^:-;'^> 7.-. TRUST COMPANIES Their Organization, Growth and Management CLAY HERRICK BUURS pteiisKiNc '11 NEW YORK BANKERS PUBLISHING COMPANY looy V\& Vv mmt Copyright 1909 •BANKERS PUBLISHING COMPANY ' ■' \ NEW YORK PREFACE. THH writer is spared the task, somewhat eoinmon to authors, of offer- ing an apology for the addition of another "to the already largt; ninuher of books on the subject, " because the literature on the subject of trust companies is small in amount, and nearly all of it has appeared since the preparation of this work was begun. 7'he present volume is composed of a series of articles which appeared ill '"rill Bankers .M.igazine" of New York during the years lyot to l{)07, iiieliisi\ f. When the preparation of the series was begun, in lyo.S, there li.id been j)ublished but one treatise on trust companies — Mr. George Cator's monograph on "Trust Companies in the United States," a valu- able work, but one which treats the subject briefly and from the academic standpoint. The only other writings on the subject consisted of advertis- ing booklets j)ublished by trust companies, and a very few magazine arti- cles. In lyoi, Mr. Ernest Heaton issued his "The Trust Comj)any Idea and Its Development," a brief but instructive sketch of the develoj)ment of the institution in the United States, Canada, Australia and elsewhere. The following year there appeared Messrs. Kirkbride and Sterrett's excel- lent work on "The Modern Trust Company," treating the subject at length and from the {)ractieal standi)oint. So far as the writer knows, these comj)rise all the general works tiiat have been published on the sub- ject. A number of the financial periodicals ))ublish articles relating to trust com})anies from time to time, and many trust comj)anies issue adver- tising booklets containing important information regarding their methods of business. But the material at the dis])osal of one who would make a study of the trust company from either the historical, academic or prac- tical standpoint is thus far (juite limited. The |)resent volume contains the only attempt yet made, so far as the writer knows, to present an historical sketch of the development of the American Trust Company. The writer is conscious of some defects in the work, and no doubt there arc other defects of which he is not conscious. The fact already men- tioned, that the chaj)ters of the book were originally written as a series of articles appearing monthly in a magazine, may account for some })eculiari- ties of method. The time at the writer's disj)osal Ix'ing such as could be found when not employed at his regular duties, was not sufficient to enable iiim to finish various jiarts of the work to his own satisfaction. He has. however, taken the greatest pains to insure accuracy in all statements made, and has verified much of the contents of the book by jiersonal inter- views and by correspondence with numerous trust comjjany officials and employees. Recognizing the fact noted in the text of the book that there is considerable diversity in methods and })ractices among different trust companies, he has endeavored to make the work fairly representative of the most common usages, giving in the chapters on forms and- records, IV PREFACE. samples of those used by a number of different companies. This plan made impossible the following out of one complete system of forms and records such as a single company uses, a defect which is, in the writer's opinion, more than overcome by the advantage to the reader of having before him illustrations of the methods of a large number of progressive companies. In the endeavor to make the work useful to the greatest num- ber of trust companies, the writer has aimed to have it representative of the forms and methods of the company, of average size. While the writer is alone responsible for all views and statements pre- sented, he is under obligation to various gentlemen for information courte- ously given. In particular he wishes to acknowledge his indebtedness to the officials of the various companies whose forms are used to illustrate the hook, for the use of the forms and for information given in response to letters; to state officials for information regarding state legislation; to W. E. Crittenden for the preparation of the chapter on Title Insurance; to the Old Colony Trust Company of Boston for permission to reprint its Rules for Stock Transfers; to E. A. Feasel, Librarian of the Cleveland Law Library, for access to the library in the preparation of the chapters on trust company laws; to E. E. Newman for suggestions regarding the detail work of the Corporations division of the Trust Department; to James Borrowman for information regarding the Australian trust com- panies; to Frederick Vierling for information regarding the Real Estate Department and for permission to print his rules governing stock issues and papers required in accepting bond trusts ; to the Franklin Trust Com- pany for permission to print its By-laws. Acknowledgment is made in foot-notes throughout the book for information due to various authorities quoted. In preparing the articles for publication in book form, the statistical matter in the chapter on the history of the trust company movement, and the summary of the state laws (originally published in 1904), and other matter, have been brought down to the year 19O8, inclusive. CLAY HERRICK. Cleveland, O., June, 1909. TABLE OF CONTENTS. CHAPTER I. IIISTOHV OF THE TRUST COMPANY MON'J.M KNT IN IHK INITKD STATES, pp. 1-32. Diversity «)f' I''iinction.s, 1 — I-'irst (jrants of Trust Powers, ^J — Present Condition of the Four Earliest Companies, () — Other Early Companies, 7^ — Relative Progress of Trust Companies and Savings Hanks, 9 — Organization of Companies After the Civil War, 10 — Ereedman's Sav- ings and Trust Co., 12 — Comptroller Knox's Criticism of Compani<'s, \S — Competition Between Banks and Trust Companies, \\ — Steady Development, IT) — Growth froni 187.'', 16 — Chart Showing Growth, 18 — Growth of Trust Companies and Other Banks Comj)ared, 19 — Sta- tistics of Suspensions, 22— Statistics I87.'")-19(>8, 2") — Reserves, 26 — Present Statistics, 28 — Recapitulation, 30 — Causes of Growth, 31. CHAPTER II. THE FUNCTIONS Ol' TRUST COMPANIES, pp. .■!3-53. Definition of "Trust Company," SS — Nature and \'ariety of Individual Trusts, 34 — Probate Business, 37 — Investment Business, 38 — Real E-state Business, 10 — Insolvency Business, 10. — Trustee or Agent for Corporations, H — Transfer Agent and Registrar, 42 — Corporation Reorganization, 43 — ^Fidelity and Title Insurance, 44 — Safe Deposit i^isiness, 4.5 — 'Superiority of Trust Companies in Trust Caj)acities, t") — Banks and Trust Companies Compared, 47 — MiMtllaneous F'unc- tions, .51 — Sources of Earning Power, .52 — Still in I'ormativc Pe- riod, .53. CHAPTER III. rilE OIKiANIZATION OF TRUST COMPANIES, pp. .54-73. Elements Contributing to Success, 54— Preliminary Steps, .5.5 — Incor- ))oration in New York, 5o — By-laws, o8 — Selection of Directors, 66 — Special Charters, 68. CHAPTER IV. . * TRUST COMPANY LEGISLATION, pp. 71-89. Progress of Legislation, 74 — Directors, 7;5 — Capital Stock, 7-5 — Pow- ers, 76 — Powers in New York, 77 — Trustee Powers, 79 — Holdings of Real Estate, 80 — Au.xiliary Powers, 81 — Banking Powers, 81 — Reg- ulation, 83 — Double Liability. 8r.— Deposit with State. 8.5 — Restric- tio!is on Loans, 86 — Reserves. 8() Reports and l'N,iiiiiiiatiiOk Tlie Parties Interested, 395 — Accounting and Administration, 395 — Purposes of Audits, 39() — Examinations by State Officials, Commit- tees of Directors, Stockliolders, etc., 397 — The Audit Department, 399 — Selection and Treatment of Employees, 400 — Qualifications of Em- ployees, 402. CHAPTER XV. SUNDRY TOPICS, pp. 405-412. Fees, Problem of Determining, 405 — Fees as Executor, etc., 406 — As Assignee and Receiver, 407 — As Trustee Under Bond Issue, 407 — As Transfer Agent, 408 — Foreign Exchange, 408 — Time and Labor Sav- ing Devices, 408 — Branch Banking, 409 — Offices and Buildings, 410 — Exclusive Buildings, 411. CHAPTER XVI. THE DUTIES AND LIABILITIES OF TRUST COMPANIES ACTING IN VARIOUS CAPACITIES, pp. 413-443. Transfer Agent, Duties of, 413 — Liabilities, 415 — Liabilities of a Cor- poration Acting as Its Own Transfer Agent, 41 6 — Responsibility of Separate Transfer Agent, 418 — Methods of Safeguarding the Trans- / fer Agent, 421 — Rules for Stock Transfers, 422 — Duties and Liabili- ties of the Registrar, 425 — Trustee Under Bond Issues, 428 — Condi- tions in Trust Deed, 429 — Papers Required in Assuming Trust, 433 — The Payment of Coupons, 436— Escrows, 437 — Depositary Under Plans of Reorganization, 437— Executor or Administrator, 438 — Trus- tee, 440— Guardian, Conservaior, etc., 441 — The Investment of Trust Funds, 442. CHAPTER XVII. TRUST COMPANIES OUTSIDE OF THE UNITED STATES, pp. 444-456. Germs of the Idea in India and South Africa, 444 — The Australian ^ Trustee Company, 444 — Statistics of Australian Companies, 446 — Powers, 447 — The New Zealand Public Trust Office, 449 — Canadian Trust Companies, 451 — Cuba, Mexico, 453 — Argentine Republic, 454 — Japan, 454 — England and Scotland, 455 — European Countries, 456. BIBLIOGRAPHY, pp. 457-466. Books and Pamphlets Relating Directly to Trust Companies, 457 — Proceedings, Reports and Periodicals, 4r)8 — Articles in Periodicals, 460 — Banking, Technical and General, 463. GENERAL INDEX, p. 467. INDEX TO FORMS, p. 476. UNIVERSITY Of TRUST COMPANIES. crr.iPTFR f. HISTORY OF THE TRUST COMPANY MOVEMENT IN THE UNITED STATES. THK term "trust company" has not in the past been one whose meaning was clearly defined; nor is it at the present day so used as to admit of a definition that is both brief and accurate. This doubtless results, in part, from the fact that the trus t comp .uij[ ^i8 a n \ institution whose characteristics have gradually developed in accordance/ with the needs of the time and of the community; and in part because) cencerns doing widely ditferent kinds of business have found it of ad-l v.-ntage to adopt the name "trust company," and to incorporate undei^ the laws governing such companies. Even salary-loan concerns and pawnbrokers have made use of the name, and numerous abuses have led several of the States to pass laws prohibiting the use of the word "trust" in titles, except by direct authority.' DiVFRsiTV or- TinsT Company Fl'nctioxs. Among tlie fifteen or sixteen hundred trust companies now (19'>8) existing in the United States, a careful analysis of the business actually done would show that the term is applied to corporations whose functions vary greatly. Some }»re simply banks of deposit and discount; many are; savings banks; some are safe-deposit comj)anies; some are title-insurance or fidelity-insurance companies; some serve chiefly as fiscal agents for ' corporations, and as registrars, transfer agents, intermediaries in reor- ganizations, promoters, etc. ; some devote themselves to the care of estates and to services as executors, administrators, guardians, trustees, etc. Most companies combine two or more of these classes of functions, while a few undertake nearly all of them. In early years the life insurance and trust businesses were intimately associated. Thus it is evident that in tracing the development of trust companies we shall find ourselves treating of institutions which, under the same general name, have j)erformed functions of various kinds. Statistics of any sort regarding trust companies are difficult to obtain, and none can be had which distinguish between the different classes of companies using that name. There is no availal)le information showing how many of the' trust companies are doing a trust busin»ss properly so-called, as distin- guished from ordinary savings or commercial banking. It is also to be observed that some of the functions which are coming to he ncognizvd as distinctively those of the trust company have always been carried on to some extent by banks. 1 This was done in New York in 1900. 1 2 TRUST COMPANIES. Whaljias been ^sjiid refers to the use of the term by those who are to sone tle^rec, a^.-le^isi^f iowversant with its true or usual meaning. The gemral jiuljlie, iij.stjll fuvioHlsij' ignorant of the signification of the name; ai>a»Ji>GT*cdi&le':as,ijt.ui''lvS*'t^«i, many intelligent people even confuse the trust company with the "trust." A ludicrous instance of this was reported at the meeting of the Ameri- can Bankers' Association in 18.Q7. "In response to a request addressed to the Secretary of State for each State, for a certified copy of the laws relating to trust companies, about half a dozen secretaries transmitted copies of the laws regulating, restricting or prohibiting j)Ools, trusts, unlawful combinations and conspiracies in restraint of trade. The copies of these laws were returned with an explanation that it was the statutes relating to trust companies which act as trustee, executor, etc., which were desired. In one case, the Attorney-General, to whom the letter was referred, replied that he regretted misreading the first letter on the sub- ject,' but after a thorough search he was convinced that there were no statutes of his State relating to trust companies, and that, as far as he could learn, there were no trust companies doing business in his State, except the Standard Oil Co."- Education on the subject has evidently been going on, for the writer has had no trouble in getting satisfactory replies from officials of all the States. In the following paees the writer has aimed to keep in mind, when- ever possible, the distinction between the trust company proper and the ordinary bank doing business under the name "trust company;" but the reader is remmded that, in the statistics particularly, it is not possible to follow out the distinction. The reader will also observe that in our day the trust company has, in most States, so far entered into the field of the ordinary bank, that a proper definition would assign to it both bank- -ng and trust functions. Both the name trust company and the idea of its typical functions; have been known since early in the nineteenth century. It was not sup/ posed, hoM'ever, that these functions were of sufficient importance to establish a distinct class of companies for their performance, nor did the trust company as an institution attract general attention until well along in the last quarter of the century. TiiK First Grant of Trust Company Powers. The earliest instance of a company chartered with power to perform 1 trust business was that of the Farmers' Fire Insurance and Loan Com- pany, whicli was incorporated by the Legislature of New York, Feb- ruary 28, 1822.' The act states that certain persons "Associated as a 2 Paper by Ralph Stone on "Statutes of the Several States Relating- to Trust Companies." Proceedings American Bankers' Association. 1897, p. 15S. 3 For the facts stated regarding the early history of this companv.'see Cator- Irust Companies in the United States," pp. 67-72; and Proc. Anier. Bankers' HISTORY OF TRUST COMPANY MOVEMENT. 3 company uii<'.tr the- name ot tlu- Eaniitrs' Eire Insiiiancc and Loan Coin- l)any, as well for tlu- purpose of acconunodating the citizens of the State residing in the cnnitry with loans on the security of their property (which cannot now be obtained without great difficulty) as to insure llieir buildings and effects, and those of other persons, by loss from fire, and also for such other useful purposes as are hereafter specifi«-d, have prayed the Legislature for a charter of incorporation, to be l«)cated in tlie City of New York, which it is reasonable to grant." The company had an authorized cai)ital of ^f^I ,5(U1,00(), but was i)ermitted to begin with .$,■)()(),()()(). It was empowered to loan upoFi farms, houses, factories or real estate; but mortgaged property taken on foreclosure could not be held longer than five years, on penalty of b«'ing forfeited to the people of the vStati'. The company was authorized to grant annuities; to insure all kinds of property against loss or damage by Hre; to purchase and hold any stock or foreign debt, or the stock of any corporation. It was especially provid«'d that nothing in the act should ht' so construed as to authori/,c the said corporation to receive any deposit or deposits, or to discount any promissory note, bond, due-bill, draft or bill of exchange, "nor shall it be so construed as to allow any banking privileges or busi- ness whatever." Two months later — April 17, 182'2 — the same Legislature passed another act providing "That the said corporation shall also have au- thority to receive and take by deed or devise any cfl'ects and j)roperty, both real and personal, which may be left or conveyed to them in trust; and to assume, perform and execute any trust which has been or which may be created or declared by any deed or devise as aforesaid; and the said corporation are authorized to receive, take, possess, and stand seized of, and to execute any and all such trust or trusts in their cor|)or.ite capacity and name, m the sam<' manner and to the same extent as trustee or trustees might or oould lawfully do. and no further." There appears no reason to question the statement of the company that this was the earliest bestowal of such ])owers upon any corporation in the United States. It will be noticed that the powers granted are quite as broad as those now usually given to cover trustee work, though the language is more concise .-ind less explicit than that contained in most modern charters. That the growth of this part of the company's busi- ness was rapid is shown by the fact that the insurance business, which was looked upon at first as its chief field of operations, soon began to be neglected in favor of the trust business. This line of work, once established, grew steadily, and it M-as finally found advisable to give up the insurance business altogether. In 183() the name was changed to the Farmers' Loan and Trust Company. Eight years later — in 18:50 — another company was established in As.sn., 1899, pp. 2.">2-3. paper by Fiam-is S. nangs. That the company performed trust fimctlons almost from the beginning la also attested by a letter from tbo Soci.t.iiy of the company. 4 TRUST COMPANIES. New York oitv with practically the same powers. This was the New! YoTk Lfe Insurance and Trust Company, whose capital was one mdhon dllars and wh^'ch was empowered to write insurance on lives, and to ^:::: ^L of every description. For many y.ars after jtsn^orpor. tlon life insurance was the most important ])ranch of its business, and m 90Vit still made a feature of annuities. This company 'has never had accounts such as are carried by commercial or savings banks, ts de po^r 1 tust bein, largely n.oneys of executors, trustees, associations, etc- - it declines Til corporation business, and administers only private ''''It' was not long before the trust business took root and vigorously developed in New York's old rival, Philadelphia. Strangely enough Weve'r. the suggestion of taking up the new line of business came not •Zn w Yorlfbut from the far East. This fact would seem to estab- ish that, however successful the experiment may have seemed to the Farmers' Fire Insurance and Loan Company, it attracted comparatively mtk attention among other ' concerns in New York, and almost none ninety miles awayi in Philadelphia. t,, m j i i • ..h\oh Gathered in the Merchants' Coffee House in Philadelphia-whieh took the place of the business men's club of our d^y--/^^^^'. "^^ ^J^ ber, 1809. a group of prominent philanthropists and financiers of th^ Quaker City had determined upon the incorporation of a company foii he insurance of lives and the granting of annuities Three years^later on March 10. 1812, the Governor approved the charter, which had been granted by the Legislature only after much opposition -^ La^er in the Tame month the company began business with an authorized capital of ^500 000. It prospered sufficiently to declare its first dividend of tour p r Int. on Z capital paid in, on July S, 1815. Its business during hese earlv years, and up to 18S6, was correctly described ^7 the t. le of the comp;nV-a title which it still retains-the Pennsylvania Company *or Ins-Lnce on Lives and Granting Annuities. In 1829 the attention of the officers of the company was attracted to a new line of business. "The great success of what in India at this time were called agency houses was irresistibly drawing the attention of financiers toward then. These were concerns" organized to l^ansact business for trustees or individuals, to receive moneys on deposit and to administer estates, and the ad^'ance- ment of the Pennsylvania Company in its chosen work induced ^s officers to desirp an expansion in this new direction."=^ On February 4, 18. A), the directors appointed a committee to report on the advisability of enternig on "the receipt of money from persons, and, in consideration thereof, carryino- out or executing such trusts as the persons giving the money shou'ld designate." The con.mittee reported in favor of the project, the xvttorneys to whom was referred the legality of the undertaking gave their 4 Letter fi-om the President of the company. 5 "Sketch of the Pennsylvania Co. for Insurance on Lives and Grantmg An- nuities," p. 32. HISTORY or TULST COMPANY MOVKMKNT. 5 approval, and in Jumary. 1831, the ort^crrs wirr nnpowcrtd to go ahind witli the performance of tlic new line of work. But for some unexplnined rtason the work was not taken up, and the efforts of tliose who wished to pusli tl:.' matter were not sueeessful until February '2."., IS'Jfi, when tiie Legislature granted and the Governor approved a supplement to the eiiarter, authorizing the company to enter into the business of executing tr.ists. The powers granted were: To accept and execut.^ trusts of every description; to be appointed trustee, assignee, guardian, connnittee or receiver; to receive moneys or other prop* rty, real or personal, in trust or on deposit, to accumidale the interest thereon, or to allow and pay the same. As trustee, assignee, etc., tlie cduipany Mas not re«iuir«-d to gi\c bond, the company's capital and assets being taken as the security ncpiirrd by Jaw. The charter contained a provision that any court which ajipointcd lie company to any trust j)osition might ai)point a suitable person to investigate the affairs and managtm'. nt of the company: said j>erson to report "The manner in which its investments are ma'de, his opinion of '])o ability and integrity with which the affairs of the company arc con- ducted; of the prudence and safety of its in\estmcnts and the security afforded to those by whom its engagements arc held; the exj)ensc of every investigation so made shall be defrayed by th«- said company." The pro- vision was also made that the coni])any should pay a reasonable rate of interest upon any sums not less th.-n one hundred dollars collected in its capacity as trustee, assignee, guardian, connnittee or receiver, and that it should accumulate the surplus income of any minor's estate by adding interest annually on the whole as a new principal. The power to act as executor and administrator was not gi\(n until s«vent«en y«ars lrcgan at once the 6 "Sketch of the Tennsylvanla Co. for Insurance on Lives and Granting An- iltles." op. 37-3S. 6 TRUST COMPANIES. accumulation of trust business, which increased at a satisfactory rate;'^ although it seems not to have made this business its main feature at first, as did the Pennsyhania Company from this time on. The year 1835, then, saw in active pursuance of the trust business in the United States four companies, two in New York city and two in Philadel))hia. During the years that immediately followed and down to the present time, their business in the trust dt'])artment, as well as in other lines, has steadily grown, and they arc among the leading companies of to-day. The Pennsylvania Company had, in 1868, acciunulated a surplus of profits equal to its original capital of $.^500,000, and thereupon in- creased its capital to $1,000,000, distributing a stock dividend of 100 per cent, to its shareholders. In 1869 its business was divided into depart-) raents — the trust department, the department of insurance on lives and/ granting annuities, and the baiiking department. But no life insurance policies iiavc been written since 187^2, nor any annuities or endov/ments jince 1873. The safe-deposit department was added in 1872, in which year also the capital was increased to $'2,000,000.® In 189-'5 the com- pany controlled one hundred and thirty-six millions of securities held in tnist, taken at their par value, and received during the year more than a million dollars for rentals.'' On May 28, 1007, it reported a capital of $2,000,000, surplus and profits $3,721,401, deposits $17,355,322. The amount of funds held in trust, invested and uninvested, was $138,311,-125, besides which it held other trusts representing large amounts, not readily expressible in exact figures. The Girard Company, which on June 22, 1 8.Q9, changed its name to The Girard Trust Company, reported on ]\Iay 28, 1907, capital $2,500,- 000, surplus and profits $9.773,80.5, deposits $29,976,098. It held trust funds, invested and uninvested, amounting to $76,538,089, and the amount of trusts under corporation mortgages and trusts of securities held by the company as depositary and trustee for issues of collateral trust bonds is given as $253,281,535. The Farmers' Loan and Trust Company, of New York, had on Jan- uary 1, 1880, accumulated deposits of over $6,000,000. This increased to $24,000,000 in 1890, and to $41,500,000 in 1900. The company's statement for August 22, 1907, shows capital $1,000,000, undivided profits $6,469,185. deposits $81,921,575, total resources $90,104,020. The New York Life Insurance and Trust Company had on August 22, 1907, total resources of $43,240,726: the capital being $1,000,000, surplus and profits $4,022,104, deposits in trust $33,712,743, annuity fund $2,326,150, life insurance fund $381,504. This company, as already stated, has no deposits other than trust deposits. . Of all the trust companies now in existence, these four were the only j ones which began business prior to the year 1853. There were, however, 7 Letter from the trust officer of the company. 8 Sketch of the Pennsylvania Company, pp. 45, 49, 51, 52, 136, 144. 9 Cator, p. 75. HISTORY OF TRUST CO.Ml'ANV M0\I:MKNT. 7 a few other comi)aiiies ineorpor.'ited in these early years which hav.- long since gone out of busiruss, and which bore the nam.- of trust companies. The Ohio Life Insurance and Trust Company, of Cincinnati, was incori)orated February 21, 1831, and began business in January of the foUowing year.''' It had a trust department /»nd a banking department. Its powers included the issuance of circulating notes, and the hading object of its incorporation seems to have been the supplying of capital for the business of tlie community. For many y«ars the company did a large business, though, on account of losses, its dividends wen not so great as had been hoped. For the first sevnteen years they averaged not quite six and one-quarter pvr cent, p.r annum. Karly in IS.'.-' the trust dej)artmeiit liad assets of $2,750.O()(). In addition the banking department liad assets of over $1,34."),0()(). The last years of this com- pany were filled with troubles over the State tax question, the company being called ujjon for taxes of about ii=l()(),0()0 i)er year. The failure, wliich occurred August 21, 1857, and which precipitated the panic of tliat year, was attributed by the Presiihnt of the company to "loans to l)arties unable to respond at this time."'' The passage of the Free Banking law in New York, in 18.S8, was followed very soon (in July, 18."8) by the incorporation of the Nortli American Trust and Banking Company, of New York city.'- Under the law, the company could di.scount bills and notes and other evidences of debt, and loan money on any kind of security, real or personal. The company had a brief but strenuous existence. Its ca|)ital "in cash. bonds and mortgages was between two and three millions of dollars, and upon this the directors and managers contracted debts and loans to thf amount of $18,000,000."' ' In January, 1S.".9. the company purchased $1,200,000 bonds of the State of Indiana, giving its notes in payment. It also bought Ohio State stocks, giving negotiable time certificates of deposit. For many years after the failure of the company the courts were occupied with litigation regarding the legality of these transactions, and the creditors included many anxious investors on the other side of the Atlantic. Another concern that passed like a comet through the financial sky of these days was the Kentucky Trust Company, which failed in 18')1, after a very brief career. It had been chartered with an unlimited capital. The year 1853 was marked by the incorporation of the first company organized in this country to transact exclusivtly the business of a trust company. This was the United States Trust Coni|)any, of New York city, created by an act of the Legislature April 12, IS.").**. "Its charter was the basis of all special charters of a similar character afterward granted in New York, as well as of the general law for the incorporation of trust 10 Bankers Magazine. July, 1S52. Vol. VII. p. 74. 11 Ibid.. September. 1857. Vol. XII, p. 240. 12 Ibid.. November. 1854. Vol. IX. p. 849. 13 Ibid.. November. 1S52. Vol. VII. p. 341. 8 TRUST COMPANIES. companies; which was adopted in 1887 and which has terminated the granting of special charters for such iDurposes."-* This company has had an important place in financial history during its fifty-odd years of life, and its list of directors and officers has in- cluded men of national prominence. During the last two years of the Civil War, when the financial problems of the Government were most serious, John A. Stewart, then Secretary of the company, at the earnest request of President Lincoln, undertook the work of Assistant Treasurer of the United States in the city of New York. Mr. Stewart became President of the company in 1865, and served with conspicuous success until 1.903. when he tendered his resignation. He was succeeded by ex- Socretary of the Treasur)"^ Lyman J. Gage. During its half century of life, the company has paid to those who entrusted to it their idle moneys for accumulation more than thirty millions of dollars in the way of interest on such funds. ^^ Its statement on July 1, 1.907, shows total resources of $77,711,610; capital .$2,000,- 000; surplus and profits $12,513,709, and deposits in trust $61,455,947. In 1857 the Merchants' Loan and Trust Company, of Chicago, the oldest existing bank in the State of Illinois, w^as granted a special charter by the Legislature of that State. Under this charter the company was authorized tc do a general trust as well as banking business: but it did no trust business until about 1880, and did not make a specialty of such business until recent years. Its trust department was organized in 1901. ^^^ There were some other companies with the word "trust" in their titles incorporated in Illinois at this time and a little later, but they were essentially State banks with a different name. Among these were the Chicago Loan and Trust Companj', chartered in 1857, and the Real Estate Loan and Trust Company. Neither is now in existence.^ '^ \ It is thus evident that down to the time of the Civil War the numberj of companies having the word "trust" in their titles was very small, and the number that actually undertook the trust business probably did not exceed half a dozen. That there were not more trust companies organized \ during this period seems at first thought somewhat remarkable in view of the success of the four companies first mentioned, and in view of the fact that this period was prolific in the formation of State banks. Presi- dent Jackson's successful fight against the second Bank of the United States, followed by the removal of the public deposits to "pet banks," and the downfall of the Government bank, opened the field for new financial institutions. That field was, however, almost wholly for con- cerns that issued circulating notes, and this function was evidently not a part of the business of insurance companies, which were at that time, as 14 Fiftieth anniversary circular of the company, 1?03, p. 8. 15 Ibid., p. 7. 16 Letter from the Secretary of the company. 17 Cator, p. 19. HISTORY OF TRUST COMPANY MOVEMENT. 9 we have seen, the only corporations tnpapd in the trust business. As several recent writers have pointed out, tlie business of handling drposits, which is now so important to most trust companies, was then of slight consequence as compared with that of note issue. Relativf Progress oi- Thist Companies axu SAvi.voa Ba.vks. Another poii'.t of interest in this connection is the relative progrcu ' of the savings bank and the trust company nuivenients. Each had it« origin in semi-philanthropic effort (as did jflso the insurance business), though doubtless tlie savings bank movement partook more especially of this characteristic. The two classes of institutions were established at about the same time, the first savings banks in the United States having begun business in 1816— on.- in Philadelphia and one in Boston. The growth of the savings banks, after the first few years of experiment, wa» rapid, and they became an object of j)ublic interest almost from th« start. There were thirty-six savings banks in the country in 18.S0. with deposits of nearly $7,000,000; in 1833, fifty-two Ivinks, with dtposits of over $10..'?00,000: in ISTjO, lOS banks, with deposits of over !i'4.'J,000,- 000. In 1885 — about the time that the trust-company movement began in some earnest — there were 6-lfi savings banks, with deposits of ."?1.095,- 000,000.^^ Trust com])anies, on the other hand, wrre established half a century before they begati to attract general attention, and where known at all in the early years the trust business was looked upon as only one of the less important functions of insurance companies. For this marked difference in the early history of the tM-o classes of institutions, one explanation suggests itself which is quite sufficient to account for the difference. It is that the savings-bank movement began when the country had reached a c(mdition M-herein its need was felt, while the trust com- pany was established in advance of any recognized need. Indeed, as we shall see^ the conditions Mhich make possible that part of the trust com- pany's business M'hich has to do with large enterprises of a corporate nature have not existed until within the last two or three decades. It will be interesting to get an idea of the way in which the trust business was regarded in New York about the middle of the last century. In The Bankers Maga/ixe for November, 185 J,'' there appeared an article on "The Trust f'ompanit s of N« w York." These are given under three heads, viz. : 1. The New York Life Insurance and Trust ("onipany. 2. The United States Trust Company, of New York. 3. Life Insurance Companies. The Farmers* loan and Trust ( ompany is included with regular Jiie insurance companies under the third head. Of the United States Trust IS Report of Comptroller of the Currency, 1902. p. •120. 19 Bankers Magazine. Vol. IX. p. 321. 10 TRUST COMPANIES. CoQiiJany. it is remarked that it does no life-insurance business — only "receiving moneys on deposit, and executing trusts." The figures are given for the two companies above named, among the items for the New York Life Insurance and Trust Company, being "deposits in trust, trust accumulation, life insurance, annuity granted, and receivership account." After a description of the two companies, the article proceeds: "There are other com.panies in the city which, if not strictly termed trust com- panies, are yet so in fact, as they are the depositories of funds that will not be demanded for a long series of years, and on the solvenc}'^ and stability of whose affairs much depends. We allude to the life insur- ance companies." Organization of Trust Companies After the Civil War. The last year of the Civil War and the years immediately following saw a very distinct movement toward the formation of trust companies, and marked its spread into new territory. Of the companies now in existence over forty began business during the A'ears 1864-1875."'^ How- ever, many of these companies were in their early years not trust com- panies, but ordinary banks. The States represented were Pennsylvania, New York, New Jersey, Maryland, all the New England States except Maine, Illinois, Iowa and Georgia. In the eight years following 1865 about thirty-seven new charters were granted in Pennsylvania; very few of them, however, were used.~^ The Union Trust Company, of New York, was chartered in lS6i and began its work in 1865; as did also The Provident Life and Trust Com- pany of Philadelphia, both companies transacting a trust business from the beginning.-- The Trust and Deposit Company of Onondaga, at Syracuse, N. Y., began business in 1866, undertaking from the first such trust business as was committed to it.-^ The year 1867 saw the begin- ning of the Safe Deposit and Trust Company, at Pittsburg, Pa., and of the Rhode Island Hospital Trust Company, of Providence, R. I. One of the leading objects of the organization of the latter was to serve as a pecuniary helper to the Rhode Island Hospital, then in its infancy. This company, which was modeled in part after the United States Trust Com- pany, of New York, was given a threefold character by its charter: "First, a bank, with all banking powers except that of issuing a cur- rency; second, a savings institution; third, an incorjiorated executor, ad- ministrator and trustee of the estates of decedents and of the living who might desire to avail of its services."-* 20 See dates of organization of the various companies, given in "Trust Com- panies of the United States," published by the V. S. Mortgage and Trust Co., of N. Y. 21 Cator, p. 16. 22 Letters from the trust officers of the companies. 23 Letter from the Secretary of the company. 24 Circular issued by the company, giving its history. HISTORY OF TIUST (OMPANV MOVEMENT. 11 In 18(iS were cliartr red the Bro..kIyn (X. Y.) Trust Coinimny, which -coniincnccd a trust husin.ss at onct-; the W'oroesttr Snfc- Drposit and Trust Company, of Worctstor, Mass., which, however, did not accept any tru.st until 1881; and the Hartford (Conn.) Trust Company, which did not enter into a trust business until ]8<*!>.-' AmonK .»tln'r companicH chartered in New York durinfj the sixties w»re the Niw York (iuaranty and Indemnity Company, 18Cl; the National Trust Com]>any. 18(J7. and the New York Mercantile and Trust Company. IHdS.-" All three have ])assed out of existence. Tlie Nortiiern Trust Company of riiiladtlphia was estahlislu-d in 1881, transacting trust business from tin- start.-' Boston now hecanie interested in the movement, and in 1871 the New Fnjiland Trust Com))any, which had been chart«red in 18()9, In-^an busi- ness, receiving its first trust in May of that, year.-" The Mass.ichusetts Trust Company, of Boston, chartered in 1870. also began business in 1871, but did not engage actively in l!i<- trust busine-s until 1887.-" By 187;>, besides other conipanie:j in New "^'ork, Pennsylvania. Connecticut and Massachusetts, there had begun business the Camden Safe Deposit and Trust Comj)any, of Camden, N. J., which exercised at once its powers to act as executor, administrator, guardian, agent, etc.; The Connecticut Trust and Safe Deposit Company, of Hartford, which at once undertook trust business;"'' and the Illinois Trust and Savings Bank, ol" Chicago, M-hich, though authorized by its charter to accept and execute trusts, did not use such authority until ISSS. " Meantime during the sixties there had come into being a class of in- stitutions whose business is now being taki'n up very generally by trust companies — namely, the safe-dej)osit comj)anies. The Safe Deposit and Trust Company, of Baltimore. Md.. was organized in 18()l as a safe- de))osit comjjany only, its trust business being taken on in 187(>-'^' The Fidelity Trust Comijany, of Philadelphia, was established in 18()() as the Fidelity Insurance, Trust and Safe Deposit Company. While this company undertook the other lines of business indicated in its title, it made a specially of the safe-deposit business, and claims to be the ])ioni-er company in the country in this business."- The Boston Safe Deposit and Trust Comi)any was organized in 18()7 as a safe deposit company only; its name being changed and trust functions added in 1871' and 1877. Tjif Bwkkhs M \r;.\z:NF for October. 18()().'^ mentions the recent organization of the Safe Deposit Company, of New York. AvI.ieh by its eliarler wis restricted to the safe-keeping of v.. 6TS. 27 Letter from the Trea.«urer of the company. 2S Letter from the trust offlcer of the C'>mpany. 20 T^etter from the Secretary of the company. 30 I^nter fiom the Secretary of the comimny. 31 Letter from the Vice-President of the compnny. 32 Letter from the Vice-President of the company. 33 nanl'). scattered over thirteen States. The liabilities at the time of failure were .*3.().S7.560; the jimount paid creditors, after a delay of several years, finally amounted to sixty-two i)er cent, of their claims."" CoMPTKOI.I.r.Il Kxox's ClMTKISM OF SoMK OK TIIK ThIST (oMPAXIE!*. Among ,other companies that suspended during the panic of 18?.'^ were the Brooklyn Trust Company, the L'nion Trust Company, the National Trust Company, and the \\'arehouse Security Company, of New York.'"' The loose methods pursued by many Hnancinl institutions, and the craze for speculation and money-g«tting. which were largely responsible for the panic, called the attention of the Comptroller of the Currency to the different kinds of banking org.mizations. Among these the trust companies did not escape his attention. In his report for ]87'5-7i the Comptroller (Hon. .John J. Knox) says:*" "Trust and loan companies arc usually organizi-d, l\v special State statutes, in the large cities. Their capitals, deposits ;ind business are quite large in amount. Reports are not required, and inadetjuate when given. For instance, one of the largest of these institutions has published but one re}M>rt in the year, and that report contains only a st.atement of its assets, without any mention of the amount due to its depositors, or of any of its liabilities. The Bank Su])erintendent of New York, in reply to an inquiry in refer- ence to these institutions, says (under the date of Jidy ."^l, 187."^): 'The trust companies of New York are peculiarly situated. Some are under the control of the Comptroller of the Stat*-: but the great majority of them are under no sort of supervision. * * * This class of corpora- tions has multiplied rapidly during the last few years. * * * I am not able to furnish a coi)y of the charter of any of these companies.' " The Comptroller adds that he had received .some reports from trust companies, but not enough to publish without making the report "de- lusive." He had better fortune the following year, and statistics of trust companies are found in the reports from 187'> on. In his report of 187y-7(). the Comptroller .says that the reports from Philadelphia were furnished cheerfully by the officers of the companies, "although tliey ex- pressed doubt whether they could projnrly b<- classed as banking institu- tions."*' If they are living now their doubts are probably removed. The Comptroller also says: "Several of the companies state that they hold very large values, amounting to many millions, in trust, which are 38 Bankers Magazine. V.^l. XXIX. p. 0^6. and Vol. XF.II. p. 909; Keyes: Hl!«- tory of the Savings Banks of tiie I'nlted States. Vol. II. pp. 658 et »eq. 39 "Commercial and Financial Ciironlcle." July 26 and Aug. SO. 1S7S. Report of U. S. Comptroller, 1S73. p. 90. 40 Page XL.TII. 41 Page I.X. 14 " TRUST COMPANIES. not the property of the companies, and are not, therefore, returned by them as deposits proper." The same thing is true to-day, and for this reason statistics of trust companies do not convey a correct idea of the amount cf property actually under their control. Proposed Public Supervision of the Companies. Agitation to bring the trust companies under some sort of supervision was going on at this time in several States. The Bank Commissioners of Connecticut, in their report for 1S72, recommended that instead of ihe annual returns to the Commissioners then required, there be quar- terly reports, and that same be published in the newspapers.*- Such a law was enacted in 1872.*^ Connecticut Iiad live trust conqjanies at the beginning of that year. The Superintendent of Banking of New York, in his report of De- liember, 187?, recommended that the trust companies be brought under | stricter State supervision. At this time some of them were under no supervision at all, while some reported either to the State Comptroller, the Superintendent, or to a Judge of the Supreme Court. ^* The Super- intendent's recommendation was adopted, and the companies were brought under his supervision in 1874'. Competition Between Trust Companies and Banks. Evidences that trust companies were now beginning to attract some attention from the general public, and to cause considerable uneasiness, among other classes of bankers, is found also in the increasing number of comments upon them in the financial papers as well as in the Reports of the Comptroller of the Currency. In The Bankers Magazine for January, 1874,*'^ is found this statement regarding "Trust and Loan Companies": "They were intended as repositories for trust funds, for the accumulation of deposits to be loaned on mortgage, and for invest- ments in Government loans; in other words, as savings banks on a large scale. Recenth' they have been converted into stock-jobbing concerns,, apparently for the benefit of stock operators, and in large sums." The article refers to the remarks of the Comptroller of the Currency in his Report for 1873 (p. XLIII) already quoted. Two years later (April, 1876), the same magazine has this to say:*" "Recent events have led to some solicitude in regard to trust companies in this State, and the re- ports of these institutions have been scrutinized with unusual interest." On January 20, 1883, the "Commercial and Financial Chronicle" said:*^ "An important feature in our financial situation is the rapid extent dur- 42 Bankers Magazine, Vol. XXVII, p. 256. 43 Ibid., Vol. XXVIII, p. 184. 44 Ca.tor, p. 51. 45 Bankers Magazine, Vol. XXVIII, p. 520. 46 Ibid., Vol. XXX, p. 777. 47 Vol. XXXVI, p. 917. HISTORY OF TRL'ST COMI'ANV MOVK.MKN J . 13 ing late years of tlu- husiiuss of tlu- trust companies of this State. Not very long ago their position was what their nauu- implies— that i«, in- stitutions for safely keeping and managing trust funds. More recently Ihey have been running into a general hanking business, and now hold a position not very unlike the joint-stoek hanks of London, which take deposits on interest, loan them out as best they can, while leaving to the liank of England the burden of carrying the reser\e. In a similar man- ner the trust companies are dependent upon the resi-rve of the associated banks, while becoming active competitors for general deposits, vc a benefit, by helijing to check their multiplication. In all this the Superintendent only gives expression of the pr«vailing opin- ion. Trust companies are needful, but only for certain well-defined pur- poses; they are misnamed and in some cases mishading when, in the garb of a trust organization, they exercise the powers of a bank." Steady Devei.opn!i:xt of the Trirsx Companies, Notwitiistanding many such coinjilaints a>i th« se. the trust company movement went steadily forward, and encroached more and more upon the field of the regular banks. To do this they had to overcome not only the hostile criticisms of the financial press, but the force of State legislation as well. In Pennsylvania, for example, the amendment to the Corporation Act in 18S1,""' forbids trust companies to do a banking business. For many years the question was under discussion, whether Pennsylvania trust companies might legally reeeive demand deposits. As late as 1898 the Law Editor of The Bankehs Magazine expressed the opinion that it was not legal for them to do so."" The companies actually did receive such deposits, however; and in IPOO their right to do so was established by decision of the United States Circuit Court of Pennsyl- vania.'' It is still illegal for Pennsylvania trust companies to discount commercial paper., but they may buy it ! Another instance of encroachment upon the functions of banks in spite of questioned legality is furnished by the Missouri trust com- panies. In 1891 the Supreme Court of Missouri decided that trust com- panies are not hanks, and may not ree« ive deposits as banks. ^- This 48 January 10. 1SS5. Vol. XU p. 42. 49 Laws of Pennsylvania, May 24. ISSl. Act 26, sec. 1 50 Bankers Magrazlne. Vol. L.V1, p. 100. 51 Cator. p. IS. Bankers Magrazlne. Vol. LXJI. p. 561. 52 Bankers Magazine. Vol. L, p. 60. 16 TRUST COMPANIES. failed to settle the matter, however. Four years later the same court passed upon the question again, and concluded that trust companies may not receive demand deposits, unless they pay interestJ'^ Hence the re- ceiving of demand deposits by trust companies in that State now has legal sanction. No rate being specified by the court, the payment of merely nominal interest would suffice, so far as the law is concerned. There is a law of competition, however, which is another thing. The examples just related illustrate how the trust company, unlike the National bank, has develoined according to natural rather than arti- ficial laws. The law and its interpretation have been moulded to suit the ascertained needs of the business, instead of the business being moulded to conform to the law. There are those who believe that this process has evolved a more scientific system of banking than that of the banks themselves. General Statutes Re(?ulating Trust CoxMpanies. During the decade of the eighties the growing attention to the trust company as an institution was further evidenced in some of the States by the passage^^ of general laws regarding this class of institutions. New York passed such a law in 1887, since which time companies have usually been incorporated under the general law, altliough some have been organized under special acts.'^^ We have already referred to the Corporation Act of 1881 in Pennsylvania, which dealt with trust com- panies. It was further amended in 1885.^" Illinois passed a trust com- pany law in 1887.^^ Several States passed laws during this period for the purpose of regulating or restricting the business of trust companies. This subject will be discussed more at length in a subsequent chapter. Growth of the Companies in Numkers and Resources. Returning now to the consideration of the growth of trust companies in number and resources, the task is much simplified by the availability of statistics which, while incomplete, furnish the means of forming a tolerably accurate idea of the progress of these institutions. From the year 1875 on, the reports of the Comptroller of the Cur- rency give statistics of the trust companies reporting to that official. These reports do not include all of the trust companies in existence at their several dates, as the Comptroller had no authority to compel the sending of returns from State institutions. The number of companies reported for the year ended June 30, l%"5, was thirty-five. This num- 53 Ibid., Vol. LrVII, p. 16. 54 The tendency to the passage of general laws was not confined to trust companies, however, but extended to other State banking institutions. See "State Banking in the United States," by George E. Barnett, p. 22 and passim. 55 Circular published In 1900 by the New York Superintendent of Banks, giv- ing historical sketch and digest of banking laws. 56 Act of June 11, 1885. 57 Aot of June 15, 1887. HISTORY or TRUST CO.MPANV .MOXKMENT. l? ber is, of course, somewhat less than the nmnher actuallv doing business, and it is impossible to learn the exact number. The L'nited States Mortgage and Trust Company, of New York, has annual) v. since \i)iiS, published a book entitled "Trust Companies of the United States." whicli gives complete returns from practically all of the trust companies tn ex- istence, with the dates of their organizations. An examination of this Aork shows that of the companies reported, Hftv had been organized during or before the year 187.5. But, as the writer has ascertainrd bv correspondence with these companies, some of them were not organized ■at first as tru.st companies. On the other hand, as already .shown, a nimiber of trust companies organized in these early years have gone into liquidation, and their names do not appear in the book above mentioned. A rough estimate, however, shows that these two considerations alxjut offset each other, and the numlier of companies in existence in 187.'» was probably nearer fifty than thirty five. The former numlur is insignifi- cant enough as compared with the other financial institutions at that time. As against the thirty-five trust companies, there were in 1S7.'>, ficcordiug to the Report of the Comjitroller of the Currency for that vear, 551 State banks, 771 Savings banks and '2.087 National Iwinks. The trust companies liad deposits of $85,000,000. while the State banks had $1()6.000.()00. the Savings banks 6^921,000,000 and the National banks $679..000,000. Of the thirty- five trust companies reportid. N«w York State had tvvelve, Connecticut ten, Pennsylvania seven, .Massachusetts five and Rhode Island one. The incompleteness of this list is shown by the fact mentioned by the Comptroller, that while Illinois is credited with no companies in the list, the Financial Editor of the "'Chicago Tribune" reported that there were in Chicago, June SO, 187.'), five trust companies, witb aggregate deposits of $.5,688,5 7 i.'^* A general idea of the growth of trust companies from this time on will be gained most easily by reference to the charts presented herewith. Chart A is designed to show the growth in the numln-r of trust companies year by year. The heavy line follows the number of companies in ex- istence each year as reported by the Comptroller of the Currency. The dotted line follows the total number of companies organized at the close of each j'ear, as shown by figures compiled by the writer from the work "Trust Companies of the United States, l.OO.*^," already mentioned. The heavy line shoMs less than the actual number of companies in existence at any given time; because, as already stated, the reports of the Comp- troller do not contain complete reports of all the trust companies in the country. It is probable, however, that this line does indicate pretty ac- curately the relative gain, from year to year, in the numUr of com- panies; and this is the essential thing that the chart is intended to show. It will be noticed that the general trend of the two lines is the same. •"•? Report of I'. S- Comptroller. 1S75. p. Xi'VIf. 18 TRUST COMPANIES. The heavy line shows interruptions in tlie increase of the number of com- panies, in the years 1889, 1892, 1894, 1897 and 1898. For details of this kind, however, it is not safe to trust the chart, owing to the incom- pleteness of the statistics on which it is based. The dotted line shows that tfiere was no year since 1881 in which no new companies were or- ganized. This line would show no interruptions in the increase of com- panies, if there were any, because it is based on figures showing only the number of companies organized in each year, taking no account of companies which ceased to exist. Following the general trend of the lines, and averaging their courses, it will be seen that there was no marked change in the number of companies until about 1885, when there began an increase which reached its climax about 1891. From 1891 to the beginning of 1 899 the increase went on, but at a less rapid rate. From 1899 to 1907 inclusive, excepting the years 1903, 1904 and 1906, the in- CHAPT A, Bhowlne C^owth In tho nuntor of Tmst ConpenleB. 1B76 AB reportai by the Cooptroller of tho Currenor, fio Suater oreaBlBBd. 6S Bhown by "TruBt CoopanleB of Th» United StBtes", 3 3. S I 7^ ■X a,f / IS 1 a-S" .. o-ro c 3 -r 9 T^ f CO •• 6 n-s A s o i i^ : 7 n-s / TS-r / 4 7-s- 4^o / (.XS / /■' / ^oo , / / / ;f 5^ / 3.S-D J 33 ^ / a 7 -^ y / / IS y ^ J 1 a.^ .'■ . — ^ 7S --' / S.S — "^ S t ^ I ^ * ^ ^ i 1 ^ . 'I I \ I ^ ^ ' * % o Q I o * '5 ^ HISTOUY OF TRLST (OMl'ANV MOVKMKNT. 19 crease has been at a vrry imicli i^rtattT rat«- than in any of thr preceding years. It seems probable that the considerable increases in tlie heavy line in 1888 and 1898 are due not to an actual increase in the number of companies existing so much as to greater success on the part o( the Comptroller in getting reports from companies which had not hitherto reported. The following tabh- shows the nuinb< r of eonipanies at the dates given: •^ According to AccordInK to Comptroller's "TrnHt <"omi>anl<"» of the Year. Reports. rnltt-d Btiitoii." 1875 :{5 50 1880 30 54 18S5 40 99 1890 H9 255 1895 242 364 1900 290 518 1905 6f>3 1156 1907 794 14«0 190S • "=12 1470 The striking thing about the table is the rnnarkable growth in the number of com})anies since the year 1 <)()(». ^^■hile the nmnln'r of com- panies doubled between 1890 and 1900, in the se\en years 1900-1907 the number increased 50 \, or about 171 per cent., according to th«- Comptroller's figures, and 9(V-'; or about 1 S(j per cent., according to the other authority. The figures for 190S relleet the effects of the paTiic of 1907. which put an abrupt stoj) to the organization of new comp.inies. and caused the liquidation of a number of old ones. Chart B shows the growth of individual deposits of trust com- panies, and also of Savings banks, .State banks and National banks. Following the course of the heavy line, which shows the increase of trust coinjjany deposits, we find nmch the same g« neral features as in the line showing the growth in the nmnber of companies, save that there is a considerable gain from 1S80 to 1885. Especially n).irkid is tin in- crease from 1898 to 1<)0'2. inclusive. COMI'AKATIVK GilOW III OV HwKS AN)) Till ST CoMI'ANIKS. An interesting thing is the coineidenee in the general features of the lines showing deposits of trust companies and of State banks. It is also to be noted that from 1897 all four classes of financial institutions had increases of deposits much greater than » v«r U-fore. This does not seem to corrolxirate the popular impressitm that tlte trust companies are making their gains by t.iking l)usiness from the regidar banks. It rather indicat«s that the trust companies are sharing with the others in a gen- eral prosperity that is unprecdented. The following table gives the individual deposits of the same four classes of institutions for the years named, as reported by the Comp- troller of the Currenev: 20 TRUST COMPANIES. Trust State Savings National Tear. Companies. Banks. Banlts. Banks. 1875 $85,000,000 $166,000,000 $924,000,000 $679,000,000 1880 90,000,000 209,000,000 819,000,000 888,000,000 1885 188,000,000 344,000,000 1,095.000,000 1,117,000,000 1890 336,000,000 553.000,000 1,525.000,000 1,594,000,000 1895 547.000,000 712,000,000 1,811.000,000 1,715,000.000 1900 1,028,000.000 1,267,000.000 2,450,000,000 2,602,000,000 1905 1,980,000,000 2.365,000.000 3,093,000,000 , 3,882.000.000 1907 2.061.000,000 3.068,000.000 3.495.000,000 ' 4,480,000,000 1908 1.8-67,000,000 2,937,000,000 3,479,000.000 4,375,000,000 It tliiis appears that during the ten years from ISPO to IPOO, the Trust Companies gained in individual deposits $692,000,000, or about 206 per cent.; the State Banlcs, $71 '^,000,000, or about 129 per cent.; the Savings Banks, $92.5,000,000, or about Gl per cent., and the Na- tional Banks, $1,008,000,000 or about 6S per cent. The amount of the gain for Trust Companies was less than that for the other classes of institutions, but the percentage of gain was much larger. During the seven years from 1900 to 1907, the gains were, for Trust Companies, $1,033,000,000, or about 100 per cent.; for State Banks, $1,801,000,000, or 142 per cent.; for Savings Banks, $1,045,- 000,000, or 43 per cent., and for National Banks, $1,878,000,000, or 72 per cent. During these years, therefore, the amount of gain in dollars was less for Trust Companies than for any of the other classes, while tlie percentage of gain was greater than that of any but the State Banks, which made ^v remarkable gain. The figures for 1908 show that all the institutions lo.st in deposits during the panic of 1907, but the tru.st companies lost most heavily. As regards a comparison of the figures for Trust Companies and for the other fin.ancial institutions named, it is important to bear in mind that the reports of the Comptroller give the statistics for all National banks, and that said reports are fairly complete for State Banks and for Savings Banks ; while tlie statistics for Trust Companies are very far from complete. Thus, the Comptroller's report for 1907 gives the total resources of the Trust Companies of the country as 3,073 millions, whereas the figure given by "Trust Companies of the United States" is 4,285 millions. The Comptroller's report for 1907 contains figures for but one Western State, — Kfinsas, and for but one Southern State, — Kentucky. It omits a number of important Trust Company States, among which are California and Ohio, tlie combined resources of whose Trust Companies in 1907 were not less than 324 millions. This incom- pleteness is not the fault of the Comptroller, but is due to the fact that he has no authoritj^ to compel the making of reports of Trust Com- pany statistics by the different States. ^^ 59 As another Instance of incompleteness, take the Report for 1897. Two hundred and fifty-one companies are reported, with total deposits of $566,922,205. But the Comptroller calls attention to an investigation made by the New York Financier of returns nearest to January 1, 1897. showing 458 companies, with de- posit's of $675,100,000. (See Comptroller's Report 1897. page XXXVIII.) HISTORY or TRL'ST COMPANY MOVEMENT 21 C1U»T I, ■koslne ermth of !Ml»i*n»l Coaptrollvr of th« Cuttobc/, It* of kok* uK lt«r*rta of tk« l*tlon*l ruik*. st«t< Tnal tank*. ' Cospwi... jtofo L_ . 1 / t'loo 40^0 31^^ .• aee e JTO 3tOO Vr'l 3 t-ro / iiSO .• J ,'eS / ^0*1 1 fee ' 7 a<-oo ~ 7 f- > 7 0^ -■' J. . i i U -TO a *oo '"■ f ~J _^ 1 . / i_ ao^o // -4 ^^- ,..'■/ t^ - ' t.ro 1 too ^ ^7 - ' 7c° '■' "" "'• =^ ^ - Z I _ / t*-o / 1 /J JO / Jo /. z" r I *s ? ^ 1 I'TS / ^ ]7 ~t - 'J*- Z." ; ;^| ■^ t / c so .,.- Zn ISO ..-. / '' ^1. 4 ■fo ■■•- ^. V- ~ ij^. '00 ^^^^jT- - tol JfO *«o , ■~. / ^~~ 0*0 ____ ^ / L^ -~ ^ — -^ \ ■^ f --' ^ <- •« H L ^ n a <« * c- ^ 0- e - If tlic reports gave returns from all Trust Conipnnirs of thr country, the above figures for amount of gain in deposits would, of course, be increased. AVhat the etiect would Ix- iipon the percentage of gain is un- certain. The growth of deposits of all the financial institutions was checked in 1903, but the chart shows that according to the C omptrollcr's figiJrcs 22 TRUST COMPANIES. the Trust Companies suffered the most. Their growth also appears to have been checked during the years 1906 and 1.907. The chart does not show the effect upon deposits of the panic of the Fall of 1907, as the statistics are based on reports made during the Summer of 1907. BANK AND TRUST COMPANY SUSPENSIONS, 1S93-1907. (Figures furnished by Bradstreet's.) NUMBER OF COMPANIES SUSPENDED. Loan National State Savings Private and Trust Year. Banks. Banks. Banks. Banks. Companies. Totals 1893 . . . .. 154 184 50 196 14 598 1894 ... .. 24 36 8 18 3 89 1895 ... .. 21 57 18 37 2 135 1896 .... .. 42 65 20 62 8 197 1S97 ... .. 21 24 17 41 2 105 1898 .... 4 12 5 28 2 51 1899 .... 7 5 5 18 2 37 1900 .... .. 3 8 2 30 43 1901 ... 5 13 6 32 56 1902 .... 8 3 16 2 29 1903 .... .. 11 28 1 44 6 90 1904 .... .. 16 23 10 43 4 96 1905 .. 15 14 5 25 4 63 1906 .... ..4 19 2 17 3 45 1907 . . 14 28 6 24 17 89 Totals 341 524 158 631 69 1723 BANK AND TRUST COMPANY SUSPENSIONS. 1893-1907. (Figures furnished by Bradstreet's.) INDICATED TOTAL. ASSETS. National State Savings Private Loan & Trust Year. Banks. Banks. Banks. Banks, Companies. Totals. 1893 .. $84,493,433 $43,168,979 $18,763,938 $23,497,164 $14,357,500 $184,281,014 1894 .. 3.485.650 2,773,724 3,029,508 1.186,750 510,000 10,985,632 1895 . . 3.17*.S94 3,891,852 10,161.649 1,510.000 155.000 18,891,395 1896 . . 22,951.523 7,521,269 8,119.000 5,024,040 3,892,279 47,508,111 1897 .. 6,721,000 2,401.150 3,867,098 2,369.714 375.000 15,733,962 1898 . . 2,701,680 1,791,100 1,196,300 1,555,254 5.074,486 12,318,820 1899 . . 9.822,222 168,000 821,332 1.893.072 4.778.000 17,482,626 1900 . . 1,025.000 1,131,396 381,000 1,373,114 3.910.510 1901 .. 4,753,105 1,312,000 596,000 3,537,880 10,198,985 1902 . . 348,000 2,908,012 597,709 28,765 3,882,486 1903 .. 8,"5'37.907 2,187,391 35,000 3,732,557 12,764,000 27,256.855 1904 . . 6,392,424 2,939.855 1,578,068 3.498.700 1,523,575 15.932.622 1905 . . 6,639,000 1,365,100 2,028,776 2.015,920 6,390,055 19,438,860 1906 .. 1,705,000 2,768,815 25,000 4,075,320 4,490,000 13,064,135 1907 .. 42,522,429 19,678.339 7,191,686 $60,702,367 14,879.942 104,192.210 188,464,606 Totals !;204, 923,267 $93,446,970 $70,747,145 $158,530,870 $588,350,619 ESTIMATED LIABILITIES. 1893 .. $68,687,994 $38,138,323 $18,152,136 $22,929,225 .$22,388,000 $170,295,678 1894 . . 4,315,900 3,484,600 3.445.000 1,712,450 1,012.000 13.969,950 1895 .. 3.971.462 4,922,631 11,167.887 2.537,718 165,000 22,764,698 1896 . . 27,544.250 9,933,742 8,457,000 6,654.670 4,089,372 56,679.034 1897 .. 7,920.999 3,060.811 5,077.222 4,085,477 550.000 20,694.500 1898 .. 2.962,863 2,479,000 1.331,627 2.822,890 6,401.412 15,997,792 1899 . . 12,094,572 215,000 1,322,737 4,847.261 6.025,000 24,504,570 1900 .. 1,965,304 1,475,855 462,649 4,683,660 8,587,468 1901 .. 5,684,720 1,984,053 792,725 7.161.339 15.622.837 1902 . . 825.542 3,821,762 1,709.773 "51,661 6.408,738 1903 .. 9,'445.i99 2.746,533 235,000 7.286,777 14.438.168 34,151,677 1904 .. 7.767,4^4 4,362.442 1,972,000 5,481.200 2,756,300 22.339,366 1905 . . 9,260.277 2.209,887 2.613,776 3,089,423 6.846.377 24,019.740 1906 . . 2,829,000 5,457,503 45.000 6,822,952 7,725.000 22,879,455 1907 .. 39,201,694 19,852,940 6,674,071 $65,570,592 22,199,622 118,338,036 206.266,363 Totals i 203,651.658 $101,148,862 $104,024,437 $190,786,326 $665,181,875 HISTORY Ol TRLST COMl'ANV MOVEMENT. 23 Faim-hes or Thl'st CoMivwirs. Statistics retrardiiif; failures and susiK-nsions of trnst couipaiiir* are not obtainable prior to the year 181-100 of 1 per cent. From these figures, it appears that tlit proportionate numlH-r of trust company suspensions was less tliaii lliat of any class of financial institu- tions except the National banks. Regarding the losses involved in the failures, the showing of the trust companies is, on the face of the figures, not so gcwd, tlie losses as- signed to tb.em exceeding those of the other institutions, exctpt the private banks. The figures represent, however, not the ultimate losses, but the best estimates of the ])robable results obtainable at the time. An ex- a:iiination of the figures for the year lf)07. which account for 6i per 24 TRUST COMPANIES. centum of the entire estimated liabilities for the tifteen years, shows that they give a greatly exaggerated idea of the actual losses involved. Of the 17 trust companies reported siispended in 1907, at this date (Norem- her, 1908) about one-half have re-opened for business, while several others are being liquidated without loss to depositors. These include the larger companies which suspended, with one exception. A-s to the fig- ures involved, three companies, — tlie Knickerbocker Trust Company of New York, the Union Trust Company of Providence and the California Safe Deposit and Trust Company of San Francisco, — account for con- siderably over $100,000,000 of the $118,000,000 liabilities shown in the table, and the first two of these have long since resumed business and are lo-day prospering, no loss to depositoro having resulted. One competent authorit}^ estimates the actual losses due to failures of trust companies during the year following the panic of 1907 at about five and one-half million dollars, of which eight}' per centum was due to the failure of one company, — the California Safe Deposit and Trust Company. New York having been the storm center of the panic of 1907, it is significant that on August 10, 1908, the Superintendent of Banking of the State of New York, Clark Williams, reported — "So far as the records of this Department are concerned, we know of no case of a failure of a trust company resulting in loss to the depositors."* So far as the safety of trust funds is concerned, the statement made some years ago at a meeting of the Trust Company Section of the Ameri- can Bankers' Association, that not a dollar of trust funds has ever been lost through a trust company, has never been disputed, so far as the writer knows. Especial interest attaches to the record of trust companies during and since the panic of 1907, because it was the first severe strain that has been undergone by these institutions since their great development began. On the whole, the record must be pronounced very satisfactory. Al- though subjected to a strain that was unprecedented, their record com- pares favorably with that of other classes of financial institutions. The failures which occurred were in no sense ascribable to any inherent vreakness in the trust company as an institution; but are accounted for in some cases by the dishonesty of ofiicials and by undue laxity of the State laws under which ihcj operated, and in others by pressure of circum- stances which could not be overcome by any kind of banking institution. The same causes brought about the doAvnfall of other financial institu- tions, including National banks, and State banks in States having the best laws for their regulation and control. The panic of 1907 did, however, emphasize the necessity of careful and intelligent State regulation and control of trust companies^, as well as of the other banking institutions. The statement on the next page gives the aggregates of the principal items in trust company reports from 187') to 1908. This table contains. * Trust Companies Magazine, August, 190S, p. 495. I. m i i 5S£S esse 1585 c s 5 u = I S £ 5 S H 5 I 5 H 5 I g S 2 it 5 I : 8 » S i = S I S » i % ii S s 2 5 i? E i 3 =' £ 2 5 I S S = 2 i- i ,? u I ! s i S H 1 i s = a' .1 5 V i 2 S 5 S = ^ s ; s a r. K S S s s 2 s ; s s 2 I i I s S 3 s 1 1 2 ! 5 i = S I 2 = s' ^ S 5 » i S 5 s S S f. f. I 5. § s. i I S s 2 2 =■ 2 2 2" 2 u n a K 2 = I S' s i' i = s =■ s 5 5 =• s :£ £ 2 =■ n s n ft 3 -. ill iti M! = 3 I £ s s 2 f. a S S 5 1 1 5 5 = 5 5 i 5 5" S 5 ^ s 5 s ------- - 8 3 = 3 S3sa»s;:»s«:v liiiiiiiii!! ! ! i 2 ^ ^ i = £ : ; S i 3 e S I £ S £ s i ^ ^ - » ^ - . W . - . - .. - . - J. S ; 3 J 5 ' ^ - 3 a 3 .= ft a 5 5 5 5 n i s ^ S 8 S 5 J r. ft ?. a .. r. a . • - . H c s a ii a • < 7 ; ■: n n' 3 s £ s s ! ! I i 3 i : « 2 £ 9 S S •: 3 H H S •' i i 2 s i s 3 5 S i U < 8 d H 2 ^ S H •: i c^ft::ftr:iii(iiii3i!Si!SSfts = H If 5 S 5 3 I 2 • 5 s S 5 S i S i S 3 :• . S S 3 3 S 3 8 3 .•■ r. ^ 55 Sals S S s J t f 5 H 3 S 2 5 £ S £ 3 a I ft s R s s u s = rf 5 5 « = ft H a 5 ?. 5 r. SS3 3«' rr« sSS = 1 3 K n i i 3 3 e i 5 n 3 H S 5 I •: i ^ : I U H = 3 S ! 3 H 3 H ; S £ ? I m i li i 'i iijjj I i III 1 S I r. £ s « 3 a 8 3 £ 8 ^ 5 5 it I E : 2 ;: M s a r. e K r. s r. a s 3 s 1 I s f S s S s 3 : U i 3 3 £ 3 i 3 i : 3 ? I S 5 5 a a 5 3 5 H if r 2 3 a S 2 2 5 2 isJi3 3 3Sftijisi = 5H2i;?. 8s a F. I 2 S S 3 n r- 3 3 i 3 S 3 : S 3 i 2 E s =■ 3 3 ! 5 5 3 5 ; : 3 I 3 = 5 = • = '-'sas»33 = = 2Ktss52 = 3l23pMSSac3sS:H3;i 3 S S ?. 3 = 2 5 fl 3 5 3 H 5 3 i £ s = ft I i 3 i 2 5 .= 3 S Jl 5 = 3 B 5 * a I ^ i 3 3 : s § i 3 : 3 i 3 3 3 3 s 3 3 S2222SRRSR-"-" 3 i f H ! s 3 E 3 3 3 « = 3 • 3 S s 3 3 2 3 2 i § 3 S 3 a S s 3 3 3 3 i !^ ft s = s « = n 3 3 5 2 1 5J 3 i I 2 : S 5 3p3sS';3£33Zi3SI3333 ?ii nam tit iiii'^ii 3 5 3 3 3 2 § ! 3 E i I 3 ! i 3 3 = = 2' E ^ 8 3 3 3 > ^ 3 § 3 ^ 3 ft I s 3 2 ai:R = = -2-2::2K"Esssssr. 3si3a3ESc9s3i3ifa!s3 3 S I 3 ^ S 3 U M 3 U 3 3 3 f. S 9 3 3 I s 3 ;■ 3 S i 3 I i| 3 3 i 3 3 £ I 3 3 H 3 s 3 S 3 ?. ! i 3 3 3 H ^ g J 3 b n 3 3 = |r;53sss3323;j|;£ = 2H52J5 3 3 3 £ 3 M S 3 H !! 3 3 ! 3 2 3 n a i 3 333MMJOi2§Ei^?^ = 3!- S S S I fi 2 S 3 e 3 a K U i 3 8 3 < 3 3 s ;U 8 S 9 S 5 6 £ 5 i H £ V - ' ? [5 ?: 3 5 5 s s S 3 2 3 5 ^ : H- ;r 233393 = 31288=. S 3SS3S3ggHl2SIE2SiS933: siiiiniiinniiHiiH 26 TRUST COMPANIES. data from Avhich a careful study may be made of various items of man- agement as developed during the last quarter century. In the following table will be found figures dealing with a few of the important sub- jects. Principal Items of Resources and Liabilities of Trust Companies, 187:-1908. coo Cash and Deposits and due from Year, due to banks. banks. 1875. 1876. 1877. 1878. 1879. 1880. 1881. 1SS2. 1883. 1884. 1885. 1886. 1887. 1888. 1889. ISPO. 1891. 1892. 1893. 1894. 1895. 1896. 1897. 1898. 1899. 190'0. 1901. 1902. 1903. 1904. 1905. 1906. 1907. 1908. $85,147,012 87,969,758 84,549,038 73,658,004 76,013,662 90,158,637 111,905,527 144,988,775 165.645,521 189,507,810 188,615,186 214,255,658 245,797,608 259,925,079 302,626,471 339,319,740 357,540,852 415,431,461 488,934,555 478,055,823 553,756,721 592.617,492 576,598,940 665,488,712 837.510,725 1,031,735,272 1.278,849,880 1,537,476,616 1,711,485,439 1,775,499,356 2,164,645,572 2,162,228.621 2,229,495,792 2,029.978,992 $10,856,621 8,671,619 10,826,606 8,399,209 8,727,670 7,536,459 12,454,392 11,492,036 13,431,867 21,030,441 33,499,518 35,804,622 35,617,727 39,580,220 50,320,566 53,168,165 56,430,480 77,575,370 75,568,610 125,010,202 128,482,531 108,314,257 118,139,249 118,317,178 154,868,308 219,448,611 217,207,097 264,819,327 304,409,977 442,876,289 393,880,801 369,199,366 368,738,970 515,850,773 P.c. 10.6 3.4 3.3 3.9 3.6 3.7 3.9 2.4 2.3 2.4 5.3 9.1 6.S 7.6 8.3 5.9 4.6 5.4 4.5 7.2 6.5 4.9 5.1 3.4 2.9 2.9 2.0 2.2 3.0 3.6 3.1 3.7 4.9 6.1 Total loans. $65,900,174 76,608,647 67.946,390 59,303,327 61,171,877 74,675,537 101,906,566 132,054,203 140,022,358 158,018,009 141,542.649 156,828,458 196,096.830 250.700,648 291,450,367 327,882,540 356,876.320' 385,273,548 462,729,597 374,421,713 433,386,461 462,0fl0,949 445,629,725 539,162,445 599,031,033 727,952,137 939.768,891 ,192,488,311 .303,237,200 ,147,'605,557 ,549,286,662 ,609,467.839 ,601,3«4.237 ,379.481,474 Surplus and <- ^ Total in- undivided ?i § vestments, profits. -^ ^ $39,409,904 35,338,884 37,765,945 36,741,697 34,841.0186 37,654,325 33,057,627 42,813,068 47,760,410 51,250,942 55,126,600 71,802,374 72,927,7412 72,578,913 76.725,017 95,707,496 93,973.321 106,206,778 128,824,901 142,224,151 177,086,555 201,164,5S1 201,128,020 193,977,752 266,086,873 325,841,086 396.222,854 447,580,690 579,459,699 667,511,015 787,918.435 760,285,420 785,999,670 775,875,271 $7,550,560 8,823,200 8,404,212 8,616,954 9,194.570 10,245,051 11,175,663 14,212,161 15,601,710 19,810.611 19,203,984 24,520,701 27,193,319 35,951,687 38,783,114 46,828,003 55,503.845 '61,768,148 70',771,477 75,303,366 84,801,698 84,313,612 89,025,267 97,643,666 105.616,167 148,389,339 168,(284,468 225,524,514 314,496,334 329,789,576 363,515,702 395,373,620 397,865. 0'26 416,039,899 $3,511,148 3,359,110 3,169,551 3,166,960 3,494,061 4,229,889 5,049,809 6.093,307 6.245,370 6,853,477 6.209.742 6,626,538 5,502,166 3,197,112 3,677.237 3,381,217 3,138,177 3,572,886 3.187,125 3,148,156 3,334.971 3,289.547 3,361,409 3,831,147 4,121,254 4,586.760 4.835,274 4,755,911 4,328.727 4,068,868 4,196,159 3,988,181 3,868.286 3,403,376 Reserves of Trust Companies. Of special interest, in view of the recent agitation of the question in New York and elsewhere, is the subject of trust company reserves. The third column of the table gives the reserve carried bv the companies each year, the figures representing the proportions of the amounts in the sec- ond column to those of the same years in the first column. From 1875 to 1884 inclusive the per cent, of reserve never exceeded 12.8, the lowest reserve reported being in 1882, when it was only 7-9 per cent. After 1884. HISTORY or TRLST COMPANY MOVKMFAT. 27 the reserve reported was materially liierlur. never poiiifj lower than H.^ per cent, (the figure for 1887), and reaching its maximum with 26.1 per cent, in ISpt. The avtrage reserve for the thirt\-fi>ur years was nbout 1(5.2 jier cent. The criticisms against the trust companies as to resrrvc have, how- ever, been directed more especially towards the amount of actual cash carried in the vaults of the companies. In the fourtli column of the table are given the ))ercentages of such cash reserves for the several years (including as cash the amount reported for cash items) the figures representing the proportion of cash and cash items to total deposits. For the thirty-four years the average of such cash reserve has Utn a little over 4.() i)er cent. It was highest in 187.>. with lO.tJ per cent., 1886 being next, with 9.1 per cent. The lowest percentage was in 1901 — 2 per cent. From 187() to 1881 inclusive it ranged from 2.3 per cent, to fj.9 per cent. From 1885 to 18.07 it was somewhat higher, averaging about 6.2 per cent. Since 1897 it has axcrag.-d .'^.1 per ctnt. IXCHEASK IX SflU AND ('nDIVII A noticeable thing has been the tendency to increase in the Mir|iius and undivided profits as compared with the capital. This has In-en due in part to the accumulation of earnings, and in part to the tendenc}' in organizing new companies to have a large surplus paid in at the start. Most of the States that have any legislation on the subject require the nccunmlation of a surplus fund until it reaches a certain percentage of the capital stock; but the accumulation has gone far ahead of any legal requirements. C hart C shows the relative growth of these two items, the to ^ ~ ^ ■'. i j- / ■■' ; L / _j ^ 1 ,' / 1 ~ / 1 1 ,• / J I- .• "^ 1 ~ 1 1 ^ / ■~ ~ ~ ~ ~ 1 1 - 1 / ■"■ ••" ~ ~ J ^ ' IS __ Lj _. w -*^ 11 _ — — — — — - i. 1} >* — -< «- o — — > 't L c- _1 1 9- ~ ^ ^ H H ^ «■ „ ^ *» ^ ^ " 28 TRUST COMPANIES. heavy line rt prcsciitinjj; the capital, and the dotted line the sum of sur- plus and undivided profits. During 1899 the latter became greater than the capital, and has increased in greater ratio since then. The average resources of the companies appear to have been greatest during the years 1881 to 1887. The writer has been unable to find any special reason for this. It might have been due to reports being received mainlj'^ from the larger institutions. During the greater part of the time the resources have averaged from three to three and a half millions. From 1S99 to 1905^ inclusive, the averages exceeded four millions. Statistics of Trust Companies in the Various States. The following table gives the numbers and aggregate resources of trust companies in the various States and Territories about June 30, 1907, the figures having been compiled from "Trust Companies of the United States." whose statistics are the most complete of any published, so far as the writer knows. The list probably includes nearly all com- panies in existence in the United States at the date mentioned. The reader is reminded, however, that the list intends to include all institu- tions bearing the name of trust companies, and that many of them do a State banking business only, performing no trust functions: State Alabama Number of Companies. . ... 26 7 Aggregate Resources. $18,154,422.00 2,252,618.01 12.057.455.76 102,632,427.65 12,281,159.34 26,407,379.27 9,581,967.10 34,316.533.95 3.743,410.84 14,253,128,51 1,482,147.94 4,914.255,76 447,722,506.72 3,669.877.26 51,685,587.79 24,404,098.14 2,584,665.61 29,487,555.93 60,850,66.5.65 36,157.238.95 60,593.834.66 232,820,769.51 17,859,427.22 4,366.740.72 9.825.842.15 '152.341,256.89 9,473,079.20 State Nebraska Number of Aggregate Companies. Resources. ... 8 1,202.955.0s 7 .f;.92fi.nss s.'? Arkansas 30 California 36 Colorado 12 Connecticut 26 Delaware 7 District Columbia 6 Florida - - S New Hampshire.. 6 New Jersey 69 New Mexico 6 New York S8 North Carolina . . 39 North Dakota 3 Ohio . - fia 3,913.014.80 187,379,248.50 577.470.17 1,443,494.569.64 16.645,343.01 882.438.70 221 640 722 38 17 Oklahoma Oregon Pennsylvania Rhode Island . South Carolina South Dakota. Tennessee . . . ... 6 ... 14 . .. 272 ... 12 ... 21 ... 9 ... 65 . .. 43 494.512.05 Hawaii 15,915,399.52 Idaho ... 14 703,960,646,67 Illinois 64 Indian Territo Indiana ■y-. 23 80 5,206,628.85 2 193 845 99 Iowa 33 42 360 785 13 5 28.428,542.44 Kentucky . . . . 43 ....22 35 Utah 3 8.142 114 90 Louisiana Maine Vermont Virginia ... 25 21 21.583,144.50 11 367 369 45 Maryland . . . Massachusetts Michigan Minnesota . . Mississippi . . 20 ...42 .... 8 .... 5 .... 28 .... 39 T\''ashington . . West Virginia Wisconsin AVyoming Total .... ... 19 .. 20 ... 10 ... 5 ..14S0 25,782.492.87 15,732.932.07 7.977,315.82 478.762.22 Montana .... 6 $4,285,782,015.73 It will be seen that in the number of companies Pennsylvania is far in the lead; and as a matter of fact, that State developed the trust com- pany mcvement earlier and more genertilly than an.y other. In the total HISTORY OF TRL'ST COMPANY MOVEMENT. 29 resources of lier companies, liowtver. New York, which is second in the niunher of companies, is far ahead of any otiier State. The cighty-eiglit companies in New York report resources of $l,443,H)i,5(jt).(>+— an average of ^]6A03,Si7 per company. Tlie two hundred and seventy- two Pennsylvania companies show total resources of ^TOJ.DtJO.GiG.GT,— en average of .$2,588,0.01 per company. The big average for New York companies is, of course, due to the great companies of New York city, the largest of which at this date,— The Farmers' Loan and Trust Com- pany, which is also the oldest trust company in the country,— had re- ' sources of over ninety million dollars. Trust Co.mpaxics iv the Farcer Cities. The following table gives the numbers and aggregate resources of the trust comi)anies in the cities of the I'nited States having a popula- tion of over 50,000, according to the census of 1<)00. The figures are compiled from the same source as those in the last table, and are of the date June SO, 1907: Number of Aggregate City Companl>^s Resources. Albany. N. Y 2 $11.18^7.828 Allegheny. Pa 6 16,592.789 Atlanta. Ga 3 4.529.597 Baltimoie. Md 10 56.607.451 Boston. Mass 16 182,577,604 Bridgeport. Conn. . . 1 1.596.375 Buffalo. X. Y 3 20.869.299 Cambridge. Ma.^js. . . ?. 4.281.431 Camden. N. J 5 12.957.296 Charleston. S. C. . . ,'; 2.060.010 Chicago. Ill 26 410.207,539 Cincinnati, O 7 41.055.847 Cleveland. O 15 124.758.801 Columbus. O 4 8,741,251 Dayton, O 2 4,874.775 Denver, Col 5 S.723.434 Des Moines. la 2 4.049.3.S2 Detroit. Mich 4 15.848.997 Eli::;ibeth. N. J. ... 1 3.442.223 Erie. Pa 2 4.422,877 Evansville. Ind ?, 2,572.719 Fall River. Mass. .. 1 2.849.756 Grand Rapids. Mich. 2 1.549.999 Harrisburg, Pa 6 11.384.954 Hartford. Conn. . . . 4 ti. 995, 321 India'napolis. Ind. . . 7 17.795.224 Jersey City, N. J... 11 40.428.338 Kansas City. ' Kas. . . 2 1,10S.7'<1 Kansas City, Mo... 4 14.S18.866 Hoboken, X. J. ... 4 23. 260. S3 1 1.0S Angeles. C'al... 10 31.525.805 Louisville, Ky 6 2.217,208 Lowell, Mass 1 534.120 Lynn. Mass r. 5.399.622 Memphis. Tenn. . . . 14 24.9S6.S44 Milwaukee. Wis. ... ,", 4.121.7S- Minneapolis. Minn... 2 ;.si:.?;'6 City Number of Companies Xashvllle. Tenn. . . . Xew Bedford, Ma.>«s. New Haven, Conn . . NVw Orleans. La New York, N. Y ' Nf'wark. N. J Oakland, Cal Omaha, Neb Patterson, N. J Peoria. Ill Philadelphia. Pa Pittsburg. Pa Portland. Me Portland, Ore Providence, R. I Reading. Pa Richmond, Va Rochester. N. Y St. Joseph. Mo. ... St. Louis. Mo St. Paul. Minn Salt I.ake City. Utah San Antonio, Tex... San FYanclsco. Cal. Savannah. Ga. Scranton, Pa Seattle, Wash aj>rlngfleld, Mass. . . Syracuse. N. Y Toledo, O Trenton. N. J Troy. N. Y rtica, N. Y Wa.shlngton, D. C... Wllkosbnrre, Pa. ... Wilmington. Del. .. Worcester. Mass. . . Aggregate Resourr.'s. $7.23^.387 1.31.-?. 126 2.413.963 56.1i>i(.552 1,283.558.153 35.605.223 2,084.452 416.053 13.116.260 2.262.931 345.573.535 165.190.683 10.612.699 H.S27.15S 113.325.604 *; S4« 983 i::.iNi.4oi 1.54S.745 8.142.115 3.763.276 4S 162 2«2 14.695.998 34.316.534 S.647.S«T S.0S4.249 Kl.WS.lSO 30 TRUST COMPANIES. There are eiglit cities in the above list, in each of wliich tlie aggregate resources of the trust companies exceed one hundred million dollars. These are, in the order of such resources, as follows: — New York $1.2S3.55.S.153 Chicago 410.207,539 Philadelphia 345,573,535 Bioston 182,577,604 Pittsburg 165,190,683 St. Louis 127.181,401 Cleveland 124.758,801 Providence 113.325,604 The total resources of the trust companies in these eight cities is ^2,752,373,39.0, or a little over 6i per cent, of the total resources of all trust companies in the country. Comparison by Groups of States. An idea of the general distribution of the trust company business, throughout the country may be obtained by segregating the statistics by groups of States, as shown in the following table: — * Groups of Number of Aggregate States. Companies. Resources. North Atlantic 575 $2,784,291,691 South Atlantic 159 171,441,148 North Central 327 934.861,561 South Central 286 205,329,658 Western -. 133 189,858,016 Totals 1480 $4,285,782,075 Recapittilation. We have seen that the trust company first came into existence in the United States in 1822, with a single company, which had no competitors for eight years, and only three a^fter fourteen years. These early com- panies combined the trust business with the insurance business. It was many years later before the formation of trust companies as institutions apart from insurance companies began. After the Civil War a number of companies were organized, and the total number in 1875 was not'far from fifty. During the later eighties a very distinct movement for the formation of trust companies began, which was lessened in degree dur- ing the early nineties, began again with phenomenal energy about 1897,. and has continued in an increasing degree since that year. *As used in the table, the North Atlantic States comprise Maine. New Hamp- shire, Vermont. Massachusetts, Rhode Island, Connecticut, New York, New Jer- sey and Pennsylvania; the South Atlantic States. Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, and Florida; the North Central States, Ohio, Indiana, Illinois, Michigan. Wis- consin, Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska and Kansas; the South Central States, Kentucky. Tennessee, Alabama, Mississippi, Louisiana, Texas, Indian Territory, Oklahoma and Arkansas; the Western States, Montana, Wyoming, Colorado. New Mexico, Arizona, Utah, Nevada, Idaho, Washington, Oregon, California and Hawaii. HISTORY OF TRUST COMPANY MONKMKNT. 31 During its cnn-cr tlic trust couipany has umlcrfjoii.- a radical evolu- tion in the character of its business. To its original functions of trustee, agent, guardian, etc., have been added not only more extensive trust functions, such as executor, administrator, Hscal agent, etc., but other duties not contemplated by its originators. M«)st prominent among these has been the business of banking, which trust companies in manv States now undertake to the same «xtent as do the State banks and Savings banks. The growth of corporate undertakings has brought to tin- trust company many added dutit s as re|)resentatives of such corporations in various capacities. Since tlic Civil War many companies have added safe-deposit departments. In some States other lines of work have been added, including fidelity and title insurance. The conspicuous thing about the development of the trust company is that it has been able, largely through lack of legislative restrictions and because of the general breadth of its powers, to adapt itself to the par- ticular needs of the time and connnunity. When a new Held has opened, it has been ready and able to step into that field. Causes of thk Guo\\tii or Tin st (Omi'amks. Regarding the causes of growth of trust companies, the easiest thing to say is also probably the truest — that tliev are found in the tendencies of our age and nation. The trust company marks not a revolution, but an evolution in our methods of handling financial matters, and we can- not understand its development without taking into account the great changes which our civilization is undergoing. There is, to begin with, the accumulation of individual wealth — the increase in the number of })ersons and families having large interests to care for. This is not peculiar to the United States, but the general conditions which the hold- er of wealth has to meet here are quite difl'erent from those of the older countries of Europe, and make it of advantage fo find other means than those used in Euroi)e for the care and investment of great estates. A still more im))ortant influence has been the tremendous increase in corporate wealth, both in number of cor})orations and in the amounts under their control. Here are phenomena that are peculiar to the L'rit«d States, and peculiar to this age. Nothing like th«- huge corporations formed in recent years in the United States has ever been known before since his- tory began. To care for these institutions some sjjccial agency was need- ed. The trnst company jirovcd equal to the emergency. Says one writer: "Without their (the trust companies') agency some of the transactions in modern corporate business would be both cumbersome and difficult. For the success of schemes of reorganization of railroad interests and tlie financing of vast industrial consolidations, their intervention has grown to be at least an invaluable convenience, if not altogether a necessity.""' 