 Pac. 670, 65 Am. St. Rep. 238; Mathewson v. Wakelee (1910), 83 Conn. 75, 75 Atl. 93; Pundmann v. Schoeneich (1898), 144 Mo. 149, 45 S. W. 1112; Lincoln v. Morrison (1902), 64 Neb. 822, 90 N. W. 905.

42. State v. Bruce (1909), 17 Ida. 1, 102 Pac. 831, 134 Am. St. Rep. 245.

43. McKee v. Downing (1909), 224 Mo. 115, 124 S. W. 7; Stephens v. Stephens' Adm'r (1889), 89 Ky. 125, 12 S. W. 192; Marquette v. Wilkinson (1899), 119 Mich. 419, 78 N. W. 474, 43 L. R. A. 840.

44. Riehl v. Evansville Foundry Ass'n. (1885), 104 Ind. 70, 3 N. E. 633; Carter v. Gibson (1901), 61 Neb. 207, 85 N. W. 45, 52 L. R. A. 468.

45. Reichert v. Missouri, etc., Coal Co. (1907), 231 Ill. 238, 83 N. E. 166, 121 Am. St. Rep. 307; F. G. Oxdey Stove Co. v. Butter County (1894), 121 Mo. 614, 26 S. W. 367; Mattison v. Mattison (1909), 53 Oreg. 254, 100 Pac. 4, 133 Am. St. Rep. 829, 18 Anno. Cas. 218.

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vivor died, and semble where there was no joint tenancy, the title passed by operation of law to his heir at common law, if the trust was of real estate, and to his personal representative if the trust was of personality. Statutes, however, have abolished this rule, and where a trustee dies a new trustee is appointed by the court." These statutes, of course, have no effect on the principle of the right to follow a trust fund or property, or as giving an election to hold a former trustee's estate liable, except that they may give to his successor a right of action in the interest of the cestuis que trust. The rule I have been discussing appears to apply as well to the holder of trust property who gives bond for the faithful performance of his duties as to one who fails to give such bond and to conventional and statutory trustees.

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§ 38. Right to Follow Trust Funds Turned Over by a Statutory Trust Company. The inquiry proposed here does not concern trust property coming into the hands of a trust company in any other way than as trustee. The general rule as to the tracing and identifying of property as trust property in a third person's hands would, of course, apply to property received from a trustee by a statutory trust company just as to any other recipient thereof. What I wish to ascertain is whether, though you may follow trust property after it gets out of the hands of an individual as trustee, you may do the same thing when such property gets out of

46. Cameron v. Hicks (1906), 141 N. C. 21, 53 N. E. 728, 7 L. R. A. (N. S.) 407; Woodruff v. Woodruff (1888), 44 N. J. Eq. 349, 16 Atl. 4, 1 L. R. A. 380.

47. Gulick v. Bruere (1887), 42 N. J. Eq. 639, 9 Atl. 719.

48. Speer v. Colbert (1906), 200 U. S. 130, 50 L. ed. 403.

49. Tonges v. Vanderveer Canarsie Improvement Syndicate (1914), 148 N. Y. Supp. 748.

the hands of a statutory trust company holding the same as a trustee.

One argument that may be made against the right to do this lies in the fact that the statute under which a trust company holds as trustee gives to the cestuis que trust or the beneficiary of the fund either a preference right over its other creditors, as the New York statute prescribes, or securities are deposited for the primary benefit of its fiduciary liabilities, as the state of Missouri and some other states require. Do such provisions by implication indicate an exclusive remedy as to trust property?

It might be argued that so far as mere funds, money and the like, are concerned, the scheme in organization of trust companies contemplates that they are to use these in the course of their business and nothing more than a preference liability arises under general law, especially as this would be the result in the case of an individual trustee, money having no ear marks whereby it can be followed and the trustee being bound to reasonable diligence to make the fund produce an income. But when a trust consists of securities negotiable by indorsement, but yet directed to be kept intact and not sold for reinvestment, the question becomes somewhat narrower. These securities, like money, pass from hand to hand, except that one having actual notice of limitations in the power of the trustee would take them subject to such notice.

Admitting, then, that the individual trustee could not pass good title to such a taker and the cestui could follow them, could he do the same thing where a trust company transfers them? And if he elected to follow the securities, would he waive his right as a preference

creditor or to be reimbursed wholly or upon a pro rata payment, out of the securities primarily liable for fiduciary obligations?

Take again, for example, the case of a trustee having title to property the income from which is to be applied for a certain time and then the trust to cease, with remainder to go to others as a legal estate, the trustee in the meantime and upon the performance of certain conditions having the right to sell for reinvestment. If an individual trustee violated his trust the cestuis could follow the property into the hands of a purchaser with notice. Could he, however, do the same, where a statutory company is trustee and there being such statutory provisions fc: his benefit as I have indicated?

These inquiries or suggestions are considered important in view of the mingling of banking business, transfer agency business, and, in some states, fidelity bond business (this last also being a preference claim out of deposited securities, as under Missouri statute) and the long time trusts often created. The preferences as by New York law, or the deposit of securities as by other law, sometimes might prove insufficient to meet trust obligations in full. These provisions, however, emphasize the policy of the law as to trust property, while at the same time they appear not to regard its nature beyond the limit of such provisions. I realize that there ought to be, in the absence of express statutory exclusion, a very strong implication to prevent the application of long settled equitable principles, merely because there is a new kind of trustee, as to the assets of which there are preferences given in favor of trust creditors. A Pennsylvania case speaks of a deposit made with a

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50. Graff v. City Savings Fund & Trust Co. (1911). 46 Pa. Super Ct.