60 Bankers Magazine, Vol. LX. p. 2'2. 32 TRUST COMPANIES. Coincident with this tendency to great consolidations — whether as result or as cause will not be discussed here — is the growing recognition among all classes of people of the value of associated effort. Here again the trust company finds itself in harmony with the times. It is an inter- mediary between great enterprises and the groujD of individuals who constitute its customers. It takes the amounts, large or small, con- tributed by the latter, in trust; and the result is a large amount which it can invest in any corporate undertaking to the mutual advantage of all concerned. The political economist will not fail to see here an important service to the community. Surplus funds, useless in small amoimts, are gathered together and made to do service in enterprises that benefit the whole people. At the same time, the profits go to those who furnish the capital. The trust company is emphatically an institution of the people. As one writer has pointed out, it enables us to reap most of the ad- vantages claimed for community of ownership, without the dangers that would come with the systems proposed by dogmatists. ^^ Advantages of the Trust Company Form of Organization. Turning to the specific causes of growth of trust- companies as com- pared with other financial institutions, various writers have pointed out the advantages which the trust company has over its competitors.^^ As compared with National banks, and with some State banks, it usually es- capes with less taxation. It attracts deposits by paying interest on them. A third cause, and in the writer's opinion by far the most important one in most communities, lies in the wide range of powers which the trust company may exercise. In most States it may do all of the things that an ordinary bank may do, except issue notes; and it performs numerous duties that other banks may not undertake. These wide powers attract customers. It is a distinct convenience to most people to have all of their financial business attended to under one roof. The trust comjjany will not only care for their banking business, but will also receive their valu- ables for safe-keeping, care for their property, manage their estates tem- porarily or permanently, make investments for them, give financial and legal advice, aid in the preparation of wills and execute the same after the decease of the customer. 61 Article on "The Trust Company," by Charles W. Stevenson, in "The Bank- ers' Monthly," Sept., 1903, p. 191. Articles by the same writer in "The Bankers' Monthly" for July, August and October, 1903, treat this phase of the subject at some length. 62 See Bankers Magazine, Vol. XLIIL, p. 722, and Vol. LVIII.. p. 505. CHAPTER II. THE FUNCTIONS OF TRUST COMPANIES. THE trust company of today jxrforms a j^r.at vari.ty of fuiutioris, some of wliich are piculiar to itstlf, whilr many are undertaken by other financial institutions. The most distinctive function of th.- trust company is undoubtedly that of acting as trustee for various pur- poses. Historically, this was the first kind of business, aside from insur- ance, that trust companies were authorized to undertak«-, and the lejfisla- tion of those States that have laws on the subject indicates that the law- makers had in mind such business as atfordinj; the essential reason for the chartering of these comi)anies. ^^■ith hardly an exception, the granting «»f other powers seems to have been intended by the framers of the laws as merely incidental to or helpful in the carrying out of duties as trustee. The Simie intention is evident in the name "trust company" — i. e., a company organized to accept and execute trusts. Welwter defines a trust as "something committed to a person's care for use or management, and for which an account must be rendered." Blackstone defines it as mean- ing, in law, "an estate devised or granted in confidence that the devisee or grantee shall convey it, or dispose of the profits, at the will of or for the benefit of another; an estate held for the use of another." A trustee is a person or corporation to whom a trust is committed. With this in mind, it is not difficult to understand the theory of the trust company — simply a corporation empowered to undertake those special trusts of a business nature that men'are apt to commit to others. This is the original and essential mission of the trust com|)any. Experience has demonstrated, however, that for the jiroper execution of such trusts the company is under the necessity of carrying on other lines of business which increase its usefulness as a trustee. Thus one function after another has been added, until today the trust company undertakes a great number and variety of duties which justify the de- scriptive name that has been ap)ilied to it of "the department store of finance." Because of this diversity of functions, trust eonipani«-s usually carry on thei-r work in departments, tlu- most common division being a three- fold one — into banking, trust and safe-de|)osit departments. Often the banking dei)artment is subdivided into the savings and the commercial banking dej^artments. and the trust department into two parts, of which one is devoted to trust business for corporations, and the other to trust business for individuals. The largest com}>anies fr»'quently have other de- partments than these, sometimes In-cause the volume of business makes a further division advantageous, and sometimes Ix-cause other lines of busi- ness are included. Among the other departments sometimes found are 2 34 TRUST COMPANIES. the bond (or investment) department; the mortgage department; the transfer (or registration) department; the real-estate department; the re- organization department; the title-insurance and the fidelity insurance departments. Most companies make some special provisions for women, and some have a special woman's department. If the word trustee be taken in its widest meaning, the greater part of the functions of the trust company might be included in a description of its duties as trustee. There are certain forms of trustee work, how- ever, which occur so frequently that they have come to be referred to by special names, and it will be convenient to consider the various functions in the following groups: Business as trustee or agent for individuals, under private agreement. Probate business. Investment business. Real estate business. Insolvency business. Business as trustee or agent for corporations. Business as transfer agent and registrar for corporations. Corporation reorganization and financing. Fidelity insurance and title insurance. Safe-deposit business. Savings and banking business. Miscellaneous. Nature and Variety of Individual Trusts. The number and variety of trusts undertaken for individuals under private agreement are very great, and new forms of such trusts are being constantly created. They come from many different classes of people — from active business men who have some special matters that they do not care to handle for themselves ; from teachers, artists, doctors, clergymen, women and others who feel that their inexperience or lack of time makes it wise to shift financial affairs to other shoulders; from persons whose poor health requires that they live in other climates and leave their business cares behind; from absentee property owners; from the aged, either too feeble to attend to active business or willing to take a well-earned rest; from persons planning to spend some time in travel and who must have a responsible agent to look after their affairs while awa}'; and from others who, either from choice or from necessity, wish to avoid the care of their property either temporarily or perma- nently. In such cases the trust company takes entire charge of the property, whether real or personal, or both, just as an individual acting in like capacity -would do. It collects interest, couijons, dividends, annuities, pensions, and any other form of income, notes, accounts, bonds, mort- gages, land contracts, etc.; if part of the property be real estate, it FUNCTIONS OF TRUST (OMl'ANIKS. 85 looks after rtpairs and iiiiprovniRnts, stcs that tin- property is kept rented, keeps up iiisiiranee, pays taxes, eollects rents; it acts as attorney in faet, executes contracts, leases, deeds, etc. It remits or accumulates the income, reinvests the ])rincij)al, aeeordiiif; to th<- tlies tlie in- come as directed in the deed of trust. Trusts may be created for the In-nefit of one making the trust, either subject to his revocation at any time, or beyond his control. The young or inexperienced sometimes inherit estates, and suddenly find themselves in situations needing experience and wisdom beyond that which they pos- sess. Occasionally persons in active business life find themselves dis- qualified tlirough accident, sickness or other cause from caring for their business, and turn it over to the trust company. Persons whose incomes are received at long intervals or at uncertain times may arrange with tlie trust company to have the income paid to them in equal monthly installnu nts. If the security is ample, the com- pany will sometimes make tem})orary advances if necessary. Trust companies are sometimes called upon to act as agents for the payment of such regul.arly recurring items as premiums on insurance, taxes, etc. In some instances they have undertaken to care for burial lots and graves. Persons who are to be away for a considerable time apjioitit tlie com- pany custodian of valuable papers and securities. This function is of much greater importance than mere safe-keeping. While the owner is away, it may be of tlie greatest imjjortnnce to get at the papers. Bonds may be called for redemption, the owner may wish to place the securi- ties as collateral for a loan, eoiqions may become due, and the owner need the money for them. Some trust companies do a considerable business in the handling of escrows. They act as temporary trustees of papers, money or other projierty placed in their hands by otie party to be given to a second OF T^r 36 TRUST COMPANIES. party upon the performance of a -contract, the payment of a certain sum in money or the fulfillment of some other provision determined by the parties to the agreement. Sometimes estates which have been iniprovidently managed are placed in the hands of trust companies in the hope that they may be freed from incumbrances and put upon an income-producing basis. In some notable cases the superior facilities of trust companies have enabled them to preserve and make valuable estates that would have been worthless in the hands of the owners. A new field of business is now being taken up by the trust companies, in the form of trust agreements relating to life insurance. The policies are made payable, or assigned, to the trust company as trustee, and at the death of the assured the company collects the proceeds of the poli- cies, of which it has meantime been the custodian, and applies such pro- ceeds according to the trust agreement. Many insurance companies do not write policies allowing stated payments to beneficiaries, and this plan therefore furnisJies the opportunity not otherwise open for the insured to have such disposition made of the proceeds of his insurance. Trust agreements are also made by which beneficiaries may be paid stated annuities out of the proceeds of life-insurance policies. This ar- rangement is specially valuable where a man is not able to carry an amount of insurance such that the income alone will support the family. The trust company can so invest the proceeds that a small portion of the principal may be used each year while the balance is kept profitably in- vested. The fund may thus be made to provide a suflicient income during the probable life of the widow or during the minority of the children. One of the leading companies of the central States advertises that by this plan it is possible to pay an annuity of $500 for forty years out of $10,000 insurance, of $1,000 for forty years out of $20,000 insurance, etc. It is customary in appointing the trust company trustee to have the fees of the company made a part of the contract, and it may thus be known in advance just how much the expense will be. While the trust company is a corporation, it has usually succeeded on account of its wide powers and the character of the men in control in maintaining a degree of personality which adds to its attractiveness to customers. The confidential nature of many of its duties brings it into close touch with those whose affairs it handles. It is customary for trust companies to keep all trust funds entirely separate from their general assets; and, indeed, this is required by law in many States. This means that in case of the failure of the company the funds belonging to a particular trust cannot be mingled with the general assets of the company nor levied upon in any way by the credit- ors of the company. In addition to this, the trust becomes, in case its funds are not intact, a creditor of the company, protected as are its other creditors by its general assets. Trust funds are thus doubly safeguarded. FUNCTIONS OF TRUST COMPANIES. 37 Securities and otlur property Iield in trust stand in the name of the company as trustee (etc.) for So-and-so, and thus show on their face that thty are not the jiroperty of the company. Probatk BrsiNKt-s. The statutes of many States jrivc to trust eompani«s the |)owcr to accept and execute duties entrusted to tlum hy will or by appointment of court as administrator, etc. In sucii capacities the company has the same powers and duties that an individual would have if acting in the same capacity. The manifest advantages which the trust company has over an individual for the ])erf«rmance of such trusts are sttadily drawing to it a large portion of tiiis business; and it is saf«- to prophesy that it will ultimately become tlie usual practice to «iitrust the execution of wills and the administration of the estates of tlu- dead to trust companies rather than to individuals. Business of this kind includes services as txecutor, administrator, trustee, guardian, connnittee. conservator. An executor is a person appointed by tin- testator in his will to take charge of his estate and dispose of it as directed in the will. An administrator is an officer appointed by the court having such jurisdiction in the several States to take charge of the estate of one who dies without leaving a will, and to dispose of the same in accordance with tlic inheritance laws of the State. An administrator-with-the-will-/innexed is a})|K)inted by the court to take charge of the estate of a deceased {)erson when no executor has been named in the will, or when the executor named refuses to act or dies. Acting in any one of these capacities, the trust company assumes en- tire charge of the estate, subject to the supervision of the court, and after a period varying in the several States, but usually eighteen or twenty- four months, makes a final distribution, according to the terms of the will or the laws of inheritance, as the case may be, and files with the j)roper jiublic official an itemized statement of all receipts and ex- l)enditures under the trust. In winding up the afl'airs of an estate, the executor or administrator frequently finds it necessary to turn a portion of it over to a trustee appointed to manage it for the beneficiaries or to a guardian appointed to look after the estates (and in some States the persons) of heirs who are minors, or to a committee or ct»nservat the form of certificaticm varies somewhat, it never covers more than the regularity of the issue and the genuineness of the document. Most trust companies do, however, make it a point not to authenticate lx>nds without having reason to believe that the undertaking rej)resented is presumably safe. Unquestionably the best companies do. and ought to, exercise the great- est care in this matter. In its capacity of trustee under a trust deed, the trust company is charged with the duty of acting as agent and j)rotector of the bond- holders. In case of default of the company issuing the l>onds. it usually has the duty of foreclosing on the property in the interests of the hold- ers of the securities, and of exercising numerous incidental duties con- nected therewith. It is often charged with the custody and managrmmt of a sinking fund, either in connection with its duties as trustee under a trust deed, or as a separate undertaking. 63 See Chapter XVI. 42 TRUST COMPANIES. It acts as fiscal or financial agent for corporations of all kinds — States, municipalities, railroads, industrial concerns. It pays bonds, coupons, interest. It may take entire charge of the disbursement of dividends and interest, attending to the publication and mailing of notices, etc. For syndicate managers, voting trusts, etc., it issues and collects calls for installment payments, and computes and distributes to the proper parties the amounts of their participations in the profits or proceeds. It acts as depositary of cash and securities, under varying conditions. Underwriting syndicates appoint it depositary and trustee. It is made agent to receive subscriptions to stocks and bonds, and to deliver the same when issued. It may receive and execute for corporations any of the trusts that have already been mentioned as undertaken for individuals under pri- vate agreement. Business as Transfer Agent and Registrar.* Trust companies are very generally used as transfer agent for stocks, and as registrar for stocks and bonds. In the older financial com- munities the value of such services has come to be so generally recog- nized tluit securities not registered by a responsible agent are looked upon with suspicion. The historical reason usually given for the adop- tion of the custom of having a registrar not connected with the concern issuing the stock, was the discovery some years ago in New York that a prominent railroad president had fraudulently overissued the stock of his company many hundreds of shares. The employment of a responsible registrar makes such a fraud impossible, for the essential function of the registrar is to see that not more than the authorized amount of stock is issued. The transfer agent assumes the entire work of transferring the stock of a corporation — a duty requiring thorough knowledge of the laws gov- erning such matters, and great care and accuracy in the performance of the details. The cancellation of a single certificate of stock and the issu- ance of a new certificate often involve the change in ownership of tliousands of dollars' worth of property; yet it may be done by a few strokes of the pen. It is often desirable to register bonds, either as to principal or as to interest, or both. Usually the trust company that acts as trustee under llie bond issue also acts as registrar of the bonds. In some communities the same company is often appointed both transfer agent and registrar of the same stock. This is illogical, since the function of the registrar is to operate as a check upon any error or irregularity on the part of the transfer agent. See Chapter XVI. FUNCTIONS or THIST ( OMI'ANIF.S. 43 COHPOKATIOV KKOIUiA.VI/.ATION AN!* I'l N A XCIXG. Some trust coinpauii s li.irullf .i l.ir^r aiiioimt of busiiirss in the reor- ganization or HnaneiuiT of corporate enterprists of diHermt kinds. This field is one eoncerninf; whieh a wide difl"«-rfnec of opinion exists among managers of trust companies as well as among the general public. Therr are companies which devote themselves to this business very largelv, while others abstain from it absolut«ly, brlicving it not a proper fiehl for com|)anies which handle fund.s in trust. In the consideration of the problem nuieh drpmds upon the char- acter of the tinanciiig that is to be und«-rtaken. No well-inforuji-d person will deny that there is a field for services in this line whose legitimacy is beyond tpiestion, and whose performance involves little risk. It is like- wise evident that there is a class of operations so risky that no corpora- tion which handles the funds of others ought to undertake them. The temptation to step from one class of operations into the other is some- times great; and this fact doubtless accounts for the prejudice that exists in some quarters against trust coinpauics Mnd.rtaking eorpnration finan- cing of any kind. When it becomes necessary for any reason to r«-organi/,e a corpora- tion having outstanding securities, the trust company offers exceptional facilities for the work. The plan of reorganization must first be deter- mined.. If new securities are to be issued the old ones must be called in and tem])orary receipts given. When the new securities are ready they must be distributed among the receipt-holders in the proper propor- tions — the determination of which may require careful computation. At the same time an assessment may have to 1m' colh-eted, or a cash or stock dividend be distributed, rraetional shares or bonds may need t<» be pur- chased or sold. When a new corj>orate enterprise is proposed in any comnnniity some one in whom the public has confidence nmst investigate and report, or else each prosj)ective investor nuist make investigation for himself. Some one must see that the new corporation actually owns the property •which it claims to have; that its title is good; that the securities which it offers to the public are correctly ])repared. and that they give the pur- chaser a real li«-n upon the property; in short, that the whole proposition is legitimate and made in good faith. The servic»'s here outlined appear to be perfectly legitimate, and to involve no risk to the trust company undoxes within the main vault arc rented, access to which may be had only by the renter or his authorized deputy in company with the vault attendant. For the storage of larger articles of value, vaults are provided in which space is rented by the cubic foot or yard. Many companies maintain delivery wagons, and call for or deliver valuables entrusted to their care. Coupon rooms are provided, w])ere each customer may cut his coupons or examine his papers in absolute privacy. The large companies also provide other conveniences, such as toilet-rooms, reading-rooms, parlors, conunittee- rooms, etc. This department is a valuable, if not a«necessary, part of the equip- ment of a good trust company. An increasing ninnber of depositors feel the need of such accommodations, and nuich prefer to have them under the same roof as their bank or trust company. While the expense of equipping the best vaults is great, it is not all chargt-able to the safe- deposit dei)artmenl, since trust companies need large and impregnable vaults for the safe keeping of the securities and other valuables en- trusted lo them in the other departments of their business. S'^PERIORITV OF TkI'ST COMPANIES OVER I NMI VIOIA F.S A( TIXCJ IN TrIST Capacities^ The advantages which the trust company has over individuals for the performance of the various trust duties outlined in the preceding pages are many. The following are among the most conspicuous of these advantages : The life of the trust ctMiipaiiy is perpetual it will live long enough to execute the trusts that are connnitted to it. On the other hand, an in- dividual to whom a trust is committed may die on the very day that he undertakes the trust. To install another individual trustee will then in- volve delay and additional expense — ])erhaps serious loss. And when it is done, there is no guarantee that he will not die, making another change necessary. Even if the individual lives, he may for various reasons resign the trust, or may become incapacitated through sickness or other cause. • See Chapter Vin. 46 TRUST COMPANIES. The trust company has an established office and can always be found when needed. The mdividual is sometimes difficult to locate. The trust company is always at its place of business every business day of the year. It does not take vacations, docs not go away on business trips, does not get sick. The trust company is organized especially for carrying on such work, which is therefore not secondary to its own business, but is a part of its business. If an individual is competent to carry on such work it is because he has had a successful training in looking after his own af- fairs, and his success is usually due to the fact that he has given his business his undivided attention. If he undertakes the trust it must be as a thing secondary to his own business, or else he must neglect the latter. Finding that he has not the necessary time to look after details, he may turn them over to an incompetent employee. Being organized for the work, the trust company has all the necessary equipment— officers and clerks trained for the service, conversant with laws and forms and methods of procedure, vaults for the safe keeping of valuables, correct forms for the keeping of accounts, books to keep track of due-dates of securities and times for the payment of taxes, insurance, premiums, etc. It does not forget. It is the trust company's business to understand the work. It does not make mistakes due to ignorance, and would be responsible if it did. It has the benefit of a large experience in the work it is undertaking. Very often individual trustees or executors, however honest and faithful, make mistakes that are costly or entirely disastrous. For the making of investments in the name of the trust, the trust company has advantages which few if any individuals have. The matter is determined by a committee of men trained in such work, and with every facility at their command for keeping in touch with conditions and knowing something of intrinsic values. The extent of the company's operations also enables it to buy on better terms than the individual can. The trust company gives to the trust, w'ithout extra cost in ordinary matters, the benefit of the best legal advice. It unites the advantages of the advice of a number of experienced counselors with the promptness in action of a competent individual. The trust company is, in most States, subject to examination by State authorities. Its books are always open to inspection by the proper persons. They are intelligible and kept up to date. The individual trus- tee under private appointment is not usually subject to examination; and when he is, his books are often in a tangle. The superior facilities of trust companies often enable them to ad- minister trusts witli far greater economy than is possible to the in- dividual trustee. Expenses are often much less, while the company is usually in position to secure a greater income for the trust than could the individual. The latter must give a bond, the cost of which must be borne by the estate : while the trust company's assets and special deposit with the State protect the trust without extra cost. FUNCTIONS or TRUST COMPANIES. 47 Frequently the interests of the estate — perhaps its very preservation — depend upon temporary advanees of monty. The trust company is in position to make such advances; few individuals are. Individuals are often subject to personal prejudices, sympathies or influences which lead them into unwise uses of the property. The trust company is not subject to these things. The most important eonsid«ration of all is that of safety — the abso- lute safety of the property. Here the advantag«s offered by the trust company as compared witli the individual are unquestioned. Besides the State supervision just referred to, the trust coujpany protects its cus- tomers by a larfje capit/>l and surplus, and in most States by a deposit made with the State officials to fjuarantee the faithful performance of its trust duties. These things amply insure against loss due to possible dishonesty on the part of the company's officers or employees. The com- })anv as an institution cannot j)ossibly be dishonest or unfaithful. It has nothing to gain and everything to fose by such a courne. It is to con- tinue in business for a long term of years or perpetually. Its success de- pends upon its reputation for integrity and faithfulness. \i a rec«nt meeting of the Trust Company Section of the .\merican Bankers' Asso- ciation, it was stated that there had never been a trust fund impaired by a failure of a trust eomj)any having control of the fund. Instances of loss to depositors in the banking department there have been, though not many; but the trust funds are so safeguarded that the loss to them is well-nigh impossible. There may be loss to the ordinary creditor of a trust company without in the slightest degree impairing its trust funds, which are kept se})arate and are not a part of its assets. On the other hand, losses through individual trustees, executors and administrators have been numerous. How often have the papers t«»ld of instances where individuals serving in such capacities have proved un- faithful or fatally incompetent! Men of reputation for unquestioned integrity have been led through speculation or «-mbarrassment in their own affairs to borrow the funds entrusted to them with the full intention of repaying the loan in a few weeks or months, only to find that such restituti(m is imjiossible, th.it they are defaulters, and that the widow and orphan are left penniless through their unfaithfulness. Others, wil- fully dishonest, liave squandered the funds entrusted to them until cvi ry cent was gone and the beneficiaries of the trust were lef't in dir*- need. Bonds furnislied by these men have often proved worthless; and where ultimately found good, great expense of litigation has Wen incurred, and the property has Ixen tied up j^ending s«'ttlement of suits. Business of Banks and Trtst Companies Compaiikp. Trust companies carry on the banking business, and in the great majority of cases this business constitutes the largest part o( their duties. The banking department is usually divided into the department 48 TRUST COMPANIES. of commercial accounts, in whicli the business is similar to that of the National bank with the exception of note issue, and with the exception in many States of discounting paper; and the savings department, in which the business is identical with that of the savings department of the incorporated Savings banks of the central States, and not materially different from that of the mutual Savings banks of the East. In vieM- of the statement just made, the question naturally arises, "What is the difference between the trust company and the bank?" This tjuestion has been discussed to some extent in the periodicals and in the circulars of trust companies. In these discussions are represented diam- etrically opposite views; namely, that there is no difference between the two institutions, and that there is a wide difference. The variety of opinion arises from the fact that different writers tell of the particular trust companies with which they are familiar, and which differ from each other; and also — and more generally — from the fact that some dis- cuss the question from the theoretical side, while others, disregarding the theory, speak of the actual practice as they find it. So far as concerns business other than that of the banking depart- ment, the foregoing discussion of the functions of trust companies re- veals an important difference between these companies and banks. While it is true that some of these functions have been and still are carried on to some extent by some banks, the tendency is to leave this field wholly to trust companies, while many of these functions may not legally be undertaken by banks. Allowing for exceptions, it may be said without fear of contradiction that the functions thus far described are distinctively those of trust companies. As a matter of theory there are important differences between the business of the banking department of trust companies and that of State and National banks. In theory and in early practice the banking depart- ment of the trust company was merely incidental to its other functions, being maintained to care for the funds coming to it in trust. The trust company is a depositary for the inactive and accumulating funds of the community, the bank for the active fimds — the funds used in business. It follows that the natural depositor of the bank is the business man, or firm or company, whose funds are continually in use, quickly turned over, and who expects in return, not interest, but accommodation in the way of discounts. The natural depositor of the trust company, on the other hand, is the person or concern whose funds are not in active use, and who wislies a place for the safe-keeping and accumulation of same. A prominent writer on trust company subjects®* has classified trust de- positors, as distinguished from bank depositors, as follows: 64 Breckinridge Jones, President of the Mississippi Valley Trust Co., St. Louis. His paper on "The Trust Company Question," delivered before the Mis- souri Bankers' convention in 1892, and published in pamphlet form by his com- pany, is a masterpiece, and has been widely copied. So far as the writer knows, it was the first published study of the question. The -n-riter acknowledgres his indebtedness to this paper for many of the points here given. FUNCTIONS OF TRUST COMPANIES. 49 "1. The laborer, mechanic, chrk, teacher — all those who work for wages or on salary. 2. The capitalist, the professional man, the married woman who has a separate estate. 3. The business man who wishes to separate his private income or the surplus profits of his business from his general business capital. 4. The corporation, jiublic or private, that is accumulating a sinking fund, or any individual who is husbanding a balance to pay a debt. 5. The executor, administrator, curator, guardian, assignee, receiver, trustee under deed or will or order of court. In short, all such who wish their daily deposits to draw interest." A study of this list reveals a class of accounts entirely distinct from those handled by the ordinary bank, and a class of accounts, too, for which little provision is made by National banks or by the old-time State banks. These trust depositors expect from the trust company in return for their accounts compensation of quite a different kind from that which the bank depositors expect from their bank. Their moneys are placed in the care of the company for accumulation; they want interest on their funds as well as a safe place to keep them. The ability to withdraw the funds on demand is not of pressing importance to them, and they are often willing to give notice some time in advance of intention to with- draw their deposits. It results that the trust company is in position to invest its funds in ways quite different from the bank. The funds of the latter must be so placed that they can be quickly recovered to meet the needs of cus- tomers, being usually invested in paper that will mature in tliirty, sixty or ninety days, or four months at the longest. The trust company can safely make long time loans on collateral or on real estate. Moreover, since the trust company pays in full for the use of its depositors' money by allowing interest on such money, it has no obligation to confine its loans to depositors, but may lend to whomsoever offers the best security and the highest rate; or it may invest its money largely in bonds and stocks. The bank remunerates its depositors by ofl'ering them a line of discounts, and hence must reserve its money mainly for loans to such depositors. The necessity of di\iding its loanable funds equitably among its de- positors who desire discounts requires the bank to confine its loans to comparatively small amounts, while the trust company is in ))osition to make large loans. As a matter of theory, then, luith as regards the classes of customers whom they serve and as regards the uses of their funds, trust companies and banks occupy distinct fields. They are co-ordinate institutions, each supplementing the work of the other, and l>oth necessary factors in car- rying on the financial affairs of the community. There is here not com- petition, but co-operation. 50 TRUST COMPANIES. So much for the theory. In actual practice, the differences between the two classes of institutions are much less marked, and the tendency in many communities is steadily to lessen such differences as do exist. As a matter of fact the trust companj'^ of to-day has invaded a portion of the field of the bank, while, on the other hand, the bank is invading a portion of the field of the trust company. Most trust companies seek business accounts, payable on demand by check, offering as inducement interest on satisfactory daily balances. In cases where the law does not forbid, some companies also offer lines of discount. On tl^e part of the banks there is a noticeable tendency in many localities to seek inactive accounts on which interest is allowed. This movement is being taken up by National banks, which in some instances maintain savings depart- ments. The result is that there are communities in which there are only slight differences between the business done by State banks and that done by the banking departments of trust companies. Both maintain com- mercial banking and savings departments conducted in the same ways. Their loans and investments are of practically the same character. In other communities, where most of the banks and trust companies follow the lines of business for which each M'as theoretically established, there may sometimes be found individual trust companies which do a regular banking business, and individual banks which compete for the dormant accounts that naturally belong to trust companies or Savings banks. Taking it the country over, it is safe to say that the difference be- tween the average State bank and the banking department of the average trust company is slight, except in those States where trust companies may not discount commercial paper.*'" Such differences as exist usually concern the proportions of the various kinds of business handled, busi- ness accounts as a rule forming the larger, and inactive accounts the smaller part of the bank's business, while the reverse is true of the banking department of the trust company. Where the trust company is forbidden to discount commercial paper, there results, of course, a distinct difference in the business of the two institutions due to such prohibition. In such cases the trust company still handles a large number of business accounts, as many business men either do not need discounts, or have other means of procuring them. In many places the practice has grown of forming working agreements by which groups of banks and trust companies throw business into each others' hands. By this means a given group of financiers is able to handle financial business of any kind. This plan is a recognition at once of the need of both institutions and of essential differences in their functions. 65 This statement is based on a personal study of trust companies in eight of the largest cities, and upon an examination of the business advertised in the circulars of some three hundred representative trust companies located in all parts of the c«untry. FUNCTIONS or TRUST COMPANIES. :.! There is considerable dirterence between the State laws governing trust companies and those governing State banks. As a rule, the former arc much less hampered by restrictions in the character of their business. In a later chapter tlie laws of the different States will be discussed in detail. It is evident that then- is a close resemblance between the business of the savings department of the trust company and that of the Savings bank, especially of the incorporated Savings bank, which is the usual form of such institutions outside of the Eastern and New England States. Both are after savings accounts. With r»gard to the mutual Savings banks, particularly, the theory is that such institutions exist especially for the accounts of those whose savings are comparatively small, while the trust companies are supposed to exist primarily for the safe keeping and accumulation of larger accounts. In practice, however, this distinction is not always maintained, although it is j)robably true that the average savings account of the trust company is larger than that of the mutual Savings bank. But trust companies usually advertise that deposits of more than five or ten thousand dollars will not 1m- received at the regular interest rates. The minimum deposit rcking or in private safes. These funds are thus placed at the disposal of the community for use in carrying on its business, and make possible enterprises that b»nefit the whole people, and that would otherwise fail for lack of available funds. Particularly is this the case with reference to those companies in outlying parts of large cities, or in other localities where banks would not find enough business to keej) them alive. As an instance of this, the writi-r knows of a trust company located outside the business district of a large city which in ten years accumulated de))Osits of over two millions, the larger part of which came from persons who had not therttofore deposited in banks at all. Here was a large sum put into active circulation and so made ])roductive, to the nuitual benefit of the depositors, the bank and the community at large. MiSCKLI.AXEOrS I'rXcTlONS. Occasionally trust comjjanies perform functions not mentioned in the foregoing discussion. For instance, some companies, in the far Western States particularly, write fire insurance as agents. The wide powers granted by the laws of most States permit trust companies to undertake almost any kind of financial business, and the result is that companies 52 TRUST COMPANIES. in different localities take up special lines of business for which there happens to be a field. It is usual for trust companies to ofl'er to customers the services of their officers for legal and financial advice on ordinary matters that in- volve no complicated questions. This does not mean, of course, that the campany undertakes to do the lawyer's work in such cases. But many of its customers are wholly ignorant of the most common principles and practices in business and commercial law, and as a result are greatly profited by advice in what seems to the experienced a very simple mat- ter. Much litigation and loss, and many foolish "investments" are pre- vented by a little advice to such persons. The banker sometimes per- forms similar services for his customer, but the usual bank customer is acquainted with business procedure, while a considerable number of trust company customers are not so acquainted. Complaints are heard in some quarters that the trust company is en- croaching upon the field of the lawyer. Undoubtedly this is true as regards the Iiandling of estates and the performance of many duties of a iiduciar}^ nature. On the other hand, the trust company gives employ- ment to a large number of lawyers. Every company has its attorney or force of attorneys, and trust officers are usually chosen from the ranks of those who have had legal training. Trust companies make it a prac- tice, when a lawyer brings them a trust, to retain him as attorney for that trust whenever special services are needed. Furthermore, the trust company is a great aid to the lawyer in many ways. He often needs to select for his clients a trustee, guardian, receiver, assignee, depositary, etc. He is often called upon to make investments for his clients — a re- sponsibility that man}' lawyers do not care to assume. In the practice of corporation law the lawyer finds the trust company of special use to him. Its facilities for the accurate keeping of accounts, preparing re- ports, caring for securities and managing estates appeal to many lawyers who have not the time or the inclination to assume other than the purely legal part of the work. To a great extent the trust company supplements and assists the lawyer of large practice. Sources of Earning Power. It is evident that the sources of earning power of the trust company are much more numerous than those of the bank. It may do all that the bank may do, and many things besides. One writer^ "^ has pointed out the fact that the trust company has developed all the earning power of an individual, thus adding greatly to its profits, as well as to its useful- ness. To get at the possible earning power of the trust company, therefore, one must remember that it is not confined to the profits from the interest on funds under its care in the form of capital and deposits, 66 Guy Morrison Walker: pamphlet on "Trust Companies." FUNCTIONS OF TIUST ( O.MI'ANIES. 53 but adds fees for its services in trust e:ii).uiti< .-, i»f urdiuary kinds and special fees for special services. The trenundous earnings of some trust companies have been due more to the skill of tin ir officers in per- forming services of a more or less personal nature than to the natural earnings of their banking departments or the regular fees on trust work. It is also true that during the Hush times preceding the year 1903, large sums were made by many companies through underwritings and stock investments. These means of profit were, to say the least, hazard- ous, and in many cases the profits of this kind of preceding years have been reduced or turned into losses since Ifjon. The depreciation of values beginning in 1903 brought about a healthful reaction in tin- unli.y of some companies. The Trusi Company Stii.i. in thk Foum ativi: Pkuiud. One thing that must strike the careful observer forcibly is that the trust company as an institution is still in the formative period. As has been already pointed out, it travels ahead of statute law, such laws usoally being formulated to govern a business already est«blish«d. rathi r ihan outlining a business to be put in operation, as was the case with the National Bank Act. As a consequence it is too -early to determine the exact form into which experience will cause the trust eonipany business to crystallize. • That there is and ought to be a growing d«inand for more careful regulation and examination of trust c«)mpanies in many States is evident, and the interests of both the public and the trust companies themselvfs will be subserved by a wise response to such demand. On the other hand, it would be a misfortune if unnecessary restrictions were imposed, which would result in preventing the trust companies from developing in har- mony with the changing conditions of our American life. In this power of adjustment to existing conditions lies the secret of the great success of these institutions, not only in making earnings for tluinsclves, but as ■well in serving the general public. Those bankers wlm, feeling the com- petition of trust companies, wish to have the laws of various Stat< s amended so as to put the banks in better relative position, should bear this fact in mind. If changes are to be made in the laws, wisdom dictates that such changes be in the line of removing any needless re- strictions on the work of the banks, if such exist, ratlur than imposing any needless restrictions on the worlt of trust companies.'"'" The fact is that, allowing for some exceptions, the methods of trust companies are, on the whole, sound business methods, attended with as much safety to the public and to the companies as those of the banks. Besides this they have the great advantage of Ix-ing better adapted to jircsent needs, and of being able to adapt tlxniselves to new needs when they present themselves. 67 See Guy Morrison Walker: pamphlet on "Trust Com pan less." I'P. H-16. CHAPTER in. THE ORGANIZATION OF TRUST COMPANIES. THE question as to whether there is a sufficient field for the organiza- tion of a new trust company in any given community is one which should be given careful study before steps are taken for such organization. During the flush times preceding the depression of 1903 and the panic of 1907 some trust companies were undoubtedly organized for which there was not a sufficient field. Many of them have passed out of existence, involving losses to their stockholders. On the other hand, trust companies have been started in places where the conservatives could see no possible chance for success, and have become prosperous and useful institutions. Whether the trust company form of organization is to be preferred to others must, of course, depend upon the circumstances of the time and place. The present tendency, however, is imdoubtedlj'^ towards prefer- ring the trust company form except where the conditions clearly call for a National bank; and many State banks and incorporated Savings banks, as well as some National banks, are being changed to trust companies. Be- cause of their wide povv'ers and of the privileges wliich they enjoy, these institutions often thrive where ordinary banks could not make a living. Elements Contributing to Success. The success of a new institution will depend very largely upon the men behind it. A poorly "backed" company will have difficulty in mak- ing a success even in a good field, while companies with the proper back- ing and officers have often prospered in fields that seemed fully occupied. If a new company is projected, therefore, the question of prime impor- tance at the start is, Who will be its stockholders, its directors, its officers? Tirst of all, they should be men whose standing in the community is unquestioned — men of probity and character. Men who have money and nothing more may help the bank at the start, and may bring it much busi- ness, but they cannot help in building up business among the general public, whose confidence must be obtained before the new institution can meet with pronounced success. While this is conspicuously an age of money and money power, there are, fortunately, some things which mere money can not do, and one of them is to secure the confidence of the public. I There is no substitute for character as a means of leading the people to put trust in a financial institution. The shareholders should be men whose interests lie in the community where the company is to be located, thereby insuring their continued sup- port of the enterprise after it is launched. An institution with good ORGANIZATION OF TRUST COMPANIES. 55 prospects is almost always able to pick its stockholders, and should avoid admitting those who wish to subscribe uurely as a speculation. Sub- scribers are often required to pledge a certain amount of business to the new company for a given period, and to state wiiat business thry think they can bring from others. If the concern is to do a general business, not confining itself to a specialty, the stockholders should \>e so selected as to represent as many different lines of business and professions as .j)0ssible. Some difference of opinion exists as to whether it is better to have a large number of stockholders with few shares held by each, or to limit the number and increase the holdings. The former plan usually insures a larger group of customers from the start, and gives the general public more interest in the project. The latter plan permits of more unanimous and concerted action, and is sometit!i>een incorporated under the general trust company law of that year, though some have been in- corporated under the old plan of a special act of the Legislature. L'nder the general law. tiiirteen or more persons may form such a corporation. They must first publish a notice of intention to organize a trust com- 56 TRUST COMPANIES. pany, at least once a week for four weeks, in a newspaper to be desig- nated by the Superintendent of Banks, in the city or town where such trust company is proposed to be located; and a copy of such notice must be sent at least fifteen days before the filing of the organization certi- ficate, to each trust company organized and doing business in the city or town where such company is proposed to be located. The State banking department furnishes a form for this notice, which reads as follows: NOTICE OF INTENTION TO ORGANIZE. We, the undersigned, hereby give notice of our intention to organize a trust company, under and pursuant to the laws of the State of New York, and in conformity with the statute in such case made and provided, we hereby specify and state as follows, to wit: First, The names of the proposed corporators are: Second, The name of the proposed trust company is . Third, The location of the proposed trust company is to be . In witness whereof we have hereunto affixed our signatures this day of , 190—. (Here must be placed the signatures of the corporators.) The corporators, having complied with these requirements, must fur- nish proof of their having done so to the Superintendent of Banks. For the notices in the newspaper, ordinary proof of publication should be furnished. The department furnishes a form for the proof of service on the existing trust companies, as follows : PROOF OF SERVICE OF NOTICE OF INTENTION TO ORGANIZE. State of New York, | County of j ss. , being duly sworn, deposes and says that he is upwards of twenty-one years of age, and resides at No. , in the city of ■ — ; that on the day of , 190 — , he served a copy of the annexed notice of intention to organize upon each trust company hereinafter named by mailing to each of such trust companies a true copy of said notice at the post office in the city of , inclosed in a sealed envelope and directed to each of such trust companies at its post office address, and prepaying the proper postage on each of said notices so mailed, as follows, to wit: (Here must follow the names of the said trust companies.) This document must be properly sworn to. The certificate of organization must next be filed with the Super- intendent of Banks, after the expiration of the required period as above stated. The form of such certificate reads as follows : CERTIFICATE OF ORGANIZATION OF . Know all ^ien by these presents: That we, the undersigned, , , , all being persons of full age and citizens of the United States, and a majority of us being residents of the State of New York, do hereby associate ourselves together for the purpose of forming a trust company, under and pursuant to ORGANIZATION Ol' TRUST COMPANIKS. :,? the laws of the State of New York, and for such purpose we do hcrcbv, under our respective hands and seals, execute and duly ackn«iwledfre this organisation certificate, in duplicate, and specifically state as follows, to wit: First, The name by which the corjxiration shall be known is . Second, The place where its business is tu be tran^ucted is Third, The amount of its cai)ital stock is to be dollars, and the number of shares into which the same is to be divided is — ' . Fourth, The name, residence and post office address of each member of the corporation are as follows: , , . (Here must be given the complete list of stockholders.) Fifth, The term of existence of the corporation is vears. Sixth, the subscribers, the nieniiiers of the s.iid curixiratidii, tio, and each for himself docs bcrciiy, (lce State of New York. In wiTNKSs wnKKKOK, ^Ve have hereunto set our bands and seals, and ex- ecuted this certificate in djiplicate, tliis day of , 190—. (Here must follow the sifrnatures of the stockholders, and they must swear to same before a notary in the usual form.) Within si.xty days after its acknowledgment, this certificate, which, as stated must be executed in duplicate, must be filed, one copy in the office of the county clerk of tlie county wherein such trust company is proposed to be located, and one in tlie office of tlie Superintendint of Banks of the State. A certified cojiy of the duplicate filed with the county clerk must be sent to the Superintendent of Banks, that he may have official notice of the filing of said duplicate. The statute says: "Upon the receipt of any such organization it r- tificatc in the office of the Superintendent of Banks, if it shall not be in form and substance, or duly and properly acknowledged, as herein re- quired, or sliall not be accompanied by satisfactory evidence of the pub- lication and service in got)d faitii of the notice of intention to organize, tlie Superintendent shall refuse to file sucli certificate until it shall be amended in conformity to the provisions of this artieh-. If fulfilling all of the prescribed conditions, the Superintendent shall indorse the cer- tificate filed for examination, with the date of such indors«'nient." Having filed the certificate, the Superintendent is charged with the duty of ascertaining as best he can whether the public convenience and advantage would be jjronioted by th<> proposed trust company and wlietlier the men In-hind it are fit and })ossess the confidence of the public. If he is not satisfied of such fitness and advantage, he must, within sixty days after the filing of the certificate with him, notify the county ebrk that he refuses to issue a certificat*' of authorization for such tru>t com- pany. If he is so satisfied, he must issue the authorization certificate within sixty days from the filing of the organization certificate, provided the organization tax has been paid to the State Treasurer and a receipt therefor is shown, and provided that he has ascertained by an examination that the recjuisite capital of the projioscd corporation has been fully 58 TRUST COMPANIES. paid in, in cash. TJie persons in charge of organizing the company must therefore see to it that these matters are attended to in season. The -company is forbidden to begin business until the authorization certificate from the Sui)erintendent of Banks has been received; and it must also, before beginning active business, file with the Superintendent a list of its stockliolders, giving Ihe name, residence, post office address and number of shares held by each of them respectively, which list must be verified by the tAvo principal officers of the corporation. While these legal proceedings are being attended to, presumably by the attorney of the corporators, a large number of details must be looked after by the man or men who are to be in active control of the company. Stock certificates must be ready to give to the stockholders when the subscriptions are fully paid. The seal of the company must be secured. The quarters for the company must be made ready, and the various books, records and blanks must be prepared. Arrangements must be made with the correspondents of the banking department. After organization, the first duty of the directors is the adoption of a set of by-laws and the election of officers. Before the actual election of officers, there is usually an understanding as to who the men in active control are to be. It saves much time and trouble if the by-laws are pre- pared in advance by some competent person. After organization, the directors will of course make such changes in such by-laws as they see fit before adopting them, but they can work to much better purpose with An outline already drawn. By-Laws. The exact form of by-laws will of course vary greatly with different companies, many details depending upon the size of the company, the probable character of its business, etc. Herewith are submitted the by- laws in use by a company in New York, having total assets of about eleven millions. They serve as a fair sample of the by-laws of a progress- ive, up-to-date company, but of course contain provisions peculiar to the company, and are perhaps longer and more detailed than usual. The article on officers and employees, in particular, is apt to be quite different in smaller companies. Often the Secretary and Treasurer is the head executive officer, the President being merely an honorary office. Sometimes one of the Vice-Presidents is the active head. BY-LAWS OF THE FRANKLIN TRUST COMPANY, OF THE CITY OF NEW YORK, BOROUGH OF BROOKLYN. Amended to and Adopted February 4, 1903; Amended, December 9, 1903. ARTICLE I. Stockholders. Section 1. A regular annual meeting of the stockholders of the company shall be held at its office at 10 o'clock a. m. on the second Wednesday of January in each year, or, if that be a legal holiday, then on the next business day, for the election of trustees in the class whose term of office shall then next expire; and for the transaction of such other business as may properlj' be brought be- ORCiANIZATION OF TRIST COMPANIES. 59 fore the meeting. Such election shall he between the hours of 10 a. m. and II a. m., and shall be advertised and . In addition to such other notice, if any, as may be requirvKl from time to time by law, ten days' written or printed' notice of the regular annual meeting and also of every special meetiiijr of the sbM-kholdcrs sliall l>e served jHTsonally upon each stockholder of record, nr maihtl t(» such sttx-kliolder at his post office address as shown on the stin-k h-tlgcr, nr publislicd nt least twice not more than twenty or less than ten tlays Iwfore tl*e merting. in Mime newspaper published in the Borough of Hrooklyn, City of .New York, and such notice of special meetings shall state the objects of tlie meeting. Section /f. The holders of record of not less than one-fourth of all the capital stock of the company issued and outstanding, represented in person or by proxy executed ]>ursuant to the recpiirements of the Cleneral Cori><»ration Law, shall constitute a quorum for the transaction of business at any meeting of the stockholders except in the cases where otherwis*- provided by \\v (ienernl Cor- poration Law; but if there be less than a quorum representeil at any meeting, the holders of a majority of the stock so represente«l pre.M-nt in |)erNon or by proxy may adjourn the meeting to some future date. Section 7. At ai\y and all meetings of the stix'kholders, every registered owner of shares may vote in person or by proxy extvuted pursuant to the re- quirements of the General Corporation Law, one vote for each sliare owned by him and standing in his name, but no jiroxy shall l)e valid after the expiration of eleven months from the date of its execution, unless the member executing it shall have specified therein the length of time it is to continue in force, which shall be for some limited period. .\t all elections of trustees the voting shall be by ballot, and a plurality of the votes cast thereat shall elect. Section 0. The stockholders at each annual meeting shall also elect, or appoint, three persons, who shall not he trustees or officers of tlie company, and who need not be stockholders, to act as ins|>ect(»rs of ehftion at all the follow- ing meetings of the stockholders until the close of the next annual meeting. If an inspector shall decline to serve, or neglect to attend any meeting, or his office shall become vacant, the President may appoint an insj>ector in his place. The inspectors of election shall take charge of the polls, anti, after lialloting, shall sign and acknowletlge a certificate of the result of the vote taken, and shall return, file and verify statements and certificates in the s{>ecial ca.ses as pro- vided in the General Corporation Law. Each inspector before entering uj>on the performance of his duties shall he sworn to faithfully execute the duties of inspector at such meeting with strict impartiality ami according to t\v best of his ability. ARTICLK IL Board ok Tristek-s. Section 1. The bu.siness and affairs of tl»e company shall be directed by • board of twenty trustees, who shall l>e elected by ball<»t in accordance with law at the annual meeting of the stockholders, six at the n»«-eting of Januar>, 1900, and every third year thereafter; and seven at the nuvting of January. \9H\. and every tlvird year thereafter, and seven at the meeting of .Ianuar> , 190:?. and everj" third year thereafter; the tenn of office of each class to conmien*^ on the next succeeding Wednesday at 9 a. m.. and continue thn-e years or until their suc- ces.sors are elected and qualified. Each trusttH» must be a holder of record in his own name and right of *t least twct\ty-five shares of the caj>ital ste a trustee. 60 TRUST COMPANIES. Section 2. "Whenever a vacancy shall occur in the board, by death, resigna- tion, or otherwise, in the interval between the annual meetings of the stock- holders, it shall be filled by the board for the remainder of the term, by election by ballot at a regular meeting, after nomination at a previous monthly meeting; or, if no such nomination has been made, after nomination by the executive committee at any regular meeting of such committee, held at least one week previous to such meeting of the board of trustees at which the election is to be held, and notice by the secretary of the proposed election shall be sent with the notice of the meeting at which it is to be held. Section 3. There shall be a regular meeting of the board of trustees on the first Wednesday after the first Monday of every month, except January, when it shall be held on the third Wednesday, at 9 a. m., or at such other day or time as the board may from time to time appoint, to which a report shall be made by the President of the business and affairs of the company. At all regular meetings of the board the following shall be the order of business, unless changed by a vote of a majority of the trustees present: 1. Calling the roll. 2. Reading the minutes of the last regular meeting and of any special meeting or meetings held since the last regular meeting. 3. Reading the minutes of the meetings of the executive committee since the last meeting of the board. 4. Report of the President. 5. Report of the Secretary, 6. Reports of committees. 7. Unfinished business. 8. New business. Section 4. At the regular meeting of the board of trustees on the third Wednesday of January in each year, after reading the report of the inspectors of election and calling the roll, the first business shall be the election of a Presi- dent, Vice-Presidents, and an Executive Committee; and whenever a vacancy shall occur in the office of President or either of the Vice-Presidents, or in the Ex- ecutive Committee, it shall be filled at a regular meeting of the board, or at a special meeting called for that purpose after notice in either case by the Secre- tary of the proposed election and the meeting at which it is to be held. Such elections shall be by ballot. Special meetings of the board of trustees may be called at any time by the President, and shall be called by him upon written request of three trustees. ARTICLE III. ExECUTivTE Committee. Section 1. There shall be an executive committee consisting of the Presi- dent ex-officio and four trustees elected annually by the board of trustees, who shall organize by the election of their own chairman (who shall not be the President), and shall hold their ofBces until their successors are elected in their places. Vacancies in the committee shall be filled by the board of trustees. Section 2. The executive committee shall have and exercise in the intervals between the meetings of the trustees all the powers of the board which can lawfully be delegated, and shall have general supervision of and direct the affairs and practical operation of the company. It shall superintend and advise all investments of the funds of the company, and of trust funds in charge of the company for investment, and shall supervise all special trusts; and no guardian- ship, receivership, or special trust, other than by orders of a court having jurisdiction, shall be accepted by the company without the committee's approba- tion and concurrence, except that in the intervals between the meetings of the committee such trusts may be accepted by the President upon approval by the counsel, such action to be reported at the next meeting of the committee. The executive committee may, in its discretion, authorize the President to make such loans and investments as are permitted by law and report the ORGAXrZATIOX OF TULST ( OMI'ANIES. 61 same at its next following meetinp, and its cliairnian siiall, durinff the pleasure of the comniittee, have such i)owtr and perforni sneh lawful acts as the com- mittee may deem necessarj- for the proi)er transaetjon of the current husiness of tlie company. Secliuii .>'. The executive conwnittee shall designate from time to time the banks or financial institutions in wiiich deposits of the moneys of the company shall be made. Section 4. The executive connnittee shall meet once every week, and at such other times as it may appoint, or may i)e called i»y the President or its chair- man. A majority of tin' committee shall form a ({uoruni for husiness, and reg- ular minutes of its proceedings shall he kept, which sliall always Ih» o|H-n to the inspection of any trustee, and shall he read at the following meeting of the board of triistees. Section '>. Subject to the ;q)i)roval of the board of trustees at it.s next following meeting, the executive connnittee may fix the compensation imd define the duties not otherwise enumerated of the ofhVers. clerks and eniplo>«-es of tl»e coni])any, who shall give such bonds as the connnittee may retpiire'as further provided for in Article ^'II., Section I. All ag«-nts or employees of tla- com- pany shall he subject to removal by the executive committee, with or witliout assigiuuent of cause or reason for such action. ARTICl-K IV. E X A M I N I N Co M .M I TTi: f. . Section J. There shall be an examination made it. Decemlwr and Jime of each year, of the books, accounts, cash, and securities of the company, by a connnittee to be appointed each half year by the boanl of trustees for that purpose, who shall rei)ort to the board the results of such examination, aiul sign and verify the scnii-aiiiuial stati-nient to the Hanking l)e|>artment ntpiin-il by statute, and the committee last ai)pointed may make sn<'h other examination^ at such other times as it may deem lu'cessary. Section ?. Trustees while serving on the executive connnittee shall l>e in- eligible for appointment on the exaniiuing connnittee. AHTICl.K V. Other Co.mmittff.s. Section 7. The board of trustees may from time to time direct the creation of other committees, and may a]ipoint from among their number, or otherwise, such other conunittees, standing or special, as nuiy be deemed proper, and may direct and delegate to any such committee such powers and duties as may seem expedient, and revoke the sanie and terminate such duties nt pleasure. AUTICLE VI. CotNSKI.. Section 1. Coinisel shall be apj>ointed by the executive committee, at stated annual compensation, for general .advice to the officers, executive conuuittee or board of trustees in the performance of their duties. Section .'. In all cases of loans on bond and mortgage, excepting those where the title is guaranteed by a cori)oration approved by the boanl of trus- tees, an abstract of title. ai>pro"ved by the couum-I of the company, shall be de- posited with the conipany. .\UTICT.K VII. Okkickhs ano I'.mim.oyev.s. Section 1. The officers of the conipany shall l>e a President, n Vice-President, a second Vice-President, a Secretary, two .Vssistnnt .Secretaries and a Trust Offi- cer, all of whom, excejit the President, and Vice-President.s, shall hold their respective offices dnrii\g the pleasure of the hoard of trustees or of the executive 62 TRUST COMPANIES. committee. The President and the Vice-Presidents shall be trustees of the com- pany, and shall hold their offices respectively for one year from the third Wednes- day of January in each year, and until others are elected in their stead. Bonds satisfactory to the executive committee, and in amount not less than ten thousand dollars, shall be given by the Secretary, Assistant Secretaries and Trust Officer, and not less than five thousand dollars by each clerk. New or additional securi- ties may at any time be required by the executive committee. Section 2. The election of officers shall take place on the third Wednesday of January in each year as provided for in Article II, Section 4, and vacancies shall be filled as therein provided for. The salaries or compensation of all officers and employees of the company shall be fixed by the executive committee, subject to the approval of the board of trustees as provided for in Article III., Section 5. Section 3. The executive committee, subject to the approval of the board of trustees, may from time to time appoint, or authorize the President to appoint, such agents and employees as it may deem best, and may prescribe the duties of the officers, agents and employees of the company. All agents and employees of the company shall be subject to removal as provided for in Article III., Section 5. Section 4. The President shall be the chief executive of the company. He shall preside at all meetings of the stockholders and of the board of trustees, and he shall be a member ex-officio of all standing committees, except the examining committee. He shall have general charge, supervision and control of the business and affairs of the company, see to the proper and safe custody of the securities of the company and in its charge, subject, however, to the authority and control of the board of trustees and of the executive committee; and, subject to review of his action by said board and committee, he may ajipoint, suspend and discharge all agents and employees. He may call special meetings of the trustees whenever he may deem it proper, and shall call them whenever any three of the trustees shall request him in writing to do so, of which meetings at least one day's notice shall be given. Section 5. It shall be the duty of the President or a Vice-President to sign all certificates issued for deposits of money, and all checks drawn, except checks for dividends and coupons, which shall be signed by any two officers of the company; and to keep, or cause to be kept, a daily record of all moneys received and paid out by the company. He shall countersign or certify all bonds issued by the company as trustee. Whenever any stock shall be hypothecated with the company as security for a debt or loan, the President is authorised at his discretion to cause the transfer of same to the company. He shall also have power to make any and all transfers of the securities of the company, which may be authorized by the executive committee. He shall at all times exercise such general direction and supervision over the business of the company as its interests and security may require; and in all cases where the duties of the subordinate officers and agents of the company are not specially prescribed by the by-laws or resolutions of the board »f trustees or of the executive committee, they shall obey the orders and instructions of the President. Section 6. The President shall have the custody of the seal of the com- pany, and shall have the power to affix the same to certificates of the capital stock of the company; to certificates acknowledging satisfactions of judgments and mortgages and to assignments of mortgages; to releases of portions of mortgaged premises, to transfers and powers of attorney for the transfer of hypothecated stocks, and for the collection of interest and dividends; to legal proceedings; to any assignments of mortgages or stocks to the Superintendent of the Banking Department; also to all deeds and releases of any real estate, or portions thereof, which have been or may be conveyed to the company in or by any trust deed or mortgage, and to any contract in relation to any real estate or portions thereof, so conveyed, when such deed, release or contract is authorized or required by the provisions of said deed of trust of mortgage; to certificates of deposit; to receipts for money or property; to acceptances of ap- ORGANIZATION OK TRUST COMPANIES. 6S pointment, as executor, adniiiiistrator, guardian, receiver or otiier special trust, ordered by a court having jurisdiction, and to such transfers of the securities of the company as may be aiithorized by the executive committee. The seal of the company shall not \>e affixed to any other deed, conveyance or instrument whatever, unless by autiiority of the board or executive committee. Sfcfion 7. In tlie case of the death, alisence, or disability of tl»e President, his powers shall be exercised and his duties discharged by the Vice-President, and in like manner the second Vice-President shall have tiie jmwers and duties of the President, in the event of the absence or disaiiility of tlw l'resi(b-nt and Vice-President; and in the event of the death, absence, or disability of the President, Vice-President and second ^'ice-President, the executive conunittee for the time being shall appoint one of their numtx-r to act as I'n-sident until the board of trustees shall, by a majority vote of tlieir number, apj)oint a trustee to act as President pro teniporv. The said Vice-Presidents shall perform all such other duties as may be assigned to them from time to time by the board or the executive ccMumittee. One of the ^■ice-P^esidpnts shall be a salaried officer of the company, ami shall devote his entire time and attention to the busiiu-ss. He shall assist the Presi- dent, as he mav be directed from time to time. He shall, under direction of the President, be charged with the administration of the business ane assigned to him by the \ice-Presi- dents. President, executive conunittee, or board of trusters. Section 10. The .Assistant .Secretaries shall assist the Secretary. In the absence or disability of the Secretary, an .\ssistant Secretary shall have the powers and perform the duties of the office. The .\ssistant .S«>cr.taries shall perform such other duties a.s may be assigned to tliem by the Vice-Presi- dents, President, executive committee, or board of trustees. In case of the absence or disability of the Secretary and both Assistant Secretaries, the Presi- dent shall designate such trustee, officer or employee of the company as he may deem proper to act as Secretary firo Itnifxirt-. with the like powers and duties. Section 11. The Trust Officer shall give his special attention and supervisioji to the various trust accoimts opened in the office, sec that all entries of debits and credits are correctly made and projierly registenMl, and all trust records properly nuide and kept. He shall have general charge of the transfers and registries of all stocks and bonds, the exchange of bonds, the payment oi inter- est of all registered bonds and coupons paie closed for such length of time as the board of trustees may from time to time determine as necessar}' before the j>aynKnt of dividends, and before meetings of the stock- holders for elections. ARTICLE XI. Amexd.mekts to By-L.kws. No new by-laws shall be adopted, nor shall any alteration be made in the by-laws, except upon notice stating the proj>osed amendment given at a previous regular meeting of the board of triistees, or upim recommendation of the execu- tive committee, and notice mailed to each trustee not less than five days in advance of any regular or special meeting of the board. The bv-la\vs are drawn up by the directors of tlu- company, who have power to determine their form, provided, of course, that they are not contrary to law. In New York the capital stock "must In* at least $300,- 000; provided, however, that a corporation with a capital of not less than $ti00.000 may be organized in any city containing more than 100,000 in- habitants and less than 2">0,000 inhabitants, and a corporation may be 5 66 TRUST COMPANIES. organized with a capital of not less than $150,000 in any city containing more 'than 25,000 inhabitants and less than 100,000 inhabitants, and with a capita] of at least $100,000 in a city or town the population of which does not exceed 25,000 inhabitants." The laws of New York prescribe that the number of directors must be not less than thirteen nor more than thirty; the exact number, within these limits, being left for determination by the by-laws of each com- pany. The number necessary to form a quorum may be determined by the by-laws or organization certificate, but "such quorum shall not be less than one-third of such board of directors, and in no case less than seven." No person can be a director who is not the holder of at least ten shares of the stock. "The persons named in the organization certificate, or such of them respectively as shall become holders of at least ten shares of such stock, shall constitute the first board of directors, and may add to their number not exceeding the limit of thirty, and shall severally continue in office until others are elected to fill their respective places." Within six months from the commencement of business they must classify themselves, by lot, into three classes, as nearly equal as may be. The term of office of the first class shall expire on the third Wednesday of January next following such classification; the term of the second class expires one year thereafter, and that of the third class two years thereafter. As the terms of the various members of the board expire, others are elected to fill their places by the stockholders, who may vote in person or by proxy. Proper notice of the regular meetings for such elections is required. If the stockholders fail to elect new mem- bers at the appointed time, the directors have power to fill the vacancies, as well as to fill any vacancies occurring in the interval between elections. Each director "shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such corpora- tion, and will not knowingly violate, or willingly permit to be violated, any of the provisions of law applicable to such corporation, and that he is the owner in good faith, and in his own right, of the number of shares (ten) required bj- this section, subscribed by him or standing in his name on the books of the corporation, and that the same is not hypothecated or in any way pledged as security for any loan or debt." A certified copy of this oath must be transmitted to the Superintendent of Banks and filed and preserved in his office. Care in the Selection of DinECTORS. The choice of directors is a matter of supreme importance to the in- terests of the company. Unless they are men of known integrity and business capacity, the company will have difficulty in making a success. It has already been urged that the stockholders of the company should be men of good standing in the communit}', and the best men among these should be chosen as directors. Upon them will devolve the responsibil- ORGANIZATION OF TRUST COMPANIES. 67 ity for the general management of the company. They will choose the officers who will have charge of the active management of the company, but both the stockholders and the public expect, and have right to ex- pect, that the directors will see to it that these officers manage the com- pany in the best way. No man has a right to accept the election as a director of a trust company who is not willing to give enough of his time and attention to know that matters are being properly conducted. One cannot too strongly deprecate the practice followed by some, of accept- ing places on such boards without intention of giving any thought or time to the trust thus accepted. Suits at law have been instituted against such careless officials when their inattention has permitted losses to stock- holders and di'})ositors alike, and the laws of some States hold them re- sponsible. Whatever the legal aspect of the case may be, one who accepts such a trust and then gives it no attention, is morally guilty of crinunal care- lessness. He jeopardizes the property of others, and perhaps the very means of subsistence of widows and orphans. Having completed the adoption of by-laws, decided the membership of the first board of directors, and chosen officers, and carried out the legal requirements already described, the organization of the trust com- pany is complete. While these things are Ining attended to, it is presumed, as already stated, that the material equipnunt of the company is being made ready by those who are to be in charge of it. The offices of the company will be more or less elaborate in their arrangements, ac- cording to circumstances. It is not often that too much money is spent in making the quarters attractive and convenient, both to customers and to the workers. The general public is certain to judge an institution largely by appearances, and an attractive looking suite of rooms is very apt to add largely to the success of the company. Much difference in the customs in this matter is observable in different cities. In some it is the usual thing for banks and trust companies to be equipped in elab- orate fashion. In such cities a new institution must, of course, sec to it that its quarters compare favorably with others. In some cities com- paratively little attention is given to making the offices attractive and convenient. A new institution starting in such a city will manifestly be the gainer by starting an improvement in this matter. Many of the larger trust companies of to-day own the ir own build- ings, which are constructed specially for their use. The advisability of this depends largely upon local conditions, but in most communities has much to commend it. A building is an asstl tliat people can see, and tends to give a feeling of confidence. The vaults of the company shoiild be strictly up-to-date, and large enough not for the present only, but for jirobable future needs. The mistake of having them too small is much more common than that of having them too large. A trust company will ordinarily have use for a large'- vault or vaults than an ordinary bank. Wcausc of the securities 68 TRUST COMPANIES. of others that must be cared for in addition to its own securities and records. If only one vault is erected, that part used by the banking de- partment should be separated by a grill from the portion used by the trust department. If a safety deposit department is to be conducted, of course a special equipment is necessary. Organization of Trust Companies by Special Charter. As already stated, trust companies in some States are incorporated only by special charter granted by the Legislature. In these States, after it has been decided to apply for a charter, a committee of the per- sons interested is appointed to draw up, under legal advice, an act of in- corporation involving such provisions as are wanted (being sure to specify a wide range of powers), and to arrange for the introduction of the bill to the Legislature by some member thereof. If the Legislature sees fit to grant the charter, either as presented or amended by the Legislature, the company is usually authorized to begin business as soon as it wishes after the passage of the act. Such special acts, in the absence of general laws regulating the busi- ness of trust companies, define the powers and limitations of the com- pany. If general laws for such regulation of trust companies exist in the State, then the special act merely names the corporators, creates them a corporation under the name chosen, and confers upon them the author- ity to transact a trust company business under the general laws in force relating to such corporations. The charters of companies established in the early years of the trust company movement have had added to them numerous amendments grant- ing larger powers, as the Legislatures became more liberal in such mat- ters. The amendments are passed by the Legislature in the form of special acts, and become part of the charter upon their formal accept- ance by the company. In cases where general laws regulating the busi- ness of trust companies have been passed subsequent to the granting of special charters, such general laws, or parts of them, become part of the charter of the company upon their acceptance by the latter. The follow- ing charter of a large Boston company,* doing both a banking and a trust business, will illustrate the usual form and scope of these special charters and of acts amending same: COMMONWEALTH OF MASSACHUSETTS. THE NEW ENGLAND TRUST COMPANY. Act of Incorporation, Granted April 22, 1869. Section 1. Nathaniel Thayer, John C. Lee, Benjamin T. Reed, their asso- ciates and successors, are hereby made a corporation by the name of "The New England Trust Company," to be located in the City of Boston, for the purpose of holding property in trust, and for other purposes hereinafter set forth; and * Trust companies in Massachusetts were formerly incorporated only by special act. They may now be incorporated under the general incorporation law for trust companies, signed by the Governor May 25, 1904. ORGANIZATION Or TRUST COMPANIES wj subject to all the duties, restrictions and liabilities set forth in all ^nrral laws which now are or may hereafter be in force in relation to such corporations. CAPITAL. Section- 2. The capital. stoe an amount not exceeding in the whole the sum of one million dollars (aj amended March SO, 1S71), divided into ten thousanil shares of one hundred dollars eacli, and the same shall be ])Jiid for at such time and in such manner us tin- U.ard of directors shall decide; provided, that no business shall Ik- transacted bv the corporation until the whole amount is subscribed for, and at least one hundred thousand dollars shall have been actually paid in and invested accordinjr to law, and no shares shall be issued nor dividends made until the par value of such shares simll have been actually paid in cash. rOWEUS. Sect-ox S. Tlic s.iid c.irjxiration shall h,i>, ^■.,^^, i i.. nr.n.- .mil fn.lii moneys or property in trust or on deposit from courts of law or ele«lge as collateral, of any of the aforesaid securities; but all real estate acquired by fore- closure of mortgages, or by levy of execution, shall be sold at public auction within two years of such foreclosure or levy. Amended Charter — Section ;?. It shall be lawful for the said corporation to invest its capital, and all moneys held by it in trust, in the authorizeil loans of any of the counties, cities, or towns in any of the New England .'states, or to loan the same to this Commonwealth, or to any county, city or town therein : and said corporation may also invest such capital and moneys in any other securities in which savings banks now are or hereafter may Ik* allowcil to invest, and shall be subject to and governed by the provisions concerning savings banks which are contained in sections one hundred and forty-three and one hundred and forty-six of chapter 57 of the General Statutes.' • General Statutes. Chapter 57. Section 143. "No such corporation .shall hold, both by way of Investment and as security for loans, more than one-half the capital stock of any bank, nor have more than seventy-five per cent, of its deposits Invested In mortgages of 70 TRUST COMPANIES. BANKING-HOUSE. Section 6. Said corporation may hold real estate in the City of Boston, suitable for the transaction of its business, to an amount not exceeding two hundred thousand dollars. EXAMINATION BY SAVINGS BANK* COMMISSIONER. Section 7. The said corporation shall semi-annually make a return to the Commissioner of Savings Banks of this Commonwealth, on or before the sec- ond Mondays of May or November, which shall be signed and sworn to by a majority of its board of directors, stating the full amount of its capital stock and of all moneys and property, in detail, in the possession or charge of said company, as deposits, trust funds, or for purposes of investment; and the Com- missioner of Savings Banks shall have the same access to the vaults, books, and papers of this corporation, and it shall be his duty to inspect, examine and inquire into its affairs, and to take proceedings in regard to them in the same manner and to the same extent as if this corporation were a savings bank, subject to all the general laws which now are or hereafter may be in force in relation to such institutions in this regard. TAXES. Section 8. Repealed by the amended charter, and the following substituted: Section 8. Said corporation shall be subject to the provisions of chapter two hundred and eighty-three of the acts of the year eighteen hundred and sixty- five, and any acts now existing, or which may hereafter be passed in amendment or lieu thereof; it shall also, annually, between the first and tenth days of May, return to the tax commissioner a true statement, attested by the oath of some oflScer of the corporation, of all personal property held upon any trust on the first day of May, which would be taxable if held by an individual trustee residing in this Commonwealth, and the name of every city or town in this Commonwealth where any beneficiary resided on said day, and the aggregate amount of such property then held for all beneficiaries resident in each of such cities and towns, and also the aggregate amount held for beneficiaries not resident in this Com- monwealth, under the pains and penalties provided in section fourteen of chapter two hundred and eighty-three of the acts of the year eighteen hundred and sixty- five, and acts in amendment thereof, for corporations failing to make the returns provided by said act. Said corporation shall annually pay to the Treasurer of the Commonwealth a sum to be ascertained by assessment upon an amount equal to the total value of such property at a rate to be ascertained and determined by the tax commissioner, under section five of chapter two hundred and eighty-three of the acts of the year eighteen hundred and sixty-five and acts in amendment thereof. No taxes shall be assessed in any city or town for state, county, or town purposes, upon or in respect of any property held in trust as aforesaid; but such proportion of the sum so paid by said corporation, as corresponds to the amount of such property held for beneficiaries resident in this Commonwealth, shall be credited and paid to the several cities and towns where it appears, from the returns, or other evidence, that such beneficiaries resided on the first day of May next preceding, according to the aggregate amount so held in trust for beneficiaries residing in such cities and towns respectively; and, in regard to such tax so to be assessed and paid as aforesaid, said corporation shall be subject to sections eleven, twelve, thirteen, the last paragraph of section fifteen, and sec- tion seventeen, of chapter two hundred and eighty-three of the acts of the year eighteen hundred and sixty-five and acts in amendment or lieu thereof, so far as the same are applicable thereto. real estate, nor invest more than ten per cent, thereof, and not to exceed one hundred thousand dollars, in the capital stock of any corporation." Section 146. "No member of a committee or officer of such corporation charged with the duty of investing its funds, shall borrow or use any portion thereof, be surety for loans to others, or in any manner, directly or indirectly, be an obligor for money borrowed of or loaned by the corporation." or ORGANIZATION OF TRUST; COMI'AMK- :i FIXAXCIAL AGENCIES. Sectiok 9. The said corporation is also authorized to act as agtnt for the purpose of issuing, repjistering, or countersigning the certificates of stock, bond^, or other evidences of indebtedness of any corporation, association, municipality, state or public authority, and to receive and make payments on account of the same, on such terms as may be agreed upon. CH.VRTEH PERPETL'AL. Section- 10. This act shall take effect upon its passage, and shall continue in force fifty years, unless sooner modified or terminated by the legislature. Amended as folloics—Sertion 4. Section eight, and .so much of section ten, of chapter one hundred and eighty-two of the acts o( the year eighteen hundred and sixty-nine, as limits the existence of said corporation to fifty years, is hereby repealed. Amended Charter—Section r>. This act shall take effect whenever it shall be accepted by a vote of said corporation, at a meeting warned for the jiurfKise. Within thirty days after such acceptance, a copy of the vote accepting the same, certified l)y and attested by the oath of IIr- President, or one of the Vice- Presidents of the corporation, and the Secretarj- thereof, slmll Im* ftleti in the office of the Secretary of State, and such certificate shall be conclusive evidence of such acceptance. The amended charter was duly accepted April IJ. 1S71. and the proper certificate filed. AN' ACT To AMEXD THE CHARTER OF THE N'eW EkGI.AND ThIST CoMPAXY. Be it enacted by the Senate ami House of Representatires, in General Court assembled, and by the authority of the same, as folloirs: Secti(e a|)p<)inteceedings in the probate court or elsewhere, connected with any authority exercised under this act, all accounts, returns, and other papers may be signed and sworn to In behalf of the corjioration. by any officer thereof duly authorised by it; and the answers and examinations, imder oath of such officer, shall be receiveoration, and the court may onler and compel any and all officers of said corporation to answer and attend .ound' to follow, and be entirely governed by all directions contained in any will or instrument under which it may act. Section IJ. No money, property, or securities received or held by said company under the pro\ isions of this act shall be mingUni with the investments of the capital stock or other moneys or property belonging to said corporation, or be liable for the debts or obligations thereof. 72 TRUST COMPANIES. Section 4. The returns of said corporation required to be made to the Commissioners of Savings Banks shall be in the form of a trial balance of its books, and shall specify the different kinds of liabilities, and the different kinds of its assets, stating the amount of each kind, in accordance with a blank form to be furnished by said commissioners. And these returns shall be published in a newspaper of the City of Boston, at the expense of said corporation, and in the annual report of said commissioners. (Sectiox 5. This act shall take effect upon its acceptance by said cor- poration, which acceptance, with the date thereof, shall within ten days there- after be certified by the President of the corporation to the Secretary of the Commonwealth. Approved 3Iay 16, 1877. [Accepted by the corporation at special meeting, June 1, 1877.] AN ACT To ALLOW THE NeW EnGLAXD TrUST CoMPAXY TO 3IAKE ADDITIONAL INVESTMENTS. Be it enacted, etc., as follows: Section 1. The New England Trust Company, incorporated under chapter one hundred and eighty-two of the acts of the year eighteen hundred and sixty- nine, may, in addition to the investments which it is authorized to make, invest the moneys intrusted to it, or in any way received by it, in the notes of manu- facturing corporations created by the laws of any of the New England States, the property of which is unincumbered by mortgage, and which have paid a div- idend for the two years next preceding such investment; also to take as collateral upon the notes of individuals, citizens of this state, for a period not exceed- ing four months, the bonds of cities in the United States containing at least one hundred thousand inhabitants, whose net indebtedness does not exceed five per cent, of the valuation of the taxable property therein, to be ascertained by the last preceding city valuation for the assessment of taxes, and selling in the market above par; provided, that said bonds shall be taken at not over eighty per cent, of the market value thereof. Section 2. This act shall take effect upon its acceptance by the New England Trust Company. Approved March 16, 1882. [Accepted April 10, 1882.] Where general laws regulating the trust company business are in force, the special act, as stated above, may not recite the powers and limitations of the company in detail, but mereh' refer to the general law covering the case. The following is an illustration of such a special act: CHARTER OF THE FEDERAL TRUST COMPANY. COMMONWEALTH OF MASSACHUSETTS. In THE Year One Thousand Eight Hundred and Ninety-Nine. AN ACT To Incorporate the Federal Trust Company. (Chapter 93, Acts of 1899.) Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: Section 1. James W. Kenney, Thomas B. Fitzpatrick, Josiah S. Dean, James M. Morrison, Charles J. Connelly, John W. Home, William J. Emerson, Thomas L. Jenks, Joseph B. Horton, Jeremiah C. Spillane, John J. Johnston, William ORGANIZATION OF TRUST COMPANIES. 7:^ J. Carlin, Pierce Powers, John E. Stanton, John B. Fitzpatrick, Lawrence J. Logan, Thomas F. Galvin and Joseph H. O'Neil, their associates and successors, are hereby made a corporation under the name of the Federal Trust Company. Section 2. Said corporation shall have authority to establish and maintain a safe deposit and trust company in the City of Boston, with all the powers and priviiefjes and subject to all the rijrhts, duties, liabilities, and restrictions set forth in all general laws which now are or hereafter may b«- in forcr rt-latlng to such corporations. Sectiox 3. This act shall take effect upon its passage. House of Representatives, February /;, /v'-f'. JoHX L. Battb, Speaker. In those States and Territories whose laws make no special provisions for tl)c incorporation of trust companies, and where the system of special acts granting cliarters docs not prevail, such corporations are organized under the general incorporation laws or under the banking laws. The forms for such incorporation vary somewhat in the several States, but the incorporation certificate, which is forwarded to the Secretary of State, usually specifics the names of the corporators, the name of the proposed corporation, its location, its puri)osc, and powers desired, the amount of its capital and number of shares into which it is divided, and the date of the instrument. The Secretary of State examines the certificate to make sure that it contains nothing inconsistent with the laws of the State, and if he finds that it is all right in this respect, issues his certificate that the articles of incorporation have been filed, and that the company has au- thority to do business. CHAPTER IV. TRUST COMPANY LEGISLATION. DURING the past few years there has been an increasing activity among the State and Territorial lawmakers in the passage of laws relating to trust companies. At the meeting of the Trust Com- pany Section of The American Bankers' Association, in 1897, it was stated that only nineteen of the States had general trust company laws.* In 19O8, all but three of the States and Territories had some sort of general legislation regarding trust (Companies, though in several in- stances such legislation is very incomplete. In twenty-nine States and Territories, trust companies are incorporated under and governed by general trust company laws ; in eleven others, trust companies are or- ganized under the general incorporation laws, but are governed by gen- eral trust company laws. In seven States, trust companies are incor- porated by special acts of the Legislatures. Florida, Nebraska and Nevada give no recognition to trust companies in their legislation. All three have trust companies in operation, how- ever, the number of such corporations reported in June, IPOS, being as follows: Florida, 8; Nebraska, 9; Nevada, 5. In these States no dis- tinction is made between trust companies and other corporations, and they are formed under the general incorporation laws, or if they do a banking business, under the banking laws. In seven States, namely, Connecticut, Delaware, Maryland, New Hampshire, South Carolina, Vermont and Virginia, trust com- ipanies are incorporated by special acts of the Legislatures. These States have some general statutes relating to trust companies, placing them under the control of the State authorities, authorizing them to execute certain kinds of trusts and fixing methods of taxation; but in Virginia there is only a little of such legislation. In North Caro- lina trust companies were incorporated only by special acts until late in the year 1907, and in Rhode Island until 1908, since which time they may be incorporated under the general trust company law. Alabama, Maine and Massachusetts have only in recent years given up the incorporation by special acts for that by general statutes. Maryland formerly had a general law for the incorporation of trust companies, but this was re- pealed in 1890. The preamble of the act of repeal sets forth that be- cause of the changes in the character of trust companies since 1876 (when the general law was passed), and on account of the incomplete- ness of the general law, it had been necessary to incorporate trust com- panies by special acts anyway, and that the latter method of incorpora- tion is a proper one. » Proceedings Trust Company Section, 1897, p. 15S. TRL'ST COMPANY LEGISLATION. 75 In Iowa, trust companies are organized under the general laws with trust powers only, or under the banking law if they are to undertake the bankinir business. Paragraph 1889 of the Code of 189.5 gives trust com- panies limited Savings Bank powers, except companies organized prior to 1886, which seem to be authorized to do both banking and trust business. The laws of the State relating specifically to trust companies are very meagre. The following thirty-nine States and Territories have more or less complete general trust company laws: Alabama, .\rizona, .\rkansas, California. Colorado, District of Columbia. Cieorgia. Hawaii. Idaho, Illinois, Indiana, Kansas, Kentucky. Louisiana. Maine. Massachusetts. Michigan. Minnesota, Mississippi, Missouri, Montana, New Jersey, New Mexico, New York. North Carolina, North Dakota, Ohio, Oklahoma, •Oregon, Pennsylvania, Rhode Island, South Dakota. Tennessee, Texas, Utah, Washington, ^^'est Virginia. Wisconsin, Wyoming. Of the States and Territories in which trust companies are governed by general trust company laws, about two-thirds provide specially for their incorporation, while in the other third the organization is con- ducted under the general incorporation laws. The minimum number oi' corporators required varies from S to 2.1^ the latter number being required in the District of Columbia, and the former in nine ditlerent States. Five is a favorite number, ten States fixing it as the niinimum. The number required in New York is 13. ' NfMUER OF Director? Reqi'irf.d. Many of the States stipulate the minimum number of directors that a trust company may have, a few also stipulating the maxinunn number. In Colorado and Washington, the number required is at least .S ; in Mon- tana, from 3 to -25; in Idaho, Maine, New Jersey. New Mexico, South Dakota, Tennessee and Wisconsin, at least .'5; in Georgia and Kansas, from 5 to 15; in Missouri, Oklahoma and Texas, from 5 to "25; in In- diana, at least 6; in Michigan, at least 7; in North Dakota, from 9 to IT); in ^linnesota, from 9 to 27; in the District of Columbia, from 9 to SO; and in New York, from l.S to 30. The Amoi-nt qk C'apital Stock. The amount of capital stork which trust companies are required to have varies considerably in the ditierent States and Territories, and is naturally smallest in States where the towns are apt to hv small. — though this is by no means an invariable rule. In alx>ut half of the States having legislation on the subject, a definite minimum amount of capital is fixed without regard to the size o( the town or city in which the com- pany is loc.-'.ted. The other States arrange schedules in which the mini- 76 TRUST COMPANIES. mam capital required is determined by the size of the place in which the company is situated.* Thus, South Carolina fixes the minimum capital with which trust companies may be formed anywhere in the State at $25,000; Texas, $50,000; Hawaii, $100,000, half paid; California, Georgia, Kansas,. Louisiana, Mississippi, Missouri, JNIontana, New Jersey, New Mexico, North Dakota, Tennessee and West Virginia, $100,000; Ohio, $100,- 000 or $125,000, according to business done; Pennsylvania, $125,000;. Minnesota, $200,000, and the District of Columbia, $1,000,000. The following States have schedules in which the minimum capital re- quirements range between the figures shown; Alabama, from $25,000 to $100,000; Arkansas, $50,000 to $100,000; Colorado, $50,000 to $250,- 000; Idaho, $10,000 to $100,000; Indiana, $25,000 to $100,000; Iowa, $10,000 to $50,000; Kentucky, $15,000 to $200,000; Maine, $25,000 to $150,000; Massachusetts, $100,000 to $200,000; Michigan, $150,000 to $300,000; New York, $100,000 to $500,000; North Carolina, $5,000 to $25,000; Oklahoma, $100,000 to $200,000; Oregon, $10,000 to $50,- 000; South Dakota, $25,000 to $100,000; Utah, $25,000 to $100,000;. Washington, $10,000 to $100,000; Wisconsin, $50,000 to $100,000; Wyoming, $10,000 to $100,000. It thus appears that the smallest mini- mum capital required is in North Carolina, where, in towns of 1500' or less population, companies may be formed with a capital of $5,000; while the largest minimum is that of the District of Columbia, $1,000,- 000. It should be added that the minima above given usually apply only to companies which actually undertake a trust business; the mini- mum often being smaller if the comjjany does only a banking business. Most of the States do not place any maximum limit to the capital al- lowed, but a few do. The maximum limit is $1,000,000 in Kansas; $2,- 000,000 in Georgia, Indiana, Minnesota, and Pennsylvania; $5,000,000 in West Virginia, and $10,000,000 in Missouri, Montana and Texas. Powers and Capacities of Trust Companies. The powers, or capacities in which trust companies may act, are much the same in different States and Territories having general trust company laws, save in the extent to which a regular banking business- may be conducted. Such companies possess, of course, the powers generally granted to all corporations. The special powers are usually enumerated in detail; and in those cases where they are not so enumer- ated there is usually a provision authorizing them to undertake "any lawful trusts" and to conduct all "such business as is usually carried on by such companies." There is evidence that the trust company laws of the State of New York have been taken as a guide in the construction of trust company laAvs in many of the other States. This resulted, no doubt, both from the * Details of these schedules, as well as of other matters htre mentioned, are given in Chapter V. • TRUST COMPANY LEGISLATION. 77 fact that New York has long htLU tht- financial centre of tlie country, and iHcause it was early in the field witii a general trust company law, such a law having been passed in 1887. The fact that New York's laws have for many years served as guides in many lim s of legislation other than financial must also have had its influence. It will be useful to know in detail the j)rovisions of the New York laws regarding the powers of trust companies, and the sections of the statutes giving these powers are therttitrc priseiilcd in full: POWERS OF TRUST COMPANIKS IN NEW YORK. (As amended by CliajHer IIU. Acts of 190S.I Section IjC. Powers of Corporation. Upon tin- filinji of any siuli «-«-rtift- cate of authorization of a trust company, tin- pirsons named tlu-reiri and thdr successors shall thereni)on and thereby heeonie a corporation, tind in addition to the i)0\vers conferred hy the general corporation hiw and tti«- >tolilie or corporation; and in Mich capacity to n-ceivc and disltiirse money, to transfer, refjister and conntcrsifrn certificates of st«»ek, hon»ls or other evi- dences of indebtedness, and to act as aj;ent of any cor|>oration, foreijfU or domestic, for any lawful pnr])osc. ~. To receive deposits of trust moneys, securities an(i other persona! prop- erty from any person or cor])oration. and to loan niotuy on real or |>ersonal securities. 3. To lease, hold, purchase and convey any and all real projx'rty necessarr in the transaction of its business, or which tlu- purposes of the corporation may require, or which it shall acquire in satisfaction or partial sati>faction of debts dui- the corporation under sale.;, judpmeiils or mortjrajies, »ir in settlement or partial settlement of debts due the corporation by any of its debtors. 4. To act as trustee imder any mortpajre or bonds issued by any municipal- ity, body ]>olitic or corporation, and accept and execute any <»tl»er municipal or corporate trust not inconsistent with the laws of this state. 5. To aece])t trusts from and execut<' trusts for married women, in respect to their separate ])roin'rty, and to be their afient in the manapement of such property, or to transact any business in relation thereto. 6. To act under the order or appointment of any court of record as guardian, receiver or trustee of the estate of any minor, and as depositary of any moneys i>aid into court, whether for the benefit of any such minor or other person, corporation or party. 7. To take, accept and «-xecute any and all such legal trusts, duties and powers in regard to the holding, management and disposition of any estate, real or personal, and the rents and profits thereof, or the sale tln-reof. as may l>e granted or i-onfided to it by any court of record, or by any jH^rson. corporation, municijiality, or other authority; and it shall l»e accountable to nil parties in interest for" the faithful discharge of every such trust, duty or power which it may so aeeej»t. 8. To take, accei>t and execute any and all trusts and powers of whatso- ever nature or descriptiim as may be conferred upon or intrust(>d or conunitted to it bv any person or persons, or any body jxilitie. eor]>oration or oIImt atithor- ity. by grant, assigmnent. transfer, devise. beills of exchange, bonds and mortgages and other securities; and when mc»neys or securities for moneys are borrowed or received on deposit, or for investment, the i>onds or oliligations of the company may be given therefor, but it shall have no right to issue bills to circulate as monev. 78 TRUST COMPANIES. 10. To be appointed and to accept the appointment of executor of or trustee under the last will and testament, or administrator with or without the will! annexed, of the estate of any deceased person, and to be appointed and to act as the committee of the estates of lunatics, idiots, persons of unsound mind and habitual drunkards. 11. To exercise the powers and possess the privileges conferred on banks and individual bankers by sections fifty-five and fifty-six of this chapter, subject to the restrictions contained in said sections. No such corporation shall have any right or power to make any contract, or to accept or to execute any trust what- ever, which it would not be lawful for any individual to make, accept or execute- No loan exceeding in amount one-tenth of its capital stock shall be made by any such corporation (directly or indirectly), to any director or officer thereof, and no loan to such director or officer shall be made without the consent of a majority of the directors. No such corporation shall transact its ordinary busi- ness by branch office in any city not named in its certificate of incorporation or charter as the place where its business is to be transacted. No trust company shall open a branch office without first having obtained the written approval of the superintendent of banks to the opening of such branch office, which written approval may be given or withheld in his discretion, and shall not be given by him until he has ascertained to Ms satisfaction that the public convenience and advantage will be promoted by the opening of such branch office; and, provided further, that no trust company in this state, or any officer or director thereof, shall open or maintain a branch office, unless the capital of such trust company actually paid in cash shall exceed the amount required by the law under which it was incorporated by the sum of one hundred thousand dollars for each branch office so opened or maintained. Every trust company and every such officer or director opening a branch office without such written approval shall forfeit to the people of the state the sum of one thousand dollars for every week during which any branch office shall be maintained without such written approval. No foreign corpora- tion shall have or exercise in this state the power to receive deposits of trust moneys, securities and other personal property from any person or corporation, or any of the powers specified in sub-divisions one, four, five, six, seven, eight, ten and eleven of this section, nor have or maintain an office in this state for the transaction of, or transact directly or indirectly, any such or similar business. Section 157. When any such corporation is appointed executor in any last will or testament, the '-ourt or officer authorized to grant letters testamentary in this state shall, upon the proper application, grant letters testamentary thereon to such corporation. When application is made to any court or officer having authority to grant letters of administration with the will annexed upon the estate of any deceased person, and there is no person entitled to such letters who is qualified, competent, willing and able to accept such administration, such court or officer may, at the request of any party interested in the estate, grant such letters of administration with the will annexed, to any such corporation. Any court or officer having authority to grant letters of guardianship of any infant, may, upon the same application as is required by law for the appointment of a gr.ardian of such infant, appoint any such corporation as guardian of the estate of sucl: infant. .\ny court having jurisdiction to appoint a trustee, guardian, receiver or committee of the estate of a lunatic, idiot, or habitual drunkard, or to make any fiduciary appointment, may appoint any such corporation to be such' trustee, guardian, recei\er or committee, or to act in any other fiduciary capacity. All moneys brought into court by order or judgment of any court of record may be deposited with any such corporation, that has been designated by the comp- troller of the state of New York, as provided by the code of civil proceedure. By amendments passed in 1898 and 3,901, certain trust companies may add to the above powers those of safe deposit^ title insurance and credit guaranty. It will be seen that the powers here granted are very wide. Those fiduciary powers that are not specifically granted are conceded by the TRUST COMPANY LEGISLATION. 79 general power to aecept api)ointiiieiit to act in "any other riduciary capacity," so that in the State of New York a trust company may act in any fiduciary capacity in which a natural person may act. The same broad powers are given to trust companies in most of the other States having general trust company laws, and are included in the special charters in most of the States creating such companies by special nets. The banking ])owers granted in New York are < xceptional. however, and are granted in less than half of the other States; but by very liberal con- struction of the statutes trust companies frecpiently transact substantially a banking business in States where the statut«-s do not specify such powers. Of the powers usually granted to trust companies by the State laws, some may properly be looked upon as essential or natural to a "trust" or "trustee" company, while others are manifestly auxiliary to its essen- tial powers. In the former group would In- inelud<(l powers to act as trustee for any purpose, as executor, administrator, guardian, agent, etc. Other powers, such as banking, savings banking, safe deposit, fidelity and title insurance, etc., more or less closely allied to the business of the typical trust company, may be classed as auxiliary powers. That the legislators have taken some such view of the case is evident from a study of the powers granted. Both in the States having general trust company laws and in those which charter trust companies by spe- cial act of the Legislature, there is praotic.'l unanimity in the granting of the powers included in the first group, while those in the second group, with the exception of safe deposit, are not so generally given. It is beyond the scope of the present inquiry to attempt to discuss the powers impliedly given to trust companies by the various statutes, or to assemble the decisions of the courts regarding the extent of such powers. But it will be useful to compare, briefly, the powers explicitly given to these companies by the States having g«neral trust company laws. As already suggested, the greatest unanimity appears in the grant- ing of powers to act as trustee, as executor and administrator, as guard- ian, as agent, etc. The power to act as executor and administrator is specifically granted in all of the thirty-seven States named, except Kansas, Maine, Oregon and Wyoming. In Kansas it would seem to be impliedly granted by the wide general powers conferred. Wyoming j)ermits the acceptance of "any trust in writing." Maine presents an interesting case. In this State trust companies may act as executor; but are expresslv forbidden to act as administrator or as guardian, even if their special charters specifically grant such powers. Tin Oregon statutes do not enumerate the powers of trust companies. The power to act a$ guardian of minors, persons non compos mentis, (tc, is specifically granted in all of the thirty-seven States named except Maine, Oregon and Wyoming. The guardianship of minors usually, and 80 TRUST COMPANIES. of other persons always, applies to the estate only. In most States the power named is to act "as guardian of the estates," etc.; in some, it is the indefinite power to '"act as guardian." California, Illinois, Louisiana, Massachusetts, Ohio and Tennessee specifically state that the guardian- ship of minors shall be of the estate only, and not of the person. On the other hand, power to act as guardian of both the estate and the person of minors is specifically given in Arkansas, Indiana, Kansas, Minnesota and Montana. In the District of Columbia, trust companies may act as guardian of the estate of a minor only with the consent of the guardian of the person. The limitation formerly specified in the New York stat- utes, providing that trust companies may act as guardian of the estates of minors, the income of which is one hundred dollars per annum or more, is also found in the statutes of Colorado and Georgia. Sixteen of the States and Territories specifically grant the power to accept and execute trusts for married women with respect to their separate estates. A power always included is that to act as trustee for various purposes. It is usually stated that the company may act as trustee for individuals, for corporations both public and private, for municipalities and States. The power to act as fiscal agent and as registrar and transfer agent is as a rule specifically given, as are also the powers to act as depositary of funds paid into court and of funds under the care of executors, admin- istrators, guardians, etc.; to manage estates; to receive trusts from courts; to hold deposits of trust moneys; to act as receiver or assignee; to act as agent for the investment of money; to make loans on real or personal property; to deal in bonds, stocks and securities. Regulations Regarding the Holding of Real Estate. The regulations regarding the holding of real estate by trust com- panies are usually somewhat more liberal than those which govern the real estate holdings of National banks, but a few States, notably Louisiana and Michigan, make provisions almost identical with those of the National Banking Act. Most of the States grant the power to hold such real estate as is necessary for the transaction of the company's busi- ness, and such as it may acquire in settlement or partial settlement of debts due to it. While the intent usually appears to be to limit the hold- ings much as those of National banks are limited, the language is often such as to permit of a liberal construction. As an example of statutes permitting such liberal construction, that of New Jersey reads as follows : "To lease, hold, purchase and convey any and all real estate necessary for or convenient in the transaction of its business, or which the purposes of the corporation may require, or which it shall acquire in satisfaction or partial satisfaction of debts due the corporation under sales, judg- ments or mortgages, or in settlement or partial settlement of debts due the corporation by any of its debtors." TRUST COMPANY LEGISLATION. 81 There are, however, great differences in thi- wording of the statutes in tile different States and Territories relating to this matter, and it is not possible to form a correct idea of their purport without a separate and detailed account of the statutes in each State. Perhaps the widest powers of this kind are those of trust companies in Idaho and Pennsyl- vania, which, besides holding real estate that is the subject of title in- surance by them, have the right "'to purchase and sell real estate and take charge of the same," and in Utah, where they may "buy, sell or mortgage" real estate. The right to hold real estate in trust for others is of course included in the trust powers given to trust companies. Auxiliary Powers of Trtst Companies. Of the powers usually looked upon as auxiliary to the main busines.s of trust companies, that of conducting a safe-deposit business is the one which the States are most nearly unanimous in granting. Indeed, this business has come to be looked upon as being quite as essential to trust companies in the larger cities as any other function. The fidelity insurance business is specifically permitted to trust com- panies in about half of the States and Territories, while in a number of others trust companies are given more or less limited powi-rs in the way of guaranteeing bonds and acting as surety for particular purposes. West Virginia specifically prohibits trust companies from acting as surety on bonds or guarantor for individuals, firms or corporations. Connecticut prohibits trust companies from engaging in any kind of in- surance business, except that certain companies already engaged in title insurance are allowed to continue. About a third of the States grant the specific j)ower to trust compa- nies to conduct a title insurance business. In Pennsylvania trust com- panies are organized under the title insurance company law, which giants most of the trust powers. Banking Powers of Trust Comp.\nies. In view of the great extent to which trust companies engage in the business of both savings and commercial kanking. the statutory pro- visions regarding the transaction of such business are of special interest. But even a cursory examination of the statutes reveals the fact that the power to conduct such business usually depends more upon the implied powers and upon the interpretation of the statutes than upon powers specifically granted. One is met at the outset by the question as to what constitutes banking powers as distinguished from trust powers in the handling of funds. There is evidence that the legislators themselves were in most cases not clear as to the extent to which they were permit- ting the banking business. In several States, as for example Colorado and Pennsylvania, trust companies are forbidden to engage in banking 6 82 TRUST COMPANIES. "except as lierein authorized;" while they seem to be authorized to un- dertake several important banking functions. In Colorado specific pow- ers are granted to receive demand deposits and to "purchase" bills of exchange, etc., and to loan on real or personal security. The same powers are held by trust companies in Pennsylvania. The power to pur- chase commercial paper differs only in form from the power to discount it, and not much ingenuity is required to do an actual discount business under these statutes, and such discounting in the form of purchase is widely carried on in Pennsylvania. So far, then, as the receiving of both demand and time deposits, the discounting of commercial paper and the making of loans on real and personal security constitute a banking business, trust companies in these States may do a banking business in spite of the apparent intention to forbid such business. Another interesting case is that of New Jersey. In this State trust companies are forbidden "to discount commercial paper;" but they have specific authority "to purchase, invest in and sell * . * * promissory notes, bills of exchange. '^ * "" " They also have specific authority to receive deposits subject to check. About twenty of the States and Territories appear to grant the specific power to purchase or discount commercial paper, while about the fcame number grant the specific power to receive both time and demand deposits. Unquestioned power to do a banking business is given in Ala- bama, Arkansas, Georgia, Idaho, Louisiana, Maine, Mississippi, Mon- tana, New York, North Carolina, Oregon, Tennessee, Texas, Utah, Washington, West Virginia and Wyoming. In Ohio and Kentucky, while trust companies organized simply as such may not do banking, companies may be organized to do both kinds of business. An analogous case is that of Illinois, where banks may be given trust powers. In several other States the statutes readily permit the interpretation of granting banking powers. Indiana, Michigan, Minnesota and Wisconsin specifically prohibit banking. The fact is that it is a very difficult task to draw a hard and fast line between banking business and business in the handling of money that is purely and simply a trust business. Indeed, banking is itself, in a sense, a trust business. If extreme instances be taken, it is of course a simple matter to say that this is a trust business, and that is a banking business. But just where to draw the line between the two classes of functions is quite a different matter. When, therefore, the legislator sets before himself the task of forbidding trust companies to do a banking business, he must solve not only the problem of how to provide for the enforcement of the statutes he may devise, but also the more intricate problem of clearly distinguishing between that which he means to au- thorize and that which he means to forbid. On the whole, considering the difficulty of the problem, and the industrial conditions under which trust companies have developed, it is not surprising that trust companies in TRUST COMPANY LKCUSI.ATKXN. 83 most States do a baiikiDg busimss in sj)itf of tin- lack of specific authority. A noticeable thin^ about the powi^rs usually ^'rant«d to trust compa- nies is the evident intention to place them on an absolute par with nat- ural persons in their power to accept and execute trusts of every de- scription. In a considerable number of the States the statutes carefully provide that such corporations may accept and execute any trusts not inconsistent with the laws of the State and of the United States, "to the same extent and in the same maimer as natural persons." Regarding the j)owers of trust companies in those States where their charters are granted only by special act of the Legislature, it is not possible to speak in general terms without an examination of each and every such chartir, further than to say that as a general rule the powers, so given are quite as wide and as varied as those given by general laws. In the few States in which no trust company laws exist, and where special charters are not granted, considerable ingenuity has U-en neces- sary to carry on the trust business under the general corporation laws. Americans are not lacking in ingenuity, and the way has usually been found when needed. Thus, where the corporation had not the power to act as trustee, administrator, etc., individual directors or officers have taken such appointments, the companies have furnished the necessary security, and the business in its details has been performed by the com- pany. In the State of Washington, before the passage (in 1903) of the Trust Company Law, some of the courts held, contrary to the usual legal ruling, that trust companies, being created artificial "persons,"' were therefore endowed with the powers of natural "j)ersons." The well- established principle of the common law is that coriX)rations possess only such powers as are s})eeiHeally granted in their ehartt rs. Statutory Provisions for the REr.i'L.XTioN of Thi'st Co.mpanies. Statutes intended to throw safeguards about the prosecution of the business of trust companies are found in a majority of the States and Territories having general trust company laws, and also among a num- ber of the .States in which such cor)ioratioiis are ch.irtered by special acts of the Legislatures. The methods commonly relied upon in such statutory attempts at reg- ulation and supervision include provisions for a capital adequate to su|)- port the probable credit operations of the company and to provide secur- ity for its creditors; the accumulation of a surplus fund, to supplement the good acconi))lished by the provision for adeouisiana, Michigan, New Mexico, New York, New Jersey, Ohio, Oregon, Washington and West Virginia require that before a dividend is declared one-tenth of the net earnings shall be car- ried to a surplus fund until such fund amounts to 20 per centum of the capital. Kansas and Texas require that the same percentage of earnings be carried to surplus fund imtil the latter equals one-half of the capital, and South Dakota, until it equals 30 per centum of the capital. Missouri requires that one-tenth of the net earnings be carried to a "guaranty" TRUST C{)M1>ANY LEGISLATION. 85 fund, until the fund i().'!. by vote of the pcoplr, an amendment to the constitution removing such double liability was carried. Just how this aflects companies already existing is a question for the courts to decide. At present the laws apply the doubh- liability of stock- holders to trust companies in ('olorado, the District of Columbia. Geor- gia, Idaho, Illinois (if doing banking business), Indiana, Iowa, Kansas. Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota (con- stitutional rtquirement), Montana. New York, North Carolina, Rhode Island, South Carolina (if doing banking). South Dakota, L'tah, Texas, Vermont, Washington, West \'irginia and Wyoming. Sixteen of the States require trust companies to deposit cash or se- curities of a specified character with State officials, to Ik- held in trust as security for the company's creditors. .As a rule these deposits arc for the special protection of creditors of the trust department, and in such cases the deposit is ordinarily not required unless the company under- takes such trusts as those of executor, administrator, guardian, itc. A few of the States, however, make this deposit a protection to all of the company's creditors, and require such deposit before the company is authorized to do business. The income from such deposits goes to the company so long as it is solvent. In several States the deposit is stated to be in lieu of giving special bond or security in the case of each trust, and need not be made if the company elects to give such special Ixinds instead. The amount of the deposit is $50,000 in North Dakota. Okla- homa and Texas; $100,000 in California; .f'JOO.OOO in Missouri. In Illi- nois it is .$200,000 in cities of 100,000 or more inhabitants, and $50,000 in smaller cities. In Michigan, it is fifty per cent, of the capital, but not more than $'^200,000 in amount; in Wisconsin, fifty per cent, of the capital, but not more than $100,000 in amount. The District of Colum- bia requires a deposit to the amount oi one-fourth of the capital. Min- nesota requires the deposit to be at least $50,000, and not less than one- fourth of the capital. In New Jersey the securities so deposited must equal in value at least one-fifth of the liabilities incurred as assignee, re- ceiver, administrator, guardian or trustee, unless the deposit amounts to at least $100,000, in which case it need be only one-tenth of such liabili- ties. The amount of the deposit in New Mexico is from $50,000 to $'200,000. In New York it must amount to ten per cent, of the paid-up capital, but not less than $100,000 in amount in cities whose population exceeds one hundred thousand. $50,000 in cities of from on«- hundred thousand to five hundred thousand, $30,000 in cities of from twenty-five to one hundred thous.md. :ind $'i0.000 in smaller plac<-s. Maryland rc- (juires fifteen per etJit. of the capital, and not less than $30,000 in 86 TRUST COMPANIES. fimount; Virginia, five per cent, of the capital, and not less than $12,500 nor more than $25,000 in amount. In Ohio, the amount is $100,000 for companies whose capital is more than $200,000, and $50,000 for smaller companies. Instead of a deposit, South Dakota requires trust companies, before undertaking any trust, to furnish a bond in favor of the State in an amount equal to the capital. Restrictions in Rklation to Loans. The majority of the States having any kind of trust company legis- lation place restrictions on trust companies regarding their loans, their investments or their total liabilities. Such restrictions vary greatly in the different States, being quite ample in some, and very meagre in others. The most common provisions are those forbidding trust companies to make loans on their own stock as security, and to make loans to their y the fact that about a third of the States and Territories have no satisfactory re- quirements regarding reserves. This does not mean, of course, that trust companies in these States do not actually keep reserve funds, for the unwitten laws of business and of competition are quite as insistent upon obedience as are the laws of the statute books. The best- managed companies everywhere keep as large reserves as their business demands ; and it is for the poorly-managed concerns that the statutory provisions are necessary, just as criminal laws are needed, not for the law-abiding people, but for tlu! lawless. If the wisdom of State legulation in any particulars is conceded, the necessity of a recjuirement for an adequate reserve fund certainly umst be. An examination of the statutes shows that where the tjuestion has been taken up and acted upon by the State legislators, the opinion has quite generally prevailed that the reserve required to be kept by trust companies ought to be about the same as that required of State banks. The following table shows the reserves required of trust companies in various States. Except where otherwise stated, the percentages refer to the ratio of resen-c to aggregate deposits. In some cases the reserve named in the table applies to trust companies only when they do a bank- ing business ; in which case it is frequently the same as for banks. Alabama 15%, 2-5 in cash. California 20% in cities of 200,000 or more; 15% eisewliere: % in rash. Connecticut 15%, 4-15 in cash. Idaho 15%, Vz in cash. Kansas 25% of demand, 10% of time deposits. Louisiana 25% of demand deposits, 8% in casii. Maine 1,5% of deposits pa\al)Ie on demand or within ten days. Massachusetts In Boston, 20% of agjrr^Mjate deposits less time deposits not pay- able within tiiirty days; elsewhere, 15% of same; 2-5 in cash. Reserve companies in Boston, 14 in cash. Michigan 20% of "Matured obligations and money due and payable." Vi in cash. Missouri 15% of demand deposits. Montana 15%. New Jersey 15% of demand deposits, 1-5 in casli. New Mexico 15% of lial)ilities, less deposit with 'IVrritorj". 2-5 in cash. New York Reserves are fifrured on agKrepate deposits less trust funds, time deposits not payable within thirty days, and deposits secured hv New York State bonds. In New York city. l)orough of Manhattan, 15%. all in cash. In New York city, other iiomughs, 15%. 2-3 in cash. Elsewhere in state, 10%, ^ in cash. North Carolina 15%. 2-5 in cash. Ohio 15%, ()% of deniantl and 1% of time deposits in cash. Oregon 15% of demand and 1<)^; of time deposits, in cities of less than 50.000; elsewhere, 25% of demand and 10% of time deposits. 1-3 in cash. Pennsylvania 15% of denumd and 7»4% o( time deposits, 1-3 in cash. Rhode Island 15%, :-5 in cash. (Savirgs department excepted.) South Dakota 25% of demand and 10% of tinie deposits. Texas 25% of demand deposits. 1-10 in cash. Washington 20% of demand deposits. West Virginia 15% of demand deposits. 2-5 in cash. Wyoming 25%. 88 TRUST COMPANIES. Reports and Examinations. Whatever restrictions are placed upon these corporations by the statutes, such restrictions must evidently be of little avail in the cases of those companies which are inclined to evade the law, unless means be provided of keeping the State officials acquainted with the way in which their business is being conducted. The natural ways of accomplishing^ this result are by means of frequent reports and of examinations. The value of reports is of course in direct ratio to the honesty and frankness of the officials of the company making such repQrt, and their usefulness- therefore becomes slight when made by dishonest officers. It is a matter of common knowledge that reports may be easily "doctored" so as to make an insolvent institution appear very prosperous, and that the last reports published by defunct companies usually indicate a sound condi- tion. But if the requirement of reports be made in connection with fre- quent examinations which reveal the truthfulness or untruthfulness of the reports, they serve a useful purpose. The laws now require trust companies to furnish reports in over forty of the States and Territories. The frequency of such reports varies from one to five times per annum; and in the States having the most carefully prepared laws on the subject, special reports may be called for at any time by the State official to whom the reports are made. In Tennessee the reports are not made to any official, but are merely pub- lished in a newspaper. A number of the States designate the character of the information to be given in the reports, and some of them specify in detail and at some length the exact form required for such reports, the form in a few States requiring a complete list of all investments, and a description of the property held in trust. The completeness of these reports is in striking contrast with the meagreness of those which satisfy the requirements of the law in some of the States, where the provisions on the subject are most unsatisfactory. Most of the States which re- quire reports provide that they must be published in a local newspaper. Trust companies are liable to some sort of an examination by State officials in about fort}' of the States ; but in about one-fourth of these the examinations need not be made periodically, but only at the discretion of an official who very probably has little time or inclination for the work, so that companies may go for years without examination. In all of the States the courts probably have the right to investigate a trust company's handling of trusts committed to them by such courts to the same extent as though the trusts were committed to individuals. This right is specifically mentioned in a majority of the States. A few States also provide that the books of the company shall be open to inspection by persons interested in any trust held by the company. Where periodical examinations are required, their frequencj'^ is either once or twice per annum, with special examinations at any time at the discretion of the examining official. TRUST COMPANY l.FXilSLATlON. 89 Tlie State officials undrr whose suptrvision triiht compaiiifs arc placed in the different States vary greatly. Where a State banking department is in existence, the head of that department has supervision of trust com- panies. In a few States this duty is entrusted to the State Insurance Commissioner. In other States it is «X(rcised by the State Auditor, the State Treasurer, or the Secretary of State. In the District of Columbia the Comptroller of the Currency has supervision of trust companies. In over a dozen States trust eonijjanies are under practically the same regulations regarding rej)orts, examinations, etc., as the State banks. The principle of State supervision of banks, insurance companies and other financial institutions is pretty thoroughly established in this country, although there are those whose strong objections to "paternal- ism" in government lead them to look with disfavor upon such super- vision. The excellent record of the National banking system certainly affords strong argument for Government supervision of banks. This is perhaps not the place to discuss the general (juestion; but if the prin- ciple of supervision is accepted, as in the writer's <»pinion it ought to be, there is certainly great room for improvement in the laws of most of the States and Territories in the regulation and supervision of trust compa- nies. Less than one-half of them can be said to havt- satisfactory stat- utes for the control of such institutions. On the other hand, it may be said with nuich truth that great prog- ress has been made, and that, considering the short time that trust com- panies have been a factor in the financial world, the progress has been quite remarkable. It took many years to develop our banking systems out of the chaotic conditions of the first half of the nineteenth century. Then, too, the attitude of the trust companies themselves promises much for rapid advancement in legislation regarding them. The great major- ity of the leading companies welcome the placing of greater safeguards about the business. In a number of instances legislation designed to regulate trust companies has come through the agitation of the subject by the trust companies themselves. Many trust companies in States where the laws do not require examinations are in the habit of l)aving their business thoroughly examined by expert accountants. CHAPTER V. SUMMARY OF STATE AND TERRITORIAL LAWS RELATING TO TRUST COMPANIES. The aim in the preparation of this summary has been to include the essen- tial facts, greatly condensed, of the laws of the several States and Territories specifically relating to trust companies. Effort has been made to have it correct as far as it goes, and to include the latest legislation on the subject The scope of the work is, however, limited to a summary of statutes specifi- cally relating to trust companies, and no effort has been made to include reference to all corporation or banking laws that might be construed as applying to trust companies. The writer wishes to acknowledge his indebtedness to oflBcials of the vari- ous States and Territories for copies of State and Territorial laws on the subject and for information furnished; and also to E. A. Feasel, Librarian of the Cleveland Law Library, for courtesies extended in the use of the library, without which the preparation of this sunmiary would have been impossible. Alabama. THREE or more persons may incorporate for the purpose of carrying on any lawful business, under the Business Corporation Act, sec- tion 16 of which defines the powers of banks and trust companies doing a banking business. The powers specified are to do a regular bank- ing business, including discounting; to make loans of all kinds; to issue bills to circulate as money, upon the terms prescribed in the Constitution of tlie State; to become trustees for any purpose; to be appointed and to act as executors, administrators, guardians and receivers; and to "do any business and exercise any powers incident to the business of trust com- panies doing a banking business." Married women and children may control their own deposits. Stockholders are not subject to double lia- bility. Stockholders have the right of access to the books and records at reasonable and proper times. Trust companies may consolidate with other banks or trust companies. Reports according to a form prescribed by him must be made to the State Treasurer not less than twice each year, such reports to be as of any past day specified by the Treasurer. They must be published in a local paper. The State Bank Examiner, who is under the direction of the State Treasurer, must examine each company at least once a year, without previous notice, and oftener if so directed by the State Treas- urer. The capital required is $25,000 in towns of less than 5,000 inhab- itants; $75,000 in cities of from 5,000 to 30,000; $100,000 in larger cities. The reserve required is 15 per centum, of which two-fifths must be in cash in vaults. Loans may not be made to officers or employees "without good security." Loans to one party may not exceed 10 per centum of the capi- tal, surplus and undivided profits, uifless amply secured by good collat- eral or approved by a majority of the board of directors. STATE AND TERRITORIAL LAWS. 91 Prior to the p.-issajje of the .-ihove-named Act. in ipOf?, trust compa- nies were chartered hv special acts of the Legislature, and such charters usually grant ample ))owers. (General Laws IpO:",, Xos. SD;" and r^2'2; Laws 1907, No. 2J3.) AuiZONA. Trust conipanirs are incorporated under the general incorporation law, under which any number of persons may associate for incorporation "for the transaction of any lawful business." The trust company law is found in the Acts of 1903, No. 3L Powers specified, to act as executor, administrator, guardian, trustee, or guardian of the estate of a lunatic, idiot, minor, "or to act in any other fiduciary capacity as if it were a natural person." The articles of incorporation must authorize such powers. The courts are given power to make such appointments. Such courts or officers making appointments may require the company to give such security as they deem proper, and to make orders regarding the trusts committed to them and to require all accounts that they might re- quire of a natural person acting in the same capacity. Trust companies are forbidden to make loans on their capital stock, or to purchase same except to prevent losses on debts previously contracted. They must re- port to the Auditor of the Territory, who is ex-officio Hank Comptroller, finnually. The Comptroller must examine each company annually or oftener, and after each examination report their condition to the .\ttor- ney-General. (Code 1901, i)aragraphs 130. 131. 76 i. Acts 1903, No. 31. Acts 1907 J No. 96.) Arkansas. Three or more persons may associate under the provisions of the general incorporation law to be incorj)orated as a trust company. Arti- cles of association shall state the face value of the shares, but same may not be more than $1,000. The capital, paid up, must l>e not less than $100,000 in counties whose ])oi)ulation exceeds oO.OOO; not less than $75,000 in counties whose po})ulation is from 40.000 to 50,000; and in no event less than $50,000. Powers specified, to receive moneys in trust, and to accumulate same; to allow interest at not exceeding the highest rate allowed by law; to accept and execute all such trusts and perform such duties of every description as may be commiHed to them by State or United States courts; to hold real or personal estate or trusts created in accordance with the laws of the State, and execute legal trusts in re- gard to same; to execute or guarantee any bonds required to Ih^ given in proceedings in law or equity in the courts of the State, but no such l>ond shall exceed one-half the jiaid-up capital of the company; to act as agent for the investment of money for other persons, and as registrar or transfer agent; to execute trusts for married women in respect to their separate property, real or personal, and as agent in the managt^ment of 92 TRUST COMPANIES. same, "and generally to have and exercise such powers as are usually had and exercised by trust companies ;" to act as administrator, receiver of any estate, guardian or curator of" any infant or insane person or his estate; to conduct fidelit}' insurance and title insurance business; to loan money on real estate and collateral security; to issue its debentures- or notes and to pledge its mortgages upon real estate and collateral se- curities as security therefor; to buy and sell Government, State, munici- pal and other bonds, negotiable and non-negotiable papers, stocks and other investment securities. "In all other respects such corporations shall be governed by the laws of the State governing banks, and subject to- such examinations as banks are now, or hereafter may be, subjected to by the laws of this State." Any trust company now existing may avail itself of this act, if its capital be such as required hereby. (Laws of 1903, Act 135. Laws of 1907, Act 208.) California, Trust companies are organized under the provisions of the general incorporation law. Number of corporators required, three or more. (Civil Code, 1906, Paragraph 287). Such companies are regulated and; governed by the provisions of an act approved April 6, 1891 (chapter 264, Laws 1891) — (as since amended). Powers specified, to act as ex- ecutor, administrator, guardian (of estate only, not of person), assignee, receiver, depositary, trustee. In these capacities their compensation shall not exceed that allowed to natural persons for like services. Courts are authorized to make these appointments. Courts may permit persons holding like trusts to deposit their funds with a trust company, and have the amount of their bonds reduced. Such corporation shall not be required to give bond or security other than the deposit with the State, but shall be responsible for funds handled same as a natural person. The paid-in capital must always equal at least ten per centum of the total deposits and amount due creditors, the surplus being reckoned as a part of the capital. But the maximum capital required by this provision shall not exceed $1,000,000. A trust company may not act in fiduciary capacities unless it has a capital of at least $100,000, of which .$100,000 is paid in cash. Interest must be paid on all moneys held in trust. The company must deposit with the Treasurer of the State, before accepting any trust above men- tioned, or deposits of trust money, the sum of $100,000 in bonds of the United States, the State of California, or any county, city or school dis- trict thereof, or in first-lien mortgages on improved and productive real estate in the State, worth at least twice the amovmt loaned thereon. Such securities shall be registered in the name of the Treasurer of the State, and may be exchanged from time to time. The company shall receive the income from same, so long as it is solvent and conforms to the law. If the paid-up capital of the company exceeds $250,000, it may mort- gage any improved and productive real estate owned by it to the State Treasurer, and have same counted as a part of the deposit. STATE AND TKP.UITORIAI. LAWS. 93 Trust conipanit's are required to render to tlie Bank Commissioners, tit their call at least three times a year, comph-te reports of condition as of a specified past day. Special reports may Ix- called for by the Com- missioners. They must exaniin*^ each company at least once a year. Every company must obtain from the Commissioners a license to do business. The use of the word "trust" in titles is forbidden to other corporations. Trust companies are forl)iddfn to make loans upon their own stock, or to purchase same, except to prevent loss upon dt-bts previ- ously contracted, in which case the stock must Ix- sold within six months. The reserve required is twenty per centinn of demand or imnudiate liabili- ties and of time certificates of dejiosit, if the company is located in a city of '20(),()()0 or more inhabitants; or fifteen per centum if ltK'at«"d elsewhere. One-half of the reserve may be on deposit subject to call in ^ny solvent bank or trust company. The term "trust company" ih banly nuntioiicd in the statut. 2.S2] ; Civil Code, 190(), para- graphs 287, 290^/0, :>83b; General Laws 1906, page 46, Act 296 [This is the act creating the Board of Bank Commissioners, passed 1903, S65, amended 1905, 304]; Laws 190.'>. clia]»ter 2".9; I-aws 1907. chapters ;')(», ■75, 302, 4r)3.) COLOKADO. Five or more ))ersons may associate for incorporation as a trust com- pany. They shall execute articles of incorporation as provided in section 2, chapter 19, General Statutes. One copy of these articles shall l>e filed with the Secretary of State, and one with the recorder of deeds in the county where the conijiany is to do business. The capital, paid in full, in cash, must be at least $;)0.000 in cities of the second class, and at least $250,000 in cities of the first class. The number of directors must be three or more. Powers specified, to act as fiscal agent, registrar and transfer agent; to receive from persons, corporations or under order of court, deposits of money, securities or other personal property in trust or for investment or for safe keeping, subject to withdrawal on demand or on time certificates ; to hold and accumulate same or pay interest there- on at not to exceed six per centum; to loan on real or personal security: to act as trustee under any mortgage or deed of trust or \wnd. "and to ac- cept and execute any other trust" not inconsistent with the laws: to act 94 TRUST COMPANIES. under order of court as guardian, receiver or trustee of the estate of any minor, the annual income of which is not less than $100, and to act as depositary of funds paid into court; to accept and execute any legal trusts regarding the handling of estates, real or personal, of living or deceased persons, confided to it by courts of record, persons, corporations or otJier authorit^^, being accountable to all persons in interest for the faithful discharge of such trusts ; to take and execute any trusts confided to it by courts of record and hold real or personal property in connection with such trusts; to purchase, invest in and sell stocks, bills of exchange, notes, bonds and mortgages and other securities, and to give receipts, certificates, bonds or obligations for same or for moneys borrowed; to act as executor, administrator, trustee under will, conservator or committee of the estate of lunatics, idiots, persons of unsound mind and habitual drunkards — courts being authorized to make such appoint- ments ; to conduct a safe-deposit business, a fidelity insurance business ; "provided, that nothing herein shall authorize trust companies to engage in the business of banking except, in the event of being expressly author- ized, except to the extent herein allowed and provided for." * * * "That all corporations incorijorated under this act may do or perform all acts and exercise all powers connected with, belonging to or necessary for the full and complete exercise and discharge of the rights, powers and responsibilities hereinbefore granted, and all provisions of this act shall be liberally construed so as to accomplish the purposes and objects hereby proposed." A trust company may hold such real estate as is necessary to carry on its business. Courts appointing the company to trusts may make such orders and require such accounts as they might if the company were a natural per- son. The trustees or board of directors have discretionary power of in- vesting trust funds in the stocks or bonds of the United States, any State, any incorporated city or county of the State duly authorized, "or in such real or personal securities as they may deem proper, but no trust com- pany shall invest in the stocks or bonds of any private incorporated com- pany." No loan shall be made, directly or indirectly, to any trustee, director or other officer of the companj^, and no loan on the stock of the company. Stockholders are subject to double liability. In handling court trusts the company is subject to the same responsibilities, has the same powers, and shall receive the same compensation as individuals holding similar trusts, except as herein otherwise provided. Trust funds and in- vestments must be kept separate from the assets of the company and be so designated as to show to what trust they belong. Trust companies are under the supervision of the State Bank Commissioner, to whom they must make not less than three reports a year, according to a form pre- scribed by him. The reports must be called for a past day, the days se- lected to be the same as those named by the Comptroller of the Currency for the first, third and fifth calls for reports of National Banks. Special reports may be called. The Commissioner must examine each company STATE AND TERRITORIAL LAWS. 95 twice a year or ofteiur. The use of the words "trust" or "trust com- pany" in titles is forbiddtn txctpt to regularly incorporatrd trust com- panies. (Mills Annotated Statutes 1901, paragraphs 54i-5441, incl. Laws of 1907, chapters 111 [H. B. 16I] 138 and 140. See Revised Statutes 1908, sections 296-314 incl., section 847, sections 315-352 incl.) Connecticut. Trust companies arc incorporated by special act of the Legislature. There are a number of general laws regulating the business of such cor- porations, most of them applying also to State banks and Savings banks. Trust funds, unless it is otherwis*- provided in the instrument creating the trust, may be invested in such securities as Savings banks are al- lowed to invest in. Tliese are specified in great detail, and include United States bonds, certain State and municipal bonds, loans on certain col- lateral, notes of two or more persons resident in the State, stock of banks and trust companies in the State or in New York city or Boston, certain railroad bonds, mortgages on real estate worth at least double the amount loaned and situated in the State or in certain specified places, and deposits in banks or trust companies in the State or in New York, Massachusetts or Rhode Island. Trust companies maintaining savings departments are required to invest the deposits of such department sep- arately according to the rules for investment for savings banks; such investments being exclusively for the protection of savings depositors until their claims are paid in full. Such deposits are also treated separ- ately for purposes of taxation. Notwithstanding anything in their char- ters to the contrary, trust companies are now (1908) expressly forbidden to issue, sell or negotiate their own bonds or mortgage securities, etc., as investments, to guarantee same, or to engage in any form of insurance business; except that a company actually engaged in the business of a title insurance and guarantee company on January 1, 1907, may con- tinue such business. Trust companies may receive deposits of public moneys under certain restrictions, but not to an amount from one official of more than thirty per cent, of the paid-up capital, surj)lus and ])rofits of the company. They must maintain a reserve fund of fifteen per centum of aggregate deposits, of which not less than four-fifteenths nnist be in legal tender on hand. One-fifth of the reserve may consist of certain approved rail- road bonds and the rest may be on demand deposit with specified reserve agents. Loans may not be made on the stock of the company. Loans to one person, firm or corporation may not exceed ten per centum of paid- in capital, surplus and profits, except that on collateral, with a margin of twenty per centum, such loans may not exceed twenty per centum of such capital, surplus and profits. Paper endorsed by officers or clerks of the company may not be discounted. Loans to parties out of the State may 96 TRUST COMPANIES. not be made until the loans to residents amount to at least half the capital. Loans to directors may not exceed five per centum of capital, sur- plus and profits to any one, or twenty per centum to all together ; but these provisions do not apply to loans on collateral with a margin of twenty per centum. Such loans on collateral to one director must not exceed ten per centum of capital, surplus and profits. The use of the word "trust" in signs or titles is forbidden except to regularly cTiartered trust companies. The statutes provide in detail for the issuance of a new savings pass-book when the old one is lost. Trust companies are under the supervision of the Bank Commission- ers, to whom they must render at least five reports each year, setting forth in detail such information as said commissioners may require. They are subject to examination semi-annually or oftener, the Bank Commis- sioners being required to examine each department of such companies. If the Treasurer of the trust company is also Cashier of a National bank, examinations must be made at the same time as the National bank examiner examines the National bank. If a trust company does a surety business, it is required to make annual reports with special reference to that business. For purposes of taxation, trust companies must file statements with the tax commissioner annually during the first fifteen days of October, showing number of shares of stock, their market value, names and resi- dences of stockholders and number of shares owned by each. In the February following, the company must pay to the State Treasurer a 'tax of one per centum on the market value of each share, less the amount of taxes paid on the company's real estate in the State, which is assessed in the taxing district in which it is located. (Revised Statutes, 1902, sections 254, 1969, 3400, 3401, 3402, 3403, 3404, 3411, 3416, 3428, 3429, 34.57, 3458, etc. Public Acts, 1903, chap- ters 167 and 204. Public Acts, 1905, chapters 54, 204, 207, 231. Public Acts, 1907, chapters 85, 86, 130, 180.) Delawaue. Trust companies in this State are incorporated by special act of the Legislature. There are a few general laws regarding such corporations, most of them applying also to other financial corporations. They are under the supervision of the Insurance Commissioner, to whom they must render not less than two reports each year, according to the form prescribed by him, within twenty days of receipt of request from him for such report. Such report must be published once in a local newspaper. The Commissioner has authority to examine trust companies at his dis- cretion or on request of the company. If unsafe conditions are revealed, the commissioner may take temporary charge, and report to the Attorney- General, who shall institute proceedings. If a trust company is author- ized to act as surety or guarantor, it must lile with the Insurance Com- STATE AND TERRITORIAL LAWS. 97 missionor a copy of its cliarter, make to liiin an annual statement and pay an annual license fee of $100, and other lesser fees. Courts are authorized to appoint trust companies to offices of trust; and may in their discrnds jfiven for faithful performance of duty; but the capital, surplus and jjroperty of the company shall be liable. All liabilities and obligations arising out of 3.Tiy sucli trusts are "made liens upon its real estate prior and paramount to any other lien or iiieuinhrance tin- s.iid corporation niav create or suffer respecting the same." (Statutes, Vol. XXII, chapter .S.'U), sections 1, ii. 4, :>, 7, 8, 9. Laws of 1903, chapter .S30.) DiSTHKT OF C'OUMUI \. Twenty-five or more persons may incorporate to do "a safe-deposit, trust, loan and mortgage business." They shall rile an organization cer- tificate with the Commissioners of the District. Notice of intention to or- ganize nuist be printed in two newspapers in the District at least four times per week for three weeks. The charter, when granted, must be filed with the recorder of deeds for the District, and copies of both the or- ganization certificate and the charter must be filed with the Comptroller of the Currency, under whose supervision trust companies operate. The Comptroller has over trust companies the same visitorial and examination powers that he has over National banks, and trust companies must report to him ;is the National banks do. They may not begin business until the capital stock is paid in full and the deposit of securities with the Comptroller, hereafter described, is made. Powers specified, to make contracts; to sue and be sued, implead and be impleaded in any court as fully as natural persons ; to make and use a common seal ; to loan money ; "to accept and execute trusts of any and every description which may be connnitted or transferred to them"; to act as a receiver, assignee, ex- ecutor, administrator, guardian of the estates of minors with the consent of the guardian of the person of such minor, and committee of the es- tates of lunatics and idiots; to accept deposits of money for the purposes herein designated; to act as fiscal and transfer agent and registrar; to issue its debenture bonds upon deeds of trust or mortgages of r«-al estate under conditions specified. The courts of the District are authorized to a|)point trust coni|)anies to act in fiduciary capacities. The capital stock, all property of the company and the liability of stockholders and officers are to be considered as the security requirtd by law for the faithful per- formance of duties, and are absolutely liable in case of default. Trust com})anies must also make a deposit with the Comptroller of the Cur- rency, in trust, either in money or in bonds, mortgages, deed of trust or other securities equal in actual value to one-fourth of the capital stock paid in. The Comptroller may from time to time require an additional deposit not exceeding in value one-half the paid-in capital stock. The •company may hold real estate not exceeding in value 5^.')00,000. and in 98 TRUST COMPANIES. addition such as it may acquire in satisfaction of debts. But real estate acquired under foreclosure or to secure debts may noi be held longer than five j'cars. Charters of such corporations may be made perpetual, or may be limited in time, subject to the approval of Congress. The capital must be at least one million dollars, half paid in, and all paid within one year. Taxes of one and one-half per centum per annum must be paid, in lieu of personal taxes. Stockholders are subject to double liability. The number of directors must be not less than nine nor more than thirty ; all of them must be stockholders, and at least half of them citizens and residents of the District. The District Supreme Court has jurisdiction over trust companies in the requirement of statements, examinations, making of orders regarding trusts, etc. Similar corporations already or- ganized maj^ acquire the privileges of this act, and all such are subject to its provisions. Congress reserves the right to alter, amend or repeal the act. Trust companies, in common with all other banking institutions in the District, are required to make the same reports to the Comptroller of the Currency that National banks are required to make. These re- ports must be published in two or more daily papers of Washington, one of which must be a morning newspaper. The Comptroller may examine such companies at his discretion, or may take possession of them for the same reasons and in the same manner as in the case of National banks. (Code of the District, sections 71.'>-748. Act approved June 25, 1906. Included as sections 186-^220, and section 224, in National Bank Act, edition 1907.) Florida. There are no statutes regarding trust companies. Three or more per- sons may incorporate "for the transaction of any lawful business of a public or private character." (Revised Statutes, chapter 2, article 1, sec. 2122.) But banking corporations must have five or more incorporators, (section 2l65). Foreign corporations may do business upon complying with certain provisions detailed in an act approved June 1, 1907. Chap- ter 4671 of Laws, approved June 1, 1899, authorizes solvent guarantee companies, surety companies, fidelity insurance companies and fidelity deposit companies to become surety upon the bonds of city, county and State officers. Georgia. Five or more persons may incorporate a trust company. They must tile articles of incorporation with the Secretary of State. Before the filing of such articles, notice of intention to organize must be published once a week for at least four weeks in a local newspaper. Powers speci- fied, those of ordinary corporations, and in addition, to act as fiscal and transfer agent and registrar; to receive deposits of moneys, securities and other personal property and to loan money on real or personal securities? to hold real estate such as is needed for the purposes of the corporation STATE AM) THKRiroiIIAI. LAWS. 99 and such as is acciuind in scttl.nunt of dtlts dur to it; to act as trustee under mortgages and bonds, and to accept and execute any other nuini- ci))al or corporate trust not inc<)nsist«nt with law; to execute trusts for married women in respect to tlieir s« parate property, real or personal, and to act as agent in the management of same; to act under appoint- ment of court as guardian, receiver or l<-ustee ot the t state of any minor, the annual income of which is .flOO or more, and as depository of moneys paid into court; to receive court trusts of all kinds; to receive in trust and manage property of all kinds committed to its care by persons, bodies politic or corporations; to purchase, invest in and sell sttuks, bills of ex- change, bonds and mortgages and to issue- tin obligations of the company for moneys or securities borrowed or received on deposit ; to act us ex- ecutor, administrator, or connnittec of the estates of lunatics, idiots, per- sons of unsound mind and habitual drunkards. Capital rcfjuired, at least $10(),()0() paid in, and not to exceed .f'J.OOO.OOO, divided into shares of $100 each. Tb.e Board of Trustees may consist of not l«-ss than five nor more than fifteen ))ersons. Trust companies may accjuire and exer- cise all the rights and privileges and be subject to the same liabilities and restrictions as banks ujion compliance with the banking laws. .Savings banks, trust, security or guarantee companies already organized may ac- quire the powers here stated. All trust companies which receive de- posits arc under the jurisdiction of tlu' State Bank Examiner and are subject to the same laws as banks. Tiiey must r«nder at least four re- ))orts each year to the Examiner. uj)on his call. .Such reports must give full statements of condition according io a pn scribed form as of any I)ast day specified by the Examiner, and nmst be published in a local paper within ten days. The Examiner nmst examine «ach company twice a year or oftcner. The companies are re(juired to k«ep an accurate list of the names and addresses of stockholders, and to send such lists to the Examiner on the first day of .July of each year. Checks may not be cer- tified unless the money for same is on deposit, and such checks nmst l>e charged at once. (Acts of 1898, |). 78. SMi)|)lement to th.- ( -mI. . ]<>o\, sections (ilj8- 0K)(). Acts of 1907, No. 8L) Hawaii. Trust companies are organized under the general laws, their p«)wers and limitations being defim-d by special acts relating to such corpora- ticns. The corporate name must contain the word "trust". It must be organized for the specific purpose of doing business as a trust company, and such objects must be expressed in its articles of association. The capital must be at hast .flOO.OOO. fully subscribed, and at least ."?.')(>,000 must bj paid in. No eorpc»ration not so organized may act in fiduciary capacities or use the words "trust" or "trustee" in its corporate name. Powers specified, in addition to ordinary corporate powers: To receive 100 TRUST COMPANIES. and hold and reconvey and dispose of any propert}'^, real and personal, which may be committed to it upon any trust or trusts whatsoever, from any source, including married women and minors, individuals, corpora- tions, courts ; to act as agents or attorneys in the management of prop- erty; to act as transfer agent, registrar, agents for buying and selling securities, managers of sinking funds; to act as executor, administrator, trustee, receiver, assignee, guardian, by appointment by will or by court; to loan money upon real or collateral security; to issue notes and debentures and to pledge mortgages and other securities as collateral therefor; to do a safe deposit business; to hold such personal estate as is necessary; to lease, hold, purchase and convey real estate as its cor- porate propert}'; to purchase, hold and sell stocks and bonds; to act as agents of insurance companies and security companies; to do a general trust and security business; "to transact as agents any other business or undertaking, trust, mercantile or otherwise which may be necessary, use- ful or conyenient to the main purpose of the corporation". But "Nothing herein contained shall be construed as giving the right to issue bills to circulate as money or to discount commercial paper, or to do a general banking business, or to do a savings bank business." Any Circuit Judge may require of any trust company which has been appointed to act in any fiduciary capacity bj' Hawaiian courts, a bond in an amount not exceeding .$r)0,000, conditioned for the faithful per- formance of duties arising from any such fiduciary appointment; and no further bond shall be required, unless the value of a single estate un- der its management is more than $50,000. Investment of trust funds are at the company's risk, unless they are such as the courts recognize as proper when made by an individual acting in like fiduciary capacity or are permitted by the instrument creating the trust. Trust companies are under the supervision of the Treasurer or the Auditor of the Territory. They must render and publish statements in January and July of each year, according to a schedule prescribed in the statute. The Treasurer of the Territory may at any time and in his discretion deputize a competent person to examine any trust company; and must have such examination made at any time upon written request of six stockholders or depositors, provided they deposit funds to cover the cost of the examination. (Laws of 1905, Acts 68 and 69; Laws of 1907, Act 76.) Idaho. Trust companies are organized under the provisions of the general incorporation laws. Five or more persons may incorporate. They must file articles of incorporation. The number of directors shall be not less than five, and each must own at least $500.00 par value of stock. Stock- holders have the right of cumulative voting. Trust companies are gov- erned by the provisions of chapter 92 of the Laws, as amended, which STATE AND TERRITORIAL LAWS. 101 relates to "trust, guarantee title, abstraet and saftty deposit eompanits." Powers specified, to do a title insurance business; to receive on deposit and in trust estates, both real and personal, and nianaj^e same; to act as trustee, assignee, receiver, guardian, extcutor, administrator and to ac- cept and execute "trusts of every description not inconsistrofits. The investments permitted inehide United States bonds; munici})al bonds of Idaho and of other States which have not defaulted on interest for three' ye-ars. but not more than 50 per centum of tlie ass'-ts may be invested in securities of any one State-, county or municijiality outside of Idaho; first mortgages upon property worth double the amount loane-d upon theiu; re-al estate witliin specified limits; eonunercial paper inider certain restrictions. The reserve re'- quired is 15 per centum, of whieli one-half may Im- on deposit with other banks or trust companies. The banking dej)artme'nts e)f trust companies are spe-eifieally made- subject to the regulations, examinations and reports required of all bank- ing institutions. They are under the supervision of the State Bank Com- missioner, M-ho must e-xamine them at least once a year, without previous 102 TRUST COMPANIES. notice. The Commissioner must call for at least two reports a year, and may call for not to exceed three additional reports. (Code 1901, chapter 92, sections 2.^532-2337; sections 2086 sqq.; Session Laws 1905, No. l67; Session Laws 1907, S. B. 93, page 545.) , , Illinois. Trust coihpanies *aVe incorporated under the general incorporation IftV?, tbtiti jiegiilgfed fey .'the provisions of the trust company law. If they wish to do both' a banking and a trust business, they are organized as banks, and qualify under the trust company law. Powers authorized, assignee or trustee by deed; executor, guardian or trustee by will; trustee, assignee, receiver, guardian, conservator, executor or administrator by appointment of court; the appointment as guardian or conservator shall apply to the estate only, and not to the person; depository for persons holding fiduciary appointments. Such corporations are not required to give bond or security, but are responsible for investments and are further liable tlie same as natural persons in like positions. They are required to pay interest on all trust funds, at a rate fixed by contract or ordered by the court. Their compensation may not exceed that allowed to natural persons for like services. Before accepting trust appointments or de- posits, each compan}^ located in a city of 100,000 or more inhabitants shall deposit with the Auditor of Public Accounts the sum of $200,000, and each company in towns or cities of less than 100,000 inhabitants shall deposit $50,000. Said deposits are for the benefit of creditors of the company, and shall consist of bonds of the United States or muni- cipal bonds of this State or first mortgages on improved and productive leal estate located in this State and worth at least twice the amount loaned thereon. If it appears to the Auditor that the value of the trust property held by any company exceeds ten times the amount of its deposit with the State, he must require such company' to increase its deposit to $500,- 000 if located in a city of over 100,000 inhabitants or to $125,000 if in a smaller city or town. The deposit may be reduced to the original amount when the Auditor is satisfied that the value of the trust property held has been reduced below ten times the amount of such original de- posit. Neither the deposits nor the loans of such a company shall at any time exceed ten times the amount of its paid-up capital and surplus. Trust companies are required to file with the Auditor, during the month of January of each year, a statement of condition as of Decem- ber 31 preceding. The information called for is detailed in the statute, and is very full. It includes a list and brief description of trusts held. The Auditor may at his discretion call for additional information, and for additional reports at any time. The Auditor must make an examina- tion of each company annually, and may make examinations oftener if he thinks best. The annual statements, in condensed form, must be pub- lished by the Auditor at the expense of the companies, once a week for statp: and territorial laws. los three consecutive weeks in two newspapers of general circulation, one printed in Springfield, and one in the county scit of the county in which the company is located. Trust companies which do a hanking business are, as above stated, organized under the hanking laws, and as to their banking departments are subject to the provisions of such laws. (Starr & Curliss' Annotated Statutes, 18y(i, chapttr Si, sections 89-107. Act of May 7. 1897. Act of April 24, 1899.) Indiana. Ten or more persons may incorporate a trust company. They shall file articles of association with the Secretary of Slate. The amount of capital shall be at least $100,()()() in cities of ovt-r .'»(),()()() inhabitants; at least $")(),()00 in cities of between 25,000 and .')().()()() inhabitants, and at least $2"),000 in cities of less than 2a,()()0 inhabitants. Maximum limit, $2,000,000. The capital must be divided into shares of $100 each. Where it does not exceed -t 100,000 it must hv fully paid. Stoi'kholders are subject to double liability. The directors shall numlwr not le.ss than six. Each must own at least ten shares of stock, and a majority must be citizens of the State. Powers specified, to hold real estatr and j>er.sonal property such as is necessary for the convenient transaction of its busi- ness, for the use and occupation of officers and employees and for the safe-keeping of its assets, deposits and j)roperty held in trust, and such as is acquired in satisfaction of debts; trust property may be invested in real estate only if the instrujnent creating the trust so specifies; to hold real or personal property in trust, however received and from whatever source — whether courts, corporations or persons — upon trusts created in accordance with the laws of the State and of the L'nited States; to ex- ecute trusts for married women in respect to their separate property, and to act as agent in the management of such property: to act as fiscal and transfer agent and registrar; to conduct a fidelity insurance busi- ness; to act as depository of the funds in charge of State, municipal or corporation officials or other officials or private persons; to act as trustee, assignee, receiver, administrator, executor, guardian of the person or es- tate of minors, guardian of the estate of lunatics, imbeciles, spendthifts. habitual drunkards or other persons disqualified «)r unable to managr their estates; courts are given authority to make such appointments, and no bond or security is necessary to enable a trust company to accept such appointments; to act as general agent and attorney in fact for public or private corporations or persons in the management of real estate and personal propertv; to receive, undrr specified conditions, trusts rrsigned by others; to receive savings deposits under the same regulations regard- ing repayment as savings banks; to invest deposits and trust funds at the discretion of the directors in such personal securities as are not hereinaft<-r expresslv prohibited, but special directions or agreements imposed by order 104 TRUST COMPANIES. of court, will, contract, etc., must be followed. .Trust companies are "for- bidden" to "engage in any banking, mercantile, manufacturing or other business, except such as is hereby expressly authorized"; provided that promissory notes, etc., made negotiable by the laws of the State when paj'able at a bank shall also be negotiable if payable at a trust com- pany- They shall not loan to directors, officers, agents, or employees, or allow them to become indebted to the company. Interest at not less than three per centum per annum shall be allowed on all trust funds of $100 or over remaining with the company uninvested for over six months. Such corporations are subject to the orders of courts committing trusts to them. Annual reports must be rendered to the Auditor of State, and the same must be published in a local newspaper. Corporations not or- ganized under the provisions of this act are forbidden to use the word "trust" in their titles. Sliares of trust company stock are to be assessed in the town or city where they are located, and taxed at the same rate as other property in the locality. Such companies must render to the local assessor, between ISIarch 1 and May 15 each year, a statement giving the number of shares and estimated cash value of same, less real estate or other tangible property at its assessed value. Foreign companies may operate after procuring a certificate of authority from the Auditor of State. Before such certificate is issued, certain statements and informa- tion must be filed with the Auditor, who must satisfy himself of the solvency and the safety of the company. Such corporation must deposit with the Auditor securities to the value of $25,000 to remain for one year; and thereafter must keep with the Auditor securities equal in value to the amount of its liabilities to citizens of the State. If the company becomes insolvent or fails to carrj'^ out its agreements, the Auditor shall revoke its authority to do business in the State and apply to the proper court for a receiver to take charge of the deposit above mentioned. Trust companies are under the supervision of the Board of Bank Examiners, who work under the direction of the Auditor of State. They are to be examined, thoroughly "as often as shall be necessary", no previous notice of the proposed examination being given. The fees for examination are paid by the companies as examined. (Acts of March 4, 1893, p. 344, Acts of 1893; March 6, 1899, p. 503, Acts of 1899; March 7, 1901; Feb. 24, 1899; Feb. 27, 1899; March 11, 1901; chapter 148, Laws of 1903; Acts of 1905, p. 199; Acts of 1907, chapters 83, 182, 281.) Iowa. Trust companies are organized under the general incorporation laws. There is very little legislation regarding such companies. Loan and trust companies are authorized to receive time deposits and issue drafts on their depositories. Such companies, organized under the general incor- poration laws, which were engaged in the banking business prior to Jan- uary 1, 1886, and have continued therein since that date, may become STATE AND TERRITORIAT. LAWS. 105 State banks. Trust companies are specifically uiade subject to the con- trol of the State Bank Examiners, who are appointed by the Auditor of State. They must have a full-paid capital of not less than $10,000 in towns of less than lO.OOO j)opulation. and not less than !f'.')U,000 in larger places. The bankinj; law, which applies to trust companies, requires such institutions to make quarterly reports to the Auditor of State, who also has power to examine them at his discretion. The stockholders are subject to double liability. (Code 189.'), section 188<): Laws of 1904, chapter S.";; Laws of 1906, cliapter 81; Laws of 19e sum may be increas«d to ^i() per centum. If the Inirrower is a directcr or officer of the company, lie sli.ill not he permitted to Ik?- come indebted to the company in excess of ten per centum of paid capital and surplus, uidess the excess t)e secured by mortgage or pledge of real or personal property double in value the amoinit of such excess. When acting in trust caj»aeities whose duties are regulated by law or .e invested at the dis- cretion of tht directors; the triist funds, under order of court or as pro- vided by law for the investment of other trust funds. Trust companies must make reports and be subject to examinations the same as banks; i. ('., reports shall be m.idt (inarterly. and each alternate report shall be published in a newspaper published in the county, if any, and which has the largest hotia fide circulation in the comity. (Statutes, l.QO.S, 5j^()()S-()n). I iws of 1})()|., chapter 7S I.iws of 1906, chapters -^^^J, K) and 1 Ki. Louisiana. Five or more persons may incorporate for the purpose of conducting a savings, safe deposit atid trust banking business. A certificate ot 108 TRUST COMPANIES. authority must be obtained from the State Examiner of State Banks, One-half of the subscribed capital must be paid in before commencing business, and the balance within ninety days. Powers specified, to have succession for a period specified in the articles of incorporation, not to exceed ninety-nine years; to have the other ordinary powers of corpora- tions; to hold real and personal property needed or convenient for the purposes of the association; the real estate that may be held is limited to such as is necessary for the proper transaction of the business and such as is acquired in satisfaction of debts, but the latter may not be held more than ten years; to accept and execute "trusts and agencies of any and every description which may be committed or transferred with their consent to them by any person or persons, corporation, board or body, public or private,"or by State or United States courts; to act as executor, administrator, syndic, receiver, curator, tutor, trustee or assignee, "in the same manner and to the same extent and under the same conditions that natural persons may be so appointed"; but as curator of an interdict or tutor of a minor, it shall have charge of the estate only, not of the person, and the commissions allowed by law shall be equally divided between the company and the persons having charge of the person ; to act as depository of funds held by persons or officers acting as fiduciaries; to do a banking business. Regarding the trust business that may be undertaken, it is to be noted that the constitution and laws of the State prohibit trusts, as they exist elsewhere under the common law ; and the trust company act spe- cially provides that nothing therein "shall be construed as authorizing the constitution of any agency or trust in this State which is contrary to the public policy of the State of Louisiana, or which seeks to place the propert}'^ of persons or estates in this State out of commerce, in con- travention of the laws of inheritance of this State, or of the prohibitionsi therein contained against f^^dei commissa and substitutions." There is no limit specified to the number of directors, but a majority of them must be citizens of the State. The capital of the company, where it acts in fiduciary capacities, is to be taken as the security re- quired by law for the faithful performance of duty; but the court may require other security. Money or property deposited by married women or minors is subject to their control. The company must keep a reserve of 25 per centum of its demand deposits. Of this eight per centum must be on the premises in cash. The remainder of the reserve may consist of deposits in other banks, or bills of exchange, or discounted paper maturing within not more than one year, or in State, United States or municipal bonds. The capital must be at least $100,000. Such companies have the powers and are subject to the regulations and liabilities of State banks. They may have branches within the limits of the municipality or parish. Trust funds may be invested in United States or State bonds, county, municipal and other public bonds of Louisiana and other States that are quoted at or above par and have not STATE AND TERRITORIAL LAWS. K..0 dcfault.cl in intrrtst tor two ytars; stocks of railroads, canals and other quasi-public corporations quoted at or above par and liaving paid interest at not less than four per centmn lor rive years; (»r in rirst mortgages on real estate apj)raised at double the amount of the loan and said mortgages runninj; not longer than ten years. Trust funds or pn>perty must not be included in the published assets of tin- company. Reports as of n si>eciried past day must bt made, on call of the State Examiner, four times a year, and must be publish, d in a local paper. Examinations are made by the same official, .it his discretion or on order of the Governor or the Courts. Loans to any one borrower, except loans on "good collateral or solvent endorsements," are restricted to 20 per centum of the capital, surplus and undivided profits. No loans may be made to officers or em))loyees, unless aj)proved l)y th«- Directors at a meeting at which tlie api)Iicant is not })r«sent. Before declaration of a dividend, one-tenth of the jjrorits must be added to the surplus until the latter equals '20 per centum of the capital. Dividends nuist be earned during the dividend })eriod. unless the undivided j)rofits are enough to pav the dividend and all losses. All loans, discounts, ovirdrafts and other debts ])ast due more than twelve months, and on which interest has not Ix-en paid, must be classed as bad debts, and be either charged off or reduced in value after an a])praisement by the Bank Examiner and two stock- holders, before a dividend is declared. (Laws of LOO'i. Act No. 45. Act No. 179; Laws ipoL Act No. 10; Laws 190(), Act No. IK); Laws of 1J>0H. Acts 188. '2."»1. 288.) Maink. L'ntil late in the year 19*^7. trust companies in this .State were in- corporated only by special acts of the Legislature, their powers In-ing derined in such special charters. They may now be incorporated under tfie provisions of the elaborate trust company law, approved .March 21, 1907. The number of corj)orators required is rive or more. The powers speciried are to receive deposits and to allow interest thereon ; to Uirrow money; to loan money on credits or real estate or personal security, and to negotiate loans and sales for others; to do a safe depdsit business; to hold and enjoy real or personal or mixed property; to act as transfer agent or registrar; to execute trusts of every description and to hold proj)erty in connection therewith ; to act as assignee, receiver, executor, "and no surety shall be necessary upon the bond of the corporation, un- less the court or officer apjjroving such bond shall require it"; "to do in general all the business that may lawfully be done by trust aiul banking C(.)mj)anies." Capital required, $2;}.0()0 in a town of not more th.an five thousand inhabitants; $;)0,()00 in cities of from five to ten thousand inhabitants; .i<7.").000 in cities of from ten to twenty thousand in- liabitants; ij^l 00.000 in cities of from twenty to thirty thousand in- babitants; .*1.")0.000 in larger cities. The shares must have a par value of .f 100 each. No stock shall be issued until its jiar value has been paid in in cash. no TRUST COMPANIES. The number of directors shall be at least five, two-thirds of whom must be residents of the State, and each of whom shall own at least ten shares of stock. The stockholders may at their option elect from the Board of Directors an Executive Committee of not less tlian five mem- bers. The Board of Directors or the Executive Committee shall con- stitute the board of investment of the company, and shall keep records of all loans and investments, which record shall be submitted to the directors, stockholders and bank examiner. A separate trust department must be maintained, and all trust moneys and property be kept separate. Persons holding fiduciary appointments may deposit their funds or securities with a trust company. Loans to one person, firm, business syndicate or corporation may not exceed ten per centum of the total capital, unimpaired surplus and net undivided profits, "except on approval of a majority of its entire investment board, unless secured by collateral, nor in excess of 25 per centum there- of, except on such approval and secured by collateral which in the judgment of said majority of said investment board shall be of a value equal to the excess of said loan above said 25 per centum;" pro- vided, that in determining said amount every name appearing on any loan as endorser, guarantor or surety shall be regarded as an original promissor. Bona fide discounts are not regarded as money borrowed. In all cases where loans in excess of ten per centum are granted, the records must show who voted in favor thereof. Loans in any form to officers, directors or employees may be made only after approval of a majority of the board of directors or executive committee, and the names of those voting for such loans shall be spread upon the minutes. The applicant for the loan or anj'one associated or connected with him may not be regarded as voting for the loan. Trust companies are required to make and publish reports as directed by the bank examiner. Annual examinations by two of the directors, under the direction of the bank examiner, are required. Branches may not be established outside the city or town in which the company is located, without special warrant from the bank examiner, and in any event a trust company may not establish branches outside of its own and an ad- joining county. Every director, officer, agent or emplo3'e who authorizes. or assists in procuring, granting or causing the granting of a loan in vio- lation of the law as stated above relating to loans to directors or officers, every director who votes on same, and every director, officer, agent or employee who wilfully and knowingly pays out funds or permits or causes same to be done on loans in violation of said provisions, "shall be personally responsible for the payment thereof, and shall be guilty of a misdemeanor". For purposes of taxation, trust companies are required to make re- turns to the State assessors semi-annually. Money deposited in trust companies by minors or married women is subject to their order. Such corporations are forbidden to act as administrator or guardian, anything STATE AND Tl'KUlTOUIAL LAWS. m in their charters to the contrary notwithstanding. Thtv must keep a reserve of 15 per centum of aggregate deposits payable on demand or Avithin ten days. The stockholders are subject to double liability. The laws of this State relating to "trust and loan associations" do not refer to trust companies, but to building and loan associations. (Revised Statutes, chapter 4f); Laws 188y, chapter 31 '2; Laws 1893, chapters i^81 and 293: Laws 189-'^, chapter 48; Laws 1897, chapters '218, 247, 259; Laws 1899, chapter (j8 ; Laws 1901, chapters 19(j, 286; Laws 1905, chapter 171; Laws 1907, chapters 96, 119.) >L\RYLAXU. Trust companies in this State are incorporated only bv special act of the Legislature. There was formerly a general law for the incorpora- tion of such companies, which was repealed in 1890. (Chapter 272, Laws of 1890.) The special charters define the powers and duties of such companies, which are usually quite full. The only general laws ap- plying to trust companies now are those designed to regulate and control same. They are required to make semi-annual reports as of June 30 and December 31, to the Treasurer of the State. The statutes specify the matters to be covered in the reports, but the Treasurer of State may call for additional information, and for additional reports. They are subject to an annual examination by the Treasurer or his appointee, the items to be covered in the examination being specified by the statute. If a com- pany be found unsafe, the Treasurer shall report to the Attorney-Gen- eral, who shall institute proceedings. Trust companies are required to deposit with the State Treasurer, to be held by him in trust as security for creditors, securities equal in value to 15 per centum of the })aid-up capital, and not less than $30,000 in amount. Neither the deposits nor the loans of the company shall be allowed to exceed ten times the paid-up cipital and surplus, "but any such corporation authorized to receive court deposits may at any time receive on deposit and loan out any money which may be deposited with it by order of any of the courts of this State notwithstanding such limitation." The stockholders are subject to double liability. The Treasurer of State is required to report to the General Assembly at each regular session the condition of all trust com- panies. (Acts of 1892, chapters 109, 279; Acts of IfJOS. p. Ml) >LASSACHrsETTS. Trust companies, which in this State were formerly incorporated only by special act of the Legislature, may, by an act passed in >Liy, 1904, be incorporated under the general law. Fifteen or more persons may incorporate. Notice of intention to organize a trust company must be given to the Board of Bank Incorporation, consisting of the Bank 112 TRUST COMPANIES. Commissioner, the Treasurer and Receiver-General, and the Commissioner of Corporations, and must be published. The procedure for organization is set forth at length in the statute. No shares of stock shall be issued \intil the par value thereof is paid in full in cash. The amount of the capital shall not be less than $200,000, nor more than $1,000,000; except that in cities or towns of a population not greater than 100,000 the capital stock may be not less than $100,000, divided into shares of $100 each. When the entire capital stock is paid for and issued, a list of stockholders with addresses and number of shares held must be filed with the Board of Bank Incorporation, who, if satisfied that the law has been complied with, issue a certificate authorizing the corporation to begin business. No corporation not duh^ authorized may advertise business as a trust company. OlHcers of the corporation shall be sworn to the faithful performance of their duties. Each director must own at least ten shares of unpledged itock, and a majority of them must be citizens and residents of the Commonwealth and not more than a third may be directors in any other such corjDoration. The books of the company must at all reasonable times be open to the inspection of stockholders and beneficiaries under trusts. Trust companies in Boston must keep a reserve of 20 per centum of aggregate deposits less time deposits not payable within thirty days: trust companies elsewhere in the State must keep reserves of 15 per centum. Two-fifths of the reserve must be in cash on hand. The re- mainder may be on demand deposit with Boston trust companies duly authorized as reserve agents, or with National banks in Massachusetts or in the cities of New York, Philadelphia, Chicago or Albany. A por- tion of the reserve not exceeding one-fifth may consist of bonds of the United States or of Massachusetts: provided, that the aggre- gate cash reserve must always equal five per centum of the total time and demand deposits, exclusive of deposits in the savings department. Any Boston trust company may be authorized by the Bank Commissioner to act as reserve agent for other trust companies in the state. Such re- serve agent trust companies must keep one-half of their reserves in cash, and the balance may be on demand deposit with other Boston reserve agent trust companies or with the National banks above described. Powers specified, to receive on deposit, storage or otherwise, money. Government securities, stocks, bonds, coin, jewelry, plate, vajluable papers and documents, evidences of debt, and other property of any kind; to collect and disburse income or principal; on deposits of money so received it shall not give collateral or other security; to advance money on credits on real property in the State or on personal security ; to invest in stocks, bonds or other evidences of indebtedness of corporations ; but *'no trust company shall advance money or credits upon notes secured by deed of trust or by mortgage upon farms or agricultural or unimproved land outside of this Commonwealth, except upon land situated in the New England States or the State of New York, nor invest in nor make loans upon securities of a company negotiating or dealing in such notes STATE AND TKRUITORl AL LAWS. 113 sc secured or in such mortgages"; and "no trust company shall as agent, buy, sell or negotiate securities or evidences of debt on which said company may not lawfully advance money or credits, nor as such agent buy, sell or negotiate evidences of debts secured by real estate under mortgage or deed of trust"; to act as depository of court and trust funds; if court funds remain unclaimed for a prriod of more than ten years, the court may upon motion of the Attorney-General order same to be paid to the Treasurer and Receiver-Gcn«ral to hold for the owners; to act as executor, administrator, receiver, assignee, guardian, conservator or trustee "under the same circumstances, in the same manner, and subject to the same control by the court having jurisdiction of the same, as a legally qualified person"; any such api)ointment as guardian shall apply to the estate and not to the person of the ward; to act as transfer agent, registrar, fiscal agent, trustee under l)ond issues. Trust funds may be invested only in authorized loans of the United States, or of any of the New England States. Illinois, Iowa, Michigan, Minnesota or Wisconsin, or the cities or counties thereof, or stocks of State or National banks or- ganized within the Commonwealth, or in the first mortgage bonds of a railroad incorporated in any of the New England States and whose road is located wholly or in part in the same and which has earned and paid regular dividends on all its stocks for two years, or in the l)onds of any such railroad comi)any unencumbered by mortgage, or in first mort- gages on real estate in this Commonwealth, or in any securities in which Savings banks may invest, or upon notes with two sureties of domestic manufacturing corporations or of individuals with a sufficient pledge as collateral of any of the aforesaid securities; but real estate acquired by foreclosure, etc., shall be sold at public auction within two years. The capital and liability of stockholders shall l>e held as security for the faithful performance of duties in trust capacities, and no surety shall be required upon bonds filed by such corporations, except that the court may at its discretion, upon application of interested parties, re- quire additional security where the company is by it appointed as ex- ecutor, administrator, receiver, assignee, or guardian. The company must be governed in the matter of investment of trust funds by the directions, if any, of persons creating trusts. A trust department must Ix" main- tained for the purjwse of keej)ing separate the trust funds and property and the accounts thereof. If savings dcjwsits are received, a separate savings dejjartment must l>e maintained, whose assets shall N' apj^ro- priated solely to the S'^curity and ])ayment of such deposits, the accounts and transactions of the department bt'ing kept separate. Ninety days* notice may be required for withdrawals in this department. Trust com- panies chartered subsecjuent to May '21. 18<)(). must annually set apart ten per centum of net earnings to a guaranty fund until same equals 2'> per centum of the capital, which fund shall be invested in the same manner as deposits in Savings banks may Ik- invested. \\'ith companies S 114 TRUST COMPANIES. chartered prior to that date, the creation of such guaranty fund seems to be optional, but the fund once established must be maintained as long as trust undertakings remain unfinished. The guaranty fund shall be ab- solutely pledged for the faithful performance of trust duties, and trust creditors have in addition thereto an equal claim with other creditors upon the capital and other property of the corporation. Stockholders are subject to double liability. No such corporation shall loan upon its own stock, or purchase same, except to prevent loss upon a debt pre- viously contracted in good faith, in which case the stock shall within six months be sold at public or private sale. The total loans to one person or firm shall not exceed one-fifth of the paid capital and surplus, where the capital of the com.pany is $50,000, or over, nor one-fifth of the capital of companies with a smaller capital; but bona fide discounts shall not be considered as money borrowed. Such corporation may hold real estate unencumbered by mortgage, for its use, to an amount not exceed- ing 25 per centum of its paid capital, and in no case exceeding $250,- 000; but investments legally made prior to April 18, 1894, need not on this account be changed. Branch offices for receipts of deposits, payment of checks and transacting a safe-deposit business, only, to be conducted in the same city where the main office is located, but not elsewhere, were formerly permitted; and may be continued, if heretofore authorized: but after January 1, 1909, a trust company may be authorized to have one such branch only. Reports must be made on call of the Bank Com- missioner, not exceeding five times within any calendar year, giving full information detailed in the statute. For purposes of taxation, they render an annual report in May. Such companies are subject to exami- nation by the commissioners the same as Savings banks; i. e., annually and whenever the commissioner deems it wise. The stockholders of every trust company are required to elect each year an examining committee of three stockholders who are not members of the executive or finance committees, nor the president, vice-president, secretary or treasurer of the company. At least once a 3'ear, without previous notice to the officers or directors, this committee must make or cause to be made a thorough examination of the company's aifairs. Within ten days after the comple- tion of the examination the committee must report to the bank commis- sioner, giving the assets and liabilities, including those of the trust de- partment, and such other information as the commissioner may require. The report must also be read to the directors and to the stockholders at their next meetings. If the commissioner thinks it necessary after re- ceipt of the report he may require a special examination by an expert, at the company's cost. (Revised Laws, chapter II6, including amendments to 1902; Acts 1902, chapter 855; Acts 1904, chapters 200, 374; Acts 1905, chapters 189, 228, 331; Acts 1906, chapter 204; Acts 1907, chapters 319, 320, 417, 487. Acts 19O8, chapters 116, 520.) STATE AND TERRITORIAL LAWS. n:. Michigan, Sev( n or more ptrsons may iiuorporate to carry on a "trust, dejwsit and security business. " Articles of association must be executtd in triplicate and filed. The capital must be at least $300,000 in cities of 100,000 inhabitants or more, and at least .*I;JO,()00 in smaller places, and may not exceed .f. '5,000, 000; .^O per centum must be |)aid in at the stiirt and the balance within six months. Before the company bej^ins business, ;":0 per centum of the capital, but not more than .*'.iOO,000 in amount, in securities, must be deposited with the State Treasurer. The number of directors must be seven or more, and each must own at hast ten shares of stock. Before a dividend is declared, one-tenth of the net profits must be e;irried to surplus fund, until it ecuials v»() j>er centum of the capital. Powers specified, to hold real and personal property in trust; to execute trusts for married women and minors; to administer court trusts; to act as agents or attorneys for the transaction of business, the management of estatis, the collection of inconie. principal, etc.; to act as fiscal agent, transfer agent and registrar; to act as executor, admin- istrator, trustee, receiver or assignee, guardian of any minor, incompetent person, lunatic, or any person subject to guardianshij), courts being au- thorized to make such appointments; excejjt in the discretion of the court, trust companies acting in these caj>acities need not be required to give security other than the deposit with the Stat«- Treasurer; to loan upon real and collateral security ; to issue its notes and debentures pay- able at a future date; but nothing herein contained shall be construed as giving the right to buy and sill bank exchange, or do a general banking business; to do a safe-deposit business; to become sureties in cases where, by law or otherwise, one or more sureties are recjuired, except as surety on any recognizance for criminals; to do a title insurance business. Such companies may hold real estate needed for the transaction of business, including with the business office, other apartments in the sanje build- ing to rent as a source of income, and such as is acquired in the settle- ment of debts; but the latter shall not be reckoned as an asset for longer than five years. They may hold real estate in trust. They must keep a reserve of 20 per centum of "matured obligations and money due and payable." Qf this three-fourths may be ke])t in any bank or trust com- pany approved by the Conunissioner of th«- Banking Department. The securities to be deposited with the State Treasurer shall consist of lH>nds secured by mortgages, or notes and mortgages on unincumlHred real estate in Michigan, worth double the amount secured thereby, or public stocks and bonds of the L'nited States, of Michigan, or of any State of the United States that has not defaulted on principle or interest for ten years, or in duly authorized issues of counti<-s, townships, school districts and munici]).-ilities in such States. The directors may invest the balance of the capital, and moneys received in trust, in the same securities. " or in such real or personal securities as they may deem proper." The 116 TRUST COMPANIES. stockholders are subject to double liability. Reports must be rendered quarterly or oftener, at the call of the Commissioner of the Banking Department. Such reports must be published in a newspaper. Reports must be made within ten days after each dividend, giving amount of dividend, amount carried to surplus, and net earnings in excess thereof. Such corporations are under the supervision of the Commissioner, and must be examined by him annually and when requested by the directors. If an unsafe condition is revealed, the Commissioner and the Attorney- General institute proceedings for the appointment of a receiver. The records of the stockholders must be open to inspection by directors, offi- cers, stockholders and the creditors of the company. Chapter 240, Acts of 1907, provide for "safety and collateral deposit companies", having power to do a safe deposit business and certain limited trust business. (Compiled Laws 1897, Chapter l62, §§6156-6189. Acts 1897, No. 106. Acts 1907, No. 240.) Minnesota. Three or more persons may incorporate "annuity, safe deposit and trust companies." The name adopted must be such as to be not readily confounded with that of an existing corporation; and corporations not organized under the trust company laws are forbidden to advertise a trust business. The capital shall be not less than $200,000, and not more tlian $2,000,000, divided into shares of $100 each. No business may be transacted until at least $200,000 has been actually paid in, in cash, and at least one-fourth of its capital has been invested and the securities so obtained assigned to and deposited with the Treasurer of State. The securities in which this deposit may be invested are bonds of the United States or of any State therein, bonds of the cities of St. Paul, Minne- apolis, or Duluth, and in certain other municipal bonds, county, school district and railroad bonds described in the statute. These securities are held by the Treasurer as a guaranty fund for depositors and credit- ors and for the faithful discharge of duty. Other like securities may be substituted from time to time. The income of same goes to the cor- poration making the deposit. The number of directors of such a cor- poration may be from nine to twenty-seven; a majority of them must be citizens of the State, and each must own at least ten shares of stock. Each director serves three years, one-third of them retiring each year. Directors are required to take an oath of office. The powers specified for such corporations are the ordinary powers of corporations, and in addition, to hold real estate necessary for the convenient transaction of its business, and such as is acquired by fore- closure, etc. ; but no investments may be made in real estate, either of the funds of the company or of trust funds, unless by virtue of a particular contract with the maker of a trust; to loan on mortgage security; "to purchase notes, bonds, mortgages and other evidences of indebtedness and other securities"; to hold real or personal property in trust; to receive STATE AND TERRITORIAL LAWS. ij? trusts from courts, from public- or private rorporatioiis or rn)in p.rsons; to execute trusts for married women with respect to th« ir separate estates; to act as fiscal and transfer ajjent and registrar; to act as depository for court funds, for officers and for persons acting' in trust capacities; to act as trustee, assignee, receiver, executor, administrator, guardian of the person or estate of minors, guardian of the estate of any lunatic, imbecile, spendthrift, habitual drunkard or otlur person unable to manage his estate; the courts are authorized to make- such appoint- ments, and no bond or other security lueel be- recpiired of the- corpe)rn- tion; to act as general agent and attorney in fact for the- management of estates, "and generaliy te) act for and re-pre-se-nt ce)r])oratieins or per- sons under powers and letters of attorney in all respe-cts as a natural person could do"; and to bece)me sole surety upon any Umd or under- taking in suits or special proceedings in courts. Persons holding tidii- ciary ajipointments may resign in favor of a trust company. Trust funds of -tlOO or o\er must be in\ested within a year in the- same kinds of securities as the)se specified for the deposit with the Treasurer of State, and such securities must be allowed by the- jirobate court in settle- ments. Trust funds and accounts must be ke-pt separate from other funds and accounts of the corpe)ration ; securities purchased with trust funds must be endorsed to the company as trustee-, etc. Orders of courts or agreements regarding the investment of trust funds must Ik- fedlowe d. "No such corjwration shall engage in any banking, me-rcantile, manufac- turing or other business, except such as is hereby expressly authori/effice-rs e)r e-mjjloyees, nor shall they be allowed to be-come indebted to the corporatie)n in any way ; and viola- tion of this is made the crime of e-mbezzleme nt. Such companie-s are- at all times subject to further orders from the courts appeiinting them to trusts, and must render statements to such cenirts when called for. They arc subject also to the gene-ral jurisdiction of the- district court of their county. Tlit-y must render statements .-Minually in June to the Public Examiner, and have same publisheel in a newspaper, with a list of sttx-k- holders, and give additional informatiein when called for by the Ex- aminer. The Public Examiner nuist examine- every such company each year or oftener. If he finds an unsafe ce)nditie»n, he may take charge- at once of all the aff.iirs and jiroperty of the- ce)mpany. and apply to the proper court for a receiver. Such companie-s are forbidden to make an assignment, but must notify the Examiner instead. Inautheirized eem- cerns may not use the word "trust" in titles. (Revised Laws, 1J)()"), Chapter .•)8, !jJi.S().S.S-.S()17. 55'-i« ^7 -lud Js-J'/TS. Laws of 190"). Chapter H>. Laws of 1})(>7, Chapte-r '24->.) MiSSISSIPIM. Trust ce)m)).-'ni in respect to their sejjarate property, and to act as agent for the manage- ment of such property, "and generally to have and exercise such powers as are usually had and exercised by trust companies" ; to act as executor, administrator, guardian or curator of any infant, insane person, idiot or habitual drunkard, or trustee for any convict in the jjenitentiary, under the appoin.tment of any court of record having jurisdiction; to do a fidelity insurance business; to do a title insurance business; to loan money upon real estate or collateral security, and to execute and issue its notes and delxMitures payable at a future time, and to pledge its mortgages on real estate and other securities as security therefor, but such notes and debentures may not exceed in the aggregate ten times the paid-up capital, and may not exceed the amount of first mortgages pledged to secure their payment; to buy and sell all kinds of Govern- ment, State, municipal and other bonds, and all kinds of negotiable and non-negotiable pajK-r, stocks and other investment securities. Trust com- panies must maintain a reserve of 1;5 per centum of demand deposits, en hand or on deposit. Deposits on which the company has the right to demand twenty days' notice are not to be considered demand dejM>sits. Before a dividend is declared, one-tenth of the earnings must U- car- ried to surplus until the latter equals "iO per centum of the capital. The amount of cajjital shall be not less than $100,001). and not more than $10,000,000. The number of directors shall be not less than five nor more than twenty-five; all of them must be stockholders, and a majority of them must be bona fide citizens of the State. If the number of directors ex- ceeds five, they shall be divided into three classes, so that one-third of the number shall retire each year, the term of each member being three years. They may invest moneys })laced in their charge in loans secured by real estate or other sufficient collateral security, in jiublic bonds of the L'nited States or of this State, or in the IxmuIs or stocks of any incorporated city or county in this State. The directors must meet at least once a month. Their written records must show the aggregate indebtedness of each director, and no one of them may borrow in excess of 10 per centum of the capital and surplus without consent of a majority of the others. 120 TRUST COMPANIES. Loans may not be made on the compaiiy's own stocky except to pre- vent loss on debts previously contracted in good faith, in which case the stock must be sold within six months. A trust company may own only such real estate as is required for the transaction of its business, and such as is acquired in satisfaction of debts due it. Upon making with the Superintendent of the Insurance Department a deposit of .$200,000, consisting of cash. Treasury notes of the United States, or Government, State, county, municipal or other bonds, or bonds, jiotes or debentures secured by first mortgages, or deeds of trust or mort- gages, or deeds of trust on unencumbered real estate in the State of Missouri, worth at least double the amount loaned thereon, or such other first-class securities as the said Superintendent may approve, and upon satisfying said SuiJerintendent of its solvency, any corporation organized under this act shall be permitted to qualify as guardian, curator, exec- utor, administrator, assignee, receiver, trustee by appointment of court or under will, or depositar}' of money in court, without giving bond as such, and also to become sole guarantor or surety upon bonds and to do fidelity insurance business. Such deposit shall be primarily liable for obligations of the company due to fts acting in the capacities named. Trust companies are under the jurisdiction of the State Banking Department, who must examine each company at least once a year and oftener if it seems expedient. The stockholders are also required to ap- point a committee of three or more of their number to make an annual examination. (Annotated Statutes, IpOfi, Chapter 12, Article XII, sections 1424- 1439; Article VIII, sections 130.S-1311; — as amended by Senate Bill No. 143, Acts of 1907, pages 134 sqq., approved March 18, 1907.) Montana. Three or more persons may incorporate to carry on a "trust deposit, security and loaning business." Articles of agreement must be filed with the Secretary of State, and a copy with the county recorder of deeds. The term of existence of the corporation ma}' not exceed fifty years. The capital must be not less than $100,000 nor more than $10,000,000. The number of directors must be not less than three nor more than twenty-five; all must be stockholders, and a majority must be hona fide citizens of the State. If their number exceeds five, the term of office of each shall be three years, and one-third shall retire each year. Powers specified, to receive moneys in trust; to accept and execute trusts of every description committed to them by persons, corporations or by order of courts; to hold any real or personal estate in trust; to execute or guarantee any bonds required to be given in proceedings in law or equity; to act as agents for the investment of money; to act as transfer agent or registrar; to execute trusts for married women in re- spect to their separate property, and to manage same, "and generally to have and exercise such powers as are usually had and exercised by trust STATE AND TKRIilTOHlAL LAWS. \2l companies"; to act as trustee, assignee, ree«iver, administrator, exeeutor, guardian of the pt rson and estate of any minor, or of the estate of any lunatic, imbecile, spendthrift, habitual drunkard or other persons unable to manage their estates; to do a fidelity insurance business; to do a title insurance business; to loan money upon real or personal security; to itsue its notes or debentures jjayable at ri future tinu-, and to pledge its mortgages upon real estate or other securitits as security therefor; to buy and sell (lovernnient, State, county, municipal and other bonds, and all kinds of negotiable, non-negotiable and counnereial paper, stocks and other investment securities; to become endorser and surety; to receive both time and demand dej)osits; to do a safe deposit business. The directors are authorized to invest the capital "in good securi- ties"; and the capital and funds entrusted to the company may be in- vested in notes or bonds and mortgages on unincumlH-red real «state in the State, or in stocks and bonds of this State or any State or Territory of the United States, or in the bonds of any county, city, town or school district of this State. Such cori)oration may own only such real «state as is required for the transaction of its business and such as is accjuired in the settlement of debts due it. Loans to any managing officer are forbidden exc«'pt upon good col- lateral or other good and specific security ; and where such a loan ex- ceeds 10 per centum of the capital it nnist first be approved by a m.:j«)rity of the Board of Directors and be entered with their signatures upon the minutes. Loans to any one party, — bona fide discounts excepted. — must not exceed 20 per centum of the capital and surplus. Stockholders art subject to double liability. The reserve required is fifteen per e«ntum of the total deposits, "of which such portion as the B«>ard of Directors may determine" may be on deposit in banks in cities of the first and second classes approved by the State Kxamin«T as reserve banks. The reserve banks are required to maintain a reserve of -2'> })er centum, which may be in lawful money or on deposit with banks subject to the approval of the State Examiner. The use of the terms "trust" and "trust com- pany" in titles is forbidden except to regularly organized trust com- panies. Foreign companies may operate in the State under conditions detailed in the statutes. The Laws of 190.'). page '2 Hi, provide for the organization of "Endowment and Investment Corporations", which have some of the powers of banks and of trust companies. The State Examiner is required to call for not less than four reports each year from trust companies, at intervals of not less than two calendar months; the reports to be according to a form prescribed by him and to be published in local papers. The directors are authorized to «hclarc semi-annual dividends; and reports of dividends must be forwarded to the State Examiner within ten days after same are declared. The direc- tors are personally liable for violations of the law. (Code ISQr). paragraphs 590-611. Act of March 15. l})t)l. Laws of 1905, Chapter 19- Eaws of 1907, Chapters 137, 159, l6J, 190.) 122 TRUST COMPANIES. Nebraska. This State has no statutes relating to trust companies. Paragraph •2081 of the Compiled Statutes (chapter l6, section 123), provides that "any number of persons may be associated and incorporated for the transaction of any lawful business." Nev\i)A. This State has no statutes relating specifically to trust companies. The general incorporation laws provide (Laws of 1903, chapter 121) that three or more persons may incorporate for the transaction of any lawful business, except to carry on within the State an insurance busi- ness, or that of a siirety company, or that of a railroad company other than a street railroad. Such a corporation has, in addition to certain •specified and ordinary powers of corporations, 'the powers expresslj'^ g;iven in its articles or certificate under which it was incorporated." Chapter 119, Statutes of 1907, creates a Board of Bank Commissioners. Trust companies are apparently subject to the control of this Board if ihey do a banking business, but are not mentioned in the act. New Hampshire. Trust companies, as well as banks, are incorporated only by special .act of the Legislature. The powers of such corporations are enumerated in their charters. There are a few general laws regulating the business of trust companies. For purposes of taxation, they are required to re- port to the State Treasurer annually, on or before May 1. The company must pay to the same official annually, in October, a tax of three-fourths of one per centum upon the amount of the general deposits on which it pays interest, after deducting the value of its real estate and the value of its loans secured by mortgage on real estate in the State made at a rate not exceeding five per centum per annum; and in addition a tax an- nually of one per centum upon the capital stock, less the value of all real estate owned by the corporation and not already deducted from the amount of the general deposits as hereinbefore provided. Such taxes nare in lieu of all other taxes against the corporation, their stockholders and their depositors on account of their interests therein. Trust com- panies are under the supervision of the Bank Commissioners, who are required to examine them annually, or oftener when so directed by the Governor. If unsafe conditions are revealed, the Bank Commissioners may apply to the supreme court for the a^apointment of an assignee to iake chjirge of the institution. Trust companies- are forbidden to make loans to officers or directors except b\' the unanimous approval of the Itoard of directors in writing. If the company transacts the business of a Savings bank, such business must be conducted in a separate depart- ■ment, which is amenable to the laws governing Savings banks, and the STATF. AND TKIUUTOUIAL LAWS. 123 Treasurer of tiie eomp-my shall (rhr .i Ik.irI to the savings department in like manner as is refiuired of tiie treasurers of savings banks. Trust companies are forbidden to eommenee business until they have satisfied the B.mk Commissioners that their eai)ital has Iwen paid in in accordance with the i)rovisions of their ehart»rs. The nianaj{»inent of such com- panies shall consist of a board of trustees or directors elected annually, who must be sworn to the faithful diseharsfe of their duties, and one of whom shall be elected President of th«- company. Such Iward shall elect an investment committee of not less than time of its menib«rs. The board must meet at least once each month, and receive the report of the investment committee. Each director must lu- the absolute owner of at least ten shares of stock: or of at least five shares if the capital stock does not exceed $.")0,000. A trust company ujay not 'hire" money or give its note except on the duly recorded vote of the directors. The directors are required to make a semi-annual examination of the company, forward reports of such examinations to the Bank Commissioners, and publish copies of same in a local newspaper. I'or the record of loans and invest- ments, trust companies must keep n separate lH>ok, M'ith classifications as required by the Bank Commissioners, which book nuist l>e submitted to llie Commissioners or the directors at each examination. The Treasurer of the company must report to the Bank Commissioners the condition of the company annually as of the last business day of June. Officers and employees are forbidden to receive any fee. present or benefit from bor- icwers as an inducement to make loans. Trust couipanies are forbidden to loan to one person, firm or corporation an amount in excess of ten per centum of their capital, or to hold, both by way of investment and security for loans, the stock and bonds of any corporation to an amount in excess of said ten per centum, or to make loans on th«'ir capital stiH-k. (Laws of 18.9"», chapters 90, .02, 105 and lOS; Laws of 1899, chap- ter 1 i; Public Statutes, chajiter f)5, i\-2, and ch.apters l(r2. \63 and l65, passim.; Laws of 100"), chapter 1*2.) New Jkrsey. The laws of this State rejjarding triist companies were carefully re- vised in 1899. •i"d the Trust Company Law of that year is quite elabo- rate. Seven or more persons "of fidl age" may incorporate a trust com- pany. The name of the company must contain the word "trust", and no company incorporated under any other act may use such word in its title. The capital must be at least $100,000 fully paid, divided into shares of $100 each. .More than one class of stock is forbidden. The proceedings for incorporation are specified in detail. In addition to the usual corporate jjowers. such a company, "whether sjch powers are set forth in its charter or certificate of incorjM^ration or not," shall have power: To act as fiscal or transfer agent, and in ."5uch capacity to recei\e and disburse money: to act as registrar; to act as 124 TRUST COMPANIES. agent for corporations, foreign or domestic; to receive deposits of trust moneys, securities and other personal property; to loan on real or personal- security; to hold such real estate as is necessary or convenient for the transaction of its business, or as its purposes may require, and such as is- acquired in the settlement of debts due to it; to act as trustee under a mortgage or bond issue, "and to accept and execute any other municipal or corporate trust not inconsistent with the laws of this State;" to exe- cute trusts for married women in respect to their separate property and to be their agent in the management of same; to act under appointment of court as guardian, receiver or trustee of the estate of any minor, and as depository of any moneys paid into court; to receive and execute court trusts; to manage estates; to receive and execute trusts of any nature or description confided to it b}'^ persons, bodies politic, corporations or other authority, and to hold any property or estate, real or personal, that may be the subject of any such trust; "to purchase, invest in and sell stocks, promissory notes, bills of exchange, bonds and mortgages and other se- curities", but "no corporation created under this act shall have power to discount commercial paper"; to give its bonds or obligations for moneys or securities for moneys borrowed or received on deposit or for invest- ment; to act as assignee or trustee under an assignment; to act as re- ceiver or trustee ; to act as executor, administrator or as committee of the estates of lunatics, idiots, persons of unsound mind and habitual drunk- ards; to do a safe deposit business, a title insurance business, a fidelity insurance business, and to become sole surety in cases where by law twa or more sureties are required, proA'ided such poM'ers are enumerated in the certificate of incorporation; to collect coupons or interest on securi- ties; to receive and manage any sinking fund; "generally to execute trusts of every description not inconsistent with the laws of this State or of the United States"; to receive money on deposit subject to check or otherwise. Trust companies are forbidden to make loans upon bills, notes or other evidences of debt, except to a county, city, town, township, borough or municipality of this State, unless the same shall be secured by mortgage upon lands or by other securities, the actual market value of which other securities shall at all times exceed by at least ten jDcr centum the amount loaned upon the same. Funds or property held in trust must not be mingled with the other funds or property of the com- pany. Such a company may not be appointed to act as assignee, receiver, tidministrator, guardian or trustee by any surrogate or court of the State, until it has set apart a fund specially devoted to securing its liabili- ties in such capacities of trust and confidence, invested in securities of the character in which trust funds may by law be invested, and has de- posited such securities with the register of the prerogative court. This fund must be equal to at least one-fifth the amount of the liabilities for which the fund is especially responsible, unless the fund equals or ex- ceeds $100,000 — in -which case it must be equal to at least one-tenth of STATE AX!) TKKUITDKIAI. LAWS. l^r, «i3ch liabilities. However, Hie creation of this fiii'd is not requirtd when the trust company gives security in the manner prescribed by law in such behalf for natural jjcrsons, or in cases where the trust company shall have been appointed as executor or trustti- by anv will or d.-id. If the deposit be made, no other security shall be required. A list of stockholders of record nuist be kept which must be o|)en at all times during business hours to the inspection of any stockholder. The affairs of every trust company shall be managed by a lH)ard of not less than five directors, elected annually. A majority of the Boartl consti- tutes a quorum; ])rovided that if the number of direct«»r8 exceeds nine, they may designate nine memlxrs, of whom any Hve siiall constitute a quorum. Kach director must own at least five shares of stmpany law. Before the directors may declare a dividentl. one-tenth of the net profits must be carried to a sur})Kis fund until such fund «(|uals twenty per centum of the caj)ital. The directors lyii.vt appoint exauiining ctmimit- tees who must examine the affairs of the company every six months. No loans may be made to directors, officers or employees unless the proposi- tion to make such loan shall have been submitted in writing to the direc- tors or executive committee and regularly approved by a maj«)rity of those present constituting a quorum, nor shall such p«'rsons Ix' permitted to become indebted to the company through an overdraft. At least two reports each year must l>e made to the Connnissioner of Hanking and Insurance, according to a form i)rescribed by him, and abstracts of such reports must be jjublished onct; in a local newspaj)er. Tin- Commissioner may call for sjjccial reports. No trust company shall make loans on its own stock; or be a purchaser of same imless such j)u.'-chas»' be neces- sary to prevent loss on a previously c(»ntracted debt ; and stock st> pur- chased nuist be disj)osed of within one year. Deposits made by minors are und'.'r their control. Every trust com])any receiving deposits tW" money subject to check or payable on demand shall keep a reserve fund of fifteen per centum of all its immediate demand liabilities. C)ne-fifth of this must consist of cash on hand; the balance may consist of deposits in "good, solvent banks or trust companies. ' Trust comi)anies are suble-et to the inspection and supervision of the ('(.inmissioner of lianking and Insurance, who must examine them whtii lit deems it exj)edient or ;it their request. If unsafe conditions are reveahd. he may take innn«'diate possession, notifying the Attorney-C/eneral, who shall institute such proceedings as are necessary. The capital of a trust eomp my niust be taxed in the taxing district where its office is situated, and its real estate where such real estate is situat«'d. Trust companies are specially authorized to act as depositaries for the moneys of counties, cities and oth« r nmnicipalities. Trust companies may pay to either person moneys on a joint account, whether the other be living or not. It is a misdemeanor to circulate false rejwrts regard- 126 TRUST COMPANIES. ing a bank or trust company. Foreign trust companies may do only such business as is permitted to domestic trust companies, and upon compliance with the laws. (Laws of 1899, chapter 174; Laws of 1902, chapter 71 ; Laws of 1903, chapters 210 and 21 t; Laws of 1906. chapters 157 and 191; Laws of 1907, chapters 35, 40 and 50.) New Mexico. Fifteen or more persons, a majority of whom are residents of the Territory, may incorporate a trust company. Articles of agreement must be filed with the Territorial Auditor of Public Accounts and with the probate clerk of the county. The capital stock actually subscribed must be at least $100,000, of which at least $100,000 must be paid in lawful money of the United States. The number of years that the corporation is to continue may not exceed fifty. Powers specified: To receive money in trust; to guarantee special deposits; to do a safe deposit business; to accept and execute all such trusts and perform such duties of every description as may be com- mitted to them by courts ; to hold in trust real or personal property from whatever source received, and to execute any lawful trusts regarding same; to act as principal or surety and to guarantee against loss any principal or surety on any bonds required by law ; to act as agent or at- torney-in-fact for persons or corporations in the management of real or personal property and for the investment of money; to act as transfer agent and registrar; to execute trusts for married women with respect to their separate property, real or personal, and to act as agent in the management of same ; to act as executor, administrator or as guardian of the estate or curator of an}'^ infant, insane person, idiot or habitual drunkard or convict; to do a fidelity insurance business; to guarantee the principal or interest, or both, of any securities of any kind; to con- duct a title insurance business; to loan money on real estate and col- lateral securitj^; to purchase^ invest in and sell all kinds of Government, State, municipal and other bonds, and all kinds of negotiable and non- negotiable paper, and other investment securities. Courts are authorized to appoint trust companies as administrators, guardians, trustees, re- ceivers, assignees, or in other fiduciary capacities, and as legal deposi- tories for funds in the keeping of persons holding fiduciary appoint- ments. Such court or officer may make orders regarding such trusts, and require such accounts as could be required of a natural person acting in such capacity. Any trust company may qualify as executor, administrator, guardian, receiver, trustee, assignee, committee or in any other fiduciary capacity or as depository of monej'^ in court, may be- come sole guarantor, surety upon bonds, and so on, without giving bond, iipon making with the Auditor of the Territory a deposit of not less than $50,000 nor more than $200,000, as the Auditor may from time to lime require, in cash. Treasury notes of the United States, or Government, STATE AND TERRITORIAL LAWS. 127 State or Territorial bonds, or bonds of any county of this Territory ■which lias not defaulted in the payment of its oblijjrations for five years. Such deposit shall be primarily liable for the obligations of such corpora- tion actins such companies are required to deposit with the Superintendent of Banks securities equal in value to ten per centum of the paid-up capital stock, and not less in amount than .flOO.OOO in cities of ')()(),()()() population or more, not less than $.")0,0()0 in cities of from 100,000 to 500,000 jjopula- tion, not less than $30,000 in cities of from 25,000 to 100,000 popula- tion, and not less than $20,000 in smaller places. These securities must consist of public bonds or stocks of the L'nited States, or of this State, or of any of its political subdivisions; they nmst Ik* registered in the name of the Superintendent officially, as held in trust as security for the depKJsitors with and the creditors of such corporation. Beyond tliis deposit, no security shall Ix- required of trust companies for or in re- spect to any trust, or when a})j)ointed executor, .administrator, guardian, trustee, receiver, committee or depositary; except that courts or officers making such appointments may, upon proper application, require such security as they deem proper. Such courts or officers may make further orders regarding such trusts, and may require the corporation to render such accounts as might be required of a natural person acting in like capacity. The capital of such a company shall Ih? invested in bonds and mortgages on unincumbered real property in this State to the extent of 60 per centtmi of the value therof, or in the stocks or bonds of this State or of the United States, or of any county or city of this State duly authorized by law to he issued. The stocks or bonds nuist not U- valued on the books or in rej)orts at a higher value than that determined by amortization, so as to bring them to par at maturity. Moneys received in trust may be invested, in the company's discretion, in the same classes of securities as the capital, or in the stocks or bonds of any State of the United States, or in such real or personal securities as it may deem proper. No such corporation shall hold stock in any private corporation to an amount in excess of ten per centum of its capital, sur- plus and undivided )>rofits; nor shall it own stix'k of another monied corporation (except of a safe deposit company immediately connected \vith and adjacent to it.) to an amount exceeding, in par value, ten per centum of the outstanding capital of such other monied cor|>oration. On all sums of money not less than $100 which shall be collected and re- ceived by such corporation acting in trust capacities, interest must be allowed at not less than two per centiun per annum. The affairs of 9 130 TRUST COMPANIES. s-uch corporations shall be managed by a board of directors of such number, not less than thirteen nor more than thirty, as shall from time to time be prescribed in its by-laws. Not less than one-third of such board of directors, and in no case less than seven, shall constitute a quorum. Each director must own and continue to own unpledged, at least ten shares of stock. Directors must take oath for the faithful per- formance of their duties. They must be divided into three classes, so that the terms of office of one-third of the members shall expire each year, each member then being elected for a term of three years. The directors must meet once a month. They must designate an officer or officers whose duty it shall be to submit to each director at each regular meeting, or to an executive committee of at least five members of the board a written statement of all purchases and sales of securities, and cf every discount and loan of $1000 or more made since the last meeting of the board, with description of collateral, together with other informa- tion. A verified copy of this statement must be filed with the records. Specially chartered trust companies are subject to the provisions of the general laAv so far as not inconsistent with the special laws relating ta them. Trust companies, in common with other financial institutions, are re- quired to render reports to the Superintendent of Banks, upon his call,^ at least once every three months, such reports to contain such particulars as the Superintendent may prescribe. Summaries of such reports must be published in a local newspaper. Trust companies are subject to the supervision and inspection of the Superintendent of Banks, who must examine them at least twice a year or oftener at his discretion. If un- safe conditions are revealed, he must notify the Attorney-General, and may take possession of the company until the termination of the action instituted by the Attorney-General. Special examinations by order of the supreme court may be made on application of creditors or share- holders whose debts or shares amount to $1,000. All official communica- tions from the State Banking Department must be submitted to the Directors at their next meeting after receipt of same. In April and October of each year the Directors are required to examine the company or cause a committee of at least three of their number to do so. The examination is to concern particularly the loans and discounts, and the statute specifies what it must cover. Within ten days after completion, a written report of the examination must be made to the directors, which must be placed on file in the company's records, and a duplicate of the report must be filed with the Banking Department. Such a corporation is prohibited from making loans to one person,, company, corporation or firm to an amount exceeding ten per centum of its paid capital and surplus: provided, however, that a trust company having its principal place of business in a borough in any city which borough had at the last census a population of 1,800,000 or over (i. e.,. the borough of ^lanhattan in New York city) may loan to one interest STATE AND TERRITORIAL LAWS. 131 uot cxc'teding 2'> ptr ccnluin, and a trust company locattd t-lscwljcrc in the State may loan to one interest not cxe* tding U) ptr ciiitum of its paid capital and surplus, ui)on security worth at least 15 per centum more than the amount of the loans; or, it may loan 10 per centum as first pro- vided, and may loan a further sum, which shall not exceed 15 per centum if the trust company is located in the horough of Manhattan, or which shall not exceed .'JO per centum if located elsewhere, upon securities worth at least 15 per centum more than the amount of such loan so secured; or it may make bona fide discounts for, or purchase business j)aper from one interest, to an amount which shall not exceed 'J") per centum of the com- pany's paid cajjital and surplus if the conipany is located in the borough of Manhattan, or to an amount not exeeedinj; 40 per centum if the com- pany is located elsewhere; provided further, that the total liability of any one interest shall not exceed 25 per centum of the paid capital and surplus of the trust company if it is located in the boroufjh of Man- hattan, or K) per centum if it is located elsewher*-. Loans "upon the securities of one or more corporations the payment of which is under- taken in whole or in part severally, but not j«)intly, by two or more in- dividuals, firms or corporations" (i. e., "Underwritinj; Loans") may not be made under any circumstances to an amount exc«edinp •J5 per centum of the capital and surplus of the trust company making such loan; and such loans are absolutely prohibited (a) if the lH>rrower or underwriters be obligated absolutely or contingently to purchase the securities col- lateral to such loan, unless they have paid at least '25 |Kr centum of the amounts for which they remain obligated; or (b) if the trust company making the loan is liable directly or contingently for the repayment of any {)art of the loan; or (c), if its term, including renewal, by agreenH iit. express or implied, exceeds the period of one year. Real estate mortgage loans may not be made on property already encumbered, if the prior liens exceed ten per centum of the capital and surplus of the company, or if the sum of all the mortgages thereon will exceed two-thirds of tin- appraised value of the property. Mortgages and assiginnents thereof must be immediately recorded. The limit of direct or indirect aggregate loans upon real estate security is 15 per centum of the company's assets if the company is located in Manhattan bond and trust companies", and their purpose is thus stated: "To guarantee tJie fidelity of persons in positions of trust. |)rivate or public, and to act 134 TRUST COMPANIES. as surety on official bonds, and for the performance of other obligations." They must have ten or more corporators, and the words "insurance com- pany" must form a part of their titles. The powers specified for such companies are to do a fidelity insurance business and to act as surety on bonds ; to do a title insurance business ; to act as guardian, trustee, assignee, receiver, executor or administrator in the State, without giving bond; and the proper courts and officers are clothed with authority to appoint these companies to such trusts, whether the companies be resi- dents of the State or not. Such companies must make an annual state- ment to the Insurance Commissioner, and must get from him a license, for which the annual fee is $25 for domestic and $100 for foreign com- panies. The original idea of the trust company as a kind of insurance company is noticeable in this act. (Laws of North Carolina, Revisal of 190;>, chapter 7, sections 222 to 251. Chapter 100, passim, especially sections 4726, 4799 to 4804. Statutes 1907, chapter 829-) North Dakota. Nine or more persons may incorporate to conduct the business of "an annuity, safe deposit, surety and trust company", to have perpetual suc- cession. Articles of incorporation must be filed, and other preliminaries attended to as prescribed in chapter 1 1 of the Civil Code. The capital must be at least $100,000, divided into shares of $100 each. Of this $50,000 must be paid in before commencing business, and the balance must be jiaid within two years. The $50,000 required to be paid in be- fore commencing business must be invested in bonds of the United States, or of the State of North Dakota, or in the bonds of other States, which have the approval of the State Auditor and State Examiner, or in the bonds or obligations of townships, school districts, cities, villages and counties within the State, which bonds or obligations have not been issued as a bonus for, or jDurchase of, or subscription to any railroad or other private enterprise, and whose total bonded indebtedness does not exceed five per centum of the then assessed valuation thereof, or in bonds or promissory notes, secured by first mortgages or deeds of trust upon unencumbered real estate in the State worth three times the amount of the obligation so secured. These securities must be assigned, trans- ferred and delivered to the State Auditor, to be held by him as collateral security for the depositors and creditors of said corporation, and for the faithful execution of any trusts it may undertake. The company shall be managed by a board of directors, not less than nine nor more than fifteen in number, a majority of whom shall be citizens of the State, and each of whom must own at least ten shares of stock. The specified powers of such corporations are: To hold real estate necessary for the convenient transaction of its business, and for the use and occupation of its officers, agents and employees, and for the safe keeping of its assets. STATE AND TKRIUTOIllAI. LAWS. \S:> deposits and proj)frty lu-ld in trust, and such as is acquired in the satis- faction of debts due to it; but no part of its funds may be invested in real estate except as above authorized, except that trust funds may be so invested if the instrument creating the trust or a particular contract so specifies, and not otherwise; to loan mont-y on mortgage security; to purchase notes, bonds, mortgages and other evidences of indebtedness; to hold in trust any real or personal property by order of court, or from corporations or persons, and to execute any legal trusts witli regard to same; to execute trusts for minors and for married women with respect to thtir separate property, real or personal, and to act as agent for the management of same; to act as fiscal and transfer agent and registrar; to hold on deposit for savings account, or for safe keeping, or in escrow, moneys and securities in the keeping of public or private oHieials or of persons holding fiduciary appointments, the officers or persons so de- positing being relieved fniin liability for such deposits; companies re- ceiving savings deposits shall be subject to the laws of the State regard- ing reports and examinations of Savings banks; to act as trustee, assignee, receiver, administrator, executor, guardian of the estate of any minor, lunatic, imbecile, spendthrift, habitual drunkard or other person dis- qualified to manage an estate; courts are authorized to make such ap- pointments ; "to receive deposits of money for general savings account, for safe keeping, or for investment"; "to loan money upon such securities as may be deemed advisable by its board of directors, and to borrow money in like manner upon the security of its own j)roperty or credit"; to act as attorney in fact for public or private corporations or persons in the managemtnt of real or personal property; to do a title insurance business; to do a fidelity insurance business. Trust funds and property must be kept separate from the j)roj)erty of the company and Ik- readily identifiable. Special directions regarding investments in an instrument creating a trust must be follo\\t'd. Trust companies may accept and execute any trust herein authorized, or act as sole surety on lH>nds. with- out giving security, other than the dejjosit with the State. Trust funds of over $100 in amount, not required for the us«'s of the trust for a year, must be invested in the classes of securities s])ecified for the deposit with the State. I>oans may not be made to directors, officers or employees; 2»or shall such persons become indebted to the company in any way unless authorized in regular form by the directors or investment com- mittee. Such corijorations are subject to further orders of courts ap- pointing them to fiduciary offices, and must render statements called for or required by law to such courts. They are subject to the general jurisdiction of the district court of the county. They must render an annual statement as of June 1 to the State Examiner, giving details called for by him, and must publish a condensed statement of such report in a local newspaper. The Public Examiner must examine such com- panies once every six months, without notice to officers thereof, or oftener if requi'"ed by written, verified information from a person interested in a 136 TRUST COMPANIES. trust held by the company. If unsafe conditions are found and persisted JH; he shall notify the Attorney-General, who shall institute such pro- ceedings as are called for. (Revised Code 1905, chapter 22, paragraphs 4677-4692.) Ohio. Five or more persons may become incorporated to establish "a com- mercial bank, a savings bank, a safe deposit company, a trust company, or to establish a company having departments for two or more, or all of said classes of business'". The articles of incorporation must specify what classes of business are to be included. Capital required, of a trust company, or of a combined trust company and safe deposit company or of a combined trust company and savings bank, .$100,000; of a combined trust company, savings bank and safe deposit company, or of a combined trust company, savings bank, commercial bank and safe deposit company, $125,000. Fifty per centum of the cajiital must be paid before begin- ning business, and the balance at the rate of ten per centum per month. The board of directors must number from five to thirty, three- fourths of whom must be residents of the State, and each of whom must own at least five shares of stock. They must take an oath of office. They may elect an executive committee of at least three of their number, which must meet at least once a month. The trust powers specified are: To do a safe deposit business; to col- lect income or principal of property held for safe keeping; to act as reg- istrar and transfer agent; to act as depository of court funds; to receive and hold money or property in trust or on deposit from fiduciaries, corpo- rations or individuals; to act as trustee under any will or instrument creat- ing a trust for the care and management of property, "under the same circumstances', in the same manner, and subject to the same control by the court having jurisdiction of the same, as in the case of a legally qualified person"; to execute "all such trusts of every description as may be committed to such company by any person or persons, or any corporation, by grant, assignment, devise or bequest, or which may be committed or transferred to, or vested in, such company, whether the same be to act as executor, administrator, assignee, guardian, receiver or trustee, or in anj^ other trust capacity", by order of court; to receive and take any real estate which may be the subject of any such trust, and to act as agent under any power; provided, any such appointment as guardian shall apply to the estate only, and not to the person. (But that part of the statutes which authorizes probate courts to appoint trust companies administrators, etc., was by the Supreme Court of the State, in 1903, declared unconstitutional.) Courts may order moneys paid to them, or in their charge, deposited in trust companies. Minors may control their accounts. STATE AND TERIilTOHIAL LAWS. 137 Before dividends are declared oiie-tcnth of the net profits must be carried to surplus until same equals -20 per centum of the capital. Stockholders are not subject to double liability. Checks may not be certified unless the drawer has a balance to cover same, and certified cheeks must be charged at once. Violation of this rule is punishable by fine or imprisonment in the penitentiary, or both. Emlwzzlement, the making of false entri^-s. fictitinus lK)rr<)wing with fraudulent intent to deceive examiners, the making of fal^e statements or reports with fraudulent intent, are crimes punishable by imprisonment in the peni- tentiary or fine, or both. A separate trust department must be maintained, whose assets shall not be liable for any other liabilities of tlie corporation; and separate sets of books must be kept for each department maintained. No trusts may be aceej)ted unless the company has made a deposit with the treasurer of State, said deposit to be $50,000 if the company's capital is $200,000 or less, and -i^lOO.OOC^ if its capital is larger. This deposit may be in cash, in government or municipal bonds or in certain railroad bonds. The securities may be exchanged, and tlie company may receive the income so long as solvent. The reserve required (which is the same as that required of savings banks), is 1.5 per centum of total deposits. At least six per centum of demand deposits and at least four per centum of time deposits must be in cash in the vaults; the balance of the reserve may be on deposit with other banks or trust companies designated by the Iward of directors, whose resolution regarding same shall be certified to the .Superintendent of Banks. But where the reserve required to be kept in the vaults ex- ceeds $500,000, the excess above that amount may be invested in I'nited States bonds. No reserve is required on trust funds. Trust companies — and other banks — may own such real estate as is "useful for the con- venient transactions of its business", from portions of which not re- quired for its business a revenue may be derived; but the cost of land and buildings may not exceed 60 per centum of paid capital and surplus. It may also hold such real estate as is transferred to it as security for debts; and such as is obtained by foreclosure or on judgments or decrees, but the last named must not be held more than five years except on authorization by the Superintendent of Banks. Loans to one interest including overdrafts, may not exceed 20 per centum of the paid capital and surplus. Bona fide discounts are not con- sidered as money borrowed. Loans upon real estate must be approved by the board of directors, and may not in the aggregate exceed 60 per centum of the capital, surplus and deposits, and real estate loans must be upon real estate situated in Ohio or states iuunediately adjacent thereto, and shall not exceed 40 per centum of the value of said real estate, if unimproved, or 60 per centum of its value, if improved. Loans may not Ik- made ui)on the company's own stock; nor may same be pur- 138 TRUST COMPANIES. chased except to prevent loss upon debts previously contracted in good faith: stock so acquired shall be sold within six months. Not more than 20 per centum of the capital and surplus may be invested in any one stock, security or loan, except in a building and vaults or in specified government and municipal securities. The exact limitations regarding loans and investments dejiend upon whether the corporation is organized as a trust company only, or as a trust company M'ith other departments, —banking, savings and safe deposit. In the investment of trust funds, the directions of the instrument creating the trust must be followed. Unless otherwise directed in such instrument, such funds may be invested in a general trust fund ; but no trust funds may be mingled with the other assets of the company. Trust companies, and all other banking institutions except building and loan associations, are under the supervision of the Superintendent of Banks, to whom they must render at least four reports each year, upon his calls, which shall be made (as of a past day) so far as possible for the same days for which reports of national banks are called. Special reports may be called at the discretion of the Superintendent. The reports must be published in local papers. The Superintendent must examine each company at least twice each year, without previous notice, in the presence of a majority of the members of the executive committee. Courts may appoint persons to examine a company regard- ing a trust, upon written application of a party interested in the estate held under such trust. Examinations must be made annually by a com- mittee of at least two directors or stockholders, and a copy of their report filed with the Superintendent of Ranks. (Acts of 1908, H. B. No. 833, passed in April, 1908. This bill repeals all acts inconsistent therewith, but does not go into complete operation until April 1, 1910. See also Bates" Annotated Ohio Statutes, §§ 381 7-382 Iggg, except such sections as are specifically repealed by the above bill.) Oki-a.iioma. Three or more persons may incorporate a trust company. The nttm ber of years the corporation is to continue may not exceed fifty. Cap- ital required, not less than $100,000 in towns of less than 10,000 inhabitants, and not less than $200,000 in larger places; one-half paid in cash, and the balance to be paid within six months. The capital may not exceed $10,000,000. The affairs of the corporation shall be man- aged by a board of directors, not less than five nor more than twenty- five in number, each of whom must be a stockholder. If the number < xceeds five, they shall be divided into three classes so that the terms of one-third shall expire each year, the terms of each thereafter being three years. Powers specified: The ordinary powers of corporations; to receive STATE AND TERHITOUIAL LAWS. 139 savings accounts, and the payment to tliem on tli'"ir order of deposits made by minors shall he binding on them; to guarantee special deposits; to do a safe deposit business; to accept and execute trusts and duties of everv description committed to them by persons or corporations; to ac- cept and execute court trusts; to act as assignee, receiver, trustee and depository; to hold in trust any real or personal property from whatever source received, and in whatever manner conveyed, and to execute any lawful trusts in regard to same; to act as surety on bonds, and to guar- antee against loss any principal or surety on a l)ond ; to do a fidelity in- surance business; to act as agents and attorneys in fact for persons and cof{)orations for the management of real or personal property and for the investment of money: to act as registrar or transfer agent; to execute trusts for married women with respect to their separate property, real or personal, and as agents for the management of same; "and generally to have and exercise such powers as are usually had and exercised by trust companies"; to act as executor, administrator, guardian or curator of any infant, insane person, idiot or habitual drunkard, or trustee of oks and records of the coni})any shall be kept open "for the in>pection of all persons interested." Trust companies may qualify as guardian, curator, executor, administrator, assignet. reeeiv«r. trustee or dep«»sitary ol" money in court, without giving K)nd as sueh. and become sole guarantor or surety upon any Iwnd requir«d by the laws of the State, any other statute to the contrary notwithstanding, as well a» to insure the fidelity of persons holding places of public or private trust; provided, such company shall first deliver into the custody of the Treas- urer of the State a deposit of $.'>().000. consi.sting of cash or Govern- ment, county or municipal bonds, or bonds or warrants of the State, or notes or debentures secured by first mortgage or deeds of trust 140 TRUST COMPANIES. on real estate situated in the State, worth at least double the amount loaned thereon, and certain other securities named in the statute, said bonds 01' securities not to be received or held at a rate above par, but if their market value is less than par they shall not be held above their actual market value. Tlie fund so deposited shall be primarily liable for the obligations of the company in the above-mentioned fiduciary capaci- ties. This fund must never be less than one-half the annual premiums r.nd compensations earned by the company in trust capacities during the previous year; it must be increased each year, if necessary, to meet this requirement. Trust companies are under the supervision of the Bank Commissioner, to whom they must make at least four reports each year, on his call ; and by whom they are to be examined at least twice a year. The State Banking Board, which is composed of the Governor, Lieu- tenant Governor, President of the Board of Agriculture, State Treasurer and State Auditor, has the supervision and management of the "Deposi- tor's Guaranty Fund." To provide this fund, the Board levies against the capital of every bank and trust company organized under the laws of the State an assessment of one per centum of the average deposits, less deposits of United States and State funds otherwise secured, for the preceding year. Each year a statement must be rendered to the Bank Commissioner of average deposits for the preceding year, accom- panied by a remittance for the added amount, if any, needed to bring the assessment up to the required one per centum of average deposits. If for any cause a company's guaranty fund becomes depleted, the State Banking Board levies a special assessment to cover the deficiency. New companies deposit three per centum of their capital in the guaranty fund, such deposit being subject to re-adjustment on the basis of average deposits after the end of their first year of business. The Bank Commis- sioner delivers to each company complying with the above provisions a certificate stating the fact of such compliance and that its deposits are guaranteed by the fund. This is to be conspicuously displayed in the office, and may be used on stationery and advertising matter. When a company fails or quits business for anj' reason, voluntarily or involun- tarily, the Bank Commissioner may take possession to wind up its affairs. The depositors shall be paid in full, and if the company's available cash is insufficient for the purpose, the Banking Board shall draw from the guaranty fund. The State has for the benefit of the guaranty fund a first lien upon the company's assets and upon all liabilities against stock- holders, officers and directors and all others. (Wilson's Revised and Annotated Statutes, 1903, chapter 18, article 14, sections 1119-11.S5. Laws of 1905, chapter 10, article 3. Laws of 1908, H. B. No. 615, approved May 26, 1908.) STATE AND TEHIUTORIAI. LAWS. 141 Orkcjon. Section 7 of the general, banking law of 1907 says that any person, firm or corporation (except National Banks) having a place of business within the State "where credits are opened by the deposit or collection of money or currency or negotiable paper subject to be paid or remitted upon draft, receipt, check or order, shall be regarded as a bank or banker, and as doing a banking business under the provisions of this act." Trust companies which do a banking business as thus defined are there- fore banks in the meaning of the law, and are .so treated elsewhere in the statutes. The use of the names "bank" and "trust company" is for- bidden except to companies comjilying with the act. jirovided, that the term "trust company" may be used "wliere th«^ busin«s.-, transacted is in no sense a banking business a.s defined in section 7 of this .\ct"; and such a concern is not. governed by this act. Banks nmst be governed by a board of three or more directors. The capital required, of which at least fifty per centimi must be paid before conuneneing business, is $10,000 in villages of a popubition of less than 1,000, if'-ij.OOO in towns of from 1,000 to 2,000. $.30,000 in towns of from 2,000 to 5,000, and $50,000 in larger places. They may hold only such real estate as is necessary for the conduct of tlie business (and this nmst not exceed fifty per centum of the capital, surplus and undivided profits), sjch as is taken in satisfaction of debts previously contracted, and such as is purchased at sales under judgments, etc. This does not apply, however, to trust funds or estates. The directors, each of whom nmst own at least $.500 par value of stock, must meet at least once every three months, "and shall at such times examine tlie loans, paper and securities of the bank and its liabilities and resources of every kind." The re- sults of the examinations must be spread upon the minutes. Before the declaration of a dividend one-tenth of the profits must be carried to sur- plus until the same is equal to twenty per centum of the capital. Minors and otlier persons under disability may control tlieir own deposits. The bank may pay the balance of a joint account to the survivor. It is not liable for the payment of a raised or forged cheek unless the de{>ositor notifies it of the forgery within thirty days after his checks have been returned to him. Loans to one party, except bona fiiie discounts and secured loans, are limited to twenty-five per centum of the capital and surplus; and secured loans may not be for amounts of more than fit'ty per centum of the value of real estate or seventy-five per centum of the value of commercial paper or personal property securing same. Checks n»ay not be certified unless the drawer has the funds to meet them on deposit, and such checks must be charged at once. Loans may not be made to officers or employees, or to the State Bank Examiner or his em- ployees, unless first approved by a majority of the directors; and tin- action of the latter must appear upon the minutes. If such loans are made in a dishonest or excessivf manner, or incur great risk or loss to the \y\nk. 142 TRUST COMPANIES. every director assenting to same is personally liable. The reserve, of uhich one-third must be in cash in the vaults, must be, in cities of less than 50,000 inhabitants, fifteen per centum of demand and ten per centum of time liabilities; and in cities of over 60,000 inhabitants, twenty-five per centum of demand and ten per centum of time liabilities. All banking institutions are under the supervision of the Board of Bank Commissioners, consisting of the Governor, the Secretary of State, and the State Treasurer. They must appoint a competent examiner, who shall examine each company whenever he thinks it necessary, and at least once a year. Reports must be made to him, of a form prescribed by him, and same must be published in local papers. He must call for these reports on the same dates that the Comptroller calls for National Bank statements. (Laws of 1907, chapters 135 and 138. Also see chapter '2(55.) PeNNSYI VANIA. Although this State contains more trust companies than any other,, and rivals New York in the early development of such corporations, its statutes relating to corporations doing the business of a trust company are in need of revision and codification. The number of sections of the statutes relating to trust companies by name is very small. Most of the ordinary powers of trust companies are eninnerated in the statutes re- lating to title insurance companies. The specified powers of such companies are: To do a title insurance business; to receive and hold on deposit and in trust and as security, estate, real and personal, including the notes, bonds and obligations of States, individuals, companies and corporations, and the same to pur- chase, collect, adjust and settle, sell and dispose of in any manner, with- out proceeding in law or equity ; provided, that nothing herein contained shall authorize said companies to engage in the business of banking; to do a fidelity insurance business; to do a safe deposit business; to act as assignees, receivers, guardians, executors, administrators, "and to take and receive and execute trusts of every description not inconsistent with the laws of this State or of the United States"; to receive deposits of moneys, and to issue their obligations therefor; to invest their funds, other than funds committed to their care by the orphan's court, in and to purchase real and personal securities ; to loan money on real or personal security, and to invest funds committed to their care by the orphan's court in such securities as shall be approved by such courts; courts into M'hich moneys are paid or are to be placed by order or judgment, may direct same to be deposited with any such corporation; to act as fiscal or transfer agent or registrar; to become sole surety in any case where, by law, one or more sureties may be required for the faithful perform- ance of any trust or duty; to hold any and all such pieces of real prop- erty as may be the subject of any insurance made by such companies under the powers conferred by their charters, and the same to dispose of STATE AND TERRITORIAJ. LAWS. 143 in any manner they see proper; "to purehase and !,ell real t state and take charge of the same"; to become security for the faithful performance of duty in several cases specified and to beeome security for other pur- poses named in the statute; provided that before exercising any of the above-mentioned powers, such corporations shall have a paid-up capital of not less than $1^5,000. When acting in fiduciary capaciti«s the cap- ital of such comjjanies shall be taken as the security requind by law for the faithful performr.nce of duty, and shall be absolutely liable in case of default. Persons holding fiduciary appointments may deposit the securities or other valuables for safe k<< |)ing witli such companies. Courts making fiduciary a})pointinents to such companies may have the companies examined. Trust funds and investments must Ik- kept separate from the assets of the company, and investments made by the company as fiduciary must be so designated as to clearly show to what trust they belong. The powers of doing a safe deposit business and of acting ai fiscal or transfer agent or registrar are given to all companies incor- porated under the laws of the Commonwealth "which are by their charters authorized to act as trustees, receivers, assignees, guardians and commit- tees." Such companies may increase tluir capital stock to an amount not exceeding .$2,000,000. Previous to 18?.'? trust companies in the State were incorporated by special acts of the Legislature, but the constitution of that year forbade such special charters in the future. No provision for the incorporation of such companies under general law was made until 1881. Trust companies are under the supervision of the Commissioner of Banking. They must render to him not less than two reports each year, according to the form prescribed by him, and within five days (unless he extends the time) after the receipt of a request therefor from him. He may also call for special reports. Summaries of the reports must be published in a local newspaper at least three times. It is the duty of the Commissioner of Banking to examine such companies as often as he shall deem projier. If unsafe conditions are revealed, he must notify the At- torney-General, who shall institute proceedings for the appointment of a receiver; or, if the conditions seem to make it necessary, the Com- missioner may appoint a temporary receiver. No director of such a com- pany shall receive as a loan an amount greater than ten per centum of the paid capital and surplus; and the gross amount loaned to all officers and directors of such corporations, including concerns in which they are interested, shall not exceed twenty-five per centum of the paid capital and surplus. Such companies may not loan on their own stock: nor shall they purehase same, unless to prevent loss on a debt previously contract- ed in good faith, in which case the stock so jmrchased shall not Ik* held for a longer period than six months, "if the same can Ik- sold for what such stock cost the corporation." It is a misdemeanor punishable by a fine not exceeding -1=1,^)0 and imprisonment not exceeding two years, or both, for any director, officer or employee of a bank, trust company or 144 TRUST COMPANIES. building and loan association to make a false statement or entry on the books or to subscribe to or exhibit same with intent to deceive, or to wilfully or knowingly subscribe to a false report. All such corporations must furnish a receipt in full, by pass-book or otherwise, for all moneys received as deposits or otherwise. The reports must set out in full the aggregate of these liabilities, which must not be concealed for any pur- pose. If the company borrows money the amount must be set out in full on the books and in all reports required by law. It is also illegal to conceal any assets. Violations of these provisions constitute a misde- meanor. For purposes of taxation, trust companies must render an an- nual report on or before June 20, stating the number of shares of the company outstanding, their actual value, etc. The reserve requirements, which apply to all State banks, Savings banks and Trust Companies, are as follows: If the company receives de- posits subject to or paj^able on demand, it must keep a reserve of 15 per centum of the aggregate of all immediate demand liabilities. If the com- pany receives time deposits "payable at some future time", it must keep a reserve of 7^ per centum of all time deposits. One-third of the reserve must be in cash; one-third may be in certain specified bonds; the bal- ance may be on deposit in any bank or trust company in Pennsylvania approved by the Commissioner of Banking, or in companies in reserve cities in other States approved by him. Trust companies may renew or extend their charters for a period of twenty years on complying with the provisions of the law of May 10, 1889. (Laws of June 11, 1885, §§ 1, 2, 3; May 9, 1889, § 1 ; May 10, 1889, § 1; Feb. 11, 1895, §§ 1, 2, 7, 9; May 29, 1905; June 24, 1895, § 1, June 26, 1895; June 27, 1895, §§ 1, 2; May 29, 1901; June 14, 1901; April 21, 1903 [art. 162]; Acts of 1905, No. 131; Acts of 1907, Nos. 141, 150, 151, 512, 525. The Title Insurance Company laws are found in Pepper and Lewis's Digest, Vol. 3 [Supplement, 1894-97], chapter 12, §§ 90-109.) Rhode Island. Trust companies in this State, which were formerly incorporated otdy by special act of the Legislature, may since JNIay 26, 1908, be or- ganized under the general banking law passed on that date, to which all trust companies in the State must conform. Fifteen or more persons, all of whom must be citizens of the State, may associate for the purpose of forming a trust company. The incorporation proceedings are detailed at lengrh. No shares of stock may be issued until their par value has actually been paid in cash. Branches may be established after obtaining the consent of the Board of Bank Incorporation. None but regularly in- corporated trust companies may use the words "trust company" in signs, titles, etc STATE AND TERRITORIAL LAWS. The powers specified, in addition to ordinary powers of corpori- tions, are to receive and hold moneys in trust or on dt-posit; to allow interest on same; to make such loans and investments as are not pro- hibited by this act; to hold on deposit moneys or to receive and manage other property in charge of extcutors, administrators and other lidu- oiaries, who are released from liability for funds or other property so deposited; to do a safe deposit business; to act as executor, adminis- trator, custodian, conservator or guardian of any estate, giving bond in* the same manner as individuals so acting, but surety on such bonds shall not be required except upon written demand of a person pecuniar- ily interested; to act as assignee, receiver: to accept trusts of every description committed to il by persons, corporations or courts; courts are authorized to appoint such a corporation as administrator, custodian, gaardinn (of the estate only) or conservator, except that they may not apjioint it administrator or r^ustodian upon tin- estate of a wife dying intestate unless upon petition of the husl)an(l: to be depositary of court funds. Trust companies are required to deposit with the Treasurer of the State, in cash or in certain specified securities, an amount equal to twenty per centum of the capital as security additional to the capital for the faithful performance of trust duties. Substitutions of these securities may he made, and the income goes to the company depositing them. Banks and trust companies must maintain reserves of fifteen per centum of aggregate deposits, of which two-fifths must Ix- in cash on hand. The balance may l>e on deposit with authoriz»-d reserve agents. These reserve requirements do not apply to the funds of the savings or "participation" department, if the company has complied with the law- relative thereto, which requires that a guaranty fund equal to five per centum of the savings deposits be accumul.-itfd by st-tting aside fom one- eighth to one-fourth of one per centum of the net profits of the depart- ment each year. A separate savings department nmst Ix* maintained, whose assets are not subject to other liabilities of the company until sav- ings deposits have been paid. The investments permitted to this depart- ment are specified at great length, and includr nninicipal bonds, certain steam and electric railroad bonds, certain bank stcx'ks, loans secured by the foregoing, securities and notes of cerbiin gas. water, electric light or power, telephone, railroad or street railway companies, real estate mort- gages under certain limitations, and promissory notes under limitations. Trust companies may not make loans for the repayment of which they are directly or contingently liable; or loans in excess of twenty per centum of the capital, surplus and i)rofits. the repayment of which is un- dertaken severally, but not jointly, by two or more individuals, corpora- tions, firms or other parties. Loans to one interest, bona fide discounts excepted, may not exceed ten per centum of the paid capital and sur- plus, nor in any event thirty per centum of the capital. Overdrafts by 19 146 TRUST COMPANIES. officers or employees are forbidden, and loans to them must first h. K Trust companies are under the supervision of the Bank r • sioner, to whom thev must m-ike «f 1. , « Commis- possible, work simultaneously with the National h.,.v ■ (Laws of 1008, Chapter 1590, passed May 26, ms) '""'""• South Carolina. CorporatL Law There "re fe ^"^I'r'"*'^ ""^^^ '^^ ^"«^"-^« estate only, not of the person) trustee for th.^' T " ^°^ *^' fe ciiiy oi tne above-mentioned appointments savp fhaf ^f t- 4. onirfrt L *"'=/'""•* considers proper. The State Bank Examiner is re- r:vr=r:^re:- itt:r„;tr:;:f tr- -- No. 6^;r '""' ''°- ''^ ^^"^ "' "'°*' '^"^'•'^ L-= of ^906, South Dakota. STATE AND TERRITORIAL LAWS. U? $25,000 in towns of less tlian 10.000 inhabitants; at least $50,000 in cities of from 10,000 to 25,000, and at least $100,000 in larger cities. It must be divided into shares of $100 each, and must all be paid in be- fore commencing business. The stockholders are subject to double liabil- ity. There must be at least five directors, each of whom must own five shares of stock, and a majority of whom must be residents of the State. The powers specified are to act as assignee or trustee by deed, executor, guardian or trustee by will, such appointments having the same force as in the appointment of natural persons; to act as receiver, assignee, guardian, conservator, executor, administrator or other trustee bv ap- pointment of court; the appointment as guardian or conservator shall be of the estate only, not of the person; to act as fiscal agent, transfer agent, registrar, trustee under bond issues; to execute trusts and powers "of wh.-itevcr nature or description" not in eonfliet with the laws, re- ceived from persons, corporations, courts or other authority; to hold and manage in trust real or personal property ; to act as agent for the in- vestment of moneys in real or personal securities; to receive moneys and other property, real or personal in trust and to allow interest; to deal in stocks, bills of exchange, bonds, mortgages, notes and other se- curities; to loan on real or personal security; but the total loans may not exceed ten times the capital and surplus; to buy, sell, deal in and handle real estate, but the amount invested in real estate shall not exceed one- half the paid capital, (this does not apply to trust funds or to real estate taken in satisfaction of debts, but real estate taken as last men- tioned shall not be held more than two years) ; to receive money on de- posit subject to cheek. Before a dividend is declared, ten per centum of the net profits must be carried to surplus until the latter equals SO per centum of the capital. Before undertaking any trust the company must execute a bond in favor of the State in a penal sum equal to the capital, signed by at least three securities, approved by and deposited with the Secretary of State; the latter has the discretion of accepting a surety company bond. No other bond shall be required of the company, except that a court may at its discretion require more security if the value of an estate to be committed to the company's care exceeds the capital and surplus by more than three times. No loans may be made on the company's own stock except to pre- vent loss upon debts previously contracted in good faith, in which case it must be sold within six months. The total liability to the company of any one party nuist not exceed 15 per centum of the capital and surplus, first mortgages on prof)erty worth double the amount loaned being ex- cepted. Trust funds must be kept separat«'. The compensation received by the company must not exet ed that allowtd to natural persons for like services. A reserve must be maintained, of 10 per centum of time and 25 per centum of demand deposits ; on hand in cash or on deposit in solvent banks. The Public Examiner must call at least four reports each year, ac- 148 TRUST COMPANIES. cording to a form prescribed by him, as of past days. The reports must include a list and brief description of the trusts and of the amount of real and personal estate held under the same. Special reports may be called and all reports must be published in local papers. Each company must be examined at least once a year by the Public Examiner. Title insurance, surety and fidelity insurance companies are provided for by chapter 13, Acts of 1905. (Laws of 1903, chapter 79 [t^is is 4204 and 4205 Grantham's An- notated Statutes 1901]. See also Annotated Statutes, paragraph 3812. The trust company law is found in chapter 74, Laws of 1905, as amend- ed by chapter 109, Laws of 1907). Tennessee. Act 168 of the Acts of 1883 provides for the organization of banks, "said banks to be invested with authority, if the banking company or corporation so chooses, to couple with the ordinary business of banking a safe deposit and trust company." Such banks must have five or more directors. Their powers specified are: Ordinary banking; safe deposit business; to guarantee the payment of bonds and mortgages; to do a title insurance business, and "to accept and execute all trusts of every name and kind which may, with its consent, be imposed upon it by any person or corporation, whether the trust be that of guardian, executor, trustee, the committee of the estate of a non compos mentis, or any other trust, the said corporation being hereby invested with the power to act in such fiduciary capacity as fully as if the corporation were a person in being." Such corporation must be organized like other corporations, and must publish a statement in a local newspaper every six months. (Shannon's Code, 1896, §§ 2090-2105). Chapter 44, Acts of 1901, provides that trust companies must, in July and January of each year, or within thirty days thereafter, publish in a newspaper in the county a statement of financial condition as of June 30 and December 31, respectively, next preceding. The form of this statement is to be determined by the Comptroller of the State. Chapter 377, Acts of 1903, makes more detailed provisions regarding trust companies. Banks in counties of population from sixty to ninety thousand, organized for the purpose of conducting a savings, safe de- posit and trust banking business, with a capital of $100,000 or more, "may be appointed to accept and execute trusts and agencies of any kind and character whatsoever", to which they may be appointed by persons, corporations, public or private, or executor, administrator, guardian (of estates only, not of persons) of infants, idiots, lunatics and other persons of unsound mind, receiver, commissioner, assignee or trustee for any person, firm, association, etc., attorney in fact or agent for the transac- tion of any business, management or sale of any property whatsoever, "in the same manner and to the same extent as natural persons." The capital of such companies shall be taken as the security for faithful per- STATE AND TERRITORIAL LAWS. 119 formance of duty required by law, and no other security need be re- quired, except in the discretion of the courts. Such corporations may act as depositaries for public funds and for funds in chargr of persons acting in fiduciary capacities. Trust funds must not be included in the assets of the company. They may be invested in bonds of the United States, of Tennessee and the other States, first mortgage bonds of any railroad, bonds of any county or municipal corporation, provided such bonds be worth par or more and have regularly paid dividends of not less than four per centum for the five years preceding, or in first mortgages on real estate ap- praised at least twice the amount loaned thereon, such mortgages to run for not more than ten years. The designation of an attorney in a will, and the right of heirs to select an attorney must be recognized. When acting as guardian, such company need render statements only every two years, instead of yearly, as is required of natural persons so acting. The fees which may be charged for services in certain fiduciarv capaci- ties are specified in the statute. Texas. Five or more persons may incorporate a "banking and trust com- pany." Articles of agreement must be filed with the Secretary of State. The corporation may not continue more than fifty years. The act authorizes the establishment of banks of deposit or of dis- count, or both, having trust powers. The powers specified are: To ex- ercise the powers of banks of deposit and discount; to act as fiscal agent of corporations, public and private; to act as transfer agent and regis- trar; to receive deposits of trust moneys, securities or other personal property ; to loan money on real or per.sonal securities ; to hold such re^l estate as is needed in the transaction of the business, and such as is ac- quired in the satisfaction of debts due the company ; but the latter may be retained not more than five years; to act as trustee under any mort- gage or bond issue, "and accept and execute any other municipal or corporate trust not inconsistent with the laws of this State"; to accept trusts for married women with respect to their separate property, and to act as agents in the management of same; to act under the appointment of court as guardian, receiver or trustee of the estate of any minor, the annual income of which shall not be less than $100; to act as depository of any moneys paid into court; to execute any legal trusts regarding the management of estates real or personal, from whatever source the trust may be received; to manage estates; "to purchase, invest in, guarantee and sell stocks, bills of exchange, bonds and mortgages and other se- curities"; to issue its own bonds and obligations; to act as executor, as administrator, as guardian of any infant, insane person, idiot or habit- ual drunkard, or as trustee for any convict in the penitentiary, under appointment of court; to do a fidelity insurance business; "provided, this 150 ■ TRUST COMPANIES. act shall never be construed as authorizing the granting of a trust not lawful as between individuals." The capital shall be not less than $50,000 nor more than $10,000,000. The aifairs of the corporation shall be managed by a board of directors not less than five nor more than twenty-five in number; elected annually unless the number exceeds five, in which case they are to be divided into three classes so that each shall serve three years, one-third retiring each year. The office of Superintendent of Banking is filled by the Commission- er of x^Lgriculture, Insurance, Statistics and Plistory, who is authorized to employ clerks and examiners. It is his duty, either in person or by an examiner,, to visit and examine every trust compan}' in the State once per annum, and oftener when he thinks it necessary. The expense of such examinations is borne by the companies examined, according to a schedule of maximum charges outlined in the statute. Detailed provision for pro- cedure to enforce the authority of the Superintendent of Banking is made in the statute. In case he finds .a trust company to be in bad con- dition or to ignore his instructions, he must communicate the facts to the Attorney-General, who shall institute such proceedings as the nature of the case may require. In case of need, the Superintendent of Banking may take immediate charge of the company, pending the appointment of a Receiver. A trust company may place itself in the hands of the Superintendent of Banking by posting notice, and a voluntary general assignment is forbidden. Reports to the Superintendent, in a form prescribed in the statute and by the Superintendent, must be made upon his call at least twice each year, and oftener at his discretion. Such statements must be pub- lished in a local newspaper, and must be posted in the banking house. Trust comjianies may not loan to any one individual, company or corporation an amount greater than twenty-five per centum of the capital stock; or of the capital stock and surplus if the latter is equal to or in excess of fifty per centum of the capital. The discount of bills of ex- change drawn against actualh' existing values and the discount of paper upon the collateral security of warehouse receipts covering products in store under certain conditions, are not considered as money borrowed. Trust companies may not engage in trade or commerce. The directors may declare dividends, if earned, every six months or oftener, but must first set aside ten per centum of the net profits to a surplus fund, until the same amounts to fifty per centum of the capital. Funds in the charge of trust companies may be invested in loans se- cured by real estate or other sufficient collateral security, in public bonds of the United States or of this State, in the bonds of any incorporated city or county or independent school district in this State. Such cor- porations may own only such real estate as is required for the transac- tion of their business, and such as is acquired in the collection of debts; but the latter may not be retained more than five years. Stockholders STATK AND TERRITORIAL LAWS. 151 are subject to double liability. The books and records of such corpora- lions must be kept open for the inspection of all persons interested. Trust companies having a capital of at least $100,000, and making a deposit of $50,000 with the State Treasurer shall be permitted to qualify as guardian, curator, executor, etc., without giving bond as such. Such deposit shall consist of cash, Treasury notes of the United States, or Governnient, State, county, nniMieii)al or otli* r bond or bonds, notes or debentures, secured by first mortgagts or deeds of trust, or mortgages or deeds of trust, or unincumbered real estate in the State worth at least double the amount loaned thereon, or such other first-class securities as the Superintendent of Banking may approve. This deposit shall be primarily liable for the obligations of such company acting in fiduciary capacities, "and shall not be liable for any other debt or obligation of the company until all trust liabilities have been discharged." Trust companies already in existence may avail themselves of the provisions of this act, provided that they thereby waive the powers granted by their charters and derive their sole powers under the terras of this act. Corporations not organized under this act are forbidden to use the words "trust" or "trust company" in their titles; except that corporations already organized and authorized to use such terras in their titles may retain same by using thereafter the words "without banking privileges." Foreign corporations, other than National banks, are for- bidden to do a business of banking and discount in this State. Every banking corporation is required to maintain a reserve of at least twenty-five per centum of the aggregate amount of its demand de- posits, ten per centum of which is to be actual cash in the bank. The reserve fund or any part thereof may be kept on hand or on demand de- posit in any bank or banking association in the State of Texas or in any bank, banking association or trust company in another State approved by the Superintendent of Banking and having a paid-up capital of $50,000 or more; but the deposits in any one bank or trust company shall not exceed twenty per centum of the total deposits, capital and surplus of said bank. (Laws of First Called Session, 19O0, chapter 10 [page 489]; Laws of 1907, chapter 37). Utah. "Loan, trust and guaranty association.s" may be incorporated by three or more persons in the same manner as other corporations for pecuniary profit; and are governed by the provisions of chapters 1 and 2, title ■i, concerning corporations, except as in this chaj)ter otherwise provided. Powers specified: To do a title insurance business; to act as as- signees, agents, receivers, guardians of the estates of minors and incom- petent persons, to act as executors and administrators; "to execute trusts of every description not inconsistent with law"; to become sole security in cases where by law one or more sureties may be required; "to buy, sell 152 TRUST COMPANIES. or mortgage real estate or personal property, to loan money on real es- tate security or otherwise, to sell and assign mortgages and endorse ne- gotiable instruments, and to make, execute and deliver bonds, promissory notes and bills of exchange" ; to receive deposits of money ; provided that, if such associations shall receive commercial or savings deposits, the liability of stockholders and the restrictions concerning the lending of its funds shall be the same as those for commercial or Savings banks respectively; to act as security for the faithful performance of any contract; to do a fidelity insurance business; but nothing in this chapter shall be construed as dispensing with the approval of such association as security by the court, officer or individual charged by law with the duty of approving such security. "WTien acting under fiduciary appoint- ments the capital of the corporation shall be held as security for the faithful performance of duty, and no bond for such purpose shall be required of it. The capital^, paid up, must be at least $25,000, and in cities of the first class at least $100,000. The capital must be kept in money on hand, or on deposit in solvent banks, or invested in bonds of the United States or of this State, or of any county, municipality or school district thereof, or in first mortgages on real estate situated in Utah, worth at least twice the amount loaned thereon. Such corpora- tions are under the same provisions regarding reports as banking cor- porations. They must make to the Secretary of State not less than four reports each year, according to the form prescribed by him, and on his call. The Secretary has power to call for special reports. If satisfied that a company is insolvent, the Secretary may, through the Attorney- General, apply to the district court for the appointment of a receiver. (Statutes, title 2, chapter 6, §§ 423-130; chapter 2, §§ 388-39U chapters 1 and 2, passim; Laws of 1905, chapter 75). Vermont. Trust companies are incorporated only by special acts of the Legis- lature. The general laws regulating and restricting trust companies are quite numerous, most of them applying to Savings banks as well as trust companies, the two classes of institutions being placed under much the same regulations. The ofP.cers must be sworn to the faithful perform- ance of their duties, and the amount of bond required of the Treasurer is specified in the statutes. Such companies must make an annual report as of June 30, to the Inspector of Finance. The items to be covered in the reports are set forth in the statutes, and are very full. When de- posits are made in trust, the name and residence of the person for whom the deposit is made must be disclosed. Minors are entitled to control of deposits made by them. Provision is made for the report of all accounts inactive for ten years. In 1 8.98, and every fifth year thereafter, the pass books must be called in and be verified and be examined by an outsider approved by the Inspector of Finance. No investment of the capital, sur- STATE AND TERRITORIAL LAWS. 153 plus and deposits may be made in mortgages, except in first mortgages on unincumbered real estate to an amount not greater than three-fifths of the cash value tliereof, and not over tMo-fifths if the property be un- improved or unproductive. Not less than one-sixth of the amount of such mortgages shall be upon real estate in this State, and not more than eighty per centum of the assets shall be invested in mortgages; provided that not more than sixty per centum of such assets shall be invested in icortgages on real estate outside of this State. No mortgage investments may be made except on the written approval of three of the trustees or of the members of the board of investment. Five per centum of the de- posits may be invested in a lot and building, and part of the premises may be rented for revenue. No loans or investments on personal security rcay be made except upon at least two approved names, not less than two of whom reside in the State or within fifty miles of the office of the com- pany, or upon notes or accepted drafts from parties without the State for goods manufactured within the State and payable to parties in the State. Such loans may not be for more than one year. Not over one- third of the assets may be invested in personal securities. The statutes provide that, with the foregoing exceptions, deposits may be invested "only as follows"; then is given in much detail a list of securities, which include L^^nited States bonds, municipal bonds of specified States, Na- tional bank stocks in certain States and cities, banks and trust com- panies in Vermont, school district bonds in certain States, State bonds, and notes with any of the foregoing as collateral. But the company shall not hold, either as investments or as collateral, more than ten per centum of the capital of any one bank, nor invest more than ten per centum of its deposits or more than $35,000 of its deposits in the stock of any one bank. And all such investments and loans may not exceed one- fourth of its deposits. It shall not loan to any one person, firm or corporation more than five per centum of its deposits, nor more than $30,000; nor shall such loans be greater than $10,000 until the deposits equal $1,000,000; after which the loans may be increased one per centum of the deposits in excess of $1,000,000. "But this section shall, not apply to L-nited States bonds or municipal bonds, or to notes with such bonds as collateral." No loans may be made to officers, directors or employees without the written consent of a majority of the directors, and then not to an amount greater than five per centum of the paid cap- ital, bona fide discounts and loans on certain specified collateral ex- cepted. The comjiany may not loan on its own stock as collateral. The stockholders are subject to double liability. Trust companies may deposit on calls with banks, banking associations or trust companies in Vermont, or in New York, Boston, Chicago, Albany, Philadelphia or Concord, N. H., or in any other legal designated depositary under tlie laws of the L^nited States, or in National banks in St. Paul. Minneapolis and Kansas City, with or without interest, sums not exceeding in the ag- gregate twenty per centum of their assets. They may hold real estate 154 TRUST COMPANIES. acquired by foreclosure or in settlement of debts due them ; but such real estate must be sold as soon as a reasonable price can be obtained, and at any rate within five years; and the Inspector of Finance may at any time order the sale within ninety days of particular pieces of such real estate. The Inspector of Finance must examine such companies annually or oftener. If the Treasurer or a Cashier of a trust company is also an officer of a National bank, or if the latter is in the same office or build- ing, the Inspector of Finance shall examine such trust company annually at the same time as the United States Examiner examines the National bank. If unsafe conditions are revealed, he shall proceed against the company as if it were insolvent. The powers and restrictions of all trust companies are enlarged or abridged to conform to this chapter, their charters to the contrary notwithstanding. A trust company must pay to the State Treasurer in semi-annual in- stalments in February and August, a tax at the rate of seven-tenths of one per centum annually upon the average amount of its deposits, in- cluding money or securities received as trustee under order of court or otherwise, deducting therefrom the average amount, if any, of its capital and accumulations invested in United States bonds, and the amount, if any, of individual deposits in excess of $2,000 each, listed to the deposit- ors in towns of this State where such depositors reside. No other taxes shall be assessed against deposits or depositors on account thereof, ex- cept on individual deposits exceeding in the aggregate $1,500. Any trust company incorporated in this State may act as adminis- trator, executor, receiver, assignee, trustee, guardian of any person, sub- ject to guardianship, "under the same circumstances, in the same manner, and subject to the same control by the court having jurisdic- tion, as in the case of a natural person legally qualified." The capital, surplus and stockholders' liability are held as security for the faithful performance of duties of this character, and no surety shall be required upon bonds filed by the company, unless required by the court. Trust property and moneys must be kept separate from the assets of the com- pany, and are not liable for its debts. In addition to the examinations above-mentioned, the Inspector of .Finance may make such further ex- aminations as he sees fit, and must make them when requested by the court having jurisdiction. (Revised Statutes, 1891, §§ 4067-41S1, passirn; §§ 583 and 584. Acts 1896, Nos. 17 and 80; Acts 1900, Nos. 53 and 54; Acts 1902, No. 72; Acts 1904, Nos. 98 and 99; Acts 1905, No. 100; Acts 1906, Nos. 28, 128 and 129). Virginia. Trust companies in this State are incorporated by special acts of the Legislature, the special charters so granted specifying their powers and limitations. There are very few general statutes relating to such com- panies, and these apply mainly to foreign companies. "No guaranty, STATE AND TERRITORIAL LAWS. 15". trust, indemnity, fidelity or other company, liaving for its |)urj)ose to become security for the faithful performance of any trust or to become fiduciary." sliall do business in this State until it complies M'ith this act. It must appoint and maintain an agent residing in Richmond, upon wliom process can be served. Every foreign company nuist give bond to the Auditor of Public Accounts, with two or more sureties to be approved by him, in a sum not less than .i!I,()()0 nor more than $j,()00, with conditions to make returns and pay taxes. Roth foreign and domestic companies shall deliver, under oath, to the Treasurer of State, n statement of the amount of the capital stock, and deposit with him Ininds of the State of Virginia, or of the United States, or bonds of the cities of Richmond. Petersburg, Lynchburg, Norfolk. Portsmouth. Roanoke, Alexandria. Danville or Newport News, to an amount equal to five per centum of said capital, assigned to him in trust; but the cash values of same need not be greater than $'2.'5,0()(), and may not be less than .*li..')()0. The com- pany gets the income of th«'se securities so long as it meets its trust obligations, and may substitute other similar securities from time to time. The resident agent of the company nuist deposit with the Auditor of Public Accounts a copy of the company's charter, a statement of its capital and manner of its investment, etc., and must annually render to him a statement which must be published in a Richmond newspaper. The auditor nmst annually examine these statements. He may also at any time examine into the affairs of "any company incorporated by, or doing business in, this State." If unsafe conditions are revealed, he may revoke the certificate of authority issued to the company, and publish such action. (Code 1901, title 18. chapter .k'5, section I'JSfic, pages ()lG-().')l ). Washington-. Three or more persons may incorporate a trust company. The name of the company must contain the word "trust," and other corporations are forbidden to use the word in their titles. Capital required: .■i<10,000 in towns of less than lOOO inhabitants; .*L*).0()0 in towns of from 1000 to 2000; $20,000 in towns of from 2000 to 3000; $2r»,000 in towns of from 8000 to oOOO; $30,000 in cities of from 5000 to 10,000; $50,- 000 in cities of from 10,000 to 25.000; $75,000 in cities of from 25.000 to 50.000; $100,000 in larger cities. Existing companies may continue with capital required under the old law. At least 50 per centum of the capital nuist be i)aid in at the start and the balance at the rate of 10 per centum a month until fully paid. .Stockholders are subject to d(»uble liability. The holding of real estate is limited in practically the same way as that of National banks. Such as is not needed for the business may not be held as an asset over three years. Before declaring dividends, one- tenth of the net profits must be carried to surplus utitil the latter equals 156 TRUST COMPANIES. 20 per centum of the capital. Checks may not be certified unless the nec- essary funds arc on deposit. Trust companies must carry a reserve of 20 per centum of demand liabilities. Payment on joint accounts of not over $300 may be made to either party, whether the other is alive or not. In December of each year a report must be made of all deposits that have been unclaimed for ten years, unless the Secretary or Cashier knows the depositor to be living. Powers specified: to act as fiscal or transfer agent or registrar, and as agent for any corporation, foreign or domestic, for any purpose re- quired by statute or otherwise; to receive deposits of trust moneys, se- curities and other personal property from persons or corporations; ta loan money on real or personal securities; to discount and negotiate promissory notes, drafts, bills of exchange and other evidences of debtj to buy, sell and exchange coin and bullion; to hold all real estate neces- sary for, and convenient in, the transaction of its business, or which the purposes of the corporation may require, and such as is required in satisfaction of debts due to it; to act as trustee under mortgages and bond issues, "and to accept and execute any other municipal or corporate trust not inconsistent with the laws of this State"; to execute trusts for married women in respect to their separate property, and to act as agent in the management of same or in business relative thereto; to act as guardian, receiver or trustee of the estate of any minor, and as depositary of any moneys paid into court; to execute any legal trusts and powers regarding the management of any estate, real or personal, confided to it by any court of record, person, corporation, municipality or other author- ity, and to hold property that may be the subject of any such trust; to purchase, invest in and sell stocks, promissory notes, bills of exchange, bonds, debentures and mortgages and other securities; to issue its bonds or obligations for money borrowed or received on deposit or for invest- ment; to act as assignee or trustee under an assignment, or as receiver ;^ to act as executor, trustee under will, administrator, or guardian of the estate of lunatics, idiots, persons of unsound mind and habitual drunk- ards; to do a safe deposit business; to do a title insurance business, but not if the company does a banking business ; to collect income on securi- ties as agent; to receive and manage a sinking fund for any corporation; "generally to execute trusts of every description not inconsistent with the laws of this State or of the United States"; to receive money on de- posit, subject to check or otherwise, with or without interest. The affairs of every such corporation shall be managed by a board of directors, not less than three in number, each of whom must own five shares of stock. Trust companies may not loan to their officers, stock- holders or employees from trust funds, and any loans to them must first be approved by a majority of the directors and be entered on the rec- ords. Directors who knowingly permit a violation of this are individually liable for damages. Trust companies may not loan on the security of their o"wn stock, nor purchase same except to prevent loss on a debt previously STATE AND TKRUITORIAI. LAWS. 157 contracted in jiood faith. Tlity must make to the State Examiner not less than three reports each year, according to forms which may be prescribed by him; such reports to be rendered as of past day specified by th«' Examiner, which days shall correspond with those on which national bank statements are called for. .\n abstract of the reports must be published in a local newspaper. The Examiner may call for special reports at his discretion. Trust companies are subject to the inspection and supervision of the State Examiner, and it is his duty to examine them at least once a year witliout previous notice. W unsafe conditions are found, he must notify the Attorney-General, and may take immediate possession of the company pending the proceedings instituted by the Attorney-General, or until a receiver is appointed. Deposits made by minors and married women are subject to their control. (Pierce's Washington Code 1905, §5;7225-7'255r, 7'i'26-7'226d. Laws of 1907, chapters 22, 37, 80, 126, 225. Corporation Laws, 5; ;j 19 1-2 10.) West \'ikginia. Trust companies are organized according to provisions of the general incorporation laws, and governed by the provisions of the "Title and Trust Company" law. Powers specified: To do a title insurance business; to buy, sell, hold and guarantee bonds, stocks, loans and evidences of indebtedness, and to make and execute contracts and agreements required therefor; to engage in a general banking business, with all the incidental powers necessary thereto; as to such banking business, trust companies are subject to the banking laws, except that there shall be no limit to the maximum of paid-up capital that such companies may have; to do a safe deposit business: to act as trustee, assignee, receiver (general or special), guard- ian, executor, administrator, special connnissioner, committee or curator; to execute trusts of every description not inconsistent with the constitu- tion of this State or of the United Stat»'s; to receive deposits of money or other personal jiroperty. and issue its obligations therefor; to invest its funds in and to purchase real and personal securities, and to loan money on real and personal securities; to act as fiscal or transfer agent or registrar; to purchase and sell or take charge of real estate for other persons, firms or corporations; for the purpose of indemnifying and saving harmless any company for making any loans, or accommodations, such company is authorized to receive and hold on deposit and in trust, as security, estates, real and })ersonal, including the notes, bonds and obligations of States, counties or municipal corporations, individuals, firms or corporations, and the same to purchase, collect and adjust, set- tle and dis))ose of, in case of default upon any note or obligation for wiiich such pro))ertv has been received as indemnity, or as collateral securitv, without proceedings at law or in equity. Courts appointing such companies to trusts may. in tiieir discretion, on the application of any persons interested, investigate the affairs of trust companies so ap- 158 TRUST COMPANIES. pointed. Trust funds and investments must be kept separate from the assets of the company, and all investments made by the company as fiduciary must be so designated as to show to what trusts they belong. The capital of such companies shall be taken and considered as the sole security required by law for the faithful performance of duties in trust capacities; provided, that, where the liability of the company in any trust capacity equals or exceeds the capital and surplus, the court making such appointment, or order or decree, shall require additional security. The capital of such companies must be at least $100,000 fully paid. Such companies shall not act as surety on bonds, or do a fidelity insur- ance business, except as above specified. Institutions not regularly organized and chartered as trust companies are forbidden to use in connection with their business the term "trust company." Stockholders are subject to double liability. Every director must absolutel}^ own at least five shares of stock. Trust companies are specifically made subject to the banking laws. They may not begin business until the}?^ have obtained a certificate of authority from the Commissioner of Banking. The Commissioner must make a thorough examination of each company at least once a year. Loans may not be made upon the security of the company's own stock to an amount in excess of fifty per centum of the capital, nor may such stock be purchased or held except to prevent loss upon debts previously contracted in good faith; and in the latter case the stock must be sold within six months. Loans to one party, except bona fide discounts, may not exceed twenty per centum of the capital. Before the declaration of a dividend one-tenth of the net profits must be carried to surplus until the latter equals twenty per centum of the capital. Lists of stockholders with their addresses and holdings must be kept, which shall be open to inspection during business hours by all stockholders, creditors and by the State tax authorities. A copy of this list shall be forwarded to the Commissioner on the first Monday of July of each year. All companies are required to maintain a reserve of fifteen per centum of all deposits subject to witlidrawal on demand, of which three-fifths may consist of balances payable on de- mand due from any national or State bank (including trust companies) in the State or any solvent banks outside the State that may be approved by the supervisor in said State. Reports to the Commissioner of Banking must be made at least four times a year, "corresponding as to time as nearly as possible to the calls made by the Comptroller of the Currency," according to forms pre- scribed by him, and such reports must be published in local papers. Special reports may be called for and special examinations may be made by the Commissioner at his discretion. Foreign trust companies may do business in the State by complying with certain regulations and getting a certificate of authority from the Commissioner. STATE AND TERRITORIAI. LAWS. 159 (Acts of 1901, chapters 83 and 8.5; Acts of 1903, chapter 7; Acts of ]90.'5, chapter 4^5; Act passed February 19, 1907.) Wisconsin. P'ive or more persons may incorporate "as a trust, annuity, guar- anty, safe deposit and security coini)any." All hut companies regularly incorj^orated for the purpose arc forhidden to use the words "trust, an- nuity or guaranty company" in titles, or other words designed to indi- cate that they do a trust business. Capital rctpiired, not less than $50,- 000 in cities of less than 1()0,()()() population, and not less than $100,000 in larger cities. Maximum limit, $."»,()0(),(H)(). Fifty thousand dollars must be paid in before beginning business, and the balance within six months. All the general provisions of cha[)ters H6 and 87 relating to corporations apply to such .companies. Within six months after begin- ning business, such companies shall deposit with the State Treasurer not less than fifty per centum of the capital nor more than $100,000 in amount. Such deposit shall be in cash, bonds or mortgages, or notes and mortgages on unineumlK-red real estate within this State worth double the amount secured thereliy, or public stocks and l)onds of the United States or of any State of the United States that has not de- faulted on its principal or interest within ten years, or of any county, town, village or city in this State, and upon all which Iwnds and other securities there shall have been no default in the |)ayment of interest or principal for a longer period than thirty days. The securities must be approved by the Commissioner of Banking. This deposit shall be held as security for the depositors and creditors of said corporation, and for the faithful performance of the trusts undertaken by it. Other securi- ties may be substituted from time to time; and the company shall receive the income of the securities. Such comjianies shall In- managed by a board of five or more directors, each of whom must own ten shares of stock. Their specified powers are: to receive, hold or dispose of any prop- erty, real or personal, conveyed to them upon any trust, by any persons, including married women, minors, bodies corporate or any court, and to execute any trnsts regarding same; to act as agents for the transaction of business, management of estates, collection of income or principal, etc.; to act as registrar, fiscal or transfer agent; to act as executor, ad- ministrator, trustee, receiver, assignee, guardian of minors, persons insane or incompetent, lunatics, or any persons subject to guardianship; courts are authorized to make such appointments; no security shall be required of the company other than the deposit with the State, except in the discretion of the court; to loan on real or personal security; to do a safe deposit busin«ss; to act as surety for fiduciaries; to exercise all of the powers usually exercised by trust companies. Such companies are forbidden to buy or sell bank exchange or do a banking business. Married wo)uen and minors may control their deposits. Such companies 160 TRUST COMPANIES. may hold real estate needed to carry on their business and execute trusts committed to them, and such as may be necessary in the enforcement of claims, etc. Trust funds may be invested in the same classes of securi- ties as those in which the deposit with the State Treasurer may be in- vested, or in such real or personal securities as the directors may deem proper. Trust companies must, on or before March 1 of each year, pay to the State Treasurer a license fee of $300; and in addition a tax of two per centum on their net income during the calendar year preceding. Such payment shall be in lieu of all other taxes, except upon real estate owned by the company. Trust companies are under the supervision of the State Banking Department, to whom they must make at least three reports each year. The reports must be published in local papers. The Commissioner of Banking must examine each company at least once a j'ear. If the company is connected with a. national bank, the examina- tion must, if possible, be held at the same time that the examination of the national bank is made by federal authorities. Any officer, director or employee who makes a false statement or a false entry in the books or knowingly subscribes to or exhibits false papers with intent to deceive llie examiner, or who publishes a false report, return or statement, shall be fined from $1,000 to $5,000, or imprisoned in the State penitentiary from one to ten years, or both. (Sanborn & Berryman's Wisconsin Statutes, Supplement 1906, ^g 1791d-1791i5. Laws of 1905, Chapter 504.) Wyoming. Loan and trust companies may be incorporated by five or more per- sons. The capital, which "must be subscribed for as full-paid stock," must be at least $10,000 in towns of less than 2,000 inhabitants; at least $25,000 in towns from 2,000 to 1,000 inhabitants; at least $50,000 in towns of from 4,000 to 6,000 inhabitants; and at least $100,000 in cities of over 6,000 inhabitants. Fifty per centum of the capital must be paid in before commencing business, and the balance within six months. The shares must be $100 each. Powers specified: to exercise the ordinary powers of corporations; to buy, sell and discount bills of exchange, notes and all other evidences of debt, buy and sell gold and silver coin and bullion, receive deposits and pa}^ out same either upon order or check; to "execute any trusts which may be created by instruments in writing; such instrument may appoint such association trustee for am^ lawful purpose, and to act as Mich trustee in all matters embraced in such trust;" to do a safe deposit business; to collect income of securities left for safe keeping; to execute and issue in the transaction of its business all necessary receipts, bonds and contracts. Such companies may hold such real estate as is necessary to carry on their business, as well as such as is acquired in the settle- ment of claims. The board of directors is authorized to invest the capi- STATE AND TERKITOHIAL LAWS. l6l lal and sucli money as is receivt-d from persons or associations for in- vestment, "in good securities; and it shall be lawful for such association to make investments of its capital and of funds accumulated by its buai- ness, and moneys received from other persons and associations, for in- vestment as aforesaid, or any part thereof, in bonds and mortgages on unincumbered real estate and chattel property worth at least double the amount loaned, and also in any and all warrants and bonds of this State or any other State or Territory or of the United States, or the bonds and warrants of any county, city, town, or school district of this State legally authorized to issue such warrants or bonds." Such companies must maintain a reserve of twenty-five per centum of their liabilities to depositors, which reserve shall consist of cash on hand or on demand deposit with State or National banks approved by the State Examiner as reserve agents. Such a corporation may mortgage its real or personal property and pledge or hypothecate its notes, mort- gages and other securities, and guarantee payment of the same, to per- sons or corporations furnishing it money. Stockholders are subject to double liability. A section of the statutes which forbade such companies to receive deposits subject to check, and to buy commercial paper, etc., was repealed in 1903. (Revised Statutes, 1899, division 2, title 4, chapter 2, §§ 308.'), 3086, 3128-3139- Laws of 1903, page 59, Act of February 20, 1903. Laws of 1905, chapter 78; Laws of 1907, chapter 78.) CHAPTER VI. ORGANIZATION OF THE WORKING FORCE. IT is difficult to find two trust companies the scope of whose business is exactly the same ; and because of this fact, and because these institu- tions are still in the formative period, the plans under which the work- ing forces of trust companies are organized are nearly as numerous as the companies themselves. There is some variet}'^ in the titles given to dif- ferent officers and employees, and great variety in the duties which such officers and employees are called upon to perform. It is therefore quite out of the question to treat the subject as one might write of banks, where the names given the several workers, and the duties which they perform, are, within certain limits, pretty well defined. The average trust company worker, outside of the banking department, is usually called upon to do service of a more varied nature than that of the aver- age bank employee. The organization of the working force depends, in the first instance,, upon the character and amount of the company's business. If it is prac- tically a bank operating under the name of a trust company', as is often the case, its working force will be organized in a manner differing little from that of an ordinary bank. Its active head, where the President or a Vice-President is not an active official, is apt to be called the Secretary and Treasurer, or the Treasurer, rather than the Cashier; although the latter title is frequently used in the South and in the West. Where the business of the company is large and diversified, requiring a considerable number of officers, the titles most commonly given are President, Vice- Presidents, Treasurer, Secretary (or Secretary and- Treasurer), Assist- ant Secretaries and Assistant Treasurers. Among other titles found are Attorney, Trust Officer, Auditor, Advertising Manager, Manager of the Bond Department, Manager of the Safe-Deposit Department, and Manager of the Real Estate Department. Duties of the Various Officers. The titles given trust company' officials do not necessarily convey any idea of their duties. While the President is sometimes the active head of the company, he is more often not active, devoting to the company's, affairs only so much time as is necessary to preside at directors' meet- ings, serve on certain committees, and act in an advisory capacity. In such case, the active management devolves sometimes upon a Vice-Presi- dent, sometimes upon the Treasurer, occasionally upon the Secretary, but most often upon the Secretary and Treasurer. Where the Secretary and the Treasurer are not the same man, the duties of the Treasurer are apt to be connected with the banking department, and those of the Secretary ORGANIZATION OF WORKING FORCE. l68 with the trust department, but instances are numerous where no attention is paid to titles in the assignment of the duties of the diflerent officers. The titles of other officers, like that of Trust Officer, are more descrip- tive of their duties. The accompanying chart is designed to show the general organiza- tion of the working force of a trust company doing a considerable busi- ness in trust, banking and kindred lines of business. It represent* no particular company, but the attempt has been made to incorporate the arrangements most couunon among a number of companies examined, the type of company represented Ix ing that in the large cities of the .Middle States. Of course the various lines of work will be combined so as to be done by fewer workers if the company be smaller than the one for which the chart is designed, and will be distributed among more workers if the company be larger. The assignment of r«sponsibilities among the Assistant Secretaries and Treasurers is purely arbitrary, and in a given company may be quite diff'erent from that shown in the chart; such as- signments usually and properly depending more upon the personal fit- ness and experience of the various officers than upon their titles. A newly-organized company is apt to jiay more attention to the relation- ship of titles and duties than an old company, where the diflerent men have groAvn to their titles, their duties having been well established before the titles were given. Reading horizontally, the arrangement of the chart is designed to show the superior officer to whom each worker is responsible. Reading vertically, no effort has been made to show the relative standing of the officers and employees. Thus, each worker in the column beginning "Assistant Treasurer" is responsible directly to the Secretary and Treas- urer. Reading horizontally, one may see the special department of which each officer or worker is in charge, and the various employees who report directly to him. The question as to which of the under officers is in direct line of prouiotion depends upon the man rath< r than upon the position. Whatever title be givin the official who has active charge of the com- pany, he is the man who is immediately responsible to the directors, and through them to the stockholders, for the general conduct of the institu- tion. Upon his shoulders rests the general supervision of the aff"airs of the company; to hiui the lesser officials report, and under his general direction they administer the business of their several departments. Mat- ters of detail arc as a rule not brought to his attention, but his strength and time should Ik reserved for the consid«ration and determination of general policies. He is, of cours« , the one upon whom rests the responsi- bility for the safe and profitable investment o{ the funds of the company and of the funds which the company holds in trust. Such invtstments, however, especially those of trust funds, are not usually made upon his sole responsibility, but arc determined by an investment committee, of which he is the most infiuential member. The laws of many of the SUtes 164 TRUST COMPANIES. 1 a u J 1 4 vi ^ '' ^aiC'di^ '2r\XAAAx/yLK> ( ^r^c. Mrvw.vJ4 (Pa^ufK^ wJJU^ OuiiAAAXc^. TT^tjr ' ~^^-^i^ tttectt^ v^.^^^ - Ct"' ^^all approach and the «nnecessarv Lbor anltime /°^ «''"' '"""^^^ "' "irtail fullness and detail," retdnreitTi^r/T'' '^".'^•'•^- -J »' '"o ""le be of the utmost importanc^ of i„ »^ """"™ "^ '''"^'' ">"* "ay «.e woru of suppiyii;r:ri;:d Z:z:^ ""-' '^^^ -" "-^ - ea Jurstd;*°t:;"h;;\:^tT:';iiw?r''\'^^""'^ '-«= ""-'»« "■"> The records will be inadeouate if ?r /"'"'"' "'' """'"'""' ''"''■■' of all the essential rttTpertltJttr"?™'"" ' ™"P'^'= '^'"'^ some and unwieldv if thev eon t ^ ., '""'' "''-^ "■'" 1"= <^™bcr- Yet it is safer to r o,f ^L , jrofTo" ■": 7 n "'"""^ i"f"™ation. all. and it is better for tl f t fo thf ^ "' " ""' "'^'' "' ^' for details which the inte i.ent L„U " *° ™"'="" '"''•"'' ^P""' particular cases, than to " £ „o „r„ ^'^ ^""^ """ "' '"' ^■^"^"°» " careless, lazy »; incon;;"™' Zke; " '" ''"'''' ^"^^ '^^'"'^ *» '»^ f Jtar':::„°d;^:f ^^i;rous'^"";rt\"' "-^ «''^'-' '-p-"-- derstood by „„v Ic"r'or It '^°,°'^\°"S''V° ''' ''"P'" '"°"?'' '" ^e u„- the necessi V o^Z e' e" elf "T''' "' "'' ™"P--"' -"^out b.v costly eipcrien^cet ::czz::^'r!::.::::i:z:7' '''"-' itte;t7=was'lM "' '-'-r --'« " -n '"i;: iz could interprtThn,",, t ^ ""^ '" f' """'''"'' "«'"^ '-'"''^•J' -'» away for the dav V ' ""'"' '""^■''- ™'=" ''"^ '"^ »"' f- l"nch or simpkst f ts r i^di",,:::""" 1 "''^i' '"' '''"" "■ --^'-■> '■- FORMS FOR TRUST DEPARTMENT. 173 met with l»y many companies, and there is a distinct trend towards sim- plicity by the older institutions. Another consideration is that the bookkeeper on any particular set of books may at any time meet with accident or sickness which n.ay occasion liis long absence or death : and it is obviously important that another man be able to take his place without the necessity of a long course of train- ing, or the making of numerous errors in starting the new work. Win re it can Ik- afforded, it is of decided advantage to have the books specially prepared with printed headings for the various columns and spaces. To the man who works on the books daily, these headings may seem unnecessary; he knows what the various spaces are for without the labels. But it is not enough to have the books understood by the man who keeps them; they must be readily understandable by any intelligent person, so tliat the oflicers may know the state of things at a glance, and so that a new man may take up the work at any time. This proposition seems clear enough on its face, yet it is astonishing how litth- it is he.-ded by some institutions. Because of the frequent reports rerjuired, it is of great advantage to have the records in such form that the stenogra})her may copv them on the typewriter just as they stand. This ))recaution saves a great amount of work and many errors. There should be a general system of accounting, of which each book and record is a part, and through all of them should run a chain of en- tries that binds them together. This insures accuracy and prevents mani- pulation. The source of each entry should be readily ascertainable. Some companies, especially where loose-leaf books are used, consider it of advantage to ha\e all leaves of the same size, thus insuring uniform- ity in the sizes oi" all the books afid records. This adds much to neatness and general ap})earance, and is often of convenience. If this is done, the size should be large enough for those records which need considerable space. This requires making some records larger than necessary, but the fault is not a bad one. The size used by one of the Ix-st companies is 15y^ inches high by 13% inches wide. This makes a book of convenient shape and size. Use of Loose-Lf.af Books and C\rds. The question of the use of loose-leaf lH>oks and records is one on which opinions diller, and tlie opinions for and against their use are often quite emphatic. That they are convenient is generally conceded. The essential objection urged against them is the ease with which leaves may be removed, and the records be changed or the leaves be lost. This objec- tion is largely removed by the plan of having the keys to the books in the sole charge of one official or trusted clerk, who is held responsible for any irregularities due to removal of leaves. Where there is objection to the general use of loose-leaf records, they may be used only on ledgers and other secondary books, the books of original <-ntry being Uuind in the 174 TRUST COMPANIES. usual way. It argues much for the convenience and safety of the system'- that few cases are on record where a company has discarded loose-leaf books after having given them a trial. The use of card records is open to much the same objections as the loose-leaf book, and its advantages are of the same kind, but more pro- nounced where adapted to the needs. The use of cards for various pur- poses is steadily growing, and in many institutions has entirely displaced books in some departments. Of course the cash and securities should not be in the keeping of the ones who keep the records concerning them. Audits should be made at frequent and irregular intervals, and the cash and securities on hand must then agree with the amounts called for on the books kept by an- other. However complete and carefully arranged the set of books may be, the matter of accuracy and care in their keeping depends upon the men who do the work day by day. The books of tlie trust department ought never, even for a day. to be in the charge of novices or incompetents. The best bookkeepers in the institution ought to be in charge of these books. They ought to be well paid and well treated. This is done in most of the best-managed institutions. In others there seems to be a lack of appreciation of the importance of such work. The writer knows of an in- stance in the metropolis of the country where an unusually competent and painstaking manager of the book-keeping department was informed that, as his department added nothing to the earnings of the company, its. expenses must be kept down to the lowest possible figure ! The shallow- ness of such an argument is obvious enough. The number and kinds of books needed by the trust department de- pend upon the size of the company and the character of its business. Trust business necessarily^ accumulates slowly and usually requires years to reach considerable proportions. The greater part of the business of the average trust company, especially of the small and the new ones, is in the banking department, and what trust records are necessary may often be kept in the general ledger. In the following pages will be given descriptions of the books, records and forms required by companies 'doing considerable trust business. Many of these are not needed at all by the smaller companies, and often two or more of them may be combined in one book. There is such variety of business done by different companies that it is quite impossible to devise sets of books applicable to all, and each company is under the necessity of devising books suited to its in- dividual needs. To what extent it is desirable to discount the future in a new company, and to provide at once sets of books in anticipation of a large and diversified trust business, will necessarily depend upon the in- dividual prospects of the company. Relation of the Trust Books to the General Books. It is usual for the trust department (or departments) to keep separate records of its own work. For its cash it keeps an account Avith the bank- FORMS FOR TRUST DEPARTMENT. 175 :ng department just as any customer would; ,md some companies keep bank accounts for some of their trust funds with otlur trust companies or banks. Only the totals of such accounts appear on the general or in- dividual books of the company. For example, if at any time the trust de- partment has on hand $300,000 in cash, accumulated or awaiting invest- ment, such sum appears on the books of the banking department as a de- posit to the credit of the trust department. Regarding the details of this deposit the banking department has no more to do than with the details of the deposit of any customer. The Thist REni^rKn. When a new trust is taken on by the company, the first hook in which record needs to be made is the trust register or register of trusts. The purpose of this book is to give a list of the trusts held by the company, together with a concise history of each trust, its conditions, etc. Some com- panies use two or more books for this purpose, keeping trusts received REGISTER OF TRUSTS. ni. ,, , la ... — £J. «. „ — •7S- asi. ^ »..-/. rfivK*.^.--! ''Mfi "■in ^U\ frti fun ^1 Y+ Hr , U~« 4r>,^ ointed by the Trust Company Section of ihc American Bankers' Association to print a book of trust company forms. In Fig. 1 is given the register of trusts recommended by this com- mittee, with sample entries. When a trust is received, memorandum of same is at once made on this register, and the trust is given the next consecutive numlnr. By this number it is thereafter known, and its papers and securities are filed under that number. This is not onlv a great convenience when the number of trusts becomes large, but is a decided safeguard in filing documents. It becomes of special importance. 70 Proceedings Trust Company Section pp. 22-27. Lmerican Bankers" Association, 1901, 176 TRUST COMPANIES. too, when more than one trust is held from Ihe same party. The numbers also show the order in which the trusts were received and the total number received up to any given date. It does not show the number of open trusts, as many may be closed. In Fig. 1 the first column is for the number of the trust. The second column is for the date when the trust was opened. Care should be ex- ercised here — and in all books — to have the year, as well as the month and day, correctly and plainly indicated. After the book has been in use for a term of years, this becomes of the utmost importance. Young book- keepers frequently overlook this. The next column, headed "name," is for the name in which the trust stands. The next column, headed "character of trust," describes briefly the capacity in which the company is to act, or the general nature of the work undertaken by it. The next column, headed "source of appointment," shows whether the trust was received by appointment of court, by private agreement, or otherwise. These are all the entries that can be made at the time that the trust is received. In cases Avhere an inventory, an appraisement and a proof of publication are required, the dates when these were attended to are in- serted in the proper columns. When a trust is closed, entries are made in the next columns showing the date when closed, and the authority for such closing. It is a convenience to have a special file, called the "disposed of file/' for trusts which are closed, so that the live trusts can be kept separate. The last section of Fig. 1, headed "trusts closed," is for use in connection with this file. At a convenient time, the remaining papers of closed trusts are placed in boxes or envelopes in this file, the package is given a num- ber, which is inserted in the last column in the register, and the number of the trust and the date of closing are inserted in the columns shown. Some companies do not give new numbers to closed trusts, but file same by the original number, which is probably the better plan. There should be an alphabetical index to the register of trusts, giving the number of each trust and, if desired, the page on the register in which it is entered. The regular size of page for this register is 21 by IS^/^ inches. It will be seen that this register permits of only a meagre record of the facts regarding each trust. It serves as a convenient means of ke«p- ing a list of trusts and of learning at a glance the proper number to give to each new trust. But fuller details regarding the trusts must be written out elsewhere. Some companies have such details on a specially printed page inserted in the loose-leaf trust ledger at the beginning of the account of each trust. Many companies dispense with the use of this form of trust register entirely, and register all trusts in a book devised on quite a different FORMS rOR TRUST DKPARTMKN" 17 plan. In the book, one i)age (or more, if necessary) is given to each trust, the facts regarding the trust being treated at greater or less length, as the case in hand may require. The trusts are given the proper con- secutive numbers as received, the same as in the brief form of register. The pages are either ruled across like an ordinary record book for writ- ing, or are entirely bl.nik if they are to be filled in with a book-typewriter. The book may be spteially j)rinted, but unless loose leaves are used it will not be of advantage to have much printing, as the record needed for different classes of trusts varies greatly. In any event the matter to go in the trust register should either be dictated by an officer or inserted by an intelligent clerk who is thoroughly familiar with the work. Fig. 2 shows a page for such a register. The history of the trust may be continued on the other side. The page is quadrille-ruled, as a conveiiitiu'e in tabulating items when necessary. Its si/e is llxl.> ineln>. . The Pearl Street Savings and" Trust Company. T^IU-VJ -1 ^- ^ ■" "" "" ~ " ^" f> n„i f\ V kV ^( ■4 -9, ,,. ^ - t. ; .1 :f, -r .' t, \..< /^ _ ^, 1,-' ..ilU ^ ^^ .,. •v/ V ■\ -f. -'M ■ ^ 1 i 1 '.^^ •-,f l--^ ■ ':..J-. ,:.!l, ^ ,J . r(^ 1 1 : 1 .,, ,J-. ^, r^ ,.,!„ .^x -A r^" . ,jjt. l1» ■"S ^, fc. 1- 1, v-f ^ : i C.c^-v-.fe 1 -' 1 -,j ^ •Ir • v..t •ft _ '-f -,-.U^r, / - L' SCO, 000.0 im 1 Kro« 7/8/0 July s, 1902. AcctniD Bv EXEC con July 2, 1902. J BY TIIUST COA July 1, 1902. e» Jereey. '"'E jxay 1, 1902. snlthville. '" Salthvllle. couim »«D jtATt sueaex, New Jereey. J5P nouns. Nos 1 to 500 mousnt »iooO.OO "«" ' Sew York °" July 1, 1922. " Blanlt Trust Co. July 1, 1902. YorK Jan. July 1. BlemX Trust 00. rranohle Nine and c.ie-fourth mies of traoX, wires, etc. Power houae and eight aoree »f land, oor, 8th Ave. and 17th St., and ©- qnlpnent on eaiue. oar barns and otiuljunent and five aores of land, oor. 12th A»e. and 5Srd St. 107 oars with motors, etc. Sundry property per description In deed. All located in Sueeej Co., Jl.J. Sell property. See trust deed. intereet nay demand aotlon pari of trustee. See Fig. 3. with which the entries are made, as shown in the figure. The abbrevia- tion "Comp." at the upper left-hand corner refers to the compensation received by the company for its services. Most of the entries are self- explanatory. It will be noticed that the memoranda opposite the head- ings, "in case of default trustee may" and "in case of default bondhold- ers may" are not extended. The utility of extended memoranda on such points is doubtful. If action is to be taken in these matters, such action FORMS FOR TRUST DEPARTMENT. 179 Tutix-flB-aoi TITLE ^jun^ U)clLc.^^(:^^ . *F«. ^ >^f Ito rf7ir/i ■»tt«»^-»', ' •/0OO.« h A(f<^A. rf ^'vvtc- ^r^w. CiM.^ irw -Cwl 4 G^Caa^ L) LiiUx—v^* C»T-t-v.-- & ^Ljlu.^ OjuLuAt. o/ aJLi^ 0^. -n^. /fete 3, i<(t«>. CXUx-l-ivv,*. ^ 0^ ^i<»oa. iiu^ ^ /t5«-,_i •^/1_// 7V,«^yl-. U.' J JCiC M/it^^^.^tmtA. Fig. 19. — Inventory Sheet, Page 1. The inventory shows a balance of .$tS5,150 in Bonds and Mortgages, $7,200 in Real Estate, and $H.350 in Securities. The total inventory being $89,-l()8.69. the Principal account should show a balance of $2,168.69 Cash Principal. Such an inventory ought, of course, to be 196 TRUST COMPANIES. made somewhere in the records. It may be in such an inventory sheet as here shown; or in the trust register; or in the regular ledger account of the trust, as shown in Figure 22. The opinion has already been expressed that the general plan just outlined for the handling of estates department accounts is the best one. There are those, however, who prefer other styles of records; and in ■Ji^:. r y...r/ ^'.r.T, ^5y i.j r .}-c._ 7-^t^ Lnti- ^-..,. Fig. 19. — Inventory Sheet, Page 3. Figures 20 and 21 are shown other styles of ledger sheets, and in Figure 22, the combined journal and ledger form given in the Book of Forms issued by the Trust Company Section of the American Bankers' Associa- tion. In the ledger form shown in Figure 20, provision is made for separate accounts of Capital (or Principal) and Income, and balance columns for each are provided. The first page under the account of each trust in this ledger is a memorandum page, the information called for being shown hj the following headings: Brief of Terms of Trust, Union Trust and Storage Company, CAPITAL Ou. 0.. c. B.U-. D«, v.. o BU.„, 1 i 1 Fig. 20. — Trust Ledger, Estates Department. Date of Receipt of Trust, Amount of Commission, Character of Funds Received, Income, When to be Paid, Income Payable to, and History. The ledger form shown in Figure 21 provides for separate accounts of Principal, Income and Trust Investments. It does not have balance colunms — a serious defect. The obvious objection to these two forms, Figures 20 and 21, is that no provision is made for the keeping of more FORMS FOR TRUST DEPARTMENT 197 than two or three accounts uiukr each trust; whereas it is usually con- venient, and sonietiints imperative, that a number of other accounts, such as those shown in the headings of Figure 13, be kept. Of quite a diflercnt character than any of the ledger forms thus far given is that shown in Figure i>'J, which is both a journal and a ledger. It is necessary to show tiie form here in two parts, the two parts together »JCAN TKIl-^T < m ilJlBi ■zr:-T m- Fig. 21. — Trust lj:rK;ER, Estates Di: I'AHTJIEXT. representing the open book as it lies before the b(K)kkeeper. This form has some distinct advantages and some distinct disadvantages. The ad- vantages are most api)arent to the bookkeeper who handles the l>ook daily and is thoroughly familiar with its every detail; the disadvantages, to the officer or other employee who is not familiar with the book from daily usage, and wishes to get some information in a hurry when the bookkeeper is out for lunch. Combining as it does the journal and Fig. -t^ .t- i.» 'i~rJtfii:*J . cJ,-.^--^ ^ . Ill* »dcuv. . . . tc^l^^K^ .*-< • . . lUJ* C^rr-f -v^*. -v^Cr a -3 f>r^ " - - ■• (jjtt—iiJwi.-^. >( X ■^<*~~ - fi 5 irt»fci-. A.-*-^ *^r~^ . — Left-hand Pack. Comhinkd .Toirnai. and I,ed(;er F.stat>:s Department. ledger, all posting is done away with, except for such sub-accounts as it may seem wise to carry. The record of transactions in all the difl"erent accounts is kept in chronological order, and in rendering reports the stenographer has but to cojjy the record as it stands. -The entries for anv account may be easily found. On the other hand, the absence of balance columns, except for Cash, is a serious objection. The bal- 198 TRUST COMPANIES. iinces may be found by simple subtraction if the footings are always up to date; but they are apt not to be so. Another objection to the form is the fact that other accounts than those given may be called for, and there is no way of keeping them except as sub-accounts. Most of the entries shown in the figure are self-explanatory. For each item there is both a debit and a credit entry, and the accounts as a whole must always be in balance if the work is properly done. The check columns for Individuals, for Interest, Rents and other forms of Income, and those after the columns headed "Personal Property," may be used either for postings to sub-accounts or as a means of pick- ing out the entries for the particular classes of items, or for both pur- poses. The Principal account shows the total Principal at any time, Fig. -Rigiit-Haxd Page, Combixed Trust Joitrxai Department. LND Ledger, Estates including both Cash and Investments. The cash Principal may be found by subtracting from the balance of the Principal account the total of balances under the four accounts preceding; or by subtracting from the balance of Cash account the balance of Income account; and it may be proved by combining the two operations. Some companies prefer to carry only Cash Principal in the Principal account. The figure illustrates the plan of entering the complete inventory of an estate, at the time the property is received, in the ledger. This plan is an excellent safeguard against overlooking any item of the estate, as everj' item credited to Principal in the ledger must be ac- counted for. Items of uncertain value may be entered here at the nominal appraisal of one dollar, as shown in the figure. Whether this plan of entering the whole inventory in the ledger is better than that FORMS FOR TRUST DEPARTMENT. 199 DAILY TICKLER. TRUST DEPARTMENT, Lj L^-Uj>l Xc^ ^(CMvr >^ l9oC ^ m^ ^Ui '.^c. ___ '\r,..Xl -If^A,^!/ ±s. OkA. S< f^..t^'i.d^(^ ^'.^•Ji AtTajhr ->•->* -v-:t~ '^^ H if '^' 'tf"'"'''' ^■•^•-^^-/-^ ,^:.M. Fig. i?3.— Tickler. of confining ledger entries strictly to cash transactions and keeping the inventory elsewhere, is a matter upon which opinions differ; and there is good authority for either course. Tliere is also a difference of opinion as to whether securities of various kinds that are included in the inventory of an estate ought to be carried at an appraisal based on their market value or at their par value. Tliere are arguments for and against either course., and the question is not always an easy one to decide. SuxDRV Forms for the Corpor.vtions Division*, Tri-st Dkpart.mext. In addition to the forms foi the record of transactions involving cash, the trust department has need of numerous other forms and rec- ords. Of great importance is the Tickler of this department, upon which a memorandum is made of tvery matter that will require atten- tion at any future time. It is not safe to leave wholly to the memory of any individual or individuals the responsibility of attending to any i^O'l ^ ^ ^.^^ y f^'j ^ fe i± lAAA^iA^- liG. 54. — Tickler Card ior Gencbal Lse. 200 TRUST COMPANIES. of the details of business so important. Aside from the fact that mem- ory is not always reliable, especially when the number of details is large, is the fact that the man upon whose memory depends attention to any matter may be away or sick or dead when the time comes for such attention. The only safe plan is to have a tickler entry made of every matter that must be attended to, including those which recur at regular intervals. The form of the Tickler is not of prime importance, so long as it serves the purpose of a reminder of the business to be done at the time it is to be done; but the Tickler entries ought to be plain enough to be understood by others than the one who makes the entries. The responsibility of seeing that the business called for each day by the Tickler is attended to should rest upon one man, who will of course distribute memoranda to other workers as the circumstances re- quire. Tru«t Number. Name of Tru««-. Also Payable At \7-^ ht.^'iJJl^^ (0^ "^M. (/.. ^ O Fig. 25. — Tickler Card. For those who prefer a Tickler in book form, that given in the Book of Forms issued by the Trust Company Section of the American Bank- ers' Association is good. It is shown in Figure 23. The book may be either boimd or made on the loose-leaf plan. If bound it is made to last one year, one leaf for a day, and is indexed for months and days. If made on the loose-leaf plan, it may be indexed for years as well as for months and days, space for new leaves when needed being found by removing dead matter. The use of cards instead of books for Ticklers is rapidly growing. The cards are placed in a case which fits into a cabinet in the vault, and is brought out each morning. It is provided with index cards for years, months and daj's. The case may be provided with a locking device to prevent the cards from slipping out accidentally or in the event of the case being overturned. FORMS FOR TRUST DKFARTMENT. •201 The card form of Tickler has many injportant advantages over tlie book form, among which are these: For matters requiring attention at regular intervals (monthly, quar- terly, semi-annually, etc.), but one card need be used for each item. When the business is adjusted for one period, the card is moved for- ward to the next period. Where a book is used, separate entries of the memorandum must be made for all of the periods, which in the case of a monthly item would mean twelve entrirs each year for perhaps a number of years. If it be urged against the card plan tliat the clerk entrusted with the duty may neglect to forward the card, or may mis- place it, it may be urged that he may also neglect to write the memo- randum in each of a numlK'r of necessary plaers in a book Tickler, or inay write it in tlie wrong place. Hv^ Oct. 10 \oS i:::::^"- ^o:^ _'•• • '^^'f «-►», ...OU.T MIfMIUII „- •"-■» — eOMTIKT* 2iq-l 1^ c. Q^oo ^OO (^n :■., '' — — — Fio. 2fi.— Tic.;i^R Card. Where preliminary attention is to be irivrn a matter some days or weeks before final attention is called for, the card is placed under the first date, and when attended to is moved to the second date. Thus, an item due on the '.2()th of the month may rthr1^>^ . > . ;^ ^ rv^ ■ePRESEltTINa JLc^^,J-^ V ti^ e4eiu^^..i^(Q -TKANSrSR j^n_ .JllinoisStdiSamnosiSank., eCjLxAt? 'Wa-vsrtv/ NEW cemincATE viill bs oELrveaso /7\ / I -^ =^^ ■^^^^^'^ ONLY UPOU SUFRKHDER OF THIS RECE/Pr. (iM7~> Fig. 27. — Receipt for Stock Left for Transfer. cral dozen items occur on one page. There is much less liability of overlooking any item where each has a separate card than where there are a number of items on a page, some of which may be "dead" items. The card Tickler is expansive. If a day's work involves need for two or three hundred items, the card-case will hold the cards. If a day occurs on which but one item is to be ticklerized, but one card need be inserted. The most obvious objection to the card Tickler is the possibility that a card may be lost. The possibility of such a thing can hardly bo denied; but its danger is often overestimated. The best testimony to the safety of the system is the fact that many companies which have used the card system for years have found it safe, and are wedded to the system. In Figure 21 is shown a Tickler card for general use. It has no printing — simply lines for writing, as the character of the memoranda to be made varies so greatly that printed headings are not useful. There are certain classes of items, however, that recur so frequently that special forms may be desirable. Figures 25 and 26 illustrate two such forms, that shown in Figure 25 being for Coupons Due, and tliat shown in Figure 26 for Insurance Expirations. tLbe IlWcstern IRcservc Uruat Co. Wo. t £uclii> Bvenue. ^rust department. Oi:.BVBt,AND, O 1 /'^~~ l»O^S^ i STOCK o^ ^Kp W j2Xrxc . Jru ALny^ POR 'QO r:i-8aARBS STOCK RBTORNSD, XTbe F" 'Stern IReP'-vc Urust Co. eu. Fig. 28. — Receipt for Stock Left for Transfer. FOR>[S FOR TRUST DEPARTMENT. 203 Forms for the Transfer of Stock. When a stock certificate is brought to a transfer agent for transfer, a receipt for same is given to the person who brings it. Figures 27, 28 and 29 sliow different forms for this receipt. The receipt shown in Figure 2? is provided with a stub. In the use of the two others, a copy is made by means of a carbon sheet, the copy being taken on paper of a different color from the original. These receipts are for temporary use only, and are to be surrendered when the new certificate is delivered. The new owner of the stock is then to sign the receipt on No "720 DEPOSITED FOR TRANSFER with Zbc Clevclanb Zxmt Co. .Shs. Common __Zjyi->L_Sh$. Pre«efT«d Stock of^A.^ tJuuAnL!c^^*7L0fA^ (.2^. Zbc Clevelan^ ^ru9t Co.. ^J> 3,^^= NOTICE; — Delivery will be made to bearer only upon return of this receipt with the attached stub oroperfy signed by the depositor 720 .190. Received of Cbc ClCPClanO Cruat Co Share* Nr> A3 HEPHtStNTEO BY CEBTIf iC«Tt =;h.; No Sh» Nn «;hc No Shv Address Fig. :?9. — Ki:ci:ii»t kor St«xk I, fit vor TRANsrr.R. the stub of the certificate book. It very often happens, however, that the owner does not himself come for the certificate, but sends a mes- senger. In such case, the messenger's receipt is taken, and with the certificate is sent a receipt to Iv^ signed by the owner. Forms for this receipt are shown in Figures .SO and 31. It is preferably of small size, not over four by two or three inches, as it must be pasted on the stub of the certificate book. This transaction is evidently open to the ob- jection that the messenger sent for the sttx-k may be irresponsible or 204 TRUST COMPANIES. not well known to the company which acts as transfer agent, and the company may hesitate or refuse to entrust to him the certificates rep- resenting great value. The form of receipt shown in Figure 29 is de- signed to meet this difficulty. To the receipt from the transfer agent is attached a stub containing a receipt which is to be signed by the owner of the stock or by some person known to the transfer agent as being responsible; and without such signature the new certificate will not be delivered. This plan protects the transfer agent and works no incon- venience to the owner of the stock. The receipt shown in Figure 28 ICATE No / 3, / ^ REi . OF thexa'pital STO s: ^sos: I X) ^ BFPRFSFNTINfi / OO. o address- Fig. 30. — Receipt froji Owner of Stock. has a good point in the wording at the bottom — "Reissue of above stock will be delivered to bearer, or original stock returned if transfer can not be effected, only on surrender of this receipt." It sometimes occurs that the transfer can not be effected, and in such case it is well that the transfer agent should not ajDpear to be committed to the duty of making the transfer. IBowlino (Brccn ZTrust Co., standard Oil Building, 26 BROADWAY. ., ' lS~ (jS — New York, l^ i9^ Received from the BOWLING GREEN TRUST COMPANY, the following certificate of stock of the, uUjdrO^ ^WcC^ W) . N^<. / ^3. / /f -^ ^ fnr /(^-O ^ -— - ^ shares, in the name of 'o^-iM^ ^M^o^)^ Name.JS^l^^ 0^^^^ Fig. 31. — Receipt fkom Owner of Stock. FORMS FOR TRLST DKPARTMFN-T. ii05 TI.e transfer c-ltrk now cancels the certiHcat.- handed in for transfer, after satisfying himself that the transfer is properly autliorized, issues a new certificate or certificates, and makes the proper entries on the Stock Transfer Book, a common form of which is shown in Figure 32. Some companies have this book boinul in permanent form with an index either in the book or in separate form. Others use the loose-leaf plan, ■which is better, the index being in the shape of tabs on the edges of the leaves. The record of transfers for any number of companies — up to the capacity of the binder— are thus kept under one cover. But the plan is sometimes followed of having a separate Stock Transfer Book for the stock of each concern for whom the company acts as transfer agent. The general form for the pages in such case does not differ materially from that shown in the figure. Figure 32 illustrates a customary way of making the transfer en- tries. The first entry shows the cancellation of certificate No. 6l9 for fifty shares in the name of John Doe, and the issuance of certificate ^^i:i^:.^,...y<..^.... ^. _ iifi'i—'jiz ."..tr.'.'-it..*'"' * :::.-::/r„-::-.-.'.:.---.r;.7: .-.■.:;.• .•.■r:.-.::r=7^mi-jr:}r^-. .: r.-.v.::. ...„r.. .,,, .. ....,,..,... . ■..■./.; :,.:...... ■!-■■ -. -...r .■•.v. ..,....., ...t ........ —~— -i;: . ■;,- .... -- ! ^ J '[si ■I X './,/-*.. 21IU. . . J 1 1 >i..,;^;.... .: .^i. — a .>: '^^, ^ 1 ■ ilJo 7f icuit. ^ ^^^^ •U'.;^, ''» F 3o? •-^^.^^'i,^.^ . '-jOtl^U^, -re iL„^- aS,'. , ... ^^i^. ' 1 iiiT J^ li-r-J,..!,.. '.,, , |i-o^ a.tov. - '^u^U. ■^j '^'?.-y 2.T a.ii... ^tLu^-t^ , , u ■ 1 ^i.ii ■J. i CVxv. - ■Xa ■ , iS ait/i..- ■•'-e'-.v ■f dl ^'^ .W.Jl'XL, , ^ 1 " ' • 1 Fig. 3-\— Stock Tbaxskkr Booi No. 2211. for the same number of shares in the name of Richard Doe. The record of the new certificates is entered opposite that of the old one cancelled. The second entry shows the cancellation of a certificate for 100 shares, and the issuance of two new certificates for fifty shares each. The third entry shows the cancellation of thre«- certificates for a total of 100 shares, and the issuance o( one certificate for the 100 shares. The fourth entry is a little more intricate. C\rtificates for ten and twenty-five shares, respectively, arc cancelled; the ten shares and twenty of the twenty-five shares are transferred to a new certificate for thirty shares. The remaining five shares are added to the twenty-five shares of the next certificate cancelled, and issued in a new certificate for thirty shares. The effort is to keep the record of certificates issued opposite that of the cancelled certificates from which the shares are transferred, so fh.-it tin- source of each certificate may Iv plainly shown. 206 TRUST COMPANIES. STOCK TRANSFER BOOK. '^:i^^ 1 '^■'SJitt"' s^ Ort4«t» sS^-^ I5H (00 on IOC n^ A'a X 'O" 5>l^r«. 8 For Value Received, the undersigned hereby assigns and transfers unto . _ . '^'"'"' ^^''-^T'?" __ Out Hundred S^vm ol the COMMON STOCK of COMPANY. ol One Hundred Dollars wJ«^...^., Fig. 34. — Form for the Registering of Stock. FORMS FOR TRUST DEPARTMENT. 207 Dr U) affe^'a-.S^ Tt Cx^ Dr. a.^.^fn-^' (.1' 13 I9f Cr » «„ i^ cJL.. Ji- MTI a. ci- .^ ^*. «.. •> ~ ^7! nil T" ^ ■^7 Cte "■ '^^f., /^O /«f /CO /CO ''tlr^ /^^ ,^ '/.r 7>r ''/^yb,-' XiO /H7 7<' o */"/"! ffO ^'H kTT • ~ nr, fpc 6 ^^^^ nr nr. a>?< S^^^^h. c. UIII ^ ■» •> «„ ";^ n J^ c un k 37 -^ 37 ■~ ^ Ufc — %'^ J-c-i ^^0 •fV .^c •^N-fr-t n« Kr HN(k5 fc« -fp _^ __ ' Fig. 35.— Stojk I.k In Figure 33 is given a form of stock transfer hook which is recom- mended over the preceding form by the committee wliich compiled the* Book of Forms issued by the Trust Company Section of the American Bankers' Association. The book is made witli four blanks to a pag- . each form to be numbered, from 1 upward. The form used by a Registrar to ngister transfers of stock is very similar to the Stock Transfer Book, as will be seen by an examination of Figure 81, M-hich shows a usual form of Register. With the ex- ception of the dates of the old certificates (which some companies omit) and the signatures of the attorney for transfer, the entries in Figure 32 are reproduced in Figure St. In the last column in Figure 3-t. headt-d "Date of Cancellation," is entered opposite each certificate the date when it is cancelled — if it is cancelled. Some Registrars, however, prt- fcr to keep a stock ledger just as tlie Transfer Agent does. In such 199 DR c/,^ J__ .<< f,.,^-/ n? '■- ..^ <-/ . -.V. .^i >,.,y.,^.'J fc< TT V- ...... ^^ 'liWC^^f., G2zxAiUa .0 T ' ^-—^^^^ CtRTiriCATta SUHBtNOtBCO Ct«Tir,C«Tt» '■■UCO .H..C* ! , 1 iG 1 /•*- ,03 : ai A /oc lOO ' ;x u. '03 tir 1 7^ nS~ ^ 10 ' o^-, i5,sT, ^o j 1 ' / ivT- I . I ' 1 ; 1 1 ' 1 ' i 1 1 i 1 ; 1 j ! i 1 1 1 , 1 . : 1 ; 1 1 I — 1 — ^ — ' 1 1 1 ; i i ' , 1 , ^ 1 FiG. 3S. — Stock Ledger (Card). are thus kept in alphabetical order, a thing which can be done only ap- proximately in bound ledgers. Figure 35 provides for four accounts on each page; Figure 3(j for but one account. Four accounts may be carried in Figure 37, er the whole page may be used for one or two accounts, as circumstances require. In the card form. Figure 38. there is of course one account to a card, nnd a second card may be added when needed. The use of the card form is growing rapidly. The lK>ok form shown in Figure .S.*) has been widely used in New York and else- where. In the handling of a trust in which the company acts as trustee under a bond issue, the first entries are made, as already stated, in the Trust Register, such entries giving an outline of the provisions contained in the deed of trust. The next entries that need to be made are in the 210 TRUST COMPANIES. roi£jWuv...3/>jKv: WU,w 'iA*-4~'^ ^r>vvW«vwv 1.1CO . i... .».A»^ lOmt. out -AMft\l'il<(Ti>' _ .WTWtlTMVmi'V'sljvd^Yl 1 "^ _. ..ilLi^^^^pr*<>s^^ •0*....)..... IB JlQ Q tiCff^. EtCN. torn ISSUE ft O VN,V^.Wva^_.3?.CavT^.^:ryv\ 1 O-CCY »0»......\...,..TO'>'i-0..$lGe.^E«eit. t«TU ISSUE l'5'fG'P0( Fig. 40. — Bond Register, Second Page. ORMS I'Oll TRUST DFPARTM KNT 211 to $1,31().()()0. This rrcord provides tlu- d.it:i from wliifh may he Kariud the serial numbers aiul denominations of all l>unds outstanding at any time and of the bonds remaining unauthentieated in the hands of the trustee. At the left-hand lower corner of the page (not shown in the figure), space is jjrovided for the record of bonds cremated, if any. The advisability of cremating (or burning) retired bonds under any circumstances is a matter of dispute. If done at all, it is done in the presence of officers of the issuing eomi)any and of the trustee company, all of whom sign in duplicate a "Cremation Certificate," their signatures being duly witnessed. The Cremation Certificate reads ns follows: "This is to certify th.it we, the undersigned, have this day. in the presence of each othei, destroyed the following-described securities by burning the same to ashes, viz." Then-after follows a detailed description of the securities burned. It often hajipens that there are otlic r bonds mid. riving a giv. ii issue of bonds, and in this form of Bond Register the reverse side -^ '7' BOffoe DKLrrERrr .^,/ l....r.. Fig. W. — Bosi) Hki.istkh. of the leaf, shown in Figure 10, is arranged for the records of the underlying bonds, if any. The entries show that at the time of the issue of the $'..'. 000, ()(>() bonds of the Inter-Urban Traction Company there were outstanding two series of underlying bonds, amounting to .'t'lOO.OOO and $'2.10,000, respectively. As these underlying bonds are retired, record is made in the spaces shown. This book is made on the loose- leaf pl.wi. Figure 1-1 shows another form of Bond Register, used by ;in e:'stern company. The chief ditl'erence between this and the form shown in Figure .'i9 is that in this form provision is made for the record of bonds certified, in addition to the record of bonds delivered. This form could be improvtd by the addition of a column showing the amount of lv>nds cutstanding. although such balance may of course be figured from the data given. This form is made up in a permanently liound book, and tJie opposite folio, which has a simple record journal ruling, is used for memoranda of bonds retired and of any otiur matters of importance 212 TRUST COMPANIES. o.„ .„«.o„„ ...,v„„,o c™. .„...„ .-0.., 1 V, &^,A\.A.-: o^.wx.X-'--.^ / / % .^v.. 'Toc' OOO ^A ' ^L. s.-i i. /,-. ' .„, Xla.-^^ s^.„ '51. Y Fig. 4^. — Bond Register with Abstract of Trust Deed. aft'ecting the account. The same form may of course be adapted to use in a loose-leaf binder. Figure 42 shows a form of Bond Register which includes space for an abstract of the trust deed under whicli the bonds are issued. With /.CO . BONDS OF THE \os.^O I lo...^O-fy ..inclusivt s.r^ur,OfcJR:m.S. S^a^OK ... OU.OK O^....^.. ....,,, Fig. 43. — Memoranduji Card for Packages of Boxds. some slight changes in the wording at the left of the page, this is the form given in the Book of Forms issued by the Trust Company Section of the American Bankers' Association. At the bottom of the page (not shown in the figure), provision is made for a record of the names of the FORMS FOR TRUST DEPARTMENT. 213 officers who executed tlie deed of trust for the mortgagor company and for the trust company, and for tljc date wlien all bonds are reported redeemed. The right half of the page calls for about the same infor- mation as that called for in Figure 41. Before certifying and delivering bonds, the trust company must of course be certain that everything necessary has been attended to. A convenient way of handling the work is to have the Iwnds done up in packages, and a card like that shown in Figure l-a attached to each package. Before the package is tied uj), trusted clerks examine the bonds for particular features and certify to their correctness by placing their initi.-.ls on the card as shown in the figure. Thus, "R. M. S." has satisfied himself by examination of the bonds that the signature of the proper officer of the corporation and tlie seal of the corporation appear on each bond, and that the bonds and coupons are consecutively nr.mberod as stated on the card. "A. K. R." has examined the bonds and found that the certificate of the trust company as trustee has In-en signed on each bond and that the count of 100 bonds in the package is correct. '^'°* REQUISITION FOR BONDS. 'M^f^^K .TRUST COMPANY OF.^fec^Lrfo .-Trustee. Please authenticate under the... L^'-^L _ Mortgage of this Company. dated_;^^^j!Lfc I =:nr-__i90.aSl, LyO-O Bonds $/.<^^^.- By .j/qO. iOc^^^i^^^^^^ Fig. 44. — Reqvisitiox fob Bonds. Some companies have a blank Requisition for Bonds, which the cor- poration issuing the bonds is expected to fill out and hand to the trust company when it desires some of its bonds authenticated and delivered. A form for such a requisition is shown in Figure 44. This matter is, however, often attended to by letter or even by telephone, and in any event, the bonds are of course delivered in accordance with the pro- visions of the deed of trust. When the bonds are delivered, the trust company takes a receipt for them, in a form like that shown in Figure 45. With reference to the matter of the payee, bonds are either reg- istered or coupon bonds. Registered bonds, strictly so-called, are rarely issued in this country, except by the National Government. Coupon bonds, both principal and interest, are payable to bearer; but provision is usually made for the registering of such bonds as to principal or interest, or both, at the option of the holder. The trust company, acting 214 TRUST COMPANIES. Received, New York, i:i^vj9-A.^. / 190 T^, from the BOWJjING GREEN TRUST CO.. New York, Trustee, >5~ O O Bonds of .f Coupon No. ' o(ykv>v,|, I<^(li5 and sub^iequent ther'eto attached. /? ^ i /^ $SOO,OitO:- By ^ _ 0^^ '^^^^^ ^ Fig. 45. — Receipt for Boxds. as trustee under bond issues, must therefore keep a Record of Bonds Registered, a common form of which is shown in Figure 46. Other forms of this record provide a separate cohimn for the address of the payee, and some provide a column for the name of the officer of the trust company by whom the bonds were registered. If the bonds are registered bonds, the bond numbers should appear in the record in REOISTERED BONDS OF %Jh*..^'iA.(,&,..««: . Fig. 46. — Recohd of Boxds Registered. consecutive order; but if coupon bonds, only a few of which may be registered, such order is not important. The book should be made on the loose-leaf plan, to avoid waste of space where only a few lx)nds of a given issue are registered. Figure 47 represents a card form for a Record of Bonds Registered. The cards are kept in a case, an index card for each corporation whose ncaisTiDto *• ToOrVv^CYli^ c«i»o i o„o-».-no» or .o»o.. •I&OO'^ ^ X^OS O-'V^.^.x^A^ i ■M itTt i r a 9 3^03 <^jUOvJ2-1, o loo I fooo S'O Xooo I ooo Fig. 47. — Record of Bonds Registered. FORMS FOR TRUST DEPARTMENT. 215 fj Coupon Record! Uond NunttMi-a Coupon* l'nlA/^ /^''Ui. iT ^.'^^M^<<^/ OJ^ [/J^ ^»I^^4. A:^ Fio. 49. — Coupox Record. 216 TRUST COMPANIES. many companies make an effort to learn the name of the person who presents coupons for payment at the counter. It is often of great advantage for the trust company to have a list, even if not complete, of the holders of the securities. If a refund- ing plan is to be carried out, or when under the sinking fund pro- visions, the funds held are to be used for the retirement of bonds at certain periods, if a list is at hand, the trustee may communicate direct TRUST DEPARTMENT. a^ Chicago,^ . OU..AQ^ . 9o>r dhL g^^^(^-r- lX r/>a-y^ J rtt ^^hl^ C^ . wf Gknti.kmen; -Wc L-nd you herewith .. .3 3.p J_Coupor.s. for > ^ >S . — each, amountinK to f-O ^Q..Q^~-.. , from bonds of your Company, as set forth in receipt hereto attached, duly paid and cancelled by us. You will please. have said receipt properly signed, detached and returned to this Bank. Yours truly, ILLINOIS TRUST & SAVINGS BANK. t ^^OO.— TRUST DEPARTMENT. CHICAGO /\ J (— 'KeCClVe^ of It I ino/sTiuistS( Savim.s liANK, the following: " r> X /? r" ^■XH r,.„nnn.N,> *] for %2jS^- each for interest due-. C/CLt-. I j.'^CKT on bonds of.-_m-^.'5^\-"^H'-X'CrA<»;yv^, OrDLCtAdv ^Ta^ kaix_aT^^i^ ^r^_ Fig. 50. — Coupon Enclosube Form and Receipt. FORMS FOR TRUST DEPARTMENT. '21', Mith the lioldcrs of tl)e bonds, instead of relying upon advertisements. Jf such a list of holders is obtained, however, it must, of course be used with extreme care. Figure 19 shows another form of Coupon Record, M-liich differs from that shown in Figure 48 cliiefly in the manner of recording the bond numbers of coupons paid. This form shows more clearly the coupons presented by each customer, but makes it much more difficult to learn whether a given coupon lias been presented. » «».» -? •==.- T .m^ «... r-ci -L ico .vd?. "f. CS >cc '^ z roc I soH.jei.jKi-jjf.sUi.JiJ^yhr iffl w >i 3S. 3vj -X) (rvvvb.(L>^- Fit kCOOtM N0.1 OO AOOniS. - 1 — -1 OI>lt 1 CO, 1 «LA«0. 1 11 T / 'lOor r. ■ -Jo/^ \> to (Lot- J~>^» 7.ir 1 c 3l" h 1 ^A^'-.'.^-'-^^.wv^f^^.if,-,^*! i"^3iio"cB'^'1. h3^\ y/^ \ > 1 -Vd b^Jij Kt^'^ if'f 3! c Fig. 52. — Fee Ledger. fees are usually charged on the regular accounts. Figure 52 shows a form of Fee Ledger. This is a card ledger, the cards being kept in a case, arranged alphabetically with index cards. INCOMING REGISTERED MAIL AND EXPRESS. 3H fv,^(. Fig. 53. — Record of Incomikg Mail axd Express. The record of registered mail and express received by and sent from a trust company concerns all departments of the institution; but the trust department is so much concerned with the record that it seems Registered Mail, and Express. 6 T^ti /CO ^^>L C civ , n(. ^ 3 fr^-^X*' OA.'M. «.s.a. '/.4r Fig 54. — Record of Outgoing Registered Mail axd Express. best to include this form here. Figure 53 shows a form for the record of incoming packages, and Figure 54 a form for outgoing packages. These records are very valuable if not indispensable. FORMS FOR TRL'ST DEPARTMENT. 219 ijiii m !< Ill II III mil ^ i I 220 TRUST COMPANIES. Sundry Forms for the Estates Division of the Trust Department. For the Tickler of this division of the trust department, the various forms already shown^- are adapted, the card forms being the most con- venient. Other cards may easily be added, suited to special needs. Fig- ure 55 shows a form that is in use, and is very convenient for tickling items of income regularly recurring, and for other uses. The arrange- ment for dates at the top of the card saves much time and writing. Where an item is to be attended to on the first of each month, for ex- ample, the figure 1 is inserted under the name of each month; after the item has been attended to for one month, the card is moved forward in the tickler case to the next month. An important form is the Record of Securities held in the various trusts. Figure 56 shows, with some slight changes, the form for this Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Trust Investment ^?NU.'r.?^^r?yhvi4l. interest . on $ 'S.0rO:t2%r. . . . . @ . . ^. Trust Investment Income. $.im^. Fig. 55. — Tickler Card. record given in the Book of Forms of the Trust Company Section of the American Bankers' Association. One double page, or more if necessary, is devoted to the securities of each trust. This book is designed to serve as the ledger for the securities account, in the space provided at the right-hand side of the form. Certain memoranda are called for at the top of the form that are usually included either in the trust register or in the memorandum page at the beginning of the account for each trust in the Trust Ledger. They are not needed in all of these records, and will naturally be omitted here if given elsewhere. The size of the pages is 21% by 18 inches. The book is provided with an index at the front; or a separate index may be used. Many companies keep the Record of Securities in card form. Figures 57, 58, 59 and 60 show the set of card forms used for this purpose by 72 Figures 23-26 inclusive. FORMS FOR TRLST DEPARTMENT. •221 TRU ST 9xj±:ii5, rv^v M^rr^ .^c7?.vAUk. a/ ..-Tr-r.,«..«^'?«/.,.,r92^ .lAAP^^r^ . K^,^^AU3.A '^^-^^Uxyf^Ci^^. 1 ii i v.-^.-r*^. T L„ DATE or BONOS "^tA^S-vf 1 , 1^ OO „,„ OF Jatuhity ' kL^ .A^ . \Q i\ tU fSfoTE ■u»n »».»; ^^- emu C>fMM*M. •MMt WM ■•»■.«» ^Ctzr . — •MIVUM -L, 2c %}!- an-i ,T -S'o-oio 'li'i _^i6i 6-.- ~ LI Fic. .)7. — Card Uf.cord oi Secuhities — Boi DIVIDEND eEwioDS 9i/n-f-<'^^''-^'^-^^. / rKikmiJl hT f^L^^^UfyA 4D ^ERIOI ^■^'■4^r^..(/^'.. < f -i > RE »t ESTATE LOAN ..,M= NEOTo .cb.i ■^H.j^jiti.u^ill^tti-v^o ^a^.^.a-iw)- .i?6Y, Arr- <^f— ^avA', O-rty^s^W.'., v« ^U.i CfitoV.J a-f 1 ' Vxc. 60. — Card Recoro of SECURirtrs — Notes. Etc. 222 TRUST COMPANIES. eONDS (^r^-f7::nO ^-^inyrzA ii/^.^. /^d-'kt-h^ v^.<; ..._m,£_ ..„.„. „. n.,„„„. n... ^ ^i 0UrL.<, 1 ^< CU^.'f^f „„. ^ Y„ ■] ^..^ ...... ~ O.T. r .c.... .OL. '"'""•• ~ zz .....o. 1 •^/Ot^tW, llcri. 1^5-130^ A3lt,3.3n. (/i, MA ; iS^-J/f Soo ,.•», M,^ '^•'^ ^OC Fig. 61. — Card Record of Securities — Bonds oe Stock. REAL ESTATE LOAN Ne. 'S' 1-0 ^JSLon^,. Ul\ Oo-v\A.>-r(>Hj^ iq (kd^^u. ...r^(j d...^/.,....,. y\ . Du. *//-if A.r R.Tt /c "Yp wt. Dur^..,; ^^:^t ...cr^.o- .. ..0...T, ..T. «.., CO,, .....c. S-O . I^-O rm ...... ..?U3 (2ay\-:fct<- ^, IS- H .. o. f>r7 ,- loo .miisK, .< (p vS- 7 ^"^ 0? 3 f«^ o/f (r >s . . I / / » ^V >!al IT ' / ' 3 J "j sf .. j 1 1 Fig. 66. — Record ok Securities — Mortgage Loans. 224 TRUST COMPANIES. These records give complete lists of all the securities held in each trust, but in order to know the amount of any given security held in all the trusts in the department, it is necessary to provide another record in- dexed according to the securities. Figure 64 shows an index card for such use. Its use is merely to serve as an index to show what trusts hold any given security, and how much of it they hold. The total amount of the security held by all the trusts must, of course, be found by adding the amounts on the several cards filed after the index card for the se- curity. Some companies keep a regular line ledger for securities held in trust, a loose-leaf form for which is shown in Figure 65. Loose-leaf Records of Securities are used by some companies, and Figures 66 and 67 show the first and second pages respectively of a form for the record of mortgage loans used by a New York company. This record permits of more detailed information than is usually given in a card system. JfAu X. J^cOf ., Recorded L.ber // Page. VJ" Date 71,^. / O', /^,o. d S., SmiIoo I, Block ^J. q Resorted .X. .1^~-^^ ■ ^J.'^.-f...ArS./^f^ »4«fe. Jox.yx ^ ^I^Jjj./fcir. Examined and approved by C..._,*«S5: Valued aey//,,^^, ^ Fig. 67. — Reverse Side of Leaf Shown in Fig. 66. Usage seems to vary greatly in the matter of record of real estate held in trust. Some companies depend for a complete record of such real estate upon the rent book and the tax book — in addition, of course, to the original entries in the Trust Register and in the ledger accounts of the trusts concerned. Other companies add a complete list, in separate form, of such real estate. Figure 68, (page 219) shows the form of Real Estate Record given in the Book of Forms of the Trust Company Sec- tion of the American Bankers' Association. The book is provided with an index in front. Figure 69 shows a card record for real estate, giving about the same information as that given in Figure 68, and adding a plat of the prop- erty. Additional information, if desired, may be put on the back of the FORMS FOR TRUST DEPARTMENT. 2*5 card. These cards may cither be grouped according to the trusts own- ing the property, or be arranged alphabetically according to streets. If the former plan is adopted, an index by streets will be needed to make the record complete; and if the latter plan be fojlowed, an index by trusts owning the property should be added. The form for the Record of Rents recommended in the Book of Forms of the Trust Company Section of the American Bankers' Asso- ciation is given in Figure 70. This is made up as a loose-leaf book, the pages being arranged numerically as to trusts and alphalx-'tically as to tenants in each trust. Another form of Rent Book is shown in Figure 71, in which pro^•i.sion is made for the record of expenses on the premises rented. Some companies elaborate the records in the rent book still .St rtt± i.Oa.^JLC'y^Cf^lj^X g No 3 ±^ Sv bl ct H^ a.i^ut IIS. Dfsc Jo< w i -■^Ajjj^^ S.-f Valna.t .' e r» "Re-nt/ *t . J^ Irggj T>-v;5t fztrfg i>^.4Uir^^.(R 4^^M^4. Nn. n^l' -fv. ftuS.^U v, Tr, (f C1 <,A -s,* Fig. (iP. — Cahi) Rkal Estate Record. further, showing expenses in two columns, headed "Repairs" and "Sun- dry," and also providing a column for the record of sundry receipts, such as repayments of water rents, etc. Figure 72 shows a rent record in card form, the cards being five inches wide by eight inches long. Companies handling a number of trusts which are the owners of real estate are of course compelled to look after a great many fire insurance policies, seeing that all buildings are covered by sufficient insurance, and that policies are renewed in due season. For proper attention to the matter of renewals, reliance is, of course, placed upon the Tickler. Some companies file insurance expiration cards in the general Tickler of the Department, while others maintain a special Tickler for insurance ex- 15 226 TRUST COMPANIES. RECORD OF RENTS. Henry A. J^iJliams Estate _per Year, Payable S 'S-QQ _ Wattr i fM oer Year. Payable t ' >} per O-'t'r Lease Commences A'om Expires "Vacated' — "y- i. Fig. to. — Rent Book. pirations. Figure 73 shows the form of a card used for such a special Tickler. This also serves as a complete list of all insurance carried in the department. Some companies keep in book form a complete insur- ance record, and Figure 74, (page 219) shows a form based on that given in the Book of Forms of the Trust Company Section of the American Bankers' Association. x,„„. .Uj:^A^.Mih^.-s.:. No....!^li-...Cyia.vv^.Sf,...„ „, Rent. $52.^ per.*A^>sSCpayable in advance. ■ Lease Expires ...Q^.lL30,.i':\..Q.k.,. Interior Repairs by Exterior Repairs by Water rent paid i,y^a/^iZi ,Ouri-i _jap^ - """V -- BSNT. DR. 1(1.1 '.,. TkT r^\ hrlL.^f ,^? '¥- 1 ,3? %Jl<3U(l ., il.l 30 — 01 BM(k t/(30O!£ TUil Tu Val, S/3UO ~ ApvaiH< V^I3>^00 Fig. 71.— Rent Book. FORMS FOR TRUST DEPARTMENT. 227 S O'^^^S' PER ■\xA^ ^ ( V ^ i.^ , p sr u ^ Fig. 7^. — Kent Uecoku ix Cahd I'oEii. The exact form of the Tax Book — in which property upon which the trust company is to pay taxes as agent or trustee or in other capacities is listed — will vary according to local conditions. The forms given here- with are adapted to use in the State of Ohio. Figure 75 shows a form for the record of taxes on city property. The record covers two pages, the second page shown in the figure heing opposite the first. The same is true of the record of taxes on out-of-town property, the two pages of .. Od(r^TH- 1^0^ {jJ^S. (MjkM hur^^ .. -x^ 3i,M :^. p^4.i. cp-^ - _2ILIitl2L ''hiVLt.fti Fifi. 73. IxsiRAStK Thki.kr. which are shown in Figure 76'. Figure 77 sliows a form for record of taxes on personal property, and Figure 78 a form for the record of water rents. These forms should all be used under one cover, either perma- nently bound or in loose-leaf form. Trust companies doing a considerable jirobate business, especially if they are celled upon to administer large estates, find it desirable to keep a Probate Claim Docket, the standard form of which is shown in Figure 79- This may be used either in a permanently bound book or in a loose- 228 TRUST COMPANIES. City Property. ....^.».. .m„u:t.x TKUST PR0PEBn,NNAMEOP ^i^S" ,'•;-'. /^ro ,.- CO v>W,.^^ ■Jkn.^.r^xH^.^^.^ Fig. 75. — Tax-Book (City Prdperty), Right-Hand Page. City Property. ^77 O-.g t:- F,voi S,^,o,„..„. S.-:' V»H*TI..N 1«», r^ Clt r„, 1' L.od B.,id...-. T..I.I T., f Ax.".^.vi^,' 1 ;af sv i?/<':K-^c2.v /...^^ s /■?.>; (P^'.c.^ Fig. 77. — Tax-Book (Personal Property). Water. 0-... ^r .»,„,..... A.o... ...... .or '■it' Wh.« P.,.bl. 1 TM-^ •Jia ■is'i Sir. 'Jc.^.^^ ^^ JU^^^sMJ...^ ^1 a^uo^f. i-y-s. Fig. 78.— Tax-Book (Water Taxes). FORMS FOR TRUST DEPARTMENT. 229 leaf binder. This form provides for a complete list of all claims pre- sented against each estate, with all necessary details regarding each claim. Attention has already been called, in Figure 6, to the Probate Settlement Docket, also used by some companies. For every payment made by a trust company in behalf of any of its trusts, it is of course imperative that a voucher be obtained. In the handling of many trusts, such as that of executor, a voucher for every item of expenditure must be filed with the court at the times when re- ports are submitted to the court. Because of this fact, some companies deem it advisable to obtain for each expenditure two vouchers, one marked "original" and the other "duplicate;" the former is to be filed with the court, and the latter to be retained by the company. PROBATE CLAIM DOCKET. ProMt Court Mo.,:.::''.': ''IJhtt of Letttrt^ it^.^ .' . ' "Li_ f f»_ ' V vV ./ ^ rmwmt ....„.,.,.^ „n,.„.„^. ._. .=. % •.:=? =r ~ - ; -- ry -f ^„ u n X. rtiiu- ■>..,-,■..' .^..v , '*i iteti »f'^W^T^-JU^ i1 ft f o ai....^ . ,

' TUB UNION TKUHT OUMPANlkaK PITTBBURaU Fio. 80.— VorcHEH, 2S0 TRUST COMPANIES. is 81/^ by 7 inches. It is intended to be folded once, crosswise, so that when filed away the information given on the back, shown in Figure 81, may be easily read. The vouchers for each trust are numbered con- secutively as issued. For keeping track of the proper numbers to be given to vouchers as issued, a convenient device is to have on large card-boards, or pasted on the covers of the deportment check-book, a list of the dif- ferent trusts in alphabetical order, the name of each trust being followed by a list of numbers succeeding those of the current voucher numbers. TRUST DEPARTMEaST THE UNION TRUST CXJ(>1PANV VoR .,_(i^x.^/vaAJ~ ^ ,....., ,i,-a»,KNo. Ja,H^. , - CPr nC-^t^l^ _ VsTOOO ::.i:t::::: I'lG. 81. — Back of Voucher. As each number is issued, the number given it is scratched off the list of numbers ; so that the correct number for the next voucher issued is readily seen without the trouble of referring to the journal of the trust con- cerned. This department usually keeps its uninvested funds on deposit with the banking department of the company, (or sometimes with another company), and makes all payments by check; and the memorandum "Check No. " in Figure 81 refers to the number of such a check.' FORMS rOR TRUST DEPARTMENT. 281 A customary form for the department check is shown in Figure 82. The bookkeeper gets the debit items for entry in the books of this depart- ment from the stubs of this check-book. He obtains the credit items from credit slips, one form of which is shown in Figure 83. Statements of accounts required by tlie courts are usually made on ordinary journal-ruled statiment paper, the entries being made in chro- .^^iv. R,X7SX A.OOOX7NT; .y.lixrx!fx^.i^)or^J^^ . Fu;. 82. TiiisT Dki'aht.mknt Ciikck. CREDIT INCOME ACCOINT. / ^^!^te of^;^^^?t^^^ Interest o^:-^:^^."^-"'^^. /5-v Date "/a^ Fu;. S;}. — Credit Slip. nological order, items for principal account not being sejkarated from those for income account. In monthly or annual statements to bene- ficiaries or to the makers of trusts, however, the items on the two accounts should be shown separately. Figures 8 !•. 85 and 86 show different forms for statements to beneHciaries, designed, as will be seen, to show sepa- rately the items in principal and income accounts. That shown in Figure 86 is arranged for use in connection with the individual trust journal 232 TRUST COMPANIES. shown in Figure 1 i. The statement, it will be noted, is practically a copy of the journal; and the stenographer simply copies the entries from the journal without intermediate copying by the bookkeeper. It is a growing custom for individuals to deposit their wills with trust companies, especially in cases where the trust company is made executor. In receiving Wills the trust company undertakes to safely keep same and to deposit them with the proper authorities as soon as possible after the decease of the testator. Figure 87 shows a form for the Record of Wills on File. This is a card form, the cards being kept in a case in the vault, and being arranged in alphabetical order. The National Safe Deposit, Savings and Trust Company of tt» District of Columbia TRUST DEPARTMENT Fig, 84. — Statejient to Beneficiaries. "<:!iUj-..T.ust CourA%n; l>ho. to^. ±1 Mjt ^^2lZ^Z! ^^'■'^->^"n , :^ jUiAlLlAa^J^J:- Fio. 85. — Statement to Beneficiaries. STATEMENT OF ACCOUNT. THE CLEVELAND TRUST COMPANY. Trusiee,far t:i o tote tc of iiipm ti. iioi THE CLEVELAND TRUST COMPANY. I 113 Trclfth St., tlov., 1294 Third Ave., " iiclrs 01) 213 nrlfth S'., Ill full for Troy proiierty. P. Plui.ir.er, repair Fig. 86. — Statement to Beneficiaries. FORMS FOR TRUST DEPARTMENT. 2SS In the above pages the writer has attempted to give the principal kinds of records and forms used by the average trust company to record the history of its business in the trust department. There are of course companies undertaking special lines of work which call for varieties of forms not included in the above sketch ; and besides forms for such special lines of work, the individual preferences of the officers in different com- panies add many forms of greater or less utility which from the nature of the case it would be neither possible nor useful to attempt to include here. There is also a class of forms, legal or semi-legal in character, which the trust company uses constantly in its trust department, but Name 3.it^M^ "A WllL i! TEMPORARILY SURRENDERED "/"oT '' 7^0' TO WHOM wi^ Yy[a^^ a -iiWf^^, l^OAUz^y^^T^ ^\ ! J ->>g--Tv. 1 1 • 1 i _ 1 Fig. 87. — Record ok Wii.i^ os File. which it has not seemed best to discuss in the present articles. These in- clude forms of bonds, stock certificates, voting trust certificates, cer- tificates of participation and so forth. The exact form of such documents depends in the first instance upon the particular contract involved, and in the second instance upon the individual views and preferences of the lawyer or lawyers who prepare them. And while there is of course a general similarity in tlie forms used, tlie considerations just named result in such differences in details in documents of this character that it would be difficult to fix upon what could be called standard forms. CHAPTER nil. FORMS AND RECORDS FOR THE SAFE DEPOSIT DEPART- MENT. THE necessary forms and records for the safe deposit department are comparatively few in number. The business of the department involves the renting of individual safes or boxes, and the caring for packages left for safe-keeping. In theory, the business is sim- ple; but experience demonstrates that complicated situations are apt to arise; and it is important that the few forms needed should be prepared with care, and those affecting the contract into which the company enters should be approved by competent counsel. The Trust Company Section of the American Bankers' Association in 1904, and again in 1905, appoint- ed a special committee to report on various matters affecting the safe de- posit department, and including a compilation of forms. The reports of the two committees, bound under one cover, have been issued by the asso- ciation, and contain valuable information. The forms there given, thirty in number, provide for the needs of the largest companies, but of course include many that are not needed by the safe deposit department of the average trust company. A few of these forms, together with others col- lected from different sources, are given here. The identity of prospective customers of this department should be established with care. When the applicant is an entire stranger, some companies send to persons named as references a printed letter reading as follows: Dear Sir: — Mr. of , whose signature is attached, has mentioned you as a reference. If you consider as an honest and reliable person, will you kindly affix your signature and return to us at your earliest convenience ? It is understood and agreed by us that this will in no way make you liable for any damages. Yours very truly. Manager. Sign here — ■ Signature of Whatever the method used for the purpose, the company should sat- isfy itself that every applicant for a box in the vaults is the person he claims to be. Should he rent a box under an assumed name, in case of his death the company might be put to considerable expense and certainly would be put to some trouble, in determining to whom the box should be surrendered. It is also important that the customers of this department — FORMS FOR SAFK DKPOSIT DKPARTM KNT. 235 as of all departments, for that matter — be known to be persons of ordi- nary honesty; for while every precaution is taken to conduct the business with care, the possible presence in the vaults of a designing and dishonest person involves too much risk for the company. Assuming a prospective customer of this department to have been iden- tified as a proper person to become a renter of a box in the company's vaults, the first forms needed are the receipts mutually given by the com- pany and by the renter. The company gives a receipt for the payment of the rent of the box, a form of which with stub is shown in Figure 88. Upon the back of this form arc printed the rules and regulations of the department, which the renter, by the acceptance of this receipt and by the terms of the receipt which he gives to the company (see Figure 89), agrees to abide by. Some companies prefer not to print the rules and regulations on the back of the receipt, but simply to include in the receipt «ome such words as these: "Subject to the rules and regulations made by this company." This is intended to include not only the present rules and regulations, but also any that the company may see fit to make in the future. THE BLA^l^ TRUST COMPANY. , .. «..,.» vro. r.. iHvA.id. -•i«««»y (ppolnt- TME CLEVELAND TRUST pewtp thai would I th^Hty la rovohtd »y > wnting to t»a C0l» ~ da Duty to *i»vm accoaa to i tanta o^ Sa'a No «ow r«ntad »y i« t THE CLEVELAND T9UST COMP»Nv. at a" ti-^ta. «tt> powar thai would »ava i« pa'<0'«a«<^ir:. in the Vaults of your Company, rented by me, ts no longer authorized to have access to said Safe. Yours respectfully, . This revocation will not be considered operative by the Company until acknowledged in writing as recetved "by them Fig. 91.— Form for Revoking Deputyship. and hold safe number as joint tenants, the survivor or survivors ta have access thereto in case of death of either, but either has the power to appoint a deputy. Either of the tenants has the right to surrender the safe." Where the safe is rented by a corporation, the same form of receipt as that given by individuals may be used, but it becomes necessary to have, in addition to the receipt, an appointment of the party or parties who are to represent the corporation in access to the safe. For this pur- pose a certified copy of the resolution of the corporation is desirable, and: the following is a form used : FORMS FOR SAFE DEPOSIT DEPARTMENT. 239 Safe Deposit Register 2ai^^ V-S y^v. 'I,'cs v.. ■:, <■■<■ ;^'l Namb or RDrrai^ m .^_^ -Urr. -n-^^,, 3, fvU- J^-.t;.(^^.: , ^>^/tl ..f^ ?.■>-( -^«U.,/>^ .^.^ ..J. -i - y ' -■-' ' ■- r- i^^- j^sL ^ Samk or DiKTTv APPOWT.HENT OF OBVTY. iM-^±i KJUIDIKCR , droolu to bare •««• lo u4 coslrel a< (W al (bOTC nl» la lk< naU cir ^;u OiU-.^^v^.^l ^J oolil ihU •albonly i* mokrd i ' Vr^'-/0 / ^L ^ ■f^ Post Officr Apdur -4^ 01 0!< 0-^ n ^E. RlFkHtNCU /iitrT^. 4fM>A u^Li' V r^i FinAi. Ritiirr I bnrby Mftilr Ibal ill iIm papm m4 olkcr p Fig. 92. — Safe Deposit Register, is* Book Form. "To the Section Safe Deposit Company : At a meeting of the board of directors of the Ham and Sandwich Company, held at its office on the 9th day of February, 1906, the following resolution was adopted: 'Resolved, That shall have the right of access to the safe (No. ) in the vaults of the Section Safe Deposit Company, standing in the name of this company.' (Signed) (Seal) Received, Secretary -190 '■ President. 240 TRUST COMPANIES. This resolution may name certain individaials in person, or it may name the officer or officers of the corporation who are to have access to the safe. In the latter case, there will also be needed a certified list of the officers of such corporation, which list must be refiled as often as the corporation holds an election. For the record of cash transactions the only forms necessary are a Cash Book for receipts only (no cash being paid out in this department, except for occasional rebates), and cards, or books if preferred, for the ledger accounts of renters. Figure 93 shows a form of Cash Book. At the close of the day's business (or, in practice, at the beginning of the next day) the cash received during the day is deposited in the banking department to the credit of this department; the amount of such deposit being shown in the column headed "Amount Deposited." For the ledger accounts with customers of this department card led- gers are generally used. A form of such a card ledger is shown in Figure 301 RECORD OF RECEIPTS-SAFE DEPOSIT DEPARTME^^•. T^^ .... «1?A\s 3.0... «,H0,. p DUE ««.„ '> &jy'£^l,j ' /a V / /^ S^^y ^^'^'^^ ^ ^• . X. ^ ^^ji y2y —f ^ ^j 4„ ^ S!^i^7^^M.^Ji,^^ u fr: Z^v^. i.. ,;? - / ^ ,an^ b ^ 3o J ^ -i^ ^c. ^i '■21 - Fig. 93. — Safe Deposit Department Cash Book. 94. The size of the card is 6 by 4 inches. The record is con- tinued, if necessary, on the back of the card, which is ruled in the same way. These cards are filed in a case according to due dates of rent, and thus constitute the tickler of the department. Instead of this plan, how- ever, some companies have the cards prepared with a tab at the top of each upon which is printed the name of the month during which the rent expires. The tab for the January cards is at the left upper corner of the card, and that on the December card is at the right upper corner. The tabs on the cards for the intermediate months are arranged in order be- tween these, so that when the case is filled with cards the eye may by glancing at the tops of the cards pick out those containing expirations for any given month. A sample of this card for the month of February is shown in Figure ^5. Under this plan the cards are arranged in the numerical order of the safe numbers ; and the tabs at the tops of the cards FORMS FOR SAFE DKPOSIT DFFARTMKNT. 211 serve as ticklers. Towards the last of each month the cards for the fol- lowing month are looked over, bills for renewal are made out, and the cards replaced. The bills are made out in duplicate, one copy being mailed to the renter, while one is kept by the teller who receives rent pay- ments, serving as his memorandum of rents due. AOOMKSS. M a^ sr^i^j^ -n. ■ >«».oo llJT e>Tc ofiiT 1 ^^ r^ ^-;:^~ — 1 r^ • CBIT cat*iT ••tc ■ !■••*• '/l|o. vS ^5 ^C '/.-:, 1 1 1 r^ L^ 1 s ^ 1 I ^^.^ ...... ..-^.. Fig. 94. — Li:d(;kh Cahi). ^k'S\ NAME <^^^ (a^. t/KvA/V>.^ SAFf NO / -3 EXP.HATION ^1^ AOORESS /66 ^^tt^^. P..TA. /0.<^ . •„...« /JV RFMARKS wnTir.F OAT, oiaiT CXtOlT OATt TO 'M^ 1 05^ /O fV /r (■O :\L 7 <^.<: V.'.f ^ THE ClV IZENS aAVIMCS AND TRUST COMPANY ,.^. ,. , -, Fio. 95. — Card Leix-.eh, with Tab. 242 TRUST COMPANIES. Some companies prefer to have the department tickler in book form, as shown in Figure 9(3- This book is indexed by years and months. It is desirable to have a record showing the history of each safe, and for this purpose the Safe Register, shown in Figure 97, is used. As will SAFE RENTAL EXPIRES. i^.L C^.li.c. i ..„ N.„, Addim «■ "." .„0«„, Wbfn F.,d P.„.. rw , o6 ■U.b.S^^u^ ?l .\,^-H^^/ ^-T ^^ ?^C T 1 A A dnw^rrrs-,. :ii 1 '^lOTvnn-- 3l X /:> /O /f 1 -^^ ^..^Jr' i\H- O^L'L^..^' 10 -^ % lu.£R.«?W^v ni Q..^tfU Ml /<. ^ 2 0. a. 0;^^^ tHi &in/0i HI'I JQi (v^i((coo^. Oy. i^^->..jxtr n-m 'o/tojo^ "Hnlo^ 'hsjos dh.S. ^U,L-^U-7t H^ r ^ S c - l-"io. 98. Sakk Hkoistkh, in ("akd I-Khm. Most companies keep a Visitors' Register, a form of which is shown in Figure 99. In this book the attendants make record of every visit that is made to the safe deposit vaults by customers or by employees or officers having safes. The Mord "Room" at the top of the last column refers to the coupon room to which the visitor retires with his box. The usefulness of this memorandum lies in the fact that customers frequently are so careless as to leave articles of value in the coupon room when they replace their boxes in the vault. Before another person is admitted to the coupon room, the attendant examines it for any articles that may have been left; and if he finds any, the Visitors' Register shows to whom they belong. It will be seen that from this record the comjiany can learn just what visits have been made to any given safe, by whom they were made, and the other particulars shown in the figure. This information is frequently of great value. 244 TRUST COMPANIES. VISITORS' REGISTER— SAFE DEPOSIT DEPARTMENT. 30i b}llh.-^.. S^:tl '^:o3 9.0S Silk. J£± ^Hg^VWUC/ .3101L Am LOiiI.^.,.<^.(^r^ 22I2J. lo:zS- X02 V >g>-^/TA^ fo:-sr^ Af-/Sr Fig. 99. — Visitoks' Register. Some companies have the bookkeeping for this department dene in the department, while others, especially the larger ones, have the records involving cash kept in another department. If the latter plan is followed, it is necessary to have a set of debit, credit and memorandum slips for bookkeeping information. These include rental tickets, giving full infor- mation when a safe is rented, surrender tickets, for use when a safe is surrendered, credit slips for payments, etc. The exact forms of these tickets will depend upon the particular system of the company using them. This department also needs other simple forms, such as bill-heads. The Storage Department. As already stated, in addition to the renting of safes, this department undertakes the storage of articles in separate packages, varying from envelopes containing an insurance policy to trunks or chests containing silverware, books or other bulky valuables. This business is simpler than that of renting safes, involves fewer forms, and necessitates fewer precau- tions, the responsibility of the company being well-defined. The customer !^€k..-^.^ x .... C^p>^ /,/^o>C d«puU>K lilt «4^ #1 S S S ! S 2 r s ( Clavaland. hafaoyaeli" >-••«••«"« varao .Wi*»ro-.TM»Clly«LAJo TRUST OOVPANT t» a aaoM ••• «rv/ X % Uv'9 6 i^iy^<\^J -rv'%.A_e.^ \J^-f-0~ijL/>^^ ''CL^^yy^xJiA, ^-J^in^'XAj-* \J^ Fig. 103.— Package Record. 1. It is agreed by the depositor that no money, certificates of stock, registered or coupon bonds or other negotiable securities are contained in this deposit. 2. In case of loss of deposit through its fault or negligence, the option is reserved to the company of either paying for it, at the valuation specified by the depositor, or of replacing it in kind or amount. 3. This certificate is not transferable except by assignment endorsed hereon and approved by the company. 4. If the whole or any part of this deposit shall be withrawn before the expiration of the specified period, no portion of the charge shall be returned, and if continued longer, it shall be deemed a renewal of the deposit on the same terms, for which a like rate shall be chargeable. 5. This certificate must be presented upon the withdrawal of the deposit or any part thereof. These receipts are bound in book form, and are numbered consecu- tively. RENTALS, REK2\V.\LS AND SURRENDERS ' sL N.„, Addias i I'i. ... -»- "'" i- i'l n To.i,C«h .„.,.. ^ lb 111 /0-.(Ja..^. ^i^k-JU^d . 1^ , "f aUL^ (P^ ix,^aJi 1^ fo !|3 aw.(?.(2x^^ ,x ^ vn ^Lvi^„.H Cvrr- nCL.M.a . St a:^ .-.-.c ,^. ^, J Fig. 104. — Rental, Renewal and Surrender Book. FORMS FOR SAFE DEPOSIT DEPARTMENT. 247 The stub of this receipt should contain the same description of the package as that given in the body of the receipt. If the package is left for a longer period tlian that provided for in the certificate of deposit, upon payment of the rent for the longer storage, a renewal receipt is given in the form shown in Figure 101. At the time that the customer receives his certificate of deposit of the package, he signs a receipt for same, in the form shown at the top of Figure 102. This form, which is similar to Dau-v Repoht. HAFK m-yowrr depahtment. /?'L-..A,., rACKAocs HI MiVio ^. 'S^j^iA) 'ftM^^Z rcy 'rft^ SAFU (UKUINMIIIO X..^^^Su..f/ .^^JjkL. lATtMINT OF ! I ■• ■ I IQ^ /^.l-' wmmi, I -k'^ jlL .>-^-^ ?-''.' /fO ^.T :■ xiu- '.'■• Fio. 105. — Daily Report. that used for the receipt for keys to a safe, sliown in Figure 89, also provides for the appointment of a deputy, and contains places for the description of the depositor and for that of his deputy, and other informa- tion as shown. On the back of the card — which is 6 by 4 inches in size — provision is made for the history of the package from the time it is received by the company until it is finally delivered. (See Figure lOS.) 248 TRUST COMPANIES. The ledger card for the record of cash transactions regarding packages left for storage is practically the same as that used in the renting of safes, shown in Figure 94; the only difference being that the words "Package No. " are substituted for the words "Safe No. ." It is custom- ary, however, to have the two sets of cards of different colors. Some companies use what is called the "Rental, Renewal and Sur- render Book," a form of which is shown in Figure 104. This is intended to give a running account of the business done by the department. It shows the business transacted during any given period, and provides a means of comparing the growth of the company from time to time. This department sends to the general bookkeeper a daily report, which, together with the reports from all of the other departments, is placed each morning on the desk of the President or the executive head of the com- pany. This report shows the number of safes rented during the day, the number surrendered, the number of packages received and the number surrendered, a statement of the number of visitors to the vault during the day, and a comparative statement of the number of safes rented, packages in storage and current earnings. A form of such a report, adapted, of course, to the needs of the company which uses it, is shown in Figure 105. Monthly, semi-annual and annual statements of the same character are also prepared. CHAPTER IX. FORMS AND RECORDS FOR THE BANKING DEPARTMENT. AS has already been stated, the business of the banking department of a trust company differs little from that of an ordinary state bank, with the exception that trust companies in many states are forbidden to discount commercial paper. As a consequence many of the forms and records used by state banks, and also some of those used by national banks, are adapted to the use of the banking department of the trust company. Such forms and records have been treated at length in several excellent books on the subject and in current periodicals; so that in treating of them here it is necessary to travel over a fairly well-beaten road. However, each year sees introduced into our banking institutions new forms and devices, and he who would keep abreast of the times must be ever watchful for the latest improvements. The up-to-date systems of bank accounting involve many time and labor-saving plans, some of which are regarded by the old-time banker as sacrificing safety and com- pleteness to speed. Loose-leaf records, card systems and the doing away with the use of intermediate journals have largely supplanted the old systems in many banks; while others regard these innovations with sus- picion if not with open hostility. Experience, however, seems not to justify the fears that many bankers hold regarding new methods. The modern trust company is equipped with many devices which lighten labor, save time and insure greater accuracy and neatness. Prominent among these are the typewriter and the adding-machine, without which the enormous amount of business done each day by the large institutions would be difficult if not impossible. A great profusion of other time and labor-saving devices are used, — rotary letter-copying machines, filing-cabinets, manifolding devices, interest tables, coin-trays and counters, check-protectors, rubber stamps, etc. While there is a general similarity in the forms used by different companies for given purposes, slight variations from standard forms are so numerous that it would be quite impossible in such a sketch as this to include all good forms that are in use. In selecting the forms to be given here, as in selecting those already given for other departments, the writer does not intend to imply that other forms may not be as good. It should, perhaps, also be remarked that throughout this work the writer has usually avoided New York city forms, because the business of banks and trust companies in the metropolis is in some respects different in its requirements from that of those located in the smaller cities and in the towns in different parts of the country. 250 TRUST COMPANIES. Pioneer Trust Company. '^Ilj0y^r^ UjCL^^yrK LL^T^ 3/^^ :iS'^^. , ^ CUBC.-^^ Tel. Wo. ^^^'U^.l^ ^^h ^l i (RU MFO. CO., ROCMfSTtR AND ClEVEIAMO Fig. 106. — Signature Card. Forms for the Use of Customers. When a new customer opens an account, the first form needed is the signature-card, upon which he writes his signature to be used by the company as a means of identifying his checks. The card, a form of which is shown in Figure 106, should also contain his address, and other information as shown in the figure. These cards are filed alphabetically in cases with guide-cards at frequent intervals ; the cases being placed in such a position as to be easily accessible to the paying tellers and to the bookkeepers. Some companies take two or more signatures from each customer, so that the signatures may be filed in places convenient to the different workers who may have to refer to them. Formerly signature PROCURE SIGNATURE OF Iaj-^c^. JLtrrv^^^JU '^Qsud: (^^^^-■^sU ^ "f^J^ %oJA4-r^ S.ook, in which is entered his name and the date and amount of the first deposit. It is a great convenience to have the customer's name written on the front cover of the pass-book, and this is usually done. The pages in the old-style pass-book, still used 252 TRUST COMPANIES. in many institutions, particularly in the East, are usually ruled as shown in Figure 110, the deposits being entered, as debits to the trust company, on the left-hand page ; and the checks being entered, when the book is left to be balanced, on the right-hand page, as shown in the figure. It is now more common, however, to list the checks on an adding-machine, entering in the pass-book only the total of the checks, and subtracting such total from the footing of the deposits to show the balance. In such case the pages of the pass-book are not regarded as debit and credit pages; the book being simply a record of deposits, which are entered on either the left-hand or right-hand page of the book when the previous page is filled, as is shown in Figure 111. Rubber stamps are used to insert the words "total checks paid" and "balance," and the lines, when the book i» balanced. DCPOStTCO WITH The Merchants' Loan & Trust Co. rau j»ocon«T of ..L~..^..i^..:..^^M.!^J.:fS^.. Chiap.,. "M^^^r^JO^,,, 90.4.. Currency, DO 111 CT». (Md, :lv Silver. V, LA £ ~^ — ?^ .a^ ^1. /...a. LA. ii.: fi 03_ . Fig. 109.— Deposit Slip. Several different sizes of pass-books are usually kept in stock ta accommodate accounts of all degrees of activity, the rulings of all pass- books being the same, following either the form shown in Figure 110 or that shown in Figure 111. Some companies provide special pass-books for the use of women customers, of size small enough (about SI4 by 2^ inches) to be carried in a woman's pocket-book. The American Trust Company t*i ACCOUNT Vj i-r H {J (grg:h^r^ Fig. 115. — Counter Check, Receipt Form. more signatures on the document, the official who signs last should be responsible for the previous signatures, the responsibility of the bank <;easing with the final or at most with the last two signatures. Other objections to many voucher checks are the stating of conditions of pay- ment which put in doubt the negotiability of the instrument, and the requirement of both a receipt and endorsement from the payee. Whether the receipt adds anything to the endorsement of the check is, to say the least, a matter of doubt; and it certainly adds much to the labor of handling the check. Another thing to be noted about voucher checks is that the folded check, which is a great nuisance to the banks, is often used when a single piece of paper of the size of an ordinary check, or a little larger, would answer the purpose fully as well. It is possible to provide room on the face or back of the check for such detailed statement of account as is usually considered desirable on a voucher check, as is proved by several good forms of such instruments that are in daily use. Figure 117 shows an excellent form. Its size is 8% by 3% inches — only a little larger than the ordinary check — and yet statement space is provided of ample width and with seven lines for items. The back of this check is plain except for the words, "Endorsement by the payee is acknowledgment of full payment and satisfaction of the within account." Another form, giving less space for the statement, is shown in Figure 118. Figure 119 shows > li- J J o < Z r, Z Q, c/^— ^.9^1 irt D Z ^%^^4^. NOT NEGOTIABLE /2£B- ^ CD UJ ? ^ > Z I < z < h m < Fig. 116. — Counter Check fi<3L.^^ y (M-rs-^^yy-^ FORMS rOR HANKING DEPARTMENT. 257 1 Tt LK MXHICET AXB FVl-TON NaTIONAI- BA-VIC Of N KW YoRK Vo- - ■"^ t^ i I o ■ — -— - ~ Fig. 117. — Voucher Check. r Ckvclani.O. .:^-o ^i^— ■— — ^^^ f o((a T* TMC NATIOMAC COMMCMCIAL BANK CkXWCLANO, O. '•"^ §^lbtkor^aroi. \om^«t He . '~ 3l;;jiv;> tr»m 5t»i *ju*rph»«: ^nnUnc^O. k feic^nkrc Fio. 118. — Voucher Check. I id Pi>kButf„Vrk. THE TV^ESTERN TRUST COMPANY THE SANTA CLAtU* COMMERCIAL CO. cT^y • ft ft ^:-. I ^a •T4T«JiCVT < I'lt;. 119. — Voucher Check. a form having provision for a statement at the end of the check. These forms show three possible places on the face of a check for the statement. It is also possible to provide for the statement on the back of the check, as shown in Figure 120, which represents the back of the check whose face is shown in Figure 121. 17 258 TRUST COMPANIES. It is certain that by the use of forms similar to these the necessity of folded voucher checks could often be avoided. There are concerns, how- ever, the nature of whose accounts seems to require the folded form of Date. Amount. $ 1 This check is in fuU payment of the above account and the payee accepts it as such. Endorsements. No other receipt is necessary or desired. Fig. 120. — Back of Voucher Check. Xo. lai. Edgewatek, N.J 190 Palisades Trust and Guaranty Co. Examined and registered. OF ENGLEWOOD, N. J. 'Auditor. " ^^^ 'TO THE ORDER OF DOLLARS. Countersigned New Jersey and Hudson River Rail\^ay and Ferry Company. Vice-Pretident. ' '" ' Treasurer. Fig. 121. — Face of VorcHEE Check. FORMS FOR BANKING DEPARTMENT. 259 m ALUS CHALMERS COMPANY No i Pay TO THE ORDER OF . Dollars TO COMMERCIAL NATIONAL BANK CHICAOO.ILL. Allis-Chalmcrs COMMNr. Fin. l:i?:?.— Fack ok Fninrn VorciiER Cukck. voucher check. In such cases the convenience of the banks which must handle the checks would be greatl}' conserved if all information needed by the bank were to be found on the outside of the check when folded. It ought not to be necessary for the bank clerk to unfold a voucher check as he handles it with other checks in the regular course of business. The desired result can be accomplished by making the front of the folded voucher a regular check form, and having all endorsements appear on the ALLIS-CHALMKRS COMPANY VOUCHCn-CHCCK. To. STATKMK?Pr OATC OKSCniVTIOM AMOUNT AMOUNT. 1 • - - — j 1 Accoum and extenxons corrtct Approved for payment .....«.«^.« e..»n»^.. Fio. 1'23. — Inside or Folded Voucher Check. 260 TRUST COMPANIES. back of the folded voucher. Figure 122 shows the face of one of the best forms of folded voucher checks in use. It will be noticed that this has the appearance of an ordinary draft-form check. The other side of the folded voucher is blank save for the words at the top, "Make all endorsements here." The information needed by the bank is all on the outside of the folded voucher, so that the bank clerk is not put to the necessity of unfolding this document. Although a receipt in addition to an endorsement is required, such receipt appears on the face of the check, at the end, where it is easily seen. Some voucher checks of the same gen- eral form as this one do not call for a receipt, the endorsement being considered all that is necessary. In such cases the check usually reads, "When properly endorsed, pay to the order of " etc., "In full payment of the within account." From the standpoint of the bank this is of course an improvement over the form which requires both a receipt and an endorsement; while, as already suggested, it is doubtful whether the drawer of the check gains anything by having the receipt in addition to the endorsement. Figure 123 shows the inside of this voucher check when unfolded. Teller's Records. The different tellers keep records of their daily work and prove its correctness on books or sheets of paper variously known as "scratch- ers," "settlement books," or "proofs." In its original form this record was merely a rough memorandum used by the teller to balance his cash, containing simply lists of items on which cash was received or paid, and the cash count. This is all that is needed in a small bank having only one teller and one bookkeeper, for in such case the keeping of a complete proof such as is described below is merely a dupli- cation of the work of the bookkeeper. But in a large institution having a number of tellers and bookkeepers the system of proofs should be such as to test the accuracy of each man's work in its relations to the work of every other man in the institution. Such systems are now in use in the most progressive companies, and have put an end to the continual "checking back" to locate • errors and strike a balance of general cash, which was and is a burdensome feature of the work in banks where a general system of proofs is not in use. The particular form of the proof for each teller or bookkeeper will of course depend upon the number of such workers and upon the general arrangement of the details of the work of the company; but the principle upon which the system of proofs here described is based will apply to any institution, no matter what the number of workers or the arrange- ment of the work. This principle is, that the proof of each worker should contain a separate list of the items received from or delivered to each of the other workers. This is illustrated in figures 124 to 127, from a study of which the system will be made clear.'^^ On the Receiving 73 See also Figure 146. FORMS FOR BANKING DEPARTMENT. 261 Tellers' Proof, figure 12t, left-hand page, the first columns provide for the listing of "Commercial Credits," i. c., deposits received for checking accounts. Space is provided for the separate listing of each deposit; but instead of this the teller has here made use of the adding-machine, his assistant having taken the deposit slips received, at frequent intervals, RECEIVING TELLER CASH PROOF 1 >«». ^^ — «>.«i«.n r^«.T».j.,-,| MM*> . •»,-.« 1 - ^1 ooo 1 i^ ,..r m 3-, ^f.T .rr Om ^(f^ a< 1 ifi i c ■^ ttrtrf- ■> { ^~— tTT ^ i-T ^ Ifff vr 1 1 '] 1( ? A t -7>7 ^f - 61 .^ iJ-2 ^ iL — 1 — — f-^ S 1 — — RAO C»«-^ -^ ""— "~ — ' — ' ''^1 ' — ""^ — - , lAC t'- 1 1^4 ' ? ^^ ^H '-■■J' y- li'] m 1 __ , _^ ■uu —. ^ ourrcMM 1 — — — — ' TS iTf '!^ — MBIMI^ Sifflf'?^ ra^'cf- fJiJi? 1 ' 7 ?;'ol61i ,rp 1 1 1 h(( niozl — _i— -J ' WTH^^ /jtjii^^jff 1 ^ - - - •UMMT pss r-1-4 1 1 -- -■ ■ ■ .-- — - — - -J ! 1 1 1 1 1 ' I 1 l-ic. 124.— Ueckivint. Tki.i.kr's Prook. Lkft-Haxd Pace. listed them on the adding-macl)ine and entered the totals on the proof. By reference to Figure 127. under tlie heading "Deposits" at the right lower corner, it will br seen that the Individual Bookkeepers' Proof debits the receiving teller with the same total as here sliown credited to "Com'l Credits," $1,230,068.77. Under "General Book Credits" is given 262 TRUST COMPANIES. a list of all credits for the general books passing through the hands of the receiving teller. The total of these items agrees with the total of debits to the receiving teller on the proof of the general bookkeeper. On the right-hand page of Figure 124, the total of "Commercial Debits/' $173,586.52, will be seen to agree with the total listed to receiving teller — /IL ^-A^. f-^ Ll ^y.-->--^C. ,190-^ S1« '«'»•- " S •«««'«*« C.*T*. ^.^ .»,.-. 1 (BotiKaan ouwa A J p. M- o', i 1 ^ w,. ? / j-7 o6 T 'T IP 3 •^T ? r "H AS ff - 'Ti T 1 *^ '' ■' i>.-3r. |-Wv. ^/ ;j.S 2 foo : ^ *f-p-f (?.^ e IV (VtVO (^7 1 1 ^'f u< -f Vo - H 3 7,?i'=" .».„„. .,„ „....„. 7 I <-3 . 2 i-3 'l fS '-/ ' ll - ' 1 i Fig. 124. — Receivixg Teller's Proof, Right-Hand Page. under "Items on Us" in the Individual Bookkeepers' Proof (Figure 127). Here again the teller has entered on his proof adding-machine totals of the items, instead of listing each item. Referring again to the right- hand page of Figure 124, it will be seen that the items and the totals listed under the heading "C Paying Teller, Dr." agree with the items FORMS FOR BANKING DFPARTMFNT. 263 listed to the credit of the receiving teller on the left-hand page of Figure 125. If all the i)roofs in the system were here shown, it would be seen that the list of debits to each worker on tlie receiving teller's proof appears on the proof of such worker as a list of credits to the receiving teller, and vice versa. It is therefore evident that if any teller or bookkeeper fails to balance on completing his proof, he has but to compare his proof ■with those of the other tellers or bookkeepers to locate his error. If, for example, on the left-hand page of Figure 125, the paying teller had PAYING TEUER CASH PROOF »».» »-T»<»| L^,-ca| ...-.U_ -> 1 i^ JO fr ,-, , . . A^I^Ut— If — - ( *T -^ 1.1Z — ...■-. _ M ir-\ -b^ W - - - s Si n - - z - Z f3 ^ —_^ - wL H " Jr>^ « ?^- — — — — — — — — — — — "^ It- Lsam lam .T^ f. M _l ?<• , ." '}^ ?T 3? 1 '1 f.-\ ■ ' 1 — — Cu-U-C^r^OM.. CC....0 — "«"'— »—" — «-— 1 • i •■■! ■1 1 V] fi. ,^, . , In^ -^ U- — I— — «=~i — ^ ua li — _. — - Mi Ci5 m laaa-^ iC livr a ,^mm -_ ^ J ^ «£ • >.MTkn>u> '? ' - •^ — _ u-nuu f; H ■> , J, f "" ' .„ .^••v _aiin . »»r - - ^I^ . 5^ , ,^ c^ ^ f Tnr ««JPB^ . inf? r(i - - • \ li> iTI f f 'f 1 (" >SI 10 *"* c^-nm .WtTOOM »««.«>«C«»T. MMiy^ncaoorr. mmm^ 1 >l^ ■ "' ui- III "^ /t-J3C n^. J^^ . ,^j^_ J"; " - .\_ -h 1(7 __i Lli_ .. • -s-t-- ^^ tiza. _ _ _ _ ^..^ J X.. -;- — — — — — ' - \i-. 1 ^-j gy*^ 1 _^ _J 1 Fig. Ho. — Pavixc; Tki.i.er's Proof, I,i:»t-Haxd Page. failed to credit the receiving teller with the $6.30 item, his proof would show a total credit to receiving teller of $10,152.57 instead of $10,158.87, and consequently his total of "Debit Cash" would be $6.30 less than the total of "Credit Cash," showing an "over" of $6.30. On comparing his proof with that of the receiving teller, the error would be easily located. Under the same conditions, without a general proof system, this little item of $6..'?0 might cause the loss of several hours' time in "checking back." It is evident, too. that such a svstem as this enables each worker 264 TRUST COMPANIES. to complete his own work as soon as he has proved its correctness, in- stead of all the workers being delayed by the error of one, as is often the case where no general system of proofs is used. The writer has seen the introduction of such a proof system in an old institution result in every man being able to leave the bank with his work done at about five o'clock, whereas under the old conditions it had been the custom to "check for cash" until a late hour in the evening every few days. 0^ ^ -< .. ■fcr> ^fA^fT" «<*i ■ . ', r,i (LC-t.^i) ^•^ "fl , tr i.-ind- . ,5 i7. IT IK' To Ot^ *.&/.- 7 «.<- ^ /no , , ,po ri'ik.^,^^ •+r 1^ ,. ?^ ■ /(>« ^-D ? fl'^ /it-7U:f 1 <- .1'? 1 *^.^:rf ■ ., ^, d H ftc^'* ■v.-vv.t'^ Tn rt-o ^. 1.a.lUx* , rr (?.A.5V^ e^v- ir UJh. ■kaj3I> la*- m i-p 10 oi'V^ ,. ^ ;u /Iv^'^- ''I - 3.S3. oiiS^ /•I- "^ s J-c ^ Q«^ „ -TT" V Uj/' 1 i^ oKP ?.? • f'T' i(" it. (It r S, \T lor t, T <1 (hV ^ i.i^. -1 r ft +nT( 1 T IpT i-^ ns GJ-t-i . 'U.J^ 3.S>™, , (K a— w cjjy 1 .j- so A „ *.ss — .^ O^ to '' ^ IH-3 «/ p ■*-i-3. \d M > Fig. 125. — Paying Teller's Proof, Right-Hand Page. Referring again to Figure 124, at the close of the day the work is summarized by entering the totals of the various columns on the left- Land page under the heading "Debit Cash," and the totals of those on the right-liand page under the heading "Credit Cash." If the work is correct the totals of these columns will agree, as shown in the figure. If they do not agree the teller proceeds, as already suggested, to compare the totals of the columns of his proof with those shown on the proofs of the other tellers or bookkeepers, and thus soon finds the mistake. FORMS FOR BANKING DEPARTMENT. 265 The actual count of cash at the close of the day is sometimes listed on the proof, and sometimes listed on separate sheets of paper, which are preserved for some months. In the latter case the total count only is entered on the proof, as shown on tlie left-hand page of Figure 125, the first item under "Credit Cash," wliere the paying teller has entered his cash count total, $66,303.71. On the right-hand page of this same figure the teller has gone to the pains of recording the names of the drawee bank and the last endorser of each clicck cashed by him. This, of course, involves some work, but is evidently a valuable safeguard. GENERAL CASH _ n( cn.^Lt^i ^■Cu^io ,90^ CASH CLEARANCE -^ CASH ITEMS - y..ii Mi /^.7 (.^^ <<.'l iMttMMf Onit Ttllir «3 f / n ■^7 0>ifl Tillti ij^^ 3^ ■r^ Trite Cm-IIIm TXIn os:^ f f -^ ( -rt3 ni • Ni. TM.r ?, .■=) ?9 »... ««. • a l^H- 11 In. Dm. Itllw —LO !f7 S». iM. T>«> 1 3 .o •ro<^ 41 3 rn 10 i li 3 (lin.^^.^ QZ., 4 ^tjS 20 2. )l 7^' ro 7-<^ 22 (Jin.-^.^ 0.3 23 ^<^o src. so ISO 23 24 (h^-bcJi f.-iur^rA ?4 -K. Ifc 2lel .-it (Th^.tc^ r.,.J. (?n 25 , TO^ f-i / o ,o q^o ,n ,S to 26 <^,^.-f,,- yc.,.>c^ 27 J|^ Jl4 TO 27 Clhrxji fe-T- ^* J^n^ ^ 28 '''] -J^ 0..O 7-^ ^^ -.-. "1 1 '^ t,...^..^ )U,-^X, 39 } J 3 ,^ 1 uo >^ J ;.o 39 ^S JL^^..„..o 40 M* ■1- IS Ml iS ^^^ if X>S ■^'+- ^j .?P J^)S Fig. 128. — Bostox Ledger. easily add the deposits to the previous balance and subtract the total checks from the sum of the two. This process is a rather puzzling one to the novice, but the experienced worker on the Boston Ledger does it FORMS rOK IJAXKIXG DEPARTMENT. 269 Tu$? QMct> « CWU.I t.t.1 Ci>-<»» 0.f»*t. ^ JO li , , '11 T.r ir, ti , 2f ; IQ Vif? / ar7 .^ 2 « i - US 'rl 17 !,f,C ,u f,il Jf^ H rt-o ,) .J4 IB ' It *7 ^'xt ► ^ r?' 20 2. 21 >. V? VP 700 7f 3 3^ 7? ^. '•ii p ••/ 22 1 !t fl "f »(? ' ■/•< 73 23 ;a ;? "• ?4 ii*. 24 ^ n ii ,.i ;^ f(7 , ?s « 26 v»i >o M^ I© ^ 7° v fS h* 7C 27 r,-» '♦ ir„? 7! n »•. .« n '': Zi }i-r Kl 1 7 * 'Y'^ jp kjt. 32 ^1 il f^ 32 fri"; ill t^ 33 i;>r 4 14 f^ > .u « 3^ II It i n a . 11 ft 1 .Ci5 If 1 1 M 36 ^ in* 1 k^ 17 ■w Y ir. n 1 7^ >po H' J7 Ifl n ^.. 31 it •^ 39 ^ 10-1 411 40 /^ HJ r^ •? .s:^ if jk ■^H-\ si, _£ ff.i ^J^ J Siii }6 iJL li£ !SL ' Fio. li?8. — BosTOK Ledger (Continued). with ease. The older forms of Boston Ledger provided both a debit and a credit balance column, and this form is still in use. The more common plan, however, is to have the debit balances appear in red ink, so that only one balance column is needed. In the larger companies the names 270 TRUST COMPANIES. of the customers are usually printed in, thus saving the bookkeeper much tedious copying. The size of the page is usually about twenty-two inches wide by eighteen inches deep; the number of accounts on a page varying from twenty to forty, depending upon the depth of the page and the space between the lines. The accounts are arranged in alphabetical order, several lines being left after each letter for new names that may need to be added. In large banks each ledger contains the accounts be- ginning with certain letters of the alphabet only: e. g., one contains ac- counts whose initial letters are from A to K, and another those whose initial letters are from L to Z. The letter "B" appearing after several of the balances in the figure indicates that the pass-books of the custom- ers indicated were balanced on the dates shown. A check mark (V) is often used for this purpose, instead of "B." The Boston Ledger has some decided merits and some distinct de- fects. Its merits include the great saving of time and labor in the com- bining of journal and ledger, which does away with posting; the readi- ness with which the total day's work may be proved; the grouping of all the accounts on a few pages, making it easy to compare the balances in different accounts; the prominence with which overdrafts appear, insur- ing that they shall not be overlooked. Among the defects of this ledger are the ease with which items may be entered on the wrong line and so be made to appear against the wrong accoimt ; the fact that it is comparatively difficult to ascertain the average balances that a given customer has carried for a series of weeks or months; and the fact that the balances of inactive accounts must be car- ried forward day by day along with those of active accounts. The size of the book is also considered objectionable by some. The fact that the Boston Ledger is not adapted to the carrying of inactive accounts has led to the introduction of the system already men- tioned, of using both a Boston Ledger and a balance ledger (Figure 130), with a special journal for the latter. The more active accounts are carried in the Boston Ledger and the less active ones in the other ledger, which is sometimes called the "inactive ledger," and sometimes the "petty ledger." The total of the balances in the petty ledger is carried as an accoimt in the Boston Ledger, so that the total of balances in the latter shows the total balances for the whole set of books. Figure 129 shows a form of journal to be used in connection with the petty ledger, containing also a form for the proof of posting. This form of journal (or "scratcher" as some prefer to call it) is a great im- provement over the old form in which the deposits were recorded on one page and the checks on another, as the names of depositors having both deposits and checks need to be written but once, while nothing is sac- rificed in the way of clearness or completeness of the record. On the left of the page the first column contains the detailed list of checks and the second column the total checks against each account. Columns are provided for the check-marks used in posting. The first column at the FORMS lOR BANKING DEPARTMENT. 271 right of tlie page is for the listing of deposits ; while the two other col- umns are for the proof of posting. This furnishes a daily trial balance of all accounts active for the day. In the first column are listed the old balances, and in the second column the balances shown by the ledger accounts after the day's items are posted. At the bottom of the "Old Balance" column is listed the total of the day's credits ; and at the bottom cf the "New Balance" column, the total of the day's debits. Then, if the work has been done correctly, the footings of the two columns will agree. While this proof of posting adds somewhat to the bookkeeper's daily work, it insures the correct extension of balances, and lightens the task of th( monthly trial balance of all the accounts in the ledgers. ^tt? Journal. / -.-•'_...' CL^j,,.-^ 6 /^foa proof , / ■ , ,/ _j .»T. ^ .... ^ >f - .M ^ f}Aa...^ <:<^y:'>. > U- -'1 -■ - 2T 1,^ ^, (hy^,..JJ(?,t^ fr^ ^ ^c ^ 7'^ i>"^ v'-C - ciu^Ci '^nZl^^ ?3f '7 ^'f - It 1>S ',1 '7f 3 1 ^ Qr^^A Ow^rx^X^t^ (9. (.-ill' f(- • , JfA „ ^■f ns /)^^tc^ nu a. ?ft - 97 \,'<* i'l ff^vwJ.'^.'i d E7>c ^ 3 Ji^^^Y' ^ ^■ rsn c^- ^ tJfH .ct pa ifi'' stic^A ro^u). X T-"; J^^i^ i-^..^ 1 ?ii '1 4U^ ^ in >'i fcq ar i^^ ?/ It ^ l^ w tii ~ Un ^ U ^ ,1 Hi H i ''\0 3il a, ^ - Fig. 1^.— Jocrxai. or Scratcher. with Proof of Postikg. A form of ledger used with the journal just described is shown in Figure 130. This is a modified form of the "Cincinnati" or three-column balance ledger. As compared with the Boston Ledger, this has the ad- vantage of showing the balances of each account for a long period in a form that makes it convenient to see at a glance the average bal- ance; while the carrying forward of unchanged balances is avoided. This form may be used in either a bound book or a loose-leaf binder. The latter is preferable, because it permits the arranging of the sheets in alphabetical order, making an index unnecessary; and because each ac- count may be given as many or as few pages as it needs. The size of the sheet, exclusive of binding space for a loose-leaf binder, is about eleven bv twelve inches. 272 TRUST COMPANIES. Another form of check and deposit journal is shown in Figure 131. This is arranged much the same as the "Petty Journal" shown in Figure 129, but does not include the columns for proof of posting. The latter may be written, if desired, on separate sheets of paper; it may^ by the exercise of a little ingenuity;, be taken off on the adding machine; while some companies dispense with it altogether, relying upon the monthly trial balance to detect any possible errors in the computation of balances. ^ CUl^ ?. (3r ;j-T^ n. ,._ ^.^....^.. ^/ r...U.^.r.usrc. l<^o'n „... J.n J c... - ,^:^^ n^ .„„ c...„ ^0. n^} V If( hf /L3 to lA (.(,7 (^3 t. 1 . »f ?*• o« /l.T.T 33 -)! ,Tr> 1 o T? if a( 77 Tf f (.1 ^_£ 1 O IT r H 'C. 3 .S"<^ ' OX 'fl %^^' 1 .. ^ ft T ^7^ J 'f r.t'R fi If (..«; SMI fc 1 . , fi (.T <"{■ "? 1*1 ?7 -7lf T f I ^ o S-Of. X.\ 1. ! / / 1 It =\ H-, rl r11 \lr /m- fro .3.^ ?,1 7,T lA & ^'7 ?1 ^rfff (<. ,=).- 3 S 3.T 46 «3 71 r. /^^T 9/ 1 ^ ■ I-S' fri 3 3. ^ I 1 7 r'.<^ oft ■ 3r ■^7S ^ ^:is o(. A.. S-l- ■J,T SIS s 1 („■< (■■^ 7o<, <^o 1 l(. It fr,"r lf< / 2/f- '7 Tito 3 3 » Fig. 130. — Balance Ledgeb. In some companies, particularly in the older and larger companies in the East, the old plan of having both debit and credit "scratchers" or journals is still in use. Under this plan the checks are listed on check scratchers, a form of which is shown in Figure 132, and the deposits are listed on deposit scratchers, a form of which is shown in Figure 133. In both of these forms, the columns at the right, not filled in in the fig- ures, are for the continuation of the work begun in the first columns, thus giving space for more entries on each page. Often, however, only the rOHMS FOR l?ANKI\f; DKPARTMFA'T. 273 single ruling is includtd on each page. Various forms of ledgers are used with these scratchers, some companies still continuing the use of the old-fashioned two-column ledger, without a balance column — the ruling of the ledger being practically the same as that shown in Figure 133, with the addition of date columns on both debit and credit sides. In the newer companies, however, it is far more usual to employ one of the various forms of ledgers having balance columns. Fio. 131.— Check and Deposit Joirsai.. gat4 < J-WiV ;f ir(X ^"hLr^Ac^ qfy^j,."^"' ^.,.^ ^.^ t: rr 1 Fn j=^ n F=^ j= = = ■ -'■ ~ ^X^,4^Q. AT-.^f^ !<: ^ O^ _ _ _ _ _ - 1 - ■ -^'.j Fig. 132.— Check Scratc a^^ OlL^Jr^j (W 6 JJJ. • Ja.v^. , c>C'-U <3>>^i :^ Via. 133. — Deposit Scratches. A number of plans have been devised to lessen the labor of keeping individual accounts, the particular aim being to do away, so far as pos- sible, with the entering of items on both journal and ledger, the items being entered in the ledger directly from the original credit or deposit slips and from the checks. Figures 134 and 135 illustrate one set of forms devised with this end in view. The ledger, shown in Figure 135, is a modified form of Boston Ledger, involving some of the features of that ledger and some of the "Cincinnati" or three-column balance ledger. It may be either permanently bound or used with a loose-leaf binder, the IS 274 TRUST COxMPANIES. Cteck artaOejiasIt Journal. Self-ProtHng Trial talamem ''7M.C>Vc , a!r>r rp ^/^ i2 _ < ,^ , .It ■s^ , ai (■■^ / ,- 1 5 t7 t„ T n ^ - , c ■■ 11 J 1 o 7 , ,^ 3i^ ./-^ 'f |i ,^ '« ■•) , 1 - u 7-'" Fig. 134. — Mesiorandum Check and Deposit Journal, with Trial Balance. latter being more usual. The entries are made in this ledger directly from the deposit slips and the checks; and, as will be seen from the fig- ures, all the detail work is done in the ledger. As each account is posted ill the ledger from the original items, the total debits and the total credits, together with the old and the new balances, are entered, from the ledger, in the form shown in Figure 134, which is an abbreviated journal com- bined with a proof of posting. Here, it will be noticed, the old practice V ^ >/ ■o- -K-txlJ // //A/ - 1 u^ „.=„.„. -::rzz «~,.'^ ::::-. -™ ^.-™ ™.».=„ .^ - 'C, ^ Ton TO ^1 n 1^4- (nl 'il •' ii jr» CO ' "!: 1 1 ■f^ Tf 1?.^ T?^ ot. ^4 3^ Fig. 135. — Individual Ledger. FORMS rOR RANKING IM-.PARTMENT. 275 PHB PRUDENTIAL TRUST COMPANY % 5^- -it^ ^S_ 4^1—.- ^i ^l A% -il ±0. - 1 ^ 9^ W« Crtdll at.-v. ' W*D«kllkt • . Amount Cndiud I'u;. !;{(>. 1 N rKiii:sT Statkmi is reversed — the items being posted from the ledger into the journal, in- stead of vice %ersa. The use of the so-called journal in this case is merely to record the total day's work in compact form, and to prove that all items have been entered in the ledger. In order to abbreviate the work as much as possible, the accounts under each letter of the alphabet .ire numbered from 1 up: those whose initi.il letter is A being numbered Al. 276 TRUST COMPANIES. A2, A3, etc.; those whose initial letter is B being numbered Bl, B2, B3, etc. In the journal (Figure 134) instead of the names of the accounts these numbers are entered as a means of identifying the items. When the work of the day is completed, this "journal" will contain the totals of all the credits and debits for the day; and if the work has been done correctly, the totals of the "Checks" and "Deposits" columns will agree with the totals of these items as shown on the proofs. At the same time the footings of the "Old Balance" and the "New Balance" columns, with the total deposits added to the former, and the total checks added to the latter, will agree and furnish a proof of posting in the same manner as was explained in connection with Figure 129- If several ledgers are used, as is necessary in the larger companies, one of these journals is of course used with each ledger. The custom of paying interest on daily balances on checking accounts which have satisfactory balances is a growing one. The terms on which interest is allowed vary somewhat in different localities, but interest at the rate of two per cent, per annum on daily balances of $500 or over is quite common. For the sake of convenience it is usual to compute and credit the interest about the 28th of each month. The interest statement is then ready to hand to the customer with his returned vouchers when his book is balanced on the first of the next month. Figure 136 shows a form of such an interest statement. It will be noticed that the balances are written in thousands and hundreds of dollars only, the figures in the units and tens columns being omitted. This method is followed in many institutions as a means of lessening the work, as it cannot in any case cause more than a slight difference in the amount of interest allowed. Sometimes the interest rule specifies that interest will be allowed on even hundreds of dollars only. Figures 137 and 138 show two forms of ledgers devised with a view to assist the bookkeeper in the computation of interest on accounts. In Figure 137, in the column headed "Days," is entered the number of days that each balance stands undisturbed. In the next column, headed "Ag- gregate," is placed the product of the balance and the number of days. The principle involved in the figuring of the interest is the same as that used in Figure 136; namely, that the interest on any given amount for X days IS the same as the interest on X times that amount for one day. /li. S. Sjii E ^ om. — .... 0..^^ .r 0^. CI 2-^ T 7 "f ■SM (nP <>u>^ ±ii Olt«u^ . CUU. £^14 UffL. JLtt^ i^^±a CR.J*. n^itu Cuh^9<^^fn^^ /I */-'6^ oO li ■7(. ^^ 4.^ »s' !■» ^ 3 1 -2 31 44 'i^ 15 q.K ^Lf 4-S R^ n<^ 16- 9 ^^- 70 4fe Dl(o -1 (tU (oG 17 / f 1 tn fro 47 ^n /^ 2.>r 18 SHO f^ 4S 1& ^^ 19 12. 1 QS 49 ;i. 54 ^ .25 if,<: '7 55 ;f 1 ^i* ^ 26 1^ ; 56 27 ^^ / i(. Q,G 57 28 u, 33 :^^ 5S 29 ;«s- Go 59 Credits. >1^ ^3 ; 70 JO • 7 ko 60 Debks ^ ik-x t^ Balance ZH-^ Q Please examine balances and vouchers and report at once if any error is found. Fig. 140. — Statebient of Account. FOR>rS I'OR RANKING DEPARTMENT. 279 may be shown without rewriting the names; but in such case a consider- able space should be left after the lists under each letter of the alphabet, for the insertion of the names of new accounts. Overdrafts are entered in red ink in this form of balance book: but some forms provide two col- umns, one for credit balances and one for debit balances. In many insti- tutions, the introduction of the adding machine h;)s done away with the trial-balance book, the trial balances being taken off on the adding- machine, which is of course a much quicker and easier way. These add- ing-machine lists are preserved by pasting them in scrap-books, or by filing them in envelopes. An important part of the duties of the individual bookkeeper or of his assistant lies in the careful preservation of deposit tickets and of STATBiaCNT OP ACCOUNT a-?"' ' Dr. ( -O-^ky^ oQo^ hlOMll A Ttie Conqueror TniglCooipany.cr r 7^<: 1 (SiaLa^ruxy ^3 <7 3>S-' o "X /,t»v ^ M- XI a-l, 7 /vTAf kn 1 ^%..^ -f^ a-s ■ /3 7,r ^7 |0 .:^ 1 4ri. ^f!' fi' 3i^ / 3 \s ^•S" 'I ^/ f 3 C g*? ID f '^7 s-or _ aA -m'f 2.3 So c 3f /(vr> r\ 1 ; 1^ ,3^- '\s , -- 1 / «■ a^ - 1 ■H '^T. IX — i ftfff IH-" ^- ^4 .rV^S" s h^ ULtoTMrb. ^X / 3 Fig. 141. — STATFttENT OF Account. checks. The latter are cancelled at the close of the day's business, and filed away alphabetically by the names of the drawers until the pass- books are written up and the checks returned to the customers. The de- posit tickets, which are kept permanently by the company, are filed either by dates, all tickets for the day's work being filed together in alphabetical order, or alphabetically by the names of the depositors; some companies preferring the one method, and some the other. The pass-books for all active accounts should be balanced, and the checks returned to the depositors as vouchers, once a month. The methods of balancing or "writing up" the pass-books have been sho^vn in Figures 110 and 111. In practice it is found to be a diflScult matter to get all customers to bring in their pass-books for balancing each 280 TRUST COMPANIES. month; and there is always a considerable number of depositors who fre- quently fail to bring their pass-books when making deposits. These facts, together with other considerations, have led many companies to adopt the practice of sending monthly statements of accounts to all de- positors, the pass-books being used merely as the depositor's record of deposits made. Figures 140, 141 and 142 show different forms of state- ments of account, those in Figures 141 and 142 being practically copies of the ledger accounts in the old-style debit and credit ledger and the balance ledger respectively. Some companies have the statements kept up regularly as duplicate ledgers. The advantages of such a practice STATEMENT OF ACCOUNT CHl^jLu. T nS lA^f ^0 x^^ ^0 20 f o(. 3/7 1 ?> P (^S \^^ OS ?s^ l?> ko y^iji \lo 3 13 )S P5 ?"? //. Fig. 142. — Statemekt of Account. are twofold: it furnishes a check upon the correctness of the work on the regular ledgers, and it keeps the statepients always up to date, so that the customer may be furnished with a statement of his account on de- mand. The plan also distributes the work of preparing statements throughout the month, instead of requiring it all to be done at the close of the month, as is the case where the pass-books are called in for bal- ancing. If the duplicate ledgers are kept by a separate set of book- keepers, a check is obtained against possible dishonest practices on the part of any one bookkeeper. Figure 143 shows another form of state- ment of account, which is printed on the face of an envelope, in which the vouchers are enclosed when the statement is handed to the depositor. FORMS FOR BANKING DEPARTMENT. -VOUCHERS RETURNED THE STATE BANKING a TRUST CO. 281 If M rc»Mt U MMle wlUiln 10 d«yt. tccaunt will be conildcrcd eorrcel ». CHCCM* CHICK* '^r^- OCMtlTI 1 sTO 'hU^ , 3 S7 ^o ^ 1 in C/f 3 :ii if /^ Mh^,, ^ « /o -^ (0 S ^- In 12-Jl 'S'O « Uo OJ2 1^ 2.0 c 6>S" 7 3 7 fi 3 'T * 8 — tS. il / 7-4 7-a OA "V- 10 /^ 1 5"^ 7 £i^ 11 ;?^ 36 C^, 1 3^2 7 12 ^;?'? ^ 13 /7 ^ .3-Pf. , 1 ^V-'"^ ¥-^ 1* ko -1. ^CT 1,-, 7.?.^ / 7 10 (o 3*^ IT 19 /v? 18 — 3 >f^ 19 20 loo 21 — (fc .TO 32 2 7 /^ 23 -/^ Zfi 07 "^ ^ 2* 23 — — 26 37 38 29 SO 31 32 S3 S* 38 .•<« 1 II 1 1 1 Fio. 143. — Statement of Account. It is not the usual practice to take the depositor's receipt for the vouchers returned to him; but this is done by some companies, and there are those who maintain that a receipt in such a case is quite as important as a receipt for any valuable papers. One form of such a receipt reads as follows: "Received from the Blank Trust Company of Chicago, Illi- nois, my pass-book, balanced, with paid checks. Unless advised ta 282 TRUST COMPANIES the contrary within five days, the balance may be considered correct, and the paid checks in all respects genuine." A troublesome thing for the individual bookkeeper to handle is the stopping of payment on customers' checks. Sometimes a rack is provided, in which are placed cards like that shown in Figure 144, containing de- scriptions of the checks of which payment is ordered stopped. Another PAYMENT STOPPED. hat p -^kjoip ^. ORDER OF. REASON . 2>?><^ AMOUNT, $JL2j^1^=^ PRESENTED AND MARKED ORDERED PAID WROTE MAKER _ 1-2-02 Fig. 144. — Stop-Paybient Memorandum. plan is to paste on the ledger a slip like that shown in Figure 145. A third plan, and probably the safest one, is to make duplicates, from the descriptions furnished, of all checks of which payment has been ordered stopped. When the incoming checks are arranged in order for entry in the books each day, these duplicates are inserted in their proper order with the other checks, so that the memorandum is found where the book- STOP PAYMENT ou CHECK :So_132xS.... I Bated I^leuj;^.. 19ok... For SJ.Z£.^ I Drairu bj/^^p^ ^.€5-:,........... __ ....,......_. ..._.... I I Favor of hJ.iM:^<^y>^..^^^^^ ._. „^... I Remarks ....^bMufc.....,^ .,,.. .t.^. ,,„........ | Fig. 145. — ^Stop-Payment Memorandum. FORMS FOR BANKING DEPARTMENT. 283 keeper cannot easily overlook it. These duplicates are kept and used daily for a week or two, after which time the date of the check will of itself put the bookkeeper on his guard against paying it without investi- gation. The General Books. If a general system of proofs, such as that described in connec- tion with figures 121 to 127, is in use, the first form needed by the gen- GENERAL BOOKKEEPER PROOF | '■kl ..-il-rV - / ' ^- ^,' •' ' ....>. .«. _.. ._...„ .J=::l- ™... ...J _Lfve !^ ^„ ,o esa ,^ I _ , ►« J, :.x 1-1 „ w _ ^,. zz J Jin in Lt li zz UM _K3! ^ - iii4 s r zll ..J ry — ; — .; •-'!) :'. — oil •( in >Y UL -*^ — — ■* 1'( ^ — ^ .-:- — ^ »r — ,^^ ^ ml jj ^ .,. - ft" ^ ,, t1r -^ -p- , , — M i LLC U %l: m i| J *■ .i=--.- —m. 3 rtr ; — iji J net •"/ , inT r-l ■ /» fi,r tf r>.f ■ Itr — ' J IH '9 J n.1 . mi *7 114 ^ — IP 1 , ,, ^^ — , — .•rr^ .>=?-,. _r=-. _rr=r. — ~ nil ■1, - ... -- p-- JC F"f 1, J [|5 ■^ — n rrr "- v_^ _^ " 11 , . .... i«^ ' 1 •- — 7 ■ - — — — ., """" ^ . , '■ H '*v!i r^fj~ Ml 1^ .'•«, ..»-. " ^L. .'! 1 ..• ■f| 1 •" ■)«•( , .. , ^. rri ,, 1- Ul ►,.<. ■■ ■ m „ Ill' r( d [ — 1 J . J :=H ==! - = — . Fig. liG. — GKNKn.vi. Bookkkepku's Proof. eral bookkeeper for the record of the day's work is liis jiroof, a form of which is shown in Figure 146. On this proof he lists the items received from or sent to the other workers, in the same manner as has already been described for the tellers' ])roofs. figures 12i to I'JT. When all of the items (except the bookkeepers' totals) have been entered, the totals are listed in the places indicated under the head- ing "Summary" at the right of the bottom of the proof: and if the work has been done correctly, the total of the debit items will agree with the Q8h TRUST COMPANIES. total of the credit items. The bookkeeper then has a proof of the cor- rectness of his work for all items except the totals to be furnished liim by the individual bookkeepers, draft tellers, etc. When such totals are received they are entered in their designated places under the head- ing "Summary" at the left of the bottom of the proof, where are also entered the totals of the general book items listed on the proof. Mean- time the general journal is written up, and the correctness of the work there is indicated if the total debits and total credits agree with such totals as shown by the final "Summary" on the proof. The difference between these totals shows the amount of "general cash" at the close of the day's business; and with this figure the amount of "general cash" shown by the paying teller's summary of general cash, figure 126, must agree. 6oo :>oc S'oo fzs 5-/^72. Fig. 147. — General Jourkal, Left Page. For a general journal many companies still use the old-style two- column journal with debit and credit pages. Figure 147 shows the left- band or debit page of such a journal. The right-hand page is ruled ill' the same way, having the heading "Cr." instead of "Dr." Much more convenient than the old form is the improved general journal shown in Figure 148, in which debits and credits are entered on one page, and the names of the accounts, being in the center, need not be repeated for debit and credit entries. The width of the page is about 13% inches. Figure 149 shows another form of one-page general journal, having a different arrangement of the amount and explanatory columns. For a general ledger, the old style ruling, without balance columns, is still in use by some companies; but ledgers having balance columns^ FORMS 1 OH HANKING DF.PARTMENT. 285 •are decidedly preferable, and are in general use. Figures 150 and 151 show two forms of such a ledger — that shown in figure 151 being the better of the two, because it more distinctly separates debit and credit items. These ledgers may be either permantntly lH)und or in loose leaf form. Fig. 148. — Geveral Joubxat.. GENERAL JOURNAL. '"s ^ w-X.'^ ^V«^^.^. ^tWA.^- l^P^'fiS^^ fc i^LS^k:^ ^b^.ri 'tii. '•■ iiC 'J •r?" 3 / <.ro to 3;y^ ,n^ no ■>. 'T <'17l sU 1 fi Ul 2 ?*? 3H^ f:^'^ (^ ■ Fig. IjO. — Genk.rai. Ledger. 286 TRUST COMPANIES. The general bookkeeper enters the balances from the general ledger in the daily statement (or balance) book, which serves the double pur- pose of a daily trial-balance of the general accounts and a condensed statement, which enables the officers to see the condition of the company at a glance. GENERAL LEDGER- . >^/ ^.. _^ dn^^srx A i^^^ ^^jU^<^ -| ^a^o. 1 "-A „:b^.«c. '?;t c..^^ — z«<»^. rR„o, J _j n,(i ,. 3aq ( '''I f^-l ^'1 If. Tn 1 327 HJ Hi SO 31 hno ie c-^ Iff ^ _ _ _ _ Fig. 151. — Gexeral Ledger. In its simplest form this book is merely a list of the balances of the general ledger accounts, so arranged that separate footings may be taken of the debit and credit balances, to show their agreement. Figure 152 shows an old form of daily statement, in which the accounts are listed in the order in which they are found in the bound general ledger. As V^,? 'yunUa^llh.^'l.nci: 5i^.L,uLt5^rf Qc -^1 3 (7 7 A f'Sr S-T/'n ff ^ 11 > ^ m- ,Ou..tui£%d^.^ ■?r 1 fio \ ? 7<, ^ .ri -• , __ •-',4 1^0 C^^ ,-, ^TT K ll'n /7^ .TO ooo -STfi npo ^0 000 .'''? Ikti 'hiujji ow £i.^,« a«6 f ^Sl ??. r._ , r--^ (,^ 1 ^-, lf(n >vi^4f^e^ 'dj^.i^ / T-":.] ij ( , 7^ < f T.',-'^ *"( ," S.^r^l... ^ 2,>{r Uw;,.,UJCPr,,f;^- r-1 'lO^ ,^,, ->l Or,.<.+ Af,f,^;/~' _. -, ,^, e..i.-^:ci/..,vA,^„> (rfrT r^T f f? ("ifr^ rf f '?'? Z,^,. (^'70 T' '-7.< f Ti'' 7-7 l,']l / A.K , i7 J (?< ,*: (f Fig. 152. — Daily State jiext, Old Style. FORMS FOR BANKING DEPARTMENT. 287 Daily Balances. RESOURCES 'fA.i, "-fcs ^i4. /f, '^fcC S'xi.^S", '^or ^A^ C, iqoT " i , D.>M.sp LO.NS 1 n ■yxf /3 1 X 1 3:^7 5^" /2 / ia7 ^XT i-iS H*K> ■TO Id T^^ /o7 ra^ /07 ^2<^ 1 on .u [^RUt EST.TK Ln>NS 'M /to 1^^^ 'CpT /'fr / 6c 1 IS \- TOTAL LOAN* U- 1 C^r^ ^^ u-i:^ o/v-; ,'r-^ H0<^ ' S rj; 4oi ?M fro r Bon PS o ^ i^ <]U sx>o 9u voo h t STOCK, ?^^ t^ ' 1 ?4-/^ «r.<: ■ 1 1 ^fl» (>S 1 1 ^^^ £ TOTAL INVESTTS .•j^// 6^- /OS ,^*^ 6.^ /oS frfrti hS /cs /rtK.,,,C«SM. "i-S 63^ ^^ a-fs HO 7 Co 214 ?'('? (f. 1 (,10 Hi, R..„„Mo,™n..>s.,) ^o /,< .Tf a a. fc7^ 3-0 2.1 ^A^A ■^*/ ^s M^ l ■^'■/^f 3/ T7^ ^ , "^IH] ^1 2. / n GO a ' n C-o ■3- 1 ( n (pO a. TOTAL exPENse ^77 oi >/. (^fi <^ y/+ /^ ?.o ■^ / ^^ r^.< n Rr..>. KsT.lF. so fino ,S-o >><>o ,s~c c^^yo fO-o c<; -- f. tru. ■ ^ ■ re so C<^ ^Q 00 . Co. c'Or 1 M.lMl.rn ritollls < c- ";/ lo /P,> 7// 10 /r3. lU- /- BVNK l:,KMNC^ -, S'?<- f^(^ 2, ?ifp ^^ 3 ?fr1 •fn 3 M^O '3 ^ iNVr.MMINT n.KS.S. s 1 ^1^ , ^T-T cqRN,s.,. ?2.r >«^t Ls-p ■?2* ?s ^:ii 3^ •=. vr.RV Ftvs.sT.. TOTAL EARMN05 r- :..., c; U^TC ^■j '1 ^-T ,^^ ,< ^U? i^l ^ ClHT:.lt.T«W.F D.TOSIT 10 ooo /o OCi^ lo £ C<.MM»a.u DKrasin 1 c r I'^u ^ ' ;ofe 30-^ <'"! .-^c-T '7^ 1 C(r <3,^vS •l-'i -±J S.v.NO, DrroMT, 3A 1 M/ / ^'^ 3k 6 -;i .J^. ^ ,">,^ i1 «'?■? ' V^" ^9 H^^ G^ -SI 6^7 T'P C-L-1^ (,vS-^ i.(,S (,iS ^^ Fig. 153. — Classified Daily Statemekt. will be seen, two colimins are required for each day's statement; and the book is usually arranged to show a week's work on each double page. By having some of the pages "cut short" along the line just after the names of the accounts, the frequent rewriting of the names may be ^88 TRUST COMPANIES. The Blank Trust Company. New Commercial Accounts Opened i3_ Commercial Accounli Cloted L_ Total No. of Open Com'l Acc'ls 9-'^ f< New Savings Accounts Opened ^^^ — Savings Accounts Closed . ^ — Total No. of Open Savings Acc'ts ,^.^-yiM4 Savings Deposits £4 Bills Discounted Special Dep osits ^Ui Commercial Deposit ^S OOP gs Bankers National 1 Cerlfs. of Deposit, Spec, Seaboard National Bank l£o Certfs.o{Det>osit,4% -La Bank Building Certfs. of Deposit, 3% ^S3^2 Furniture and Fixturt Detosil Loan Payments Tjeal Estate Current Earnings ^HM £^ Stocks and "Bonds d££.200 Undivided Profilt An U Interest "Due and Unpaid Current Expenses n Int. Paid on Certif. of Deposi kJ. Int. Paid on Commercial Accounts T£^ Int. Paid on Savings Accounts ^mn lolc'^S-Z Fig. 154. — Daily Statement. avoided. In the larger companies, however, the names are usually printed in the book, and the short leaves are then unnecessary. Figure 153 shows an improved form of daily statement, in which the different accounts are grouped according to classes, and the totals of the classes are shown in red ink. The resources and liabilities are grouped sepa- rately, and only one column is used for each day's work. The balances for two weeks may be shown on each double page. Other forms of statement books provide an extra column for the group totals shown in Figure 153. Some companies have each day's statement written on a separate sheet of paper, the sheets being filed in a loose-leaf holder. Figure 154 •shows a form of such a statement, which includes also a memorandum of accounts opened and closed. FORMS I OR RANKING DEPARTMENT. 289 The arrangement of the details of the statement of course varies with different companies, according to the accounts carried and the character of the business. For example, some prefer to show in the general statement the balances in each of the depository banks, while others show, as in Figure 153, simply the totals, and give the details in a separate statement devoted to the reserve. Fig. Ijj.— Boston- Ledgkr for Gexerai, .\ccoukts. These three books — the journal, the ledger and the statement book — are the ones included in what is sometimes called the "three-book system" of keeping general accounts. Instead of this, some companies use the "one-book system" — the one book being a modification of the Boston Ledger. A form of such a ledger is shown in Figure 155. As a study of the figure will show, the accounts are kept in this Ixiok in practically 290 TRUST COMPANIES. the same way that individual accounts are kept in the regular Boston Ledger. The book serves for both journal and ledger, the entries being made directly from the original debit and credit tickets. Except for the convenience of the officers, a separate daily balance book is not needed, as the balances in this ledger provide a daily statement. In this form, the resources are grouped at the top, and the liabilities at the bottom of the page, so that only one balance column is needed. Some prefer, how- ever, to have two balance columns side by side for debit and credit balances respectively. This may be done by simply adding another balance column in the form shown in Figure 155 — the balance of the ruling being the same. Figure 156 shows the ruling of another form having wider description columns; and Figure 157 shows a form with wide description columns and two balance columns. In both of these figures the ruling for one day's work only is shown; that for the other dfijs being the same. 190 J DEBIT CREDIT BALANCE 1 DETAIL 1 AMOUNT AMOUNT DETAIL -r 1 ■ t' 1 }— 1 1 1 ■,- L_ _ J_ _ U-U 1_ ^ 1 Fig. 156. Debit items Debits CsEoiT Items Credits Resoubces LlAD.LITlES " *T -1 - 1 _ _ ^ - - — r - - - — - - *— — - - - - — An evident objection to this method of keeping the general accounts is that the book does not provide much space for the description of items ; which, for some accounts, is quite necessary. To overcome this obstacle^ some bookkeepers use an auxiliary book, in which are carried in detail those accounts whose items are apt to need much description, only the totals for such accounts being entered in the regular ledger each day. It is of course possible to do away entirely with the description columns and use the book strictly as a ledger, with a regular journal for details. Entries on the general books are usually made from debit and credit slips which are furnished to the general bookkeeper by the various tel- lers, bookkeepers and officers. Figures 158 and 159 show forms of debit and credit slips respectively. Figure l60 shows a combined debit and credit slip, which is convenient when both debit and credit go to the same bookkeeper. As a matter of convenience in filing, it is well to have all slips of this character of the same size and shape; although some prefer to have the debit slips of the size and shape of the company's check, and the credit slips of the size and shape of the deposit ticket. After using. I-OIIMS roi! HANK1N(, 1 )l I'A IM M KN T. 291 the slips should hv carefully tiled lor tuturc rffercucc, as they are the general bookkeeper's vouchers for entries in liis books. In all cases the slips should be sif^ned or initialed by the person responsible for the trans- actions represented. Theoretically they should be signed or "O. K.'d " by an officer; but this is ))ractically impossible in a large institution. Charges to the expense account, howevcl', should invariably be approved by an officer. Many companies have a special form of debit slip or voucher for petty expense items, and Figure l6l shows a form of such a voucher. I'etty ex])eiise items are of tin carried by the paying teller in his cash until tlic close of the week or month, when their total is entered DEBIT. .>v3.je<:>vsA_^ '^Qy<»-r'yyvJ^^_^d:?t^_ _MA_>L_A!tod^;::;:*vA^ y?-*.;^^?^^ ^b,.-^^ ^1- vS coo J :ioQ Date- H :3-i_.. - 190 C^. Fig. 158. — Debit Slip, ^^..^<^ .^w^(3^. CREDIT. %u.xTl%,-i:ur.^^(bc..^t ^-\^ ■S^U ;^g^JLL<£4 . FOB 1 (X-irSS XX Gb^^ r 4^cy Qu.-^^ < ""^ DATE ^^/06 O.K.., ^^-^P^, ^^^^ neocivio or The Star Trust conpanjr »o« rut nnwoM tPcoiFne ••ovi. ♦ Yv~~- *'<"* HERE. Fig. 161. — Petty Expexse Voucher. O ^C^Hc^rri ^:knr^Ji^^<2j^^ Monthly, semi-annual and annual reports are also compiled, these usually including comparative statements to show the growth of the com- pany month by month or year by year. The general purpose of such re- ports is to enable the executive officers — who naturally have little time for details — to quickly inform themselves of the condition and the trend of the business. The Loan Department. There is considerable difference among trust companies, as among banks, in the manner of handling the details connected with the mak- FORMS I'OK BANKING UKPAHTMENT. 293 ing of loans. The iiuthods vary with the size of tlie couipany, the charactiT of the; business and the preferences of tlie officers. In some companivS all the details, including the keeping of the records, are attended to by the loan clerk and his assistants; while in others nuieh of the detail, as to records especially, is handed over to other workers. Often the loan clerk keeps no journal, all the loan items being detailed in the general journal from debit and credit slips which the loan clerk hands to the general bookkeeper. In some companies the loan clerk keeps a cash drawer and issues official checks, paying out the proceeds of loans directly; while in others cash payments are made by the paying teller, and checks are issued by the draft teller or other employee. The records here described are such as are used in cases where all the details connected with loans are attended to in the loan department. us^ s... Cc>iuit^i>i. s...... C„„.,c.-,.. so,... "" ^J7 ,f^C2za. ^.TO Uri^ S V d[U<^^a.s^yH&^ /f(,i- "hUju. CU / Ottf> aji S-uu^^.^'TU.^'K..^ s*h.V^^X0i4^ Ton Jk!t^. CUiJ.^ Qhnru^r^ 3.I^S.-*^(&tX, ?!'? (,^ ^Cx^co.^ ■ r^ (M.^ ^^rL'Jh ZT .-75^^ TuifxS. >" I'u;. Ki I'oKTiox oi Daily RKrour. The loan teller's proof, being arranged according to the same princi- ple as that of the jjroofs already described.'' need not be reproduced here. A number of styles of loan journal are in use, probably the most common style being one having several columns for the different classes of loans handled, and one or more columns for interest items. Figure 163 shows a form of such a journal. In this form the interest on the different classes of loans is shown separately. Other forms have only one column for interest. The columns headed "Accrued Interest" are for the entry of interest items accruing at the regular interest periods; it being the practice of some companies to charge the total interest ac- cruing at such periods to an account in the general ledger entitled "Ac- crued Interest," and to credit it at once to earnings. Payments of such 74 See Figures 124-Ii 294 TRUST COMPANIES. 1- ■ .-! 5 ? ? % ^ : "^ 51 ± " : : " * J ; ^ ^ i o- l ; - -. ' , - --,- - : ' 1 c " ^ s 1 1 J _: 1- 11 1 r ' :; : -■ 1 ' b " 11 ^ T • ^ J i i : r,-C. '^ i _: 1 -^ ^ 5 i §"^ 3 ' ^ i^ 1 -. ; ^, L ■- I -Brf* ^-x^^ -^5^ ^ A-^{ gm*HO '•o^w 7; . ,.■'., -...•<' )n cJ'//;a -,-^uci «c{ . ■■■ -r ivnacsT u^n «T»Kirr» MKMMT MS mmmr ; on ^' A«M«r ■•uww 'VJr^ 1^ 'Xri/ f- QQ-to r^^l. 2r,. A ■^, ^-'-* ^'-^ - «-'- , - I -, /o ^^^jD^^ri.r:^^^ ' v-.ji. ^^^ -1 ! t 1 ; 1 [ 1 1 Fio. 165. — Back of Caed Ledger fob Demakd Loans. 296 TRUST COMPANIES. interest are then credited to accrued interest as received; and the balance against this account at any time shows the amount of past-due interest. This plan insures that interest shall be placed to the credit of earnings during the period in which it is earned, and it also serves as a safeguard against overlooking any past-due items of interest. The totals of the different columns in this journal are handed to the general bookkeeper on debit and credit slips at the close of each day's business. Substitution of Collateral. PittBbUrg, ?&,. ^iJx. 7 190 6 The mcersigned acknowledges that he has this day relved Trom the Blank Trust company the following securities held aa collateral to xoans- ^5"o-o-o And that he has deposited in lieu therof , subject to the same condi- tions as the collateral originally pledged, ^^^uH>. Glxi.oaxL^^.(?cu^j ^% U^. ^icr&<-. MEMO. R«T rlr 'Yr 1- , -, II ceteaimoa lOTC l»TI out O.TC OEIIT S.L»C[ W^ n [crr{^>lit^UUln.dl^ l.irs lis %, X '1^^ -, -^ oU ^ ^-sr 'f 7.Vr ie-<«) ■?LrS /3KCili nop 7.r -^or^ Z-^' n n ....... ..... .. Fig. 170. — Collateral Line Ledger. FORMS FOR BANKING DFRARTMENT. 299 and for reference in case loans must be called because of decline of collateral. For this purpose a collateral line ledger is used, of which a loose-leaf form is shown in Figure l69, and a card form in Figure 170. The figures are self-explanatory. Figure 171 shows a card used for a collateral line ledger on a dift'erent plan. An index card is provided for each kind of collateral, and behind each index card are filed the cards like that shown in Figure 171, a separate card being used for each loan. When a loan is paid, or other collateral substituted, the old card is removed from the file and destroyed. To get the total of any given collateral held, or the amount of loans on same, it is necessary to add tlie amounts on the several cards that may be filed after the index card. p^ .». || .T II n oL ^O ! I20 ^3(41 i> ooo — bi ^.^^C(^ 'vOtrOL^ -sif^.O^. ,«:6»-c t j — Fig. 171. — Coi.i.ATEn.M, Line I^edger Card. Figure 172 shows a form of collateral note used in New York city. A shorter form, used in a large city in the Central States, reads as fol- lows: % CINCINNATI. 190 On demand after date promise to pay to the order of THE BLANK TRUST COMPANY at its office DOLLARS, for value received, with interest at the rate of per cent, per an- num, payable quarterly on the 15th days of March, June, September and December of each year, unpaid installments of Interest to draw Interest at the same rate as the principal, having deoosited with said Company as collateral security for payment of this or any other liabili- ty or liabilities of to said Company, due or to become due, or that may be hereafter contracted, the following property, viz.: The market value of which Is now $ ; with the right to call for additional secur'ty should the samo docline; and on failure to respond, this obligation shall be deemed to be due and payable on demand, with full power and authority to sell and assign and deliver the whole of said property, or any part thereof, or any subst'tutes th.refor. or any additions thereto, at juiblic or private sale, at the option of said Com- pany, or its assigns, and with the right to be purchasers themselves at public sale, on tho non-performance of this prom'se or the non- payment of any of the liabilities above mentioned, or at any time or times thereafter, without advertisement or notice, and after deducting all legal and other ca-^ts and expenses for collect'on, sale and delivery, to applv the residue of the proceeds of such sale or sales so to be made, to pay any. -ither or all of sai.l liabilities, as said Company, or its president or treasurer shall deem proper, returning the overplus to the undersigned. No Address. 300 TRUST COMPANIES. This form, providing as it does for quarterly payments of interest on a demand note, illustrates the custom in some localities of carrying demand loans for several months or even years, so long as the collateral does not decline in value to a point which makes the margin too small. Jt is evident that this is quite different from the "call" loan as usually carried in New York city. 3U£L^ nvS- pay the CauUMB York, etCvejL with interest at the rate as 'collateral security for "S^i-o-o oi.,>^.S/\'^:rrrr:..ftl Cen r the payment ot this, and ^...after date, for value received, the undersigned promise to . or order, at the office of said Company, 26 Nassau Street, City of New — -N--:— . --T-,-_-r7S,--=>,,,-:r:!^._Dollars {t^OOrO^ _,. ) turn ( 5SZI_V) pef annum, having deposited with said Trust Company for all other prcMnt and future demands of the holder hereof against the a© /»-^ tO^.t>l. tor ^X*-^ ...d In ^li^i^ n.o.. ...d .I..<1 !•»< .o 'K^ o,or. •-yy ■- -"—"<>'- ~"'> '■•" '"» i~w.r. r..«t., ]"'lO. 173. — POWKK OF AllORXEV FOR TllAXSKER OF StOCK. its securities. For this purpose a copy of tlie resolution of the board of directors of the corporation authorizing sueli hypotliecation is re- quired, a form for which is as follows: COPY OF RESOLUTION. At a regular meeting of the Board of Directors of the Company of held on the day of A. D., 190 the following resolutions were un- animously adopted: RESOTjVED, that the president, vice-piesident. secretary or treas- urer of this company are, and each of them is heri by authoiized and empowered to borrow on behalf of this company from the Blank Trust Company from time to time, such sums of money as such olhcers or either of thorn may deem expedient, not exceeding in the aggregate at any one time the sum of dollars, on such terms and condi- tions as such officer so acting hereunder may approve, and to pledge as security for the re-payment of each of such loans si'.ch securities or as- sets of this company as may be reriuiied, and agreed upon between such officers and the Blank Trust Cumpany, and to give this rompaTiy's obligation or obligations in ev'dcnce thereof, and from time to time when any obligation evidencing any of such loans matures, to renew the loan in whole or m part until the same is paid In full; .and that • each of such officers is also authoriz d to borrow money from the Blank Trust Company on behalf of this Company, from time to time by re- . discounting with said Blank Trust Company any of the bills receivable held by this company, not exceedinir in the aggr.gate at any one time the sum of dollars, on such terms as such officer may ap- prove; and the Blank Trust Company may. at any time, apply any money or property in its hands belong'ng to this company to the pay- ment of any indebtedness of this company to it. whether due or not. RESOLVED FURTHER, that a cr>rtincd copy of these resolutions be -sent to said the Blank Trust Company, and that thvy shall remain in full foice until written notice of their repeal shall have been g'ven to the Blank Trust Company, and imtll all indebtedness which may have been incurred as aforesaid shall have been fullv paid and satisfied. THIS IS TO CERTIFY, that the foregoing Is a correct copy of the record of a meeting of the Board of Directors of the Company. of held in said city on the day of A. D.. 190 (.Affix seal of company here.) The officer certifying the cpt>y of resolutions should be other than the officer on whom the resolution confers power to borrow the money. It sometimes happens that a person wislies to get a loan on securi- :tics uhjch.ire in his possession, and .ire jiroperly endorsed for transfer, 302 TRUST COMPANIES. but are not his personal property. In such cases, it is best to have from- the owner of the securities a certificate showing that the other person has authority to pledge them as collateral. A form used for this purpose is as follows: AUTHORITY TO HYPOTHECATE SECURITIES. Buffalo, N. Y., Aug. 5, 1906. To the Blank Trust Company. THIS IS TO CERTIFY, That John Jones is hereby authorized to hypothecate foi- his own account or otherwise, 100 shares of The Lake Shore and Michigan Southern Ry. Co. stock standing in my name, as security for any loan or loans made by the Blank Trust Company to him or for any other indebtedness of his to said Trust Company, and to receive said security upon payment of such loan or indebtedness. This authority is good until revoked by me in writing. MARY R. JONES. Witness: Wm. Smith. For the safe-keeping of the notes and collateral, loan envelopes are provided, made of manila paper or of strong paper re-enforced with cloth, and having printed on the face memoranda regarding the con- tents. Figure 174" shows the face of such an envelope. These envelopes - (Oa ^i-OH/7U.>.r^. ^j^t\o(o DEMAND COLLATERAL LOAN No.-.2ii! — AMOUNT >3(Mlf)r XU (^.•fO.'!l.C\r>JU. %-IHO. 3/.*^ •>l.f (?.M.d^. oL IIST). lou '2„« =..^ f^- :iSiiOk£ Irf .< "?■ "(!J cd'u- -i-ic. 1 FlG. -COI.T.ATKRAL REGISTER. as-^ptt- . ■/ \mr LOAN >^y COLLATKPAL VALUE DCTOSITOR'S mcbif: kd _^ ,<7 rnr /.:..h 3'hi-Aiy.,ry^'^Lif f^'ii=^^l,t-^IX^ 3 OOO 5.CW (}H./d^K^ ^S^* ^/Jf<^^- "-* ■^ ^^•^ 1 . 1 1 .L_ Fig. 176. — Coi.lait.rai. Register. of coUateral of each loan for possible changes in collateral; but on this form it is not possible to group together all the collaterals of each customer. Some companies keep a ''Loan Accession Book," which is a register of collateral loans in the order in which they are received, being similar in principle to a register of bills discounted, a form of which is shown in figure \9\. Spaces are provided for the date, name of borrower, due- date, rate, amount and list of collateral. Real Estate Mortgage Lo.\ns. Applicants for loans to be secured by mortgages on real estate irc required to fill out application blanks giving particulars regarding S04 TRUST COMPANIES. the property to be mortgaged. This information is primarily for the purpose of enabling the company to locate and appraise the prop- erty; and secondarily to bring to light any facts that might aid in forming an estimate of the desirability of the loan. Often the appli- cation itself shows that the loan would not be a desirable one, and the company is saved the trouble and expense of making an appraisal. The amount of information called for on the blank varies considerably with different companies. Sometimes the applicant is required to sign a formal order authorizing the company to make or procure a loan, and agreeing to pay all expenses incurred should the loan be declined. Other companies prefer to have an officer fill out the blank from verbal infor- mation given by the applicant, because the personal interview often brings out important information that would not be shown in a written application. Figure 177 shows a short form of application blank. This is printed on card-board; and after the property has been appraised the SI,..! -yp'r^AX' N.. 3>f7 M-^toM ^S'O F«tF,.nlX / 7^ P..1 D». Uf-tiJ SIJ. ol r.!n/l B5«-J-»-5 RCAL ESTATE LOAN APPUCATION " " APPUCANT'S ESTJMATE tiiZ-^O^r B^ 6*^ n-. Ayr. n... ^A V" ^ "•'■" ""--^ * ^^ tx^ Pmrlptlon o( BulldlJO 1 JtliTWt.^ /iLcb''-^^ J^rjM^^ V1«o(Bkl'oS^3.(>tO, ■^>^0(K>; »,t-U.N.. I g -g Sub.Dlvl.|«. CR^r^. ^JtyrS^ Ori..U.N.. /Af ¥i S^jci n^^^^oC, ntr ^'^°i'f 1U/;y\.IK. B.^. ()>^Wba^^>^ OU-^ViaJ?. rL^ r^wvA Fig. 177. — Real Estate Loan Application Cakd. cards are filed alphabetically by names of streets. In time these card- files become valuable sources of information as to property values in the various localities in which the company makes such loans. On the back of the card is shown a plat of the property and any remarks the ap- praisers see fit to record. Figure 178 shows a longer form of application blank, this being printed on a sheet of paper 14 by 8% inches in size. After the appraisers have made their report, the application goes before the finance committee for approval or rejection; and, if ap- proved, the papers are signed and acknowledged, and the mortgage put on record. The abstract is then ordered extended to include the mort- gage, and is examined and approved by the company's attorney before the proceeds of the loan are paid to the borrower. If the examination shows an unsatisfactory title, the loan is not made, and the mortgage is cancelled of record. If prior liens are shown, these must of course be removed before the loan is made. FORMS FOR BANKING DEPARTMENT. 305 SECURITY TRUST COMPANY, N. E. Cor. Third and Market Streets, Camden, N. J. Teltfhoo. 3*2. _____^______^^___^ \J_hereby aulhorij^ the SECURITY TRUST COMPANY, of Camden, lo procurf/or "^^^Ji^ a loan of ^fO-gxP-^.A^a.'iv^ Dollars lXCKrO"r for -J^rt\^ ,^ y.,a,, m 6 per cent, interest per annum, payable semi annually, on mortgage on Ike follozving described property and \7 agree to have all necessary legal papers prepared and recorded al.^l<^_own cost, and should title prove defective, or application bewilhdraivn after papers are begun -^^^agreclapay for all expenses incurred. ^Jd^^f^y^ . occ„p.tio„.iy^W^ ,-^M^.f^^_ . pracnt condilion— >t32::^a=: when K-iit IS'J I Vilur of Crouod (Mclujivf of Buildings) present worth in C««h % I ^f-O'^ . Value of BuildiDgj(e«lusiTe of Ground) present worth in Cash | H'^'O-Q . If offered At Public Sale now I believe this property would bring at leut. | tj-0-0~O . Occupied ai_CU..ii^->/\X*-V^ . Insu ed for i30 -»g^ Annual Rent at — ■= — Assessed Valua t /i^y V^O^-^C:^^J:^\. CLu-. We have examined the above described property of located in :fcK^ CJaT" O^ L(2L.^.J-— .~ Tniihtv Oy. CjQ:fez^> o^^^Jl.. IM-»-vJ- Jil-^\A-B^ and of which the foregoing is a just and fair description, and are of the opinion that said profwAy ii worth at Irmt - ^F -rv -t^v" ;CK/>-i-j-< » -c%^^>^ '^ dollars, and would bring "' " ' - .' . The ground is worth .... t /J.O-O'^ that sum, if offered for sale. . Oy^ The improvements are worth .t9<3(3 Fig. its.— Re.m. Bst.vte Loan Appmcatiox Sheet. 306 TRUST COMPANIES. There are several styles of notes used in connection with mortgage loans. One is a simple promissory note containing a memorandum of the fact that it is secured by a real estate mortgage, such as that shown in Figure 179- Another form is more elaborate, and is accompanied by interest coupon notes. The mortgagors sign both the original note and the interest coupons; and the latter being in the form of notes are col- lected at maturity in the same manner as any note, thus making it un- 2 Uz^JK^ o !■ ■ •- I' Q-")Vg- ^XA/L- liter «.l»_Lt£L^ i-X Zbe ZTrust (Eompan? .t n^ci lot valuo r«Ool»^d, Uui I I «tth» i».M /^^OC |>t-f«n,. t I imin oi Maceh.O JAe, Soptsmtaf ou.JLuliLa- Fig. 179. — Moktg. je Note. ^_Al^ Tn.^p2:iK}L \{£j^^ (jy. SiiJ^^^J^ Fig. 180.— 3I0ETGAGE Xc FORMS FOR BANKING DEPARTMENT. 307 pecessary to send interest notices. A form of such a note is shown in i'igure 180, and one of the accompanying interest coupons is shown in Figure 181. This particuhir form of note and coupon is used for mort- gages on farm property. Figure 182 gives another form of interest coupon. The form of note wliieh are to run for with interest coupons a considerable period, is well adapted to loans md particularly to loans c5-7^^^ ^ ^'^"i^-Lj. MS'/.9Q1, /^/U^n/rr -/ ///// oc ...,..- :i3 -<^- /nT - . - 7A ,^ /^ mu. ' iNOOO. .«.«. Qu..^. */>/?» voi .aooo^ m'^,^joA Fig. 184. — Mobtgage Ledger Card, >C ^it^-Jt .-7,,^" &>>,-, , ■v.LA. =.;''ilc<- ./ t^u, S^fi> .<-ii^K ..^T.-^'-i^"-^ -^ 'CH J^ ■^ro- ~" \ 1.) At^f '■N^ 4n.Ti A? -i^-^^^ ^ . -lO- T.. ._«.>. Aa..| Fig. 185. — Mortgage Loax Ledger Sheet. 312 TRUST COMPANIES. there is not room on the card, may be given either on the loan envelope shown in Figure 186, or on a sheet contained in the envelope. These ledger cards and the loose leaves shown in figure 185 are filed in alpha- betical order, so that no separate index of the loans is required, as i» the case when a bound book is used. In Figure 185 is given a loose-leaf ledger form 15 by IS^/o inches in size, which provides space for more elaborate information. The arrangement of the items could be improved, but the form shows the information called for. The various papers connected with the loan, including the note, mort- gage, abstract and insurance policies, are placed in an envelope made of Dianila or other strong paper; and the envelopes are filed in alphabetical order (or numerical order, if preferred) in cases like those already de- scribed for collateral loans. Figure 186 shows the face of such an en- velope. There is frequently occasion to release a portion of the property covered by a mortgage, upon payment of a part of the loan. A stand- ard form of release reads as follows: For a valuable consideration, The Blank Trust Company heieby releases from the lien and operation of a certain mortgage from to the said The ' Blank Trust Company, and recorded in Vol on Page County Records, so much of the property therein described as is known and described as follows, viz: without, however, invalidating the lien of said Mortgage upon the remainder of the land therein described. Signed this day of A. D THE BLANK TRUST COMPANY. In presence of By THE STATE OF County. Before me, a Notary Public, in and for said county, personally appeared the above named The Blank Trust Company, by of the said Company, who acknowledged that they and by them as its officers The Blank Trust Company did sign and seal the foregoing instrument, and that the same is the free act and deed of the said The Blank Trust Company and of themselves as such officers. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at this day of A. D Notary Public. Miscellaneous Loan Forms. When a payment is made on a note it is sufficient to endorse on its^ back the word "Paid," with the amount of payment and the date thereof. It is a convenience, however, to have a rubber stamp for this purpose. FORMS FOR RANKING DEPARTMENT. 315 showing the balance due after the payment, so that such balance may be seen at any time without having to stop to figure up the total of pay- ments madf. Figure 187 shows a form of such a stamp. The loan department should keep a special tickler for its work. The old-time bound book tickler may be used, but cards are much more con- venient. Figure 188 gives a form of tickkr card for maturities of time loans. A form of tickler card for insurance expirations has been shown in Figure 26. Notices of interest due on loans should be sent to borrowers tin days or two weeks before such interest is payable. These notices need state S r~- BALANCE DOS ^ 3^00.— Fig. 187.— Stamp for Endorsement of Payments ok NoxEi. Time Loans Due ^QzfCK^^^AjyLi" 8 — .,^6 '± NUMMCn MAKt* AMOUNT 3^7 /f

,rVl^ ^.wLii^^ U];L^_ ..<3-0c lO — - t — ■ •4 i-r** CO Fig. 188.— Time Loak Tickler Card. 314 TRUST COMPANIES. only the total amount of the interest and the due-date; but it is more satisfactory to the borrower, and therefore often saves time in the end, to send a detailed statement, showing the principal, time, rate and amount of interest for each item. Figure 189 shows such an interest statement. When payment is made, the notice is stamped "Paid," and serves as the customer's receipt. Figure 190 shows a form having a stub attached, tf)C (ZljCVClHtib MAIPT OKFIOE- No. I EUCLID AVE. Zvn^i Company? THE INTEREST ON YOUR REAL CSTATC LOAN WILL BE QUE June ts. 1906 KINDLY SEND YOUR CHECK IN ACCORDANCE WITH THE STATEMENT BELOW. STATEMENT AMOUNT MO'8 DAYS RATE 6 6fo PLCASe PRCSCNT THIS STATEMENT WITH YOUR PAYMENT. B 8-5-5-6 Fig. 189. — Interest Notice. which is a convenience when a large number of interest payments are received in a short time. When the payment is made, the teller simply stamps the notice "Paid" with a rubber stamp bearing the date, tears off the stub and places same on a spindle. This makes it unnecessary to stop at the time to make a book entry of the payment; provided, of course, the customer remembers to bring the notice with him. FORMS FOR BANKING DEPARTMENT. S15 Figure 191 sIjows a form used for the record of interest due at the Tegular interest periods. The names of the borrowers are arranged in alphabetical order, and the sheets are filed in a loose-leaf binder. The details of the interest on each loan are shown, and from thtse sheets the stenographer copies the matter for the interest notices sent to borrowers. When the customer calls to pay his interest and has failed to bring the Wr a-y^yy^ V^-vyv^CAr COLLATKnAL Oo ^4at Ddach Thb Stub ;« ^>. Till »T <•. (Bv-Trwr> ^ '^'^-^ §lx.^:;t ;^ 37/>s~ CQ/Hi:v. J^J^ . MTOM VOV» COI.I.ATEHAI. tjOAM OP » lS"S 7'*^^^ ^0^ «K O. « ., .V .. ..... Bring This Notice With You Fig. 190. — Iktkkkst Notice. interest notice, the amount due from him is easily ascertained from these •sheets. In the last column, headed "Date Paid," the date of payment is stamped with a dating-stamp. The amounts in the column headed "Total Loans" furnish a trial balance of the loans on the date when the statement is made up. Some companies keep a loan book in which are entered all loans in the order in which they are made, A form of this book is shown in Fig- Inlcrcl dut on CAxa-^ GJ-fe^ Lo»n. ^X 6 ^ p,v. '■^ !h...^.yf.Ai. •»~rf>Sti.vw fn ifi Ir 'iT' f|i iT ., r.. {' , ,,- ZS'V' .i.: ij (■ ^^ i'l , Ml 11 ^^a,. %o\..it.. '1 V ^^ 1^* tf»joJi.,„kJi ,1. , ■■ ■■c -■-T % i. :, ■; &aL>- '--^^'■^^^^ < T - r , 1 *« J ii"^ < ** ,^,- 1 s„«,™. Fig. 197. — Line Ledger. -.-. _ ,.-/ — ; — rr PARriCULAHS ,.,. - ■ liiLl. 7n|,-,, <"J .'. 'h'< i C, ,,u.. "- (P ?,/. „ ,, '''■U ,^ r-^i '" .< 4. ,..,./ ,, h-m 1iu,cU,wtv.-.v-. V.,._.X. ul.J-.,- ,, '1,^-1 Y.^....-< .lU^.- J-.i..,,.. c v.. TJ" 1 1 III 1 1 1 Fig. 198. — Lixe Ledger. FORMS FOR BANKING DEPARTMENT. 319 $2^ Cleveland, O—^U^hJ^ 1 ——\9oL .after (^<«e-N2_ promise to.pay iDoliare^ Value received, witn intereet to the order "of JLatXA*^ Q. i at_4_per cent, per annum, payable..4i:iv4i:^cnnually. No..=__Due-^M ^ Fig. 199. — Common Form of Note. To the- JVame { Corporate style under charter) .. ^. Business ~ Location Branches _. For the purpose of procuring credit from lime to time from you for our negotiaiU paper or otherwise, toe furmisk you tvith the folUrjiing statement which fully and truly sets forth our financial condition on the day of 190 .. : -Jihich statement you can consider as continuing to he full and accurate unless notice tf change is given you. ffV agree to notify you promptly of any change that materially reduces our pecuniary responsibility In consideration of the granting of such credit, -Me agree that if we at any time stop payment or iecome insolzfnt, or commit an Act of Bankruptcy, or if any of the representations made below prove to be untrue, or if we fail to notify \cu of any material change as above agreed, then and in either such case ail our obligations held by you shall immed- iately become due and payable without demand or notice, and the same may be charged against the balance of any deposit account kept by us with you, we hereby giving a continuing lien upon' such balance of deposit account from time to lime existing to secure all our obligations held by you Cub in lUok ... CuhoobaDd B'.lli RfcciTtbl*. good ., AccouDM K«oeiT«bl«. good. Bill! or AcTouBt* Rfceiiable, oviog by OSInn UMchudiM. fiolatMd .. Fio. :300. — Form for St.vtemekts of Borrowers. S20 TRUST COMPANIES. A common form of a note is shown in Figure 199- Applicants for discounts are usually required to fill out statements showing the condition of their business, as a means of determining the amount of credit, if any, which it is safe to give them. A standard form for such statements has been adopted by the American Bankers' Associa- tion, which is shown in Figure 200. This form is for the use of corpora- tions asking for accommodation. The form for individuals and partner- ships is much the same, except that it omits the items applicable only to corporations. CAPITAL. Authorized Subscribed P«id in ..-, Held bj Company as Treaeury Stock How paid in: Cash $ ■ Other Property Description of other property and how valued. What portion of Real Estate, if any, has been acqubed through bad debts In whoee name is title to Real Estate held Incorporated in what State and under what general Law or Special Act Date of Charter Commenced Business Are Stockholders liable beyond amount of stock subscribed, If so, to what extent Amount of annual businesa Vnnual Expenses. Annual Dividends. When was last Dividend declared Rate Insurance carried on Merchandiae Real Estate .,_ Is Mortgage above stated a first lien OQ all the assets .■ Regular times of taking inventory - Give basis of statement, whether actual inveDtory, by whom ( - taken and date, or if estimate, by whom made and date. (_ • What amount, if any, of Accts. and Bills Eec. not charged off, is past due, extended or renewed \faount charged oil for bad debts last year Amount recovered during same period Amount charged oS account of plant preceding year - State last date of taking trial balance and it earn* proved. Regular times of balancing books . Nomber of Bank Accounts and where kept - NAME IN FULL. DIRECTORS. NAME IN FULL. Please Sign Company'a Kame here . By Fig. 200. — Form for Statements of Borrowebs (Continued). FORMS FOR BANKING DEPARTMENT. 321 The determination of lines of credit is a dirticult task, and if done on a large scale requires a special equipment. The larger banks maintain separate credit departments devoted to this work and furnished with ample equipment. The subject belongs to a treatise on commercial bank- ing rather than the work of the trust company, and readers interested are referred to discussions of the credit department of banks in current banking periodicals and in jniblishcd books on the subject. Investment Records. To a larger extent than banks, trust companies usually invest a por- tion of their funds in bonds and standard stocks. Journal records of INVeSTMCNT Ns 7^^ •owos Ki f^.(Rd. ^lu£^ 1 HATE ^ % --^ out PlIO ...... 1 / 1 oL L^c / 2^ ci- ice 7 1 oL (,00 7 / oi Loo Ik.. JOJ. — Ukcord of Ikcome ov Ikvkst.mexts. S22 TRUST COMPANIES. star Truet C( .'.'lilrk 'lhJcL_ ikM- PiMli'i Sn. lul 'lila^ Trust C !li.it^ 3^ 'I • TruBt C^ |lEt.ar IruBt 'Ml Fig. 203. — Cleaeing-Hotise List. FORMS FOR BANKING DEPARTMENT. 323 1 ^ n 1 li«l»tllC» IMtoMI I Mutt FMMmI FMMM .«...«- II S-... 1 r>o> ••»• n<» noil nt,m ram ■'"m uTi ' :«. 7.-..- '■.'■ifC St.,r Tr-jLt CO Ptar T/j»t Co r'^^-:; . C'j rt»i- T,-..o» Co n 1 ,- ... , ^ It I -M c , ; i t ( ;^ ; I 11. t '. 'i( / 0. ^ * 1 *< / ,■• Li* '^^ n -. 'fc? ..^cu^ i i > 1 • t -^ HI Ml tti r "^ ^■r "^ ^xl, ( I'if N^ .' s-i.<- 1 ' \h' ii - I- If Co ■+ '/ 1.. ■ .-<»3lK- (.LA ^ /HlU- •mil hC. . U. " 1 J.^ 7? ^ /c- >-<- .i'l /(wic^-. If? 4tu 7.-uot C " _ 3 n 1 /iifi j -i-f ni 2tA Jcc i ru ■• i-i ' (>.'< Ji 1 c 3.' . i-] 1> 1 ' / Ut I- i iC i'i ^ -lit' t.1. fill r.ta • Tri " Co T*!■ 1 r.ta'- ''•'1=' Co [iiii t_ -jj; 2i ii 7- • Fig. ?03.— Clearixg-Hocse List (Continued). 324 TRUST COMPANIES. such investments are usually made in the general journal, although some companies use a special investment journal, the general arrangement of which is similar to the loan journal shown in Figure l63, separate col- umns being provided for Bonds, Stocks and Sundry Investments. The total amount of investments at any time is shown in the investment ac- count or accounts in the general ledger. Sometimes all investments are carried in one account, and sometimes separate accounts are carried for bonds and stocks. The detail of investments should be shown, except in small companies where the number of investments is small, in an invest- ment ledger, which may be either in book or card form. Figure 201 shows the face and Figure 202 the back of a card form for this purpose. The face is devoted to a description of the securities and the ledger ac- count, while the income record appears upon the back. Book records are in use which follow much the same form, the upper part of the page containing the matter shown on the face of the card, and the lower part of the page providing for the income record. These records may be kept, according to local conditions, either by the general bookkeeper, the loan clerk or a junior officer. Clearing Checks. Trust companies, not being members of the clearing-houses (ex- cept in a few instances, as in Chicago), clear their checks through local national or state banks which are members of the clearing-house, and which act as their agents for that purpose. There are a few instances in which trust companies, having no arrangements for the clearing of checks through the clearing-house, are compelled to collect such items in the old way, by their own messengers. This is the case with those trust companies in New York which have withdrawn from the clearing-house privileges, and with Philadelphia trust companies. The clearing-house items are listed to the diff'erent local banks in the seme way that members of the clearing-house list them — on large sheets having columns for the listing of checks under the names of the banks on which they are drawn. Figure 203 shows such a sheet. These sheets are usually bound in book form, and each alternate sheet has per- forations between the columns, so that the lists for the different banks may be torn out and delivered with the checks listed thereon. A piece of carbon paper is placed between the first and second sheets, so that one listing of the checks makes two copies. The first sheet remains bound in the book, and is a permanent record of the out-going "clearances." In the last column, headed "Sundry Items," are gathered the totals of all the other lists on the sheet; and this list of totals is sent to the clear- ing bank with the checks and the separate lists. FORMS FOR BANKING DEPARTMENT. 3'2: Collections. \\'liiK' trust c'oiupaiiics do not ordinarily handle tin- volinnc ot" colKr- tion business tliat regular banks do, they find it necessary, if doing a CDmniercial banking business, to take care of such collections as are brought to them by their depositors. For this purpose they do not, however, usually maintain specially equipped collection departments, but handle their out-of-town collections through the banks which act as their representatives in the local clearing-houses. Local collections are sometimes handled in the same way, but more usually arc collected by the company's own messengers. COLLECTION OUK No UXOUNT OF „,;•:.•:;.. "*,"', .tT.,..,3 . '>Lv ^^ ->/i_.'so ■,,r-i^.^^^.TK '''t^cC /.^i. ■S"'/ ■^IfY >0 ^^■ ., ai < t^KuV„. ■ M.'Jf^.,jii.^>v. X> 3. >sv ■W fW. IC •) 5-i .io. 2< ^ 'Ol> ^•^ i.1- .',:i .-.« i 1 .15 Fiii. JOIm. C.)i 1 KcTioN Hkoister, Left Page. REGISTER »«VUl.£ »T .c-.... jbu.^K:--k/^.-L — '2U'I ^"n*^ i"^*. vlV- . IVCi^^Os. u-K.t? ov,.. -V ...n-./. ."if '-'V.rw. -^/t A/ ^M V7L.t. J Fig. 201]). — Coliectiok Uegistkh, Huwit Page. COLLECTIONS Fig. -205. — Register fob Local Collections. As soon as an item for collection is received it is entered on the col- lection register, and given the number indicated by its entry on the register. There are two general forms of this book, one being designed for "foreign" or out-of-town collections, and the other for local collec- tions. Figure 201 shows a form for the former, and Figure 205 for the latter. In cases where the number of collections is small, or where they are mostly foreign, the use of two forms is unnecessary, that shown in F'igure 20t being readily adaptable to both kinds of collections. Some- times, where the business is very large, a special form of register is used for sight drafts. 326 TRUST COMPANIES. Time collections should be entered also in a tickler, under their due dates. The tickler may be a card form, such as has already been de- scribed (see Figures 24, 25 and 26), or it may be a bound book. Figure 206 shows a common style of collection tickler in book form. It differs little from the discount tickler shown in Figure 195, and the same book may well be used for recording maturities of both discounts and collec- tions. Having been entered in the register and the tickler, time collections, if local, are placed in the files awaiting presentation for payment at maturity; and if out-of-town, are sent to correspondents for collection if the due date is near, or if the due date is distant are placed in the files until near maturity. Demand collections are collected or sent for collection at once. 30 COLLECTION TICKLER THUBSDAT, , ...1 90 or lm^t Paj.r. Where P»J»l>le To Wbom Sent. For Whom CoH«rt.d Amount. Ck. Renirka. ■ ■ ' , J 1 = Fig. 206. — Collection Tickler. TheSurerior trust COMRANY C/M^W^6k^^^ ^---^' ^w^.-aiRKtO...OP.OTUT. oo«arp.oT.«^ NambK. DRAWER ENDORSEE. PAYEB. AMODNT. '7-A H H i\:^i{:ULx.i^^ c^. (^\ ^cwL{ Irt-llA. /( sC "i 'f A ( . cf '\. s. -^ff-^x ^>>L.^v, ^y\^h±-^^^.r-e^ oHv^lUii, -J X ,s '^ 77/"^ Fig. 207. — Remittance Letter. Letters of Remittance, Etc. Trust companies in to^vns where there is no clearing-house of course collect their local items by messenger. Their out-of-town items, both cash items and collections, are usually collected through their corre- spondents in clearing-house cities, but in some cases are sent direct to banks located in towns where the items are paj^able. The letter forms used for listing the items are generally in bound book form, the alter- nate leaves being perforated so as to be easily torn out. A sheet of car- bon paper is inserted Tinder the perforated leaf, so that when it is torn out to be sent with the items listed thereon, the next sheet contains a copy of the letter. These copies remain bound in the book, and furnish a permanent record of remittances, thus serving in place of the old-time FOR^rS FOR BAXKIXG DEPARTMENT. 327 remittance registtr. This plan is an improvement over the old one of having all such letters copied in the letter-press. Figure 207 shows a form of such a letter. If it is used for cash items, the letter starts with the words, "We enclose for collection and credit," as in the figure; if for collections, the word "returns" is substituted for the word "credit" in this sentence. In all other respects the same form serves for the two purposes. Figure 208 shows another form of remittance letter that is being used extensively by the smaller companies. The sheet is per- forated along the line shown at the right of the figure, and on the re- verse side of the portion of the sheet to the right of the perforation, is printed a duplicate of the matter shown under the heading "Valley Park Trust Company." In listing the items the end of the sheet is folded over along the perforation, so that by the use of carbon paper two copies arc obtained of the matter listed under the last two headings, "On" and "Amount." The end of the sheet is then torn off, and serves as the remit- tance letter. By this ])lan a complete descrij)tion of each item is made Remittance Sheet Valley Park Trust Company. rv/^ / o a( 6, :x- \(^ a^^,^ 7 ^ 7W.9,/'?0(.. PLEASE REPORT Oil THE POLI.OV/nKi COLLECT IONS:- Central trust Co. Jacksomille. Fla. No. Paye;- Sent Due Aiuourit 1 2.:m h- St—'U-^.t..^. ^^-<>- L}cLrxu:L "/^K i>, l^ai fo i 1 1 Respectfully yours, Brcvn Smith, Treasurer, Fio. -'11. — CoLLECTiox Tracer. TiHjBi€?ijVrTja!*^r ©^m^^^f^^ 2 l*^. ir^r^, . .i ^K -^--^ j.^.^-^--.--5^^t?C ,1. 1 -P^^O ^.^^- S...^ X Ki-rr,^^ 03 i-'- ^, , 1 3.' -Sr^nU 1^-3 ■ ' 05 1 h i 1 ! 1 1 1 Fig. 314. — Draft Register. ing the necessary number of pages for the drafts drawn on each corre- spondent. Ledger accounts are of course kept with each bank on which drafts are drawn. "Wlien a customer wishes a draft on New York or other city he makes application to the draft teller, sometimes verbally; but many companies, especially in the larger cities, require that he present his application in writing. Figure 215 gives a form for such an application. Certificates of Deposit. Trust companiejs are often called upon to issue certificates of deposit, which in certain cases are more convenient for the customer or the company, or both, than either a savings or a checking account. FORMS FOR BANKING DEPARTMENT. 331 'These certificates usually draw interest, and are not subject to check. A common form is shown in Figure 21(). Interest ceases at maturity, and if the owner of the certificate does not wish the money and wishes interest to continue, he must get a new certificate. Some com- })anies issue special certificates of deposit which bear interest under ■certain conditions until paid, much like a savings account. Certificates Form No 17t to the order of: The Merchants' Loan & Trust Company. Chicago, ^2..kv: ,^. / ,-rr..../poA Draft on_\ ' ^^^UAf^Jd^-rK wanttd Cln^^u>-^ <^^>OfC Purchased by. '^^■^Unfv. 'XL WxrZl^^^ ^ll^o_ I'm. 2\:i. — .Vi'i'i.iL.vnoN loit DitviT. 'iLL. LitchfieidBank&Trust Co. -yyJjAJiJ^ ^ ^'rS^ij (Jkoo°A_ ^ Fig. 2\Ct. — CKHTintATi: oi Dm arc sometimes issued which do not draw interest: and some certificates are payable on demand, while others are payable on or after a certain date. If the number of certificates issued is small, the record of their issue is often kept only on the certificate stubs and in the general ledger. It is more common, however, to use a certificate of deposit retjister. A 3S2 TRUST COMPANIES. number of forms of this record are in use, varying in the amount of detail given. The simplest form contains columns for the number of the certificate, date of issue, payee, amount and date of payment. Figure 217 shows a longer form in common use. Figure 218 shows a form of register designed to keep the detail of the account so that the general ledger account need show only the total debits and credits for each day. Whatever form of register be used, the date of payment of each certificate should be promptly entered in the register. Companies which are partial to the card form of records use cards for the registering of certificates of deposit and show in the general Certificate of Deposit Register. DATE DEPOSITED BV «r«.£ ,. T«. o«,« ., r"' .MO.,T ■"" 1:7^ ::ik ~ Brought Fortaard, 00 01 02 03 04 05 06 07 08 09 10 11 - _ Fig. 217. — Certificate of Deposit Register. Certif gate of Deposit Register Fig. 218. — Certificate of Deposit Rfgister. journal or the general ledger, or both, the names and numbers of certifi- cates issued and of certificates paid. Figure 219 shows such a card record. The interest record is kept on the back of the card, the headings' of the columns being Number, Date, Amount and To, the latter heading referring to the date to which interest is paid. The cards are filed alphabetically according to the names of the payees. Certified Checks. Like banks, trust companies are often called upon to certify the checks of depositors, the amount of this work varying with the customs FORMS FOR HANKING DEPARTMENT. 333 of different communities, and being greater in the large cities. The certification is usually done by the paying teller, but is often delegated to othrrs. In some com})anies it is done only by an official, and in some <;ases this duty is performed by the bookkeeper in whose ledger is car- ried the account whose check is certified. A rubber stamp is generally used for certifying checks, although it is sufficient to write across the f;icc of the cImcU the word "'fi rtificd," folhnvfd bv tin- drile and the official NAME lUoiii-r ^. (K^O^\.^ , ADDRESS a. in [tO^ ^.. s-^ CUL\ 1 /•v,6 //^-^cs. ij ^r, (p^O ^ 7 .'6 3 n fe / f £; n iqc{. 3 ■K.o.<. ■b-w^O: TO ROM PATAMJ .Ap%^-^. '^ Sv^ M r"!'* - r/'lU^k 1 (3rr^^ a^t/.^ ax>.v^^^iZ^ .»3lJSiA.4i. ■4^AV g AA. rf-(/U 0^aA-^^ -CYv .$n^^- Certired Check, /o o«fc, « / c/\.. ^7 Vc3c~r Fig. 222. — Dehit .Slip iok Check Certikieu. Jct,a, .^..t -• U\L..^ '.^3 ^i^' s /i ' c.^ '.- ft tt ^AtlftjfUr. 'r^il tm ■ V^ X A> <.b' .^zi. ;^ ±— t Klu. :J-'3.— Cehtikiei) Checks I.eih.er AtcinsT. •HIT *»?£ r^^ytt^^?^ ^ u/tfa. > ma,v^ Fig. ^-24. — Certified Checks I.EiKiEK Accocxt. 336 TRUST COMPANIES. X LJ o 5 UJ ^ 1 K 1 E Q 1- Z UJ u Q I c 1 3 -, ■ ^ I ^ ^ s 1 1 1 1 ^ ^- i i •i s 1 1 Lj ~ 1 I % ~~ ~ ~ o ! 1 H I ^ 1 1 1 f 1 1 1 1 1 i ^ f? 5 - u ' i ^ r< o- o ; ?7 i 3 1 4 3 ^1 i i if 11 ^ S g " c i| f _i i 1 c- ^i ^i '^3 11 is a S s- ?> r/ f^ r< 4 ~75 u i ^ s r - c ^^ ^ ^=„ ^^^ ^.^^ FORMS FOR BAXKIN'G DEPARTMENT. 337 isfactory raetliod seems to be to pay in cash, and take receipts in an ordinary journal-ruled book, in which a separate page is devoted to each employee. The book should have an index — preferably a marginal index. At the top of each page are written or i)rinted some such words as these: — "Received from The Blank Trust Company the amounts set opposite my several signatures below, in full ])ayment of my salary to the dates sliown." On each line is written the date of the pay-day, and the amount due the employee to such date. It is a convenience to have the pages numbered, and in getting the pay-roll ready for the paying teller, the disbursing officer writes on pay-roll envelopes the page number and the amount due. After the teller has placed in each envelope the amount of cash called for on its face, the disbursing officer may, if he chooses, turn to the pages indicated and write on each en- velope the name of the jierson who is to receive it. This method saves the trouble of preparing for the teller a list of the amounts of each denomination of currency or coin needed for the pay-roll. The dis- bursing officer simply hands to the paying teller a voucher for the total amount of cash needed, with the envelopes showing the separate amounts. For customers who wish cash prepared for their pay-rolls, a pay-roll slip like that sho^vn in Figure 227 is provided, on which is shown the amount of each denomination wanted. Records of the Supply Department. An important task is that of looking after the supplies of various kinds — records, forms, pens, ink, etc. In the large companies a good many thousands of dollars are expended for such things each year, and a regular department is organized to care for the work. It is necessary to have a sufficient sui)ply of each article always on hand, to buy in quantities that will insure good rates; and yet to avoid loading the expense account for any one year M'ith the cost of supplies for sev- eral years ahead. In a small company the problem is comparatively simjile. and occasional inventories under the direction of a watch- ful official are all that is needed. Large companies with several de- partments require a careful system. The buying is generally done by one of the junior officers, who has charge of the department. Each iitw form as ordered is given a form number, by which it is there- after known. When sui)plies are received from the' printer by the sup- ply clerk, he makes a record of same on the left side of the card form shown in Figure 228. The date of receipt, the party from whom pur- chased, the quantity and the price are shown. These cards are filed in a case, in which sections are set off by index cards for forms of each department and for general forms; and the cards are arranged alpha- betically in each section. Supplies are delivered to the various workers only on written requisitions; and from these requisitions record of the 338 TRUST COMPANIES. The Security p^^y roll slip Trust Co ^c^- /^) /QO/j? rBJL^t '^(J^Y-rsn-.rr^ CURRENCY • / ooo / vTOO & O 0^1. COIN k \ ^7 Ho (5"0 ■s i^ PENNIFS ^ 1 TOTAl • 3 "l^io J£A Fig. 227.— Payroll Slip. A.A.'t'JiJ^skr c ^7 (Bcii>4- DISTRIBUTION B 1. S T-C T-E 1 G SIZE . cf V si , O STOCK FROM STOCK BALANCt . B.„,., Of r-i.,: Uch a..n„,y P«. M CO.. II 0... To Q-Mi., c..- O.H.M ^W d x(Pi..a. 10 llV lo-U 70?- 7 D(^ •^t"? pf 'fCC. 2oo ■ ^/fOO M. -il.li oToo ^3no ^ y' ... ' ._. " -- ' "' i_L 11 •.-i:y^^L \Hc ...1 ,^.(P)(..^x^^U a KUrrta m J' '-^cLT'^^i^ '&lr^ J- JAN a - 190/ Fig. J30. — SioKATruK r.\iii). I h ereby agree to the Rules and By-laws of TEE BLAITK TRUST COMPAIT? governing savings accounts. vo.nyj TTama UCLt'^^cH^ ^x^-jxAyU dd.OUl^,/L' AAATmnn I /f 3 Uo^r-KiLir ^ Mother »s maiden nmmt> \K.aAa^ L^'j(JUrrr,''(-f Date JAN ^ - 1907 ^^^^^ '— ' '^' inasmuch as a person's signature is apt to change mat( rially within a few years. In such cases it is undoubtedly of advantage for the com- pany to be in possession of information of a private character concern- ing which an outsider is not apt to be posted. In taking the signature of a woman, the teller should always learn whether the title is Miss or Mrs., and note the fact on the card, if the signature itself does not show it. 342 TRUST COMPANIES. The signature cards are filed in the drawers of a cabinet which is placed where it will be easy of access by the tellers and the savings book- keepers. They may be filed either numerically according to the num- bers of the accounts, or alphabetically according to the names of the depositors. If filed alphabetically, they serve as an index to accounts (which otherwise must be provided in a separate book or set of cards), thus saving uuich time and vpork. If this plan is adopted, however, great care must be exercised to keep the list always complete, and to remove the cards of closed accounts promptly and place them in a separate file. It often happens that the required signature cannot be obtained at the time the account is opened, and it is therefore necessary, in order to keep the card list complete as an index, to have a temporary card to place in the files imtil the regular signature card is completed. Figure 232 shows such a "dunmiy signature card." PnOCURC SIGNATURE OF ^Xc-Lsii: i_L^ ^c-n l< ^L^':'l REMARKS gig "u^-f gLo"^ S^f CUxf. , v^o^xi^A jL., a ijk.j^,^ NO. OF BOOK- Xi 3^6" JAN 9 - 19Q7 Fig. 232. — Dummy Signature Card. Savings accounts are often opened in the names of two persons, either of whom is to be permitted to withdraw the funds. In such cases, both signatures must of course appear on the signature card, together with the notation that either may draw. This notation is also placed on the ledger page and on the pass-book. Joint accounts are also opened with tlie agreement that in case of the death of either of the parties the account is to belong to the survivor. For the signatures pertaining to such joint accounts, some companies use the ordinary signature card and make upon it the necessary nota- tion, either with pen or with a rubber stamp, while others provide a special card. Some consider that a brief notation answers the purpose, forms used being these: "Subject to the order of either and the sur- vivor"; "joint account"; "to be drawn by either or the survivor"; "either FORMS FOR SAVINGS DEPARTMENT. 343 may draw'; "balance at death of eitlicr to l)elong to and be paid to the survivor." Others deem it better to have on the card a more formal con- tract, such as the following: "Wc, the undersigned, hereby declare that ■we are the joint owners, in joint tenancy, of the money that is now, or may hereafter be, deposited in the Blank Trust Company in our joint names, as signed hereto, and of any interest that may accrue or be credited thereto; and that either of us may draw and receipt for the whole or any part thereof, either before or after the death of the other; and that at the death of cither of us the survivor shall be the absolute owner of the balance then due the account, as surviving joint tenant, and is hereby authorized to receive the same from said company on his in- dividual check or order therefor." An interesting discussion of the company's liability in the case of such an account, written by Thomas B. Paton, and tntitled "Legal Aspects of Payment to Survivor of Joint Account," is found in the proceedings of the Savings Bank Section of the American Bankers' Association for I906. \Mien an account is opened in the name of a society or corporation, the signature card must contain the signatures of the officer or officers authorized to draw; and it is necessary also to have a certificate that such officers have been given such authority in due form. The custom with some companies is to take the signatures on a blank signature card which is placed in the regular files, and to have the certificate on a separate form, one of which reads as follows: "This is to certify that at a meeting of of the of held 190 , Mr , whose signature appears below, was duly elected of said company, and as such is hereby authorized to draw funds from and to give in- structions concerning the account of said company with The Blank Trust Company. This authority to remain in full force until revoked by action of the of said company, and written notice thereof given. Signature of This certificate must be made by an official other than the person author- ized to withdraw funds." Some companies use a special signature card for these accounts, the signatures ustially ap]>earing on the face, and the certificate on the back of the card. After an account has been ojiened, it sometimes happens that the owner wishes to give to another person authority to withdraw funds from his account for a time, or perhaps to become permanently a joint owner of tb.e account. In the former case, an order like that shown in Figure 34-4 TRUST COMPANIES. 233 answers the purpose well. If the account is to be permanently changed to a joint account, many companies prefer to close the old ac- count and open a new one, in regular form; but some provide forms like that in Figure 234, to be signed by the owner of the account authorizing the cliange. The Depositor's Pass-Book. After having filled out tlie signature card and deposited his funds^, the customer is given a pass-book, a common form of the inner pages of CERTIFICATE OF AUTHORITY TO MOVE INDIVIDUAL OR PARTNERSHIP FUNDS Hu u to (Smtfg. Ju^-:rw (c^a^A^A ./^^ .Ov oSLV^J^- °^B^ i OECeivEO BY YOJ. No. ^4^^ V*' ^ ' WITH rue BlSnfc TrUBt Co'. this authority to net.*™ IN FULt FORCE UNTIL WRITTEN Fui. 233. — Certificate of Authority to Draw Fuxds. Real Estate Trust Company authority for joint controu Jjou arc bcrcbB Sutborljce to i 7S...i-zl itanox. Bunmo ure or both, aho the balance to selonq to and be payablb ^_^ f iOTM PARTIES, IN WRlTlHO, AND UPON PRE8ENTATT0N OF THE PASS BOOK. Fig. 23\. — Authority for Joixt Coxtrol. which is shown in Figure 23.5. Some pass-books have another column for the entry of interest ; but the more common custom is to use the form shown in the figure, and either to enter the interest in red ink or use a lubber stamp for the interest entry, as shown in the figure. Where interest in credited semi-annually, as is the usual case, different colored inks are used in stamping the two interest entries for each year; as for example, red ink for the January interest and blue ink for the July interest. Some companies pay interest in April and October. The inner pages of the pass-book are usually cut off along the line above the words "Date." "Withdrawn," etc. in Figure 235, so that the headings of the first and last account pages may be seen, at whatever pagt the book is opened. The rules and regulations of the company are usually FORMS FOR SAVINGS DEPARTMEN T 345 printed on the first or last page or the cov< r, together with such adver- tising matter as is deemed best. The depositor's name is often entered on the front cover as w 11 as on the inside of the book; but customers often dislike this, and some companies therefore omit entering the name on the cover. Usage differs in the mattvr of requiring savings depositors to fill out deposit slips with their deposits. In some cities all trust companies re- quire such deposit slips, one form of which is shown in Figure 236, Other forms are like tlie ordinary commercial deposit slip, with the ad- Tjte Western Rehervk Trust C< Withdrawt Drpoaitcd Balanc«- D.te Wilhdr.«rD Dei«.Mlwi bKl.Dce ^ 3 IOC 'or _ ';Uv :^ >o S^no M^ , 1 In 1 1 c _ /»T 3.qs 3s>snQ ~%:^. \-, 1 c 1 7p _ a<.^, 1 20 ■5;PvT '^^ -. i^n _ ^k., ,"A 1 o (tfO _ f c .cs- 1 1 -^ _ ' (i,,.. 1 1 /.:• v^ a.r i« 06 Inl-resi 2 :|A /2 - -,^ Sni.L<^ 1 O cA n.^ 1 1 Q 2,\ c3 n /as ■: r -f 2S ^•,>?^ ic p-*;? 7S '■ i. .^ cv-f :i -, -, ;,"r- SA 1 1> /^ 7 S >■. , T, lo :;> :ioc> 20 "^ Fig. 235. — Savings Pass Book. dition of the number of the pass-book. In other places the use of deposit slips is entirely done away with, the depositor simply handing his deposit to the teller, who enters it on his deposit journal and on the pass-book. There is also a difference of usage as to withdrawals from savings accounts, a few companies requiring from the depositor no receipt other than tlic entry in his pass-book. The usual custom, however, is to require the signing of a savings withdrawal slip or receipt, two forms of which arc shown in Figures t2.'?7 and '2.'18. Under either plan the p.i>s-l>ook must always be presented when the withdrawal is made. Special forms are often provided for cases in which the withdrawal is for the full 346 TRUST COMPANIES. amount of the account, these forms differing from those shown chiefly in the addition of somi such words as "in full of account" or "being the full amount of dci:)osits and interest on my accoimt." Pass Book J^o.<^J.H-':r.... ( _. The MERCHANTS' Loan & Trist Co. CREDIT SAVINGS ACCOUNT OF I iJ^ame) Cy.(X.Lr\r<:K...^..^: Money... Checks /a^' Fig. 236. — Deposit Slip for Savings Accoukt. WITHDRAWAL SLIP THE NUMBER IS ON THE COVER OF YOUR BOOK BOOK No. T+SI Wmn THE AUOUMT You W|»M TO Draw Out in PLAIN FI0URE3. OOLIARS UNOIR T»£ WOnOS "DOLLARS." C(HT8 UNOER THE WORD "COTTS ' $--^f ^ ST LOUIS,. d^y.. ^ '^ RECEIVED OF COMMONWEALTH TRUST COMPANY SAVINGS DEPARTMENT SlONATVKE- Present AtioKE! aJpi t "^•-ii-wL^-rk Ww:.' ^-j-' v^'--iT.-,wu>'~-K SIC. ex. B« APPROVCO B* Fig. 237. — Savings Withdrawal Slip. FORMS FOR SAVIXGS DEPARTMENT. 317 Savings depositors frequently wisli to issue orders or checks against their accounts, and this is usually permitted, although care must be exer- cised hst the account he used as a regular checking account. The forms aAyr^o^ VoTTciTKw. cx.bvkla.nd, o .)tCv>>^. '^ lool/. KKCKIVED FROM THE RBSERVK TUVtTT COMPX.NY »'^^."~ DOLXA.RS AKD CHA.BOB TO MY SAVDIOa PAM BOOK No. 37&H- Fig. ^.'^8.— Savings DIAN ^\• nnnit A\v.vi. Si IP. iXO. 3 TRUST COMPANY PITTSBURO. jHCL-^r^/ I ~ ii^p { Kxc TO xnK Ohukr ok. a J^...vi^fc.,.C.>c/K JuyV-v>Xv-«y/(A^ — \__) wnu;n CHAinsE TO Saxtjcuu AtMJOiTsrr No._4j!p-ii-L ^AAjtxULJ CPcXfcx^^^^^ Fig. :?3n. — Ciikck or Okdkr ov Savin(;s Accoixt. iro. <^6'^^ Hotlce expires _k^^jL^^:^_Z2^ I hereby give notice to The Blani Trust Company that I will, at my option, at the expiration of ^ 1 7. ^ ~^ "n .. ■■■■ ws " ,_,, 1 ,. i T-r 1 1 ; ,.i,^ '.-U-,, ; ^v..»^r ., ,'■ _, . ., . .•C,^,*.i,:.^.. ^?»,.^ _j ! ! p . »;--.■ . . ' . ,, 1 I-tI" ,f. ... : 0(-/.>' -r .: ,.- .S ...,.,f^ .>3 and 244, the sheets for deposits and with- SAVIUSS OVttlTS. Ft JAN 121907. .-..- Pr« . VISS ^.AN.< x»... «..»,» 'tSSS .1..^ ^.^ /.T 3qs l.<},(L^.....(V.lJc^ /r ^ /.-, itf M- ,„ '■T Po-'n iTr. , ,- - 'I " 'I . I'S ^d^<&'^: 12^ ^M 1.- .■, "V? 1^ fCJ I ,^^-Sn^-zi'<^-^*.Z,W.^i,„» 71*^ <• . •>»«, ;'A , r- lyS 'iHH ^ '^^-^t oi'^v.:^^'' "s^ di: 1 j,^. o^iir 0(>.^.s.^.,-. - I.K qiu„, a^,.-'J.y.^.„ ., -, If. a <^'^,..^tt <£u..;.(H , _ . , , ^ . /.r i \ '4^,.j.. . ^ ^ ^ 1 ■- 7 S lO l-r 'i^ cLlw^,^\.i'.., ff^p ^ '--.I J n .J ^^ ^ '?('< 11 f^ ^^ 7f-E OuP^.^. tT c?..^. 1.^ '1' ' ^,.-,-(^,^. s.. cea-t*+«^ IW ■v*o n.T /,v ■^h 1 :-L^.c.,-JiKH^-..,.,-< l,i. ^./ c(i . )C 1 '? ^ m ' I ( ( •? 1 (,C llJ,:\\'^cP. , ' li 'l:c\-,if_ tt^ i.v,+ f.':,_^ cX 1 ^^., ,,,, / • i,? / PA f,fi . = — ~ =~" "" ~ ' " 1 Fig. 344. — Savings Jourxal, with Proof of Postix drawals are the same in each set, except for the headings "Savings De- posits" and "Savings Withdrawals" respectively. At the close of each year or each half-year, the sheets should be bound in permanent shape, and filed in the vault. Savings Ledgers. The use of bound books for savings ledgers is fast giving way to tlie use of either loose-leaf ledgers or cards. The disadvantages of bound books for this purpose are many. They soon come to contain many closed accounts. The space assigned for a given account is apt to be- come filled, so that it is necessary to "carry forward" the account to a new page, or else to close the account and open a new one with a new number — a troublesome process both for the coinpany and for the de- positor. Where bound books are used, provision is usually made on each page for more than one account, the number varying from two to eight. The ruling does not differ materially from that used in the loose-leaf and card ledgers here shown. Figure 24.') sliows the form of loose-leaf savings ledger that is most commonly used. Its size, including binding space, is l^Y^^dVi inches. FORMS FOR SAVINGS DEPARTMENT. 351 Some companies prefer to liave the balance column placed between the debit and credit columns. Whichever plan is adopted, there is a distinct advantage in having the rulings of the pass-books and of the ledgers exactly the same. It is sometimes considered a convenience to provide a separate column for interest entries, as in the form sho\vn in Figure 246. A few companies figure interest on each transaction rather than on the balances, crediting interest to the end of the interest period for each deposit, and charging interest similarly for each withdrawal. In such cases the ledgers are ruled to provide for these interest computa- :24£ ^^^ ,JML. iz Fig. 245. — Ledger for Savings Accoukt. -...T" "TS!^ .K«>.,T. .«^.C« INTBIMT ««-,..«,.. ^ ',' c 'C< L} 1 ?r ■" % . 1 ^ri^ '^-i o f^ Fig. ~W. — Savings I.kdgkh. with Tntfrest Coi.i tions, the headings of the columns being Date, Interest Balance, In- terest Dr., Withdrawals, Interest Cr., Dejiosits, Balance. The interest balance is kept separate until the end of the period, when it is add'i LMklki. HtL aiie£2 2S ai. .^IL Lit -'lit. I, -Haf.axck Pace. Using the journal as a guide, the cards of the accounts active for the ■day are rtmoved from the files, temporary cards (of different colors for accounts having credits and accounts having debits) being put in their plaois. After all the cards are removed the balances sliown on them are listrd on the adding machine. The postings are then made, and a ne\>- adding-machine list of balances is taken. To the latter list is added the total of the witlidrawals for the day, and to the former list the total of the deposits: whereupon the totals will agree if the work has been done correctly. All of the accounts active for the day may be included in one such proof, or a separate proof may be taken for, say, each five thousand accounts. This will be determined by the method used in the monthlv trial balances, which are often tak« n for each five or ten thou- sand accounts separately. The object in so doing is to lessen the ground 354. TRUST COMPANIES. that must be covered in searching for an error, search being necessary only for that groujo of cards which does not balance. For similar rea^onSy as already noted, companies which have a nimaber of loose-leaf ledgers keep record of the balance of each ledger separately. This may be done hy rmining in the general ledger a separate account for each of the sav- ings ledgers. A better plan, however, is to keep a daily trial balance of Pass NBW .ORlBANa '^h-'^n^, O 19 0_L Book m ,^ ? ^ -S : _is hSt^neo 5 Days for the computation of interest. Please present this ticket for the return of same. Fig. J50. — Receipt ior Savings Book. AFFIDAVTr TO XX>SS OF PASS BOOK. SItAtC or ®DtO, (.,,, Before me a Notary Public, in and for said County, personaUg CUVAHOOA COUNTY. ) ^ <9peared..^:pld^£i^-.^.0:y^r^r{^^ aho heimg-first duly sworn tays that..hJU'^s the owner of a certain savings account with Sbe Cleveland Ztvat Compant!, of Cleveland, Ohio, evidenced by PASS BOOK So.Sl2>.-^^ , issued by the said company, and is the person named in said pass book; that there is now (iue..Z^avw;Lon said pass book the sum ofj2o:^.jL.<^y)J^-iJ-A..SK.y>^^t^ that the said pass book has been Ifst, mislaid, stolen or destroyed; and thtt the said account has not been sold, assigned or pledged to any person whatsoever. SWORN TO before me and in my presence subscribed r1^<..^-(^^ Dollars. a^4>agree to pay said Mississippi Valley Trust Company the regular commission established by the St. Louis Real Estate Exchange, 2X^ on City property, or S^' on County property, upon the sale of said property at this price, or any other price which I may accept. This Contract may be revoked anytime after ._.M^IO:fn'^^../^„, |»o_7-.- Owner'. N«me _M-t;:>sA^( %> . 0^.i^-rsSUr(!c>J^ Add,.« __ J^U-A.. S^)S^ J^ , " OESCRIPTION. Street ..d Number ._Z^.>t >f _'^^'?^_^..- City Block No. ±2^ IM No._^.I7 si« of Lot._tf ....;«.. ...Z^C>._^. City W»ter y-Lc|^. Sideoilk .. ..(2t.-wv«fcrCfcr. Alley Grmde :2^ BIdg. ReilricHoot S^ifinvlLe I RecepttoB H>ll _«<1 Cemented Cellar .. V^ How Heeled >^^*t W-itnT. CoDdiUon of Bldg._^l»ryT^ DimentioDi of BIdg. :i&' X ._i? %» Dtte Building erected _/.^.'?.de Tree. >nd Shrubbery .Wt^-/tSj?gI ■ ■ — C.tyW«t«r ^ 5?! "^ Electric Light ^ Paved with (Jh^cfC A:Vid*5^;fe- *jl«y Oto Grtde P ift Building Restrictions Jirt-ix^^ytf; 3 )^. ^■zVi . - CU^P^^t: — Mortgage. S^g^X)*? Rate L> % Uv>^<^^ ^^U^r^ I > J ^p e. Ta.e». $^3 tl Price. %^cyO -o'r ''•' ''°°' ^^^' Ternns \i^a j/^^mf>^^J^ gt/. 3 i^ . Address qSOS !^aX rV ->^rwo^"i" (3^^^. . - ^ ooaro T ) Receivad Fig. i?j4. — Card Index of Properties. UNIMPROVED BUSINESS PROPERTY iv;A.d^ I L O Lot No. oS-: Fig. 255. — Card Index of Properties. An index is kept of all properties listed, and cards are found most convenient for such an index. The size of the cards is 6 by 4 inches. They are filed alphabetically by names of streets; or if out of the city, by names of towns, townships, etc. Each card contains particulars re- UNIVERSITY OF FORMS FOR REAL ESTATE DEPARTMENT. 359 garding tlie property listed on it., so that it is not necessary to look up other records to give an enquirer such information as he may wish before viewing the property. Figure 254 shows a card used for this index. An- ollier form is shown in Figure 255. The latter is one of a set of several cards differing in color, the idea being to use a card of a special color for .LEASet<7. T^P^^ O^TE N- a^(/au^Ts-Cje^ COMMONWEALTH REAL ESTATE DEPT TRUST COMPANY ST. LOUIS. MO. I Fig. 25G. — Ixdkx of Tf.nants. \^\UU^ ■ : ;JV ■ ^ ^^^^.v^jlA^W/ m Otxr^Urvyy '^<^(^. TENANTS OWNE<)'SN*UE. PH0.C ^^7^^ Location of Property JAX W»TER Rest paiO SY |NSUH*NCE PLACED BY. L±L i2u Fig. 257. — Ixdex of Tex.\xt8. each kind of property listed. The card shown is for "unimproved businea* property:" others are for "improved business property." "dwellings." "fiats and apartments," "suburban and acreage." Cards may also be dis- tinguished from each other conveniently by having tabs at the tops, a certain tab being left on all cards used for listing a given kind of property. 360 TRUST COMPANIES. OWNER'S INDEX CARD. Address /:i'Af:^O'0Arj^^^ Om\^ NUMBER STREET KINO PRICE /^ni \ \ iCi ,-fl-rv-I^T^ ,'-r /Ly>\\ , /^\.rJ^y^ry ■^3o^. ^ki i^-tA C ^.A-^Uti£r.J: I'S'O-o-O. 11&M-3 (Jh-Yxr\^./:L^^ J ^^rWL^a^ ^OtX), Si^cvO OV^. dcA.. A. d J^oo. Fig. i?58. — Index of Owners. Name ^tO f^:Y\ 1^ /311 Source oflnquiry — '^m . ""'^-V^ . U\_<\A.*„^_^ OJK^ .^ jTinc' g4.i«reoffnQM'iy Ia:^3^^ ^ AjUir^^ih^^ ^ <^>^nL ^J-JLle^JJ^f^ f~^ho-d ^ cCt aS=nJr gc>--', 1 DAT-C J_5e '/ 1 MEMORAMOOM 1 t.,. Tfi ^o-Osuf. cdt *7^/^ ^i^tc^ (2^. c^-^t^ ^.xx -f<^. ^^ a^.^ . 8 < i II i' ji ii i^ 1) _ i t 1 '' |i [1 1 Fig. ;2j9. — Index of Inquirers FORMS lOK HEAL ESTATE DEPARTMENT. 36l Figures 256 and 257 show two different forms of cards used for an index of tenants. The sizes of the cards are 3 by 5 and 4 by 6 inches, respectivtly. They arc Hlid alphalu tically. Office Of MISSISSIPPI VALLEY TRUST COMPANY. REAL tSTATE DEPARTMENT. St. Louis. I(io.,---^y<:j^^:^^:::*^-^Jb^. 190^-- Received of .._.ya£^u;^.!^L.>^aX^rr=rr:::?»-,r-rr::rrT-rr-r--rr^^ ■ .-. ^ ■ „ . D01. U K8. •t earnest money oa piu«ti>ie of a certain parcel o( improTcd property lying in Ciij Block No V of the City of St. Louis, having a front of .JhQ. feet on the. — '^^TiAifefV aidaof Q JS^::y\SX^'y\/ Street, and a depth-^TAi^wardly of- J.4^^- feet. The above described property ia this day sold by the onderaigned agent, bnt snbiec: to the approral of the ovncr thereof, to said Ljai/<:MX_f2M ...sM.a:a?«Atfr^ rrrrtrrr^rrrir-rr^r-r-^rrr::^^ the total «>n> oi J*Ai/^•.■.. A^^>:<:y<^^0^.•rr~-r■■^^~^^ :-=»— r-^ -OoUara. payable OD or Iwfore ^Q^\'-: /.V ^13S> ^ ........ : Tr — T-r — TTT ._ .with intemt at S^P^ .. per cent per ^num Irom . C^^-At^^ '*""* ■^rr'T'^rC .'. T^*^ TTHT. ... _ ...payable semi-aonaaJly, said deferred payments to be secured by ir»i parrbase money Deed of Trust on the above menuoned property. S«id property w:ll be conreyed by CtoenO Warranty Deed Iree from hens and incombrancet, except ss to general and Kpnnkling taxes for the year -. 1 .j VC . ^" 7.' ~Z^Z~'^ ..~~~^ ~^^~~T~^-. . ..and snbtequent years and all special taxes levied or assessed daring the yfx -I if.Ci4 ' — r.— rr — -, which the purchaaer aiaames and agreo to pay; sob|cct also to listing leases now uo Saul property, expiring f,jSLQj6 ubicb Ibe purchaser accepts, sa b j u l alaa la Psi* » f T w H I • bleb the purchaser aaauivcs aoJ «grrva to pay. sul^ect alsu to icstrictious now oa saiJ |>topcny, or such i ihcreoo by tbc grantor _*— -- - The s«ilc at tbr olfiic ol the MhstaalppI valley rnul Conpaay. II. upou cxsmioaiion, ibr title piotes to be dvfective. and cannot be made good within^ reaaunable time ih« sale shall i olf sO'l the curnot money returned, il the purchaser so riecu, but otherwise the sale shall suad good and be blading apva pv chA>cr ^ud owner: should title prove to be defective and cannot be made good, as aforesaid, the cust at ccrtiScate of utJc bu< l] exceed •v.it.^^'S ~— ■ ^ — " — ^ — ^r:-: ' .. Dollars, will be refunded lo said porchaaer fteiiTs. lusurance. Ininesi ou lice^l of Trust sod Tales on said {.ropeny to )•« prorated to dale \ft (.ioatog this aaie I'pi the completiou ol this sale a •.omu.issioo ol 1>,« is to be paid to tbe Mlaabatppi Valley TrwM Coapaay by the vendor rime u declared to br Ibe essence n( ibis t.oalra*-t, aud if sale is not clt,«ed prvmpt,> as alwe provided, then witbou a] notice whalerer, at i,ptioii ol owner ol vid pro|iertv. said earuesl Oionev hereby receipted for shall tie (orleitcd lo said owner liquidated danisges. aud Said purchaser ahall W taken to have wai«Td slj ri^bt. iBleresf oc e^fuity under thu coatract and in sa peopcrty. aa though Ibis couUact bad out been made SKINEO IN DUPLICATE. _. __ Accepted under above term, and cnditKin. WJSlSSIfM WUH IMST tOtHMt, 1^0. . ..(vUcUc^/'U.V^ Fig. -'«)().— Memohandcm of Sale. 362 TRUST COMPANIES. Figure 258 represents a card 4 by 6 inches in size used for an index o[ owners of jDroperty. A loose-leaf form for a list of inquirers after property is given in Figure 259. Many companies issue booklets giving a list of the properties which they offer for sale, describing each ])roperty briefly and stating the price asked. ...SALE... Purchaser Owner. .21^ U■-.,^.^^l -'? '/,C/ lX>V.<1y Sold for S^^i^CL2 .,vo . sjo^y^ Earnest Money Paid, Balance cash Payment, S^^' -' « Deed of Trust. t S / '^^T'V' Date of Sale _'J:iA-liii-_?£^_Z_i2^ Date of Closing Ma-TC ^ II , !']0"[ Taxes 190 6_ Paid by C^'.^l > -£-.- Deed to " i'<^Vo ^A l . ^^..^Ul^AjIj a me of Salesman 0\ . ^ - '^Cv Conveyance Clerk «lll x'erlfy and "OK" immediately upon closintr salt and hand to Chief Clerk who will settle with the Assisting f^gent and giveSalesman proper credit. Fig. 361.— Report of Sale. When a customer decides upon the purchase of a property, he pays down a small amount as "earnest money," and is given a receipt or memorandum of sale in such a form as that shown in Figure 260. This is written and signed in duplicate, the company retaining a copy. Upon i'ompletion of the sale, if by payment in full, the company delivers to the purchaser the former owner's warranty deed; if by partial payment, the purchaser delivers his note or notes for the balance of the purchase price, together with a mortgage securing same, and receives the warranty deed. In either case an abstract, certificate of title or policy of title insurance is also furnished. Sales are also made under land contract. rORMS rOR REAL ESTATE DEPARTMENT. 36.) The employee makinp- a sale fills out and hands to the real estate officer, topjether with the cash received, a report of such sale on a form like that shown in Figure 26 1. St. Louis yjayyy^,J_^_t904- VJ^ULA^ ict Kindly alloiv bearer to inspect premises occupied by you. and by so doing oblige. Very truly yours, MISSISSIPPI VALLEY TRUST CO., By. (R. 6. 0, Fio. OCiJ. — Pkrmissiok to Insitct rKOpniTV. When the company's agent does not accompany the inquirer to the property which he wishes to inspect, it is convenient to use a card like that represented in Figure 262, addressed to the occupant of the prop- erty, or to the party who is locally in charge. ^ ^ U^w Tenant. — ya/v. . /-S" i9o7_ Name WL^v^^^jy Oj J- O i^.^^XfJ CJ_ Prope^ented _ ^.J^lH-f U^O-r^jU-n ^-^ , Owner of Pmporty ' ilCu . 'l/lLa^-^^yty^j^^ ^L / ( Lease Former Location ""^-^ . | From 'll^ld to 'Il^jo.^.— Business Af- ^ ^rti. -Sf-. Collect Rent at ^<> • Rent. g3>Sl- per Month , Rem Begins ' //^ h l Paid |3«S7- Fig. 263. — Memorakdi-m of N'rw Tkvant. REMOVAL. ^iO.^ — ^~ 190.' N3me_y0ii!ia-tiL_^ijLk.>vt: U. Property ^H- ^ '^-^'sx^^,^r^ •^'^- Owner 05<.va'^ <^ i.^tP^V^.- to gc ^? ; — ^^— ^^^^-^--^ -^=^^ — ■ — -^ — — ""^Doll C. ^__..-5r__-. ,1906 rrrrr: Dollars. tSJl^ No. 3J_;^_.<^-T-A^ ^:t __._ fot..J^2>fy _,Month . Ending O^^-^L^'y^ -^ L.-r^ .1906 Mississippi Valley Trust Cowpany. . 't^-srsiH- .' RcoucsTS roe Fig. J65. — Receipt for Rext. The law requires monthly ! In writing before rtni on vacating premises. ...^, -J. 3'l^v^\..«i^;^)^- _... .^^^.3l.,J'^.0L _.._ 'Sill be due..'... '.''^U^rC^/\^ /., I.2Q...L. .„ REAL ESTATE DEPARTMENT Mississippi Valley Trust Company N. W. Con. 4TH AND PiNt STRCETS. ST. LOUIS, Plea^i- remit the amount. $ 201- promptly on tltat diite litgUESTS FOR KEPAIRS.SMOULD BE MADE IN WRITINa. Fig. 2(iG. — Rext Notice. stub in Figure 265. Whenever possible, it is well to get the tenant into the habit of calling at the company's office to pay his rent. Many ten- ants are willing to do this regularly ; thus saving the company the trouble and expense of a special trip for collection, besides bringing them in closer touch with the company, so that they are apt to become customers of the other departments. If it is necessary to send notices of rent due. a form like that shown in Figure 266 is mailed several days before the rent is due. When the rent is delinquent, a notice like that in Figure 267 will often obviate the necessity of legal action. FORMS FOR REAL ESTATE DEPARTMENT. 365 The Guardian Savings Sl Trust Co real estate department. CLEVELAND, o.. rlLxyr<^r 1^ , ^^Q!\- PLEASE TAKE NOTICE THAT^JXJ MUST PAY YOJ^R DELINQUENT RENT AT THIS OFriCE OH SURRENDER POSSESSION Or PREMISES A1 10 g ^ IMMEDIATELY. VOUR NON-COMPLIANCE HEREWITH WILL NECESSITATE OUR BRINGING ACTION TO SECURE possession. The guardian savings S trust Co. I inm '^jn! ^* ^^-. "■d- Fig. -^67.— Notice of DEi.ixutKST Hi:nt. THM KDOCraiTION MCVr BE ATTACnEa> TO aiu. I»t « ■ — » t^ - St No. 902_ MISSISSIPPI VALLEY TRUST(^0 REAL ESTATE DEI'ARTMEMT. TO ^. rw^. '^-^ <0 .. TO aux. Louis, Ma ^-TL. ,''^L-190.2 Please ^Hv>> /vT -^ C'^t^^tut- .Vt^t^ /-c^^^^ ^Cfc^D. A ^ g^ oX" loiio < :: ^Ltv^ 4/- . APPROVEDi -and charge t(f account ol I VALLEY trust Ral Eilatc Dtvucowrt. Fig. i?()S. — Hr.QfisiTiON ton Sri-i'i.iF.s on Hr.i'Ains. co^i ,.„„^. o. Oa,«..^.^^.(., w -.~. «:::■ _^ .-)£, flX^.,.. ^:' t'.. y<<- "-''^Ut- i-.i--. (?*Vvi.r .iA. l;.i>,/,\v.. 'A^i'';- ^\ I'lG. J()}). — Fist ok Phoi'iiitv. 45 Ht>- i2-'?^wae- '"*-• ♦ ^UiH -M? •^ «^i. "•""^ 1 ,^.-, „«^, 1 ^ «„. V.I ^, „j ^ ,/ h^L '^U ' . ; ^■fl ?* « VgpL^2_^ b 9k^ - g ^45^ Hti • >n . --" - -H '■f^- Zp ^ 1 1 '! ii!"i ill -iiill Fig. 270.— Uest-Roii. Book. 3(^6 TRUST COMPANIES. Repairs or supplies for buildings in charge of the department are or- dered upon written requisitions like that shown in Figure 268, of which carbon copies are retained by the company. Figure 269 shows a loose-leaf form used to list properties in charge of the department. The left-hand page of a "Rent roll book," permanently bound, is shown in T'igure 270. The width of the page is 18 inches. The record is contijiued on the right-hand page of the book, the columns of whihc are headed with the names of the months from March to December, inclusive. This answers the double purpose of a rent book and a list of properties handled for each landlord. Forms for the record of insurance and taxes on real estate held in the trust department have been sliown in Figures 71, 75, 76, 77 and 78. Other forms for such records are shown in Figures 271 and 272. Figure 273 shows a statement of rents collected. The sheets are arranged in a loose-leaf binder with a duplicate form underneath, so that when the sheet is torn out to send to the customer, a copy of the statement in permanent form is retained. UU^DLORDS- INSURANCE NAMF OF JS Sii RECO f ^ D. .as. ^„^ ,.«,» „-..,. ^^ -«,.. Fl P s j^ ? rn .....™„ Okt^P ^-711-^. 14A lid- I/la/k^ Sd-. , 'V oi ■i...^^, - Fig. 271. — Ixsuraxce Record. The Tickler or Maturity Index of this department does not differ in principle from those of other departments already described. Either cards or bound books are used, according to preference. The methods of accounting for this department vary according to the extent of the business, and the tastes of the officers. The general methods already described for the estates division of the trust department are for the most part adapted to the use of this department. Original entries may be made upon debit and credit tickets, such as have been shown in Figures 158 and 159, and from them be entered in the journal, or may be entered at once in an ordinary cash-book. For a journal, the form shown in Figure 274 is convenient. The names of the accounts are en- tered in the middle column, descriptions of items at the sides. The ledger forms shown in Figures l6 and 17 are convenient for accounts in this, department. Ordinary ledger forms are also used. Forms of rent books have been shown in Figures 70, 71, 72, and in Figure 270. Another form is shown in Figure 275. The top of the page being blank, such memoranda may be entered as the bookkeeper or officer in charge prefers. FORMS FOR REAL ESTATK DKPARTMENT 361 1 " '"f ^1 1 ' \ .sr. - ' " ^ '■ 9 ^ 1 1 * „ i r 1 2 J ? 5 s :t i 5 i • .».r, " ^ « f " 1 1 i I .'.". - ^ " -> " « ■Ji s 1 N r 2 o K ? (^ ; 5 5 s ^ : o 2 u ■c >• "1 Q 5 1 = 1- UJ X 5 = 13 : : ! 1 i 2 ! liT « « ' • ( r • 1 TRUST COMPANIES. RENT COLLECTIONS POP COMMON'WEALTM TRUST <- }W ?^ ,^C toAyu.: 1 ,^6 ST LOU,S. ^^. X ,.0 7 — r?.L ^c,... """• "" '» ... ^ .. A. I,ft- U'Jjc ^y;/,^^,.^. 'j-T. ■^„?. Ar.lf - ) S^SU..4'a. a.r-Wl^^t. ^^.f „ / 1 1 4v^_. U:i/L: JA 0., n^ ^. /S i<: si' ~r fML. fi .^.^i -2.^ ^A? ^ _ __ Fig. 273. — Statejif.xt of Rents Coltecteo. 403 fournal. ./to-,< A7^ Qi..^,. /.r /<7o7 : ± ^ili^/ '. — '. : , „„.. 1 „.,, .^0.., .»..„„.. „. 1 m.CC „>;,^ a./, „...„. n-. <-/ c f fti^.w Fig. 274. — Jourxal. li*' (,^. Dr. 1 ,6^. §nr.^ tyU IJ^hn *. <5?^t ^^ (;.^ _-i ^ ^ ■" "■' DISBnRSEMENT^ ' " -"■ -RENf^ECEirt-S Sl'NDHV RfCEIPTS o^-, , itEMS S„NDKV 1 .E,Ai»S FROM , Wl AMOUNT' "•(V"" DATE 1 «^,O.NT - ¥ /o /jT ^^ fU. f fl>f v> Si"^ -XL-/ 30 £i^A^^ %, %,, ?( '»^l ij , ^-f a« ^^r 3 / J / 1 Fig. 275. — Rext Book. CIIArTl'R XII. THE TITLE INSURANCE DEPARTMENT. L\WS have been enacted in many of the states throughout the coun- ' try during the past twenty-five years providing that companies may be incorporated for the purpose of guaranteeing or insuring the title to real property and to conduct a mortgage loan and trust com- pany business: the latter, however, being consistent with the powers granted them as such title guarantee or insurance companies. Among the powers of such a company is the right and authority to prepare and furnish bonds, mortgages and other securities and to guarantee the valid- ity and due execution of the same as well as the performance of contracts incident thereto; to make loans for itself or as agent or trustee for others and to guarantee the collection of interest and principal of such loans; to take charge of, sell, mortgage, rent or otherwise dispose of real estate for others, and to perform all the duties of an agent, or trustee, relative to property conveyed or otlierwise entrusted to it. Such title guarantee and trust companies have been organized and are doing business in most of our large cities. These companies preliminary to commencing work usually acquire tlie books or records of local abstract firms, or corpora- tions, as a basis for their future guarantee plants. During the past dec- ade the growth of these companies has been very rapid by reason of their extensive operations resulting from their combined powers. Experience has proven that in the consolidation of the guarantee and trust features better results have been obtained for each; this is very well illustrated in the case of a mortgage loan made by the company; after the loan has been approved and accepted the title to the property to he secured by the mortgage is guaranteed by the company; after wliich. if desired, the mortgage can be placed upon the market and be handled to better ad- vantage than one not so guaranteed. In order to fully understand how such companies transact their busi- ness in the exercise of their powers enabling them to issue their different forms of policies of title insurance it is necessajy to go into det.-:il and explain their procedure. To begin with the title insurance company owns its abstract plant, built on the most modern and approved plan, consisting of a complete history of the title to all of the real estate in the territory where it does business, including not only a transcript of the deed, mortgage, probate and tax records, but of all other matters of record which may affect the title, such as judgments, decrees, executions, levies and pending suits in any court of record, whether federal, state, county or municipal, includ- ing also plats and maps showing partitions, subdivisions, street and alley openings and vacations, etc. The necessity for this is obvious, for in guaranteeing titles the company must be absolutely certain that the ab- 24 370 TRUST COMPANIES. stract work is accurate and beyond question, and this can only be accom- plished by using a plant over which it has full and complete control and supervision. In applying for title insurance it is not only customary but the rule to require applicants to fill out printed applications for the same, wherein Pom IP. J4M6. ^>j..^d. 190;^ le^the title to premises J.JO ._ Cleveland, O The undersigned hereby employs Thb Guarantee Title and Trust Comp. hereinafter described, and if ityipprovcs of the same^o isjjie a Policy in its usual form against liens or defects the sum 6f ....^fc^^oM For a preraijjia of. ^Jo^'JJy.. % ^..a.n... Brief description of premise^ ..... Hous^eNo..^077. . .1mA'..../3Z.!^... St Premises now owned by. Estate or interest to be insured.. P»rty to be insured By what means and at what time was title vested or to be vested in party to be insured. Estimate of sa.\ae,%./0-0.0Ot... (t?o dJ-Xc^'^-3^ .t l>ii>:»'). ion, the title is insurable, he directs the issuance of the policy in accord- ance with the forms shown as Figures 277, 278, 279 and 280. If the owner of the estate to be guaranteed is a corporation, co-partnership or association, the policy would run to it, its successors and assigns, instead of to a person, his or her executors, administrators, heirs and devisees, as shown in Figure 277. 372 TKUST COMPANIES. Figure 278 shows an absolute or fee simple estate guaranteed. This form is commonly known as an owner's policy and is used as such, and the company's liability thereunder is forever, or until the policy is sur- rendered ?nd cancelled, in accordance with its conditions. P0UC7N0. 19551. Schedule A. 1. The estate or interest of the insured in the premises described below, covered hy this policy Fee Simple. I by which the estate or iaterest covered by this policy is vested An undivided one-half Interest in prerolsea described below by Descent through the Estate of S. P. Burke, deceased. Estate admin" istered upon in Cuyahoga County Probate Court , Docket 101 , No .16378. An undivided one -half interest in premises described below by Warranty Deed fron A. D. Fraser and V^ry A. Fraser, his wife , to John Benson Thomas, dated January 8, 1907, filed for record January 8, 1907, at 3:40 P. II., and being File No. 550,731.—— 8. The premises in which the insured has the estate or interest covered by this polit Situated in the City of Cleveland, County of Cir^'ahoga and State of Ohio, and knovm as being SubLot No. 3'0 in V. C. Leslie's Sub- division of part of original One Hundred Acre Lot No. 491 , as shown by the recorded plat in Volume 60 of Haps, Page 3 of Cuyahoga County Records, ana being 40 feet front on the Easterly Bide of K. 132nd Street ana extending back of equal width 120 feet deep, as appears by said plat. ^— — — ^— — .^_— ^^«^__ Fig. 278.— Title Insurance Policy (Continued). In other forms of Schedule "A" (Figure 278) where the estate or interest insured is for life, term of years or mortgage, Item 1 of the schedule would show the nature of the estate insured and Item 2 would disclose the source by which that estate was vested in the insured. THE TITLE INSURANCE DFl'AK TMENT. 373 The company's liability uiuh r these latttr forms of i)olicies ccase« upon the death of the life tenant, termination of the leasehold or dis- charge of the mortgage, respectively. Other interests or estates, such as rights of way, party walls, re- strictions and the like are insurable and the form shown as Figure 278 can be used and fitted to meet these special requirements. Schedule B. Tbii policy don not iuort •c«iMt took «e spread in detail upon the schedule it can be done by the company, otherwise resort to the rec- ords, for particulars, will have to be made. The conditions under which the policy is issued are as follows: Policy No. 19.')51. Conditions of This Policy. 1. THE Cr.VR.VNTEE TITLE AND TRT'ST COMP.VNY will, at Us i)wn cost. i3cft>nd the Insured in all actions or proceedings founded on a claim of title or incumbrance prior in date to this Policy and not excepted therein. 2. No claim shall arise under this Policy, except under section 1 of these conditions and except also In the following cases: (D Where there has been a final determination In a court of competent Jurisdiction, under which the insured may be dispossessed or evicted from the premises covered by this Policy, or from some part or undivided share or Inter- est therein. (in Where there has been a final determination, adverse to the title, as Insured. In such a court, upon a lien or Incumbrance not excepted In this Policy. (Iin Where. In cases of guarant.^e of the Interest of a morlBaRoe the mort- grage has been finally adjudged, by such a court, to be invalid, or Ineffectual to charge the premis Where the Insured shall have transferred the title Insured by an Instru- ment containing covenants of title or warranty, and there has been a final J>idg- ment rendered in such a court against the Insured, his heirs, executors, admin- istrators, or successors on any such covenants or warranty and because of some defect of title or Incumbrance not excepted In this PtMlcy. (VI Where the Insured shall have contracted in good faith In writing to pell the Insured estate or Interest, and the title has been rejected because of some defect or incumbrance not excepted in this Policy, and notice In writing of such n^jectlon shall have been given to this Company within ten days thereafter. For thirty days after receiving such notice, this Company shall have the option of paying the loss, of which the Insured must present proper proof, or of maintain- 37A TRUST COMPANIES. ing or defending either in its own name or at its option in tlie name of tlie in- sured, some proper action or proceeding, begun or to be begun in a court of competent jurisdiction, for tlie purpose of determining tlie validity of the objec- tion alleged by the vendee to the title, and only in case a final determination is made in such action or proceeding, sustaining the objection to the title, shall this Company be liable on this Policy. (VI) Where a purchaser at a sale luider the judgment or order of a court of competent jurisdiction lias been relieved by tlie court from a purchase of the insured estate or interest by reason of the existence of some lien, incumbrance or some defect of title not excepted in this Policy. (VID ^yhere the insured shall have negotiated a loan on the security of a mortgage on an estate or intei-est in land insured by this Policy, and the title shall have been rejected by the proposed lender, this Company, if there is no dispute as to the facts, will consent to the submission of the question of the va- lidity of the title, as insured, to the Common Pleas Court for the County in which is situated the property affected by this Policy, and upon the judgment of such court shall then depend the liability of this Company. 3. In case any action or proceeding described in Section 1 of these condi- tions, is commenced, or in case of the service of any paper or pleading, the ob- ject or effect of which shall or may be to impugn, attack or call in question, the validity of the title hereby insured, as insured, or to raise any material ques- tion relating to a claim of incumbrance hereby insured against, or to cause any loss or damage for which this Company shall or may be liable under or by vir- tue of any of the terms of this Policy, or in case any action or proceeding is be- gun that may have such object or effect, it shall be the duty of the insured to at once notify the Company thereof in writing and secure to it the right to main- tain or defend such action or proceeding, and to give all reasonable assistance therein, and permit it to use, at its option, the names of the insured. If such notice shall not be given to the Company within ten days after the service of summons or other process in such action or proceeding, then all liability of this Company in regard to the subject matter of such action or proceeding shall cease. Provided, however, that an assignee for value of the Policy, vvith the consent of this Company thereon endorsed, shall not be affected by such failure to notify, if such assignee through ignorance of the beginning of any such action or proceeding shall have been unable to give or cause to 'be given the notice re- quired by these conditions. This Company will pay. in addition to the amount of the loss, all costs imposed on the insured in litigation carried on by it for such party under the requirements of this Policy, but it will in no case be liable for the fees or other charges of any counsel or attorney employed by the insured, and the costs and the loss paid shall not together exceed the amount of this Policy. 4. Whenever the Company shall have settled a claim under this Policy, it shall be entitled to all the rights and remedies which the insured would have had against any other person or property in respect to such claim, had this Policy not been made, and the insured will transfer or will cause to be transferred to the Company such rights, and to permit it to use the name of the insured for the recovery or defense thereof. If the payment does not cover the loss of the insured, the Company shall be subrogated to such proportion of said rights as the amount paid bears to the amount of loss not thereby covered. The insured warrants that such rights of subrogation shall vest in the Company unaffected by any act of the insiu-ed. 5. Nothing contained in this Policy shall be construed as a guarantee against defects or incumbrances arising after the date hereof, or created or suffered by the party guaranteed; nor will this Company be liaWe in any event for loss or damage by reason of liquor taxes; nor by reason of taxes or special assessments which have not been entered upon the County Auditor's Duplicate; nor convey- ances, agreements or mechanic's liens, not filed or of record at the date hereof; nor the rights or claims of parties in possession not shown of record. 6. In every case where the liability of this Company has been definitely fixed in accordance with these conditions, the loss or damage shall be payable within thirty days thereafter. Provided, however, that in every case this Com- pany may demand a valuation of the estate or interest insured, to be made by three arbitrators or any two of them, one to be chosen by the insured, and one by this Company, and the two thus chosen selecting the third; whereupon no right of action shall accrue until thirty days after notice of such valuation shall have been served upon this Company, and the insured shall have tendered a conveyance or transfer of the estate or interest insured to a purchaser to be named by this Company, at such valuation, less the amount of any incumbrance on said estate or interest not hereby insured against, and this Company shall have failed within that time, during which said tender shall 'be kept good, to find a purchaser for the estate or interest upon such terms. And provided, also, that this Company shall always have the right to appeal from any adverse determi- nation; but no appeal shall operate to delay the payment of the loss, if the in- sured shall give to this Company satisfactory security for the repayment to it of the amount of such loss in case there shall be ultimately a determination in favor of the Company. In every case this Company shall have the option of set- tling the claim or paying this Policv in full; and the pavment or tender of pay- ment to the full amount of this Policv shall determine all liabilitv of the Com- pany under it. 7. Any untrue statement made by the insured or his agent affecting the subject matter of this Policy, or any suppression of anv material fact, or any untrue answer by the insured or his agont to material inquiries, before the is- suing of the Policy, shall avoid the Policv: but an assignee for value to whom the Policy has been transferred with the consent of the Companv endorsed there- THE TITLE INSURANCE DEPARTMENT. 375 on, shall not be affected by any such untrue statements or answers, or by such suppressions or breach of warranty In the application, of which he was Ignor- ant at the time the assent to the transfer to him was endorsed by the Com- pany. 8. All payments under this Policy shall reduce the amount guaranteed pro tanto. and no payment can be demanded without producing the Policy for en- dorsement of such payment. If the Policy be lost or destroyed. Indemnity must be furnished to the satisfaction of the Company. TIlis Policy Necesarily BelalM Solely to the Title Pnor lii ami ladodiu itt M. Assignments of this Policy must be with the assent of the Company end(7nei bercon. md lo protect falMa}acst purchasers >s*inst intermediate claims m losses, most be continued to dale. In assenting to assignments no liability Is assumed by the Company for defects or iacunbraooes created lobacqDcat to the date of this Policy. ASSIGNMENTS OK POLICY. Oeveland.Ohlo, April 16, ipO? , For Value Received I in this PoUcy to Bva U. Hubbard. AascDted to ^^ bereb) aaaign all inlerot For \'iluc Received 6«cr«tary. bereby aaaign all ioterejt 19 subject to foregoing conditions. Thb Gda«.\nt««'Titi.i AMD T«rsT Co. Cle^■eIand. Ohio, January 8, 14 07. Loss, if any. payable to Charles F. Xau«hlln. interest may appear. Cleveland. Loss, if any. payable I interest may appear. Mortgagee, as. Jlla AiTD TatTST Ca The CoAtAKTH TrTi.« A!c» Tacsr Co. Fig. i?SO.— TiTi.r TsstR.wcr Poiicy (Continued). Sometimes the applicant for insurance requests the company to issue the policy in the name of his grantee of record, instead of having the policy issued in his own name, which request is usually granted and also if the request be made by such grantee that the company eliminate from the form shown as Figure 277 the words "This policy iS issued upon application by or on behalf of the insured numl>ered and agreed by all parties claiming hereunder to be a warranty of the facts therein 376 TRUST COMPANIES. stated/' as well as paragraph 7 of the conditions of the policy above shoAvn, such request can be granted. In the form shown as Figure 277 provision is made to insure the assignee provided the policy is transferred with the consent of the com- pany, wliich consent must be testified to by the signature of the proper officers endorsed on the policy. The forms of the assignment of the policy are shown as Figure 280. THE Guarantee Title and Trust Company, OK OHIO. No328615. EXTENSION OF Policy of Title Insurance. THE GUARANTEE TITLE AND TRUST COMPANY, by this Extension Policy of Title Insurance, in consideration of the sum of , Five ooA 00 -^^^-^^^^-^^^^^^ Dollars ($5.00 ) extends its obligations under Policy of Title Insurance No. 19551, to which this is attached, according to all the terms, exceptions, stipulations and conditions of said policy, but not as against the additional matters setibrth below. — ^^^^^— — — ^— ^^^^.^— ^^^^^_— _ JudfTiaent for $100.00 damages and $10.13 costs, v;ith interest, against J. 3. Thomas, rendered January Tern 1907 , in case of W. J. Bower againat J. B. Thoaas and others. No. 130,625, Execution Docket 150, Pace '71 in Cuyahoga- County Court of Comfeon Pleas. The Taxes of ISC. Special Taxes and Assessments of any kind, if ar;/. ntness Whereof, The GrARANXEE Title and Trust Company hath caused its cor- porate seal to be hereto afiBxed and these presents to be signed by its President and attested by its i'V M imaut Secretar}', this Seventh day of — March in the year of our Lord one thousand nine hundred and seven, at 4:01 P. • Attest Fig. i?Sl. — ExTExsiox of Policy. uis«^t Secretary In assenting to such assignments no liability is assumed for defects, liens or incumbrances created subsequent to the date of the policy. Tt very frequently happens that the owners of policies, other than that of a mortgage policy, desire that the original policy be extended to cover a subsequent date. This can be done by either of two methods: THE TITLE INSURANCE DKi\\H IMKNT. 377 First — By attaching the form shown as Figure !281 to the original policy, if there has been no change in the ownership of the title, and Second — If there has been a change in the title, to cancel and sur- render the original policy and substitute, in lieu thereof, a new policy in the name of the new owner with all the attending objections as would necessarily be shown in Schedule "B" the form of which is shown as Figure 'J7i|. ])rovide(l, however, that in either of these two eases notliiiig has been done to avoid the original policy. A mortgage policy can not be extended for the reason that the guaran- tee or liability thereunder is limited, the company guaranteeing the mort- Cleveland, Ohio, April Twentloth 1907. TV.ERZkS, PoUoy of Tlt.18 Ineuranoe Ko. 19551 aal Extonalon thereof Ko. 28615, guarunteelng the title to Sublot Ko. 30 In V. C. Leslie's Eubdlrlslon of part of original One Hundred Acre Lot Ho. 491, ao shown by the recorded plat in Vol-one 60 of Uaps, page 3 Cuyahoga County Reoorda, Iseued by THE CU/JUKTEE TITLE MID 7.TJCT COV?/jr!f, January 8th, 1907 and March 7th, 1907 reepectlTely, hsvo been nislali or lost; i;OW THE.^Er03E, In oonslieritlon of THE CRJAHAJJTEE TITLE AMD TRUST CO'-TAiy having re-lasued aaii Policy of Title Inourance Ko. 19651 and Extension thereof Ho. 38G15, under Policy Vo. 30506 and delivered the sane to Charles T Laughlin, we hereby waive all right, title and claim, which we or either of us may have in, to and under said Policy No. 19551 and Extension thereof >o. 38615, and do hereby pronlso and agree to return said Policy and Extension so sis- laid or lost to said THE iJDAR/JTEE TITLE AlID T3U:t COWPAST for surrender sad car.:ellation, should the caoe ever coce into our posBesei:.-!. ^-yt^//'\ M.<.(J^/zt^.. Fui. 2%2. — Rei.kase of Claim. gage to be a first lien on the premises secured by the mortgage at the date of record, except what might be spread uj^on Schedule "B" shown as Figure 279. It may be well to note that in the event of loss, destruction or mutila- tion of a policy, the company will, upon satisfactory proof thereof, issue a duplicate of the original policy provided the insured will waive or re- lease all his or their right, title and claim in, to and under the or-ginal policy. For form of such release see Figure 282. Carbon copies of all policies, and their assignments, issued and as- sented to by the com|>any, are preserved, and a record of all such policies S78 TRUST COMPANIES. and assigrxinents is kept in a book especially made and provided for that purpose, termed a "Policy Register," a copy of which is shown as Fig- ure 283. Figure 283 completes the list of forms used in the issuance of policies of title insurance, and the last thing now to be considered is the worth and value of title insurance as a means of security and protection to the party guaranteed under the contract with the company, which contract may be defined to be an agreement whereby the insurer, for a vnluablt- consideration, agrees to indemnify the insured in a specified amount against loss through defects of title to real estate wherein the latter has an interest, either as owner or otherwise, and against liens and incum- brances charging the same, there being, however, no implied agreement on the company's part to go beyond the conditions of the title existing at the time the policy is issued or to assume a general liability to indemnify against future liens or incumbrances. TO£ ntminu mu tna nusT cone/ "■ nucmceimR. I„„ ,->. „»»„ .„., ~-„ ^ '•:>- .c... L - - TT^ _^ ■ ■ J. _ _ , - - -■ 2V- -^ ^ -i^j^ lasSBl 1 _ _ 1 1 Fig. 283. — Policy Register. The form and method of such protection is governed by the law of the state where the land is located, the title to which is guaranteed. In some localities, before a company can issue its policies, it must deposit with the proper state officials sufficient collateral to guarantee and protect the policy holders against loss which they may sustain in the non- performance of the company's contracts of title insurance with them. The deposit required for such protection, as above, may consist of gold coin. United States bonds, state securities, stocks, first mortgage loans on real estate and other approved securities, the amount and nature of which are regulated entirely by state legislation. In addition to this, further protection is afforded by the capital stock and assets of the company. With this kind of assurance a policy holder may feel fully protected in his investment or guarantee. CHAPTER XIII. METHODS OF INCREASING BUSINESS. CONTRARY to the conditions a few years ago, a consideration of nK'thods of increasing the business of a bank or of a trust comjjany at once suggests the subject of advertising. The dignity of the profession no longer forbids advertising, although success in such adver- tising still demands dignity. The successful trust companies of to-day advertise. Their advertise- ments are not the formal and unattractive cards of former years, nor are they of the cheap and flaring style of the circus poster. Advertising, in the ordinary signification of the word, is of course not the only means used by progressive companies for increasing their business, but it is now firmly established as one of the important means. The change in attitude regarding the expediency of trust company or bank advertising has come in part through the necessity imposed by keen competition, in part through a more intelligent consideration of the ethics of the bank advertising question. It has come, too, as part of a general progress in the art of advertising. Without question the people read advertisements far more than formerly. Partly as a cause and partly as a result of this, present day advertisements are more readable. The importance of the advertis- ing column or pn^rc has increased, and its quality has improved. Rkasoxs Why a Trust Company Should Advertise. The reasons for advertising on the part of a trust company are more numerous and more forceful than those for advertisements on the part of a bank. Aside from the fact that competition makes it, in most locali- ties, fairly a necessity if the company wishes to grow, there are the facts that the trust company has a much wider scope and more features to advertise than has the bank, and that the trust company is still a new insti- tution, whose functions are little understood by the people at large. Comparatively few, indeed, understand exactly what a bank can do for its customers; and fewer still what services a trust company can render. In the education of the public as to the extent and the variety of the trust company's functions, there is virgin soil for cultivation by the adver- tiser. There is also a fruitful field for tlic advertising trust comjiany in the seeking of deposits from people who have never had bank accounts. Nearly everybody has at least a little money, but less than a majority of the peojde have money on deposit. It follows that some of the advertising of the trust company must br. of the "educational" kind; i. e.. must be devoted to explaining what a trust company is. and how it can be used, and to inculcating habits of saving and thrift among the people. The results of such advertising will Ihelp the business of other companies as well as that of the advertiser. 380 TRUST COMPANIES. Short-sighted, however, would be a policy of refraining entirely from- such publicity because of this fact. In the end its effect upon the busi- ness of the advertiser, as well as upon the business in general, must b"* beneficial. The recently formed "Banking Publicity Association" is doing a good work in seeking to distribute the burden of this educational adver- tising. The economic effects of this form of publicity by banks and trust companies are of more than passing interest. The principles of economy, thrift, self-denial, abstinence from extravagance are instilled into the minds of the people. In this respect, financial institutions are doing for the present generation what Benjamin Franklin did for his. The evil effects of get-rich-quick and other fake schemes are in part counteracted. Money hidden away in the traditional stocking is brought into circula- tion and use, thereby increasing the available capital of the general public. The field for robbery and exploitation is narrowed. Direct or Individual Advertising. General writers on the subject of advertising divide it into two classes — general advertising and direct advertising. The former is designed to create a demand for the product; the latter, to make sales direct from the advertiser to the consumer. In financial publicity the corresponding classes are educational and individual advertising. Both are intended to increase the business of the advertiser, but it is evident that the latter will, under favorable conditions, produce this result the more directly. However, it is an art which requires skill and tact. Its expediency is no longer questioned by the majority of bank and trust company officials; yet it is a kind of advertising which must be conducted along lines some- what more conservative than are proper for other kinds of business. It need not and should not be unattractive and lifeless; but it must not be in any way cheap or sensational. In the minds of some of the people there doubtless lingers some question regarding the propriety of a bank advertising for business. A too strenuous bid for deposits may easily suggest that the company is badlj' in need of funds, and so tear down rather than build up the business. Above all, trust company advertising must be thoroughly honest and straightforward. Management of Advertising. The larger companies maintain an advertising department, in charge of a man specially qualified for the work, and with a corps of stenogra- phers or other assistants. The man in charge is given various titles by different companies — Advertising Manager, Manager of Publicity, Adver- tising Agent. He should have not only natural qualifications for the work, but also a special training; for advertising is a science the mastery of whose principles and details requires careful study. The advertising manager must understand human nature, possess common sense, be a master of good plain English and have the knack of stating things in clear, concise, attractive and convincing manner. A practical training in bank or trust company work is desirable, and in any event he must thor- METHODS OF IXCREASIXG BUSINESS. 381 ouglily understand the essential points of the trust company business. lie should have a working knowledge of the printer's art, know some- thing of type faces and sizes, of engraving processes, of electrotyi)ing, •of qualities and jirices of jiapcrs, understand the principles of display, know how to read and correct proof, and be familiar with mediums of advertising. Sometimes the advertising manager acts also as Auditor or as Pur- chasing Agent. Frequently in smaller companies one of the regular oflieers is detailed for this work as a part of his duties. In any case, the work should be in charge of one man who makes it his business to attend tc it. If left to be looked after by any one of the officers who may hapjnn to think of it, as is the jiractice in some companies, the inevitable result is advertising of a spasmodic and ineffective kind. In small companies, having but one active officer, the advertising will of course be one of the many duties of that officer, but a duty which he •must attend to systematically if his institution is to grow. The recoids of the advertising de))artiuent are simj)le, and few in number, but should be devised and ke})t with c.are. Samples should In- kept of all advertising matter issued, scrap-books being i)rovided for advertisements ai)j)earing in )>eriodicals. foUow-uj) letters, etc., and files for circulars, booklets and novelties. A diary or journal should be kept, showing what advertising matter is sent to persons on the advertising lists, and when sent, and recording any matters about which it may in the future be essential to have exact information. A record of results of advertising campaigns is desirable, and to this record the other de- ])artments of the company will need to contribute lists of new accounts, new trusts, new safe deposits renters, etc., traceable to advertising. The rotection against duplication of names, which should be carefully avoided. In Figure 281. the consecutive numbers at the bottom of the card refer to the advertising matter sent to the person named on the card, the scrap-books or diaries showing what was included, for instance, in advertising matter number .">. Wiicn the matter is mailed, either a check- mark or the date is inserted in the little square which shows the corre- 382 TRUST COMPANIES. spending nuinbei*. The provision for 9^ nnnibers on the card does not mean that so man}' advertisements are apt to be sent to each "i^rospect"; but a given person may receive Nos. 2, 5, 7, etc. Space is left at the right of the card for a record of letters sent to or received from the "prospect", and additional memoranda may be made on the back of the card. Figure 285 is self-explanatory. The record on the lower half of the card is continued on the back. The size of the cards is 3x5 inches. The preparation of mailing lists is a laborious and important part of the work, and should be handled with great care to select the names judiciously, to have the names and addresses correct, and to recognize the cards of those who become customers or whose mail is not delivered. The sources from which the lists may be compiled include lists of mem- bers of clubs, societies, organizations, churches, women's clubs, mercan- ACCOUNT CIO ^) --l -v\ XU^-v.^ :^, SOURCE ^^ilfWC'tM' /^J-CA erf dVv jl^Tc^''^4 ^^.x.yzElt^'ClAy\. _ 1 OjL^'. ,90(^ BUSI '"':,, 4 ^or^ St. 15 22 29 36 43 50 67 64 69 74 81 68 LETTERS \ aCNT REC'O 1/ 10 16 17 23 24 30 31 37 3S 44 45 61 52 6S 89 65 66 70 71 75 76 82 83 89 90 *V %(^ 11 18 26 32 3f) 46 63 60 67 72 77 84 9» V 12 19 26 33 40 47 54 61 68 73 78 85 92 13 ?0 27 34 41 48 55 62 ■■9 86 93 ',. 14 21 28 35 42 49 56 63 80 87 94 Fig. ^84. tile agency registers, city and telephone directories, voters' lists, lists of teachers, policemen, firemen, attorneys, business houses, permanent resi- dents of hotels and apartment houses, post office and rural free delivery lists when obtainable, acquaintances of directors, officers and employees, persons who answer advertisements. One company when starting busi- ness in New York city employed men to go through the city directory and compile selected lists of names. Special or temporary lists of various kinds are made up from time to time as occasion arises. Planning an Advertising Campaign. The best results are obtained by carefully planning in advance the main features of the advertising campaign for the year. A definite sum should be available for the purpose, but should not be exhausted by the plans made at the start — a sufficient amount being left for emergencies^ METHODS or INCREASING BUSINESS. 383 Too much must not be expected in the way of immediate results; and, indeed, although effort should be made to form an estimate of the amount of business that comes through the advertising, it must be recog- nized that it is utterl}' impossible to weigh such results with exactness. Tlie plans should provide for advertising that is continuous and per- sistent, remembering that it is constant dropping that wears away stone, and persistent advertising that brings business. Little result is to be expected from spasmodic and irregular advertising; it lacks in force and in cumulative effect. Continuous and systematic publicity stamps upon the minds of the public the name of the company and the inducements which it offers. The man who sees the advertisement of a given trust company daily comes to feel that he is acquainted with it and knows its strength and facilities. Another thing that argues for having advertise- L as. i^U^ ^ . A(T^. /1JJ^P... CJ /q3if. Ee^±- 3q< ^ j^,.s:,r..... (BU jtJt^^. .iTfr. T^emArks Uury^^ (^ .'Qjz^r-^^nJi 'Ktn^.u:;^, || 3>ate: Ad. nA-^^ 1 liir cL^ ^)(. \o 1^ 0(f =**2.l ^J^u^^fJU, "^Un^lob. IXL H Qic e used lest all advertisements appear too much alike, thus causing the reader to pass them by with the idea that he has already read them. It should be a part of the plan to use only good qualities in everything — paper, printing, illustrations, etc. A circular well printed on good 384 TRUST COMPANIES. paper costs no more for postage if sent by mail than a cheap circular; while its possibilities for good are immeasurably greater. The public instinctively associates cheap advertising with second-rate concerns. Mediums of Advertising. An important part of the plan of campaign is the selection of mediums. Nothing illustrates more forcibly the change that has taken place in the matter of financial advertising than the number of different mediums, good and bad, which are to-day used for advertising banks and trast companies. Among them are: Newspapers, daily and weekly. Magazines and illustrated weeklies. Financial periodicals. Circulars, booklets, statements, cards, monthly papers. Pay-roll envelopes. Personal and form letters. Cards in street-cars and suburban cars. Window exhibits. Signs, electric and other, on the building. Bill-boards and other fonris of out-door advertisements. Calendars, blotters, wallets and other novelties and souvenirs. Newspapers. Experts in financial advertising seem practically agreed that for local business the daily newspaper (or the weekly newspaper in small towns having no daily) is the best single medium of advertising, because it reaches more people at a less cost per capita than any other medium, and because it is the place that people expect to find the advertisements of all live concerns. They are also agreed that newspaper advertisements must be supplemented by circulars and booklets. As to the proper propor- tions of the two mediums opinion is not so unanimous, and the question is largely affected by local conditions. In cities where there are several daily papers, it is important to select the right ones. The important considerations are, a wide circulation and the reaching of the class or classes of people from whom business is desired. Frequently it is wise to use all of the local papers. As between morning and evening papers, the latter have the advantage of being more apt to be taken home and to be read by all members of the family. Oft- times it is useful to advertise in papers published in German or other foreign language, being careful to have the advertisement written in the same language as the reading matter of the paper. The frequency of the advertisements in each paper will depend largely upon the number of papers used. A common practice is to have the advertisement appear two or three times a week in each paper. The space used is generally two, three or four inches, although much larger spaces are occasionally employed. ClRCUL/VRS AND BOOKLETS. Circulars and descriptive booklets are being issued in great profusion by trust companies all over the country. Their usefulness is unques- METHODS OF IXCREASIXG BL'SINESS. 385 tioned, but its degree depends upon several things, among them being the familiarity which the people have with such literature. It is evident, for instance, that a given booklet will attract more attention in communi- ties where such tilings are novelties than it will where every trust com- pany has been issuing them for years. In the latter case, the law of the survival of the fittest is more in evidence. It is customary to have one booklet treating briefly of all the depart- ments of the company, and one booklet on each of the departments — banking, savings, trust, safe deposit, bond, foreign exchange, real estate, etc. In addition, circulars are often prepared, each of which treats of some one function, or one aspect of a function, of the company; e. g., trustee, executor or administrator, guardian, agent, registrar, collections, wills, managemtait of real estate, savings accounts, checking accounts, safe deposit, storage of silverware, storage of furs, letters of credit, interest on accounts. Educative ideas like the value of the habit of saving furnish the subjects of many little booklets. Circulars are issued directed to special classes of people — young men, teachers, firemen, policemen, farmers, actors, married women, working girls, foreigners — circulars for the last-named being written in various foreign languages. Many com- panies, particularly in towns and smaller cities, find it useful to publish a little monthly paper, distributed gratis, containing such general matter as will interest the readers together with educational and direct advertise- ments. Most companies publish in circular form their regular statements as called for, but comparatively few get full advertising value from them. The ordinary bank or trust company statement has no mean- ing to the lay reader, and therefore no interest. But if the statement be explained and put in plain English, excluding technical terms, it may be made a valuable advertising medium. Important results have been obtained from pay-roll envelopes fur- nished free to large employers of labor, having printed on their face a few well-chosen words on the value of systematically saving a part of one's salary or wages and depositing it in the Blank Trust Company. One large savings hank uses over two millions of such envelopes each year, and finds it a good investment. There are numerous ways in which circulars and booklets may be distributed. The most common ways are by sending them to persons on the mailing lists and by placing them on the desks and in racks in the office so that people may help themselves. For the purpose of mailing it is well to remember to have the booklets of a size and weight that will permit their being placed, perhaps with a letter, in an ordinary size envelope, and carried for one staniji. Mailing cards are coming to be used for this purpose. A little thought will suggest other ways in which the circulars may be distributed. The officers and clerks may carry a small supply in their pockets and hand them out as favorable opportunity occurs. They may be mailed with interest notices, with notices of safe deposit rent due, with notices to send in pass-books for entry of interest. When pass- 25 S86 TRUST COMPANIES. books are balanced and ready for delivery, there is an excellent oppor- tunity to enclose in the book a neatly printed slip calling attention to the fact that the company is making every effort to render good service, asking for criticisms if the service has been in any way unsatisfactory^ and inviting the customer to bring in his friends. Magazines, Etc. Magazines, illustrated weeklies and other periodicals whose circula- tion is general, not local, are used when a banking-by-mail business is sought. In this field the selection of mediums is of supreme importance, and the advertising manager needs to thoroughly inform himself as to the bona fide circulation of each periodical considered, the classes of people it reaches, and the localities in which its circulation is greatest. The opportunity is large to waste money by placing advertisements in mediums that do not circulate among the people wanted. Financial Periodicals. Financial periodicals are the mediums employed when advertising specially for accounts of banks and other trust companies. Letters. Personal letters, and form letters which are written as personal let- ters, are being widely used, and when intelligently written and handled prove a very valuable advertising medium. They are sent to persons on the regular advertising lists and to selected lists made up from time to time. For instance, brief letters showing the value of opening savings accounts for the children in the family may be sent to parents of new- born babies, the names being obtained from the birth lists. The subjects treated in the letters may be the same as those covered in booklets, but are treated briefly and in letter style. Some of the letters are direct invitations to open accounts. The "follow-up" system is generally used; i. e., new letters are sent out at regular intervals until the "prospect" becomes a customer or is evidently not to be reached by this method of advertising. The plan being that these letters should partake of the character of personal letters, care must be taken to adhere to the plan in every respect. The best way is to have each letter written separately by a corps of typewriter operators. If this is impracticable, the letters should be printed by a printer who makes a specialty of such work and under- stands his business. Carbon copies or poorly mimeographed copies should never be used. The letters should be personally signed in ink by an officer of the company, rubber stamp signatures being avoided. They should be sent out as first-class mail matter. Unless these precautions are taken, it is better to have the letters printed as circulars without any pretence of being personal letters. Such circulars will have a better effect than "personal" letters which proclaim upon their faces that they are not v/hat they pretend to be. METHODS or INCREASING BHSINESS. 387 Other Mediums of Publicity. Advertising cards in street cars are extensively used in most citiea. They offer space for only a brief message or reminder; but they are before the eyes of people who usually have nothing to do except to read such cards. Even the man who makes it a habit to read his paper or a book on the oar has times when he has finished his reading or wearies of it, and lets his eyes glance at the advertising cards. Care must be taken to have the type used in these cards large and plain enough to be read with ease. It is to be observed that this medium of advertising reaches only those who use the cars, and is available mainly in cold weather when closed cars are in use. Care should be taken to select car lines patronized by persons who would find the office of the advertiser con- venient. Copy for these cards must be changed frequently. Window exhibits are used by many companies. They may consist of collections of coins or currency, a check or draft of unusual amount, a picture or model of the company's new building, the last statement of the company, especially if explained in detail, a comparative statement show- ing growth, an enlarged photographic reproduction of a savings pass- book showing how an account increases by persistent saving, etc. One attractive exhibit was made of an hour-glass accompanied by a statement of the amount of interest earned by savings depositors during the hour required for the sand to run out of the upper half. Care must be taken to have such displays not too sensational. It is to be noted, too, that some companies arc so located that it might bring danger of a "run" to have a crowd gather about the window. The signs on the building occupied by the company should be distinct enough so that an ignorant person looking for the office will have no difficulty in finding it. There is also a value in signs conspicuous enough to attract attention of the general public, provided a reasonable amount of dignity is maintained. In some cities electric signs at night are used. Calendars, blotters, wallets, rulers and various novelties are exten- sively used, although their value is questioned by many advertising man- agers. It sometimes happens that even when the advertising value of such things is known to be small, it is advisable to invest in them in order to retain good will or to follow a custom established in a community, the failure to follow which by any one company would hurt its business. Companies located in small cities or towns or in the outskirts or small business centers of cities doubtless are under a greater necessity of using this kind of advertising matter than are the large companies at the business centers of the principal cities. In common with other concerns, trust companies are continually asked to buy advertising space in programmes, cook-books, monthly church or lodge papers and other printed matter issued by churches, clubs, societies, etc. The opinion seems to be pretty general and pretty definite that such things are practically worthless as advertising mediums. It is nevertheless often advisable, if not necessary, to take space in such pub- S88 TRUST COMPANIES. lications, not as real advertising, but as a gift to gain or keep the good will of the persons interested. Pehsonal Efforts by Officeus, Stockholders and Others. Besides advertising in the more technical and restricted sense, there are many other means through which a company may make itself well and favorably known to possible patrons. The first of these is the oldest, and at one time practically^ the only, means of publicity — through the personal efforts of the officers. This is still one of the important means. Through membership in clubs, societies, churches and participation in other business enterprises, the trust company officer has splendid oppor- tunities of bringing business— opportunities which are fruitful, other things equal, in proportion to his personal popularity, ability and reputa- tion for integrity. In some parts of the country, special solicitors have been employed to bring in new accounts. Thej'^ are usually given an official title for the sake of having a better standing in approaching people. Their task is one requiring great skill and care. The directors ought to be the source of much new business. They should be kept in touch with the progress of the company, with its plans and prospects, the lines of work it is undertaking, and be filled so full of information and enthusiasm that they can and will tell their friends about it. Men should be elected to the directorate who will give to their duties enough time and attention to keep informed as to what is going on, and who have enough interest in the company to use every oppor- timity to build up its business. By properl}'^ directed efforts the stockholders may be made an import- ant means of building up the business. Some companies have built up a large line of business simply by interesting the stockholders in the work. They really have important reasons for maintaining an active interest in the company's affairs, and but little effort is needed to arouse such interest and make it result in new business for the company. The essen- tial thing is to keep in constant touch with them, by letters, personal interviews, frequent meetings, providing them with samples of all import- ant advertising matter, and treating them as partners in the enterprise rather than as outsiders having no interest other than the semi-annua! receiving of dividends and the annual sending of proxies. One enter- prising bank president got his stockholders together every three months for a smoker — and the business showed the results. Many depositors (assuming that they are well treated) will be found ready to help in building up the business, if they are asked to do so. An excellent custom is in vogue among some companies, of writing a personal letter, signed by the executive officer, to each new depositor, thanking him for his account, assuring him of the desire to render efficient service, and expressing a hope that the new relations may be profitable and last- ing. This makes the depositor feel welcome, but must be backed up, of course, by courteous personal treatment. From time to time means should MKTIIODS OF IN(UKAS1N(. lU SINKSS. 389 be devisfd of keeping in toucli witli all depositors, to make tlicni feci that they are appreciated and wanted. The trust company has an oppor- tunity, if it will use it, to build up each department from among the customers of the other departments, by seeing that they are posted as ti all the services the company can render them. The various employes of the comj)any have friends and acquaintances from whom they could get accounts, if encouraged to do so. Some com- panies oft'er jjrizes each year to employes for new business obtained, RESULTS OF Audits and Examinations, Audits offer opportunities for effective advertising that should be utilized. When a thorough audit of a trust company has been made hy a responsible audit concern, and matters found in good condition, every reasonable means of advertising the fact should be employed; for it has a very strong tendency to prove to the public mind that the company is solid and trustworthy. If a good auditing department is maintained, t!»e fact should be advertised. Treatment of Customers. Witliout doubt the most effective means of building up a trust com- pany's business is found in fair and courteous treatment of all persons with whom the company has any dealings. Without it, no amount of advertising or of personal solicitation will avail to greatly increase the number of customers. The best of all advertisements is a pleased cus- tomer; a customer pleased not because he has "worked" the company for special accommodations, but because he has been treated with uniform courtesy and fairness and his business has been cared for with prompt- ness, intelligence and accuracy. He is almost certain to bring his friends' to the institution which has rendered him such services, and may be relied upon as a life-long customer, and a patron of all the departments. Cour- tesy and efficient service must be the cardinal principles governing the administration of the trust company that would build up and maintain an ever-increasing business. With these principles the whole office force must be imbued ; for in their practice every employe from office-boy \c president must co-operate. Grouchy and unaccommodating tellers, book- keepers and clerks may easily drive away more business than the adver- tising department, officers and directors can bring. The whole atmospher-j of the offices must be filled with the spirit of welcome and cheerfulness. Office Equipment. This spirit is expressible not only in the personal attitude of the officers and employes, but also in the furnishing and equipment of the offices. These should be attractive and cheerful, containing conveniences of various kinds for customers. The most up-to-date offices provide couches, writing tables, telephones, reading matter and other facilities especially for customers. A ladies' department is maintained, frequently in charge of a matron who looks after the wants of women customers. SPO TRUST COMPANIES. New currency is paid out bv the tellers. An excellent plan is to have ao ofKcial in the lobby with no other duties than to look after the interests of customers, answer questions, direct people to the proper windows. Nothing is so disagreeable, especially to a timid person, as to be sent from window to window to find the proper place to transact his business. Increasing Trust Department Business. While the methods already described will in course of time build up the business of the trust department along with that of the balance of the institution, it is of course desirable to make special effort to in- crease the patronage of this department. The greater part of its busi- ness will come from satisfied customers of other departments; and little progress can be made in securing trust business until the company has established a reputation for solidity and for skill in the handling of business. These two things are the most forceful arguments for the selection of the tnist compan^y to handle fiduciary business-, and the com- pany which is seeking such business must be prepared to show that it excels in these particulars. In seeking business of a fiduciary character, it is essential to bear in mind that this is the part of the trust company's functions which is least understood by the general public. The time will doubtless come when the usual practice, both among persons of large means and per- sons of small means, will be to use the trust companj'' as executor of their v/ills, trustee of their estates, etc.; but at present the custom is to use the services of individuals for such purposes. Those who are thoroughly informed on the subject understand the great superiority of the trust compau}^ for such duties; but such people are decidedly in the minority, and most persons either do not know that the trust company is em- poAvered and equipped to do the work, or else do not know that they have any better facilities for its performance than have individuals. The chief problem before this department, therefore, is the education of the public on the functions of the trust company and on its special qualifica- tions for the exercise of those functions. In some cases the educative work must go still further, as, for example, in teaching the importance of making a will now or else of providing for the distribution of one's estate by the creation of trust funds before death. As a preliminarv step, attractive circulars should be })rintcd which describe the work of the dei^artment. There should be one circular stating briefly but clearly all of the various duties Avhich the department is authorized and prepared to undertake. This should be supplemented by separate booklets, each of which treats more fully of a particular function, such as acting as executor, or guardian, or trustee. These cir- culars may be mailed to selected lists of people, may be placed in racks prominently located in the company's offices, and may be given out per- sonally to individuals who ask for information or who are known to be interested. ^Vhen a person asks about any of these functions, he or she METHODS OF INXREASIXG BL'SIXESS. 391 should ])f iiilrofhut'd to tlic trust oHict r. who should Inkr the time ti) thoroughly c.\'i)lain tiie advantages offered by the company. A proj)er proportion of the newspaper advertisements of the com- ]",any should he devoted to the work of the trust department, and be educative in character. In all advertising devoted to this department, it should be shown that the charges madq by the trust company do not t'xceed those made by individuals, and are often smaller. Unless this is done, the claims made for superiority of services and security may ler.d to the im])ression that the fees are correspondingly higher. For the reason already suggested, that the performance of fiduciary work by other than natural i)ersons is in most communities a new thing. s{)ecial imi)ortance is attached to cretting a start in such business. No one thing will so influence the jieople of a community towards using the trust comjiany for such duties as the knowledge that some of their prominent fellow citizens are already doing so. It is therefore of prime importance to thoroughly- -but wisely and carefully — advertise the fact when an imjjortant trust has been handled. This can be done in news items as well as by paid advertisements. If, for example, The Blank Trust Company is acting as assignee of Doe and Roe. the public is in- terested in the jirogress of the work, and the press will be glad to have frequent news items regarding it. Such jjublicity Mill imjjress upon the uinds of the public the fact that trust companies, and The Blank Trust Company in particular, act as assignees. So if John Smith has ap- pointed The Blank Trust Company executor of his will, the more widely lilt fact is knoMn the better. The fact that the late Marshall Field of Chicago chose trust companies as executors of his will and custodians of the vase funds left by him in trust, weighs more with most peoi)le than ^ny numlvr of arguments on the subject. A nitural source of trust work at the beginning is from the di- rectors and stockholders of the eomjiany. Some of them can l)e ap- ])roached on the subject directly; others can be influenced indirectly by filling them with information on the subject and setting them to work t) interest others. — a jjrocess which will readily suggest to them that they might themselves make use of the trust department. While from one point of view trusts so received are not as good for advertising ]nirposes as those received from outsiders, they carry nuich weight as evidences that the directors of the eom]>any dis})lay absolute confidence in the solidity and facilities of their own institution, about which it is presumed they have inside information. In many comnninities it is feasible to have published in the local pajiers, Sunday or other, "feature" articles treating of the progress of tl)e trust company as a quasi-public institution, aiul explaining its work and the advantages which it offers. Most comi)anies make a practice of preparing wills free of charge in cases where they arc made executors of same. An advertisement on llie subject gives a good chance to discuss the iinjiorlance of making 392 TRUST COMPANIES. wills, and to call attention to the fact that the company acts as executor and trustee. It is of great importance to cultivate the friendshija of the legal fraternity. While it is true that the trust company is gaining some of the business that has been handled largely by members of the bar, it is true on the other hand that they must and do employ legal counsel them- selves and are creating business for lawyers. The amount of competition between the two, both present and prospective, has been greatly over- estimated in some quarters. The purely legal business taken over has simply been transferred from attornej^s not connected with the company to attorneys in the employ of the companj^; while much of the business in question is technical and clerical rather than legal, and involves work which the lawyer who devotes himself to the practice of his profession is often glad to be rid of. Arrangements are often made that the trust company administering an estate shall retain the services of the lawyer chosen by the family interested in the estate; and it is customary Avhen a lawyer brings business to a trust company for the latter to employ him as attorney in any matter connected with such business which may re- quire special legal services. New companies will do well to be patient about the growth of the trust department, remembering that its progress is naturally slow, and that its business is cumulative, like that of the lawj^er or the doctor, — the greater the amount of work successfully done the easier it will be to obtain new business. It is a matter of building up a reputation, — at process which requires time. Preparation of Advertising Copy. The preparation of copy for the various advertisements requires a peculiar skill. Natural qualifications for such work are required as a basis, and must be supplemented by careful study of the principles of advertising and of the work of the best advertising writers. The work can not be done by following fixed rules, but some conclusions drawn from the practical experience of advertising men afford useful guides. The copy should be adapted to the medium used. Different kinds of copy are required for newspaper, magazine, circular and street car adver- tisements. The newspaper advertisement will be read by busy people and will usually be seen but once, the life of the newspaper being not over twenty-four hours. All that can be given is a single impression, which should be as strong as possible. The reader must get the impres- sion quickly and easily, if at all. The magazine advertisement will be read by people having more leisure, and may partake more of the "reason- why" style. In the circular or booklet still more detail may be given. A card in a street car offers space for a very few words, a single impression ; but it may be read a number of times by the same persons. The copy should be adapted to the space used. It should never crowd the space. MKTHOOS OF l.\( HKASING BUSINESS. 393 The copy should be adapted to the reader. It must be couched in words and terms that he understands. If addressed to the busy man, it must be brief; he will not read long explanatory matter. But others may want to read reasons and arguments, and too great brevity is a mistake in advertisements addressed to such persons. Advertisements addressed to the general reader must not be so long as to repel the busy reader, nor so brief as to be hard to understand. Perhaps the weakest point of the average writer of financial advertisements is a failure to understand the viewpoint of the general reader and to learn his wants and his attitude. The average man does not understand the banking or trust company business ; it is a mystery to him — simple as it may seem to an insider. lie would be greatly interested in a magazine or Sunday newspaper article explaining the details of the business ii. a frank and straightforward manner — written in plain English and not in clearing- house phraseology. He would appreciate a booklet from his trust com- pany giving such information. The wording of the advertisement should have the ring of sincerity, honesty, frankness; and it must be backed up by performance. The literary style used in the copy must be interesting, catchy; but never witty, frivolous or over-original. Parting with his money or dele- gating his business never impresses a man as a humorous procedure; the "cute" financial advertiser disgusts him. The sentences should be short, crisp, clear; the words good, common short English words, avoiding superlatives and technical terms. The test of a good advertisement is that it attracts attention, interests and convinces. It must leave the reader in a pleasant frame of mind — never scold, preach or antagonize. A fundamental principle in copy-writing is to treat one point at a time. If the reader digests that one point, the advertisement has been a marked success. The next advertisement may add another point. The copy should be addressed to just one person — the reader. He should be made to feel that his busine'ss is wanted. The copy for advertisements in periodicals should be changed fre- quently; in the newspapers, daily. This holds the interest of readers and creates the impression that the company is alive. Timeliness is a telling point. Bank-books for Christmas presents should not be advertised in July. A robbery offers a splendid oppor- tunity for an advertisement on the folly and danger of keeping large sums of money in the house or on the person; a fire, for a discussion of the advantages offered by the safe deposit department; a defalcation by an executor, for a demonstration of the usefulness of the trust com- pany in fiduciary capacities. A few live companies produced some telling advertisements for their safe deposit departments immediately after the San Francisco disaster. Of the inducements or talking points available for trust comji.iny advertisements, the strongest is undoubtedly that of the solidity of the company and the security afforded to depositors. No inducements will attract people to an institution which they do not believe to be saft. Facts tending to show solidity are ample capital and surplus, large S9i TRUST COMPANIES. assets, proportion of assets to liabilities other than capital and surplus, careful investments, reserve, well-known and substantial directors, trusts from courts, state or municii^al deposits, state sujjervisioii, an up-to-date system of accounting, the confidence of numerous depositors. Frequent and thorough audits, cither by a regular auditing department or by out side audit concerns provide an excellent talking point for solidity. Next to safety, ability and desire to give capable service is usually the best talking point. A high rate of interest is, as a rule, not a good advertising point. There is apt to be a suspicion that the high rate of interest is paid at the sacrifice of security. Nevertheless, there are excep- tions to the rule. In banking-by-mail business, Pittsburg and Cleveland banks have secured large deposits partly because of their four per cent. Interest rates on savings accounts. Where the interest rate is used as an inducement, it is of prime importance to show why it is possible to pay such rates without sacrifice of safety. Among other inducements which may be made the subjects of adver- tisements, are convenience of location, attractive building or offices, special conveniences for customers, especially for ladies, advice about business matters, opening of the office one evening a week. A series of strong advertisements may be written on the different functions of the com- pany, treating one at a time. The maxims of Benjamin Franklin and others, with brief comments, provide good material for educational pub- licity. The Typographical Make-up of the Advertisement. The typographical make-up of the advertisement should be made the subject of careful study, for it largely determines whether the reader will notice the advertisement at all. It must be different from the sur- rounding matter — set off by itself. On the average page, this may be accomplished by means of a suitable border and a white space between the border and copy. If the page is pretty well filled with bordered advertisements, however, more individuality and distinctiveness will be obtained without the border. As a rule, there should be a caption or- catch-line which stands out distinctly, to appeal to interest or curiosity. The face and size of type for use in the caption and in the body matter, as well as the border and general make-up, should be dictated by the advertiser, and the proof should be seen and corrected. It is wise to allow the printer ample time. The advertisement should have a good position on a page apt to be read by the people whom it is desired to reach. It should be given plenty of room; if the copy crowds the space, the latter should be increased or the copy be rewritten. It is economy to pay for enough blank space to give a good setting. There is an advantage in always using a distinctive style of type or border or an emblem — something which will readily give individuality to all of the companj'^'s announcements. To insure getting just the make-up that is desired many companies use electrotypes which they own and dis- tribute to the papers as needed. The cost is slight and no chances are taken of jooor judgment or serious errors. CHAPTER Ml . EXAMINATIONS, AUDITS AND OTHER MEANS OF SAFE- GUARDING THE BUSINESS. F()RTr.\A'l'j:i,Y, thf UikKikv of tla day is toward the surround- ing of the trust company business with every reasonable safe- guard. Tins tendency is due not only to the increasing public demand for such safeguards, but also to a truer appreciation on the part of directors and officers of the sacredness of their trust, and to the realization that it is good business policy to use every means of inspiring confidence in institutions whose success is built upon confidence as a corner-stone. For the safeguarding of the business of trust compa- nies every argument applies that has force in the case of banks, and addi- tional arguments are found in the wider scope of the business and in the increasingly important trusts that are committed to their care. The parties interested in the matter include the general piU)lic. the stockholders, and the emi)loyees. Of the general public, the depositor"? and the beneficiaries of the trusts are of course most directly interested; but innsnuieh as trust companies constitute an important part of our financial system, and because the failure of such a company vitally aflVets the interests of many persons who have had no direct d- panies are still using systems which invite error, mismanagement and fraud: and doubtless some will continue to use them until failure comes or until a competent accountant or auditor is employed who shall point out tilt" weak places, .\mong recent ca.ses of banks and trust companies niiiifil bv defalcations have been several in which stcalinffs of hundreds 396 TRUST COMPANIES. of thousands of dollars had been going on for a series of years ! A small trust company was robbed of several thousand dollars by an emploj-^ee who had for some time acted both as savings teller and as- savings bookkeeper ! In such cases one hardly knows whom to blame most, the defaulting employee or the officials responsible for the lack of intelligent system. It is true that no system can be devised which will absolutely prevent blunders on the part of careless or incompetent work- ers, or stealings on the part of dishonest ones; but it is entirely practi- cable to perfect systems which will reduce such possibilities to a minimum. Such a SA'stem having been adopted and put into operation, the next essential is to see that it is carried out faithfully, and that nothing that smacks of habitual carelessness, mismanagement or dishonesty exists- This can be accomplished only by means of examinations and audits, regarding which a considerable change of sentiment has taken place dur- ing recent years. The old-time banker looked upon it as something of an insult to suggest that his work ought to be checked over or examined, feeling that the dignity of his trust ought to place him above suspicion. The modern view is such that the most progressive bank and trust com- pany officials welcome thorough and intelligent audits, believing that the careful and conscientious man has nothing to lose and much to gain by having the fidelity of his administration proved beyond question. It is a frequent practice to voluntarily employ public accountants to make, thorough audits. So far as the audit is designed to detect crime, it is not a reflection* upon the honesty of the average officer or clerk — which is, indeed, as- sumed — but rather a recognition of the fact that occasionally a dis- honest man may creep in and destroy the work of the honest majority* and from this viewpoint the audit is a protection to the faithful ones. At any rate, the public is no longer disposed to accept from the directors of financial institutions which fail the excuse that "they didn't know- there was anything wrong, and supposed the officers and clerks were honest," and is coming more and more to hold such directors both mor- ally and legally responsible for such knowledge. The public is right about it, too; there is no excuse for slipshod methods and guesswork in the business of the trust company, and men who are not willing to attend' to their business have no place upon the board of directors of such a corporation. It is to be observed further that the detection of crime is by no means the only object of examination and audit. Still more important is the prevention of crime, which systematic auditing accomplishes in two ways — by the discovery of stealing at its beginning, when the amount is almost invariably small, and by the deterrent effect which is inevitable when officers and employees understand that speedy detection is practi- cally certain if anything wrong is attempted. Indeed, the very sugges- tion of stealing comes to most men only when the conditions seem to make it easy and comparatively safe. Another exceedingly important purpose of a proper audit lies in criticism and suggestion regarding the EXAMINATIONS, AL'DITS, ETC. 397 system of .•iccountiiifj and gtiural administration, the pointing out of loop- holes for error or dishonesty and the enforcinfj of faithful adlierence to the system in use. Examinations by officials representing the state government are required in many states, and ought to be in all. State laws sometimes require also examinations by committees of the boards of directors; and M-hether requin d by the state or not, such examinations are usually pro- vided for in the by-laws of trust comjianies. Examinations are also made in some companies by committees of stockholders who are not mem- bers of the board of directors, while a few companies have resorted to examinations of each department by employees of other departments. Among the larger companies the habit is growing of maintaining a special auditing dejjartment; while instead of this, or in addition to it, many conqianies have an annual or semi-annual audit by a j)ublic auditing concern. The examinations conducted under the authority of the state are intended primarily to see that the company is conducting its business in accordance with the laws of the state; and while their purpose is attained more or less com])letely, according to the thoroughness of the officials who do the work and the time at their disposal, such examina- tions are rarely thorough enough to detect any but the most bungling attempts at stealing, while suggestions regarding the system of account- ing are wholly without their province. Examinations by committees of directors arc as a rule very super- ficial and unsatisfactory, while many are mere farces. In the cases of "one-man companies" — that is, companies in which the executive officer is relied ujjon to manage the company practically alone, without advice or investigation by the directors, these examinations are apt to be exceptionally farcical; and this in spite of the fact that these are the companies which specially need thorough and frequent examination. The reasons for the incompleteness of directors' examinations are found partly in tlie common disposition to regard the director's office as a badge of honor rather than as an avenue of service, and partly in the fact that the men chosen for such })ositions are usually men whose time is very fully occuiiied with their own affairs and who often are urged to accejit the position against their wills and better judgment. Nor art the men composing these committees as a rule familiar with the details or even the principles of trust company accounting. The time given to the •examination by such committees does not average over a day or a half ■day. It is evident that such examinations can hardly be deemed satis- factory as evidences of the sound condition of the conqjany. Nevertheless, the writer does not want to be luiderstood as holding the opinion that the ordinary examination by a committee of directors is wholly useless. Failures often occur l>ecause of unsound or excessive loans or investments, and if the directors are not already aware of such •conditions in their company — as they should 1h" — even a cursory exam- 398 TRUST COMPANIES. ination may open their eyes, unless there is intentional dishonesty and concealment on the part of the officers. If the committee insists upon actually seeing and handling all securities and the notes for all loans,, it will at least have proved that the assets called for by the books are in the company's possession at the moment; while it will also have an opportunity to observe what names of officers or directors appear as makers or indorsers on the notes. This is of some value, though of course it gives no assurance that the books are correct, nor would it detect anything that would even create suspicion against an ordinarily shrewd officer who was engaged in looting the institution. There is alsa some advantage in the insight into the company's affairs which the com- mittee may gain, and in the interest which may be awakened in them. But a directors' committee examination may easily be made, and sometimes is made, of considerable value, if men are selected who are willing to give several days to the task and who have some technical knowledge which qualifies them for the work. The committee may then make some general examination of the books, examine and list all of the assets called for, with their appraisal of same, make note of items that are worthless or unmarketable or of uncertain value, point out serious flaws and tabulate loans and investments in which officers or directors are interested, giving names and amounts for each. Such a committee should not include any members of the executive committee or any of the officers, and should work independently of the latter. An examination by a committee of stockholders who are not direc- tors may accomplish much good, provided, as in the case of the directors' committee, men of ability who will take the necessary time are found. Its work may well proceed along the lines just indicated, going further if possible. Such an examination has an advantage in that it is con- ducted by men who are not directly responsible for the policy that has been pursued. Examinations by committees of employees are practicable only in companies having several departments. They may be made of some value as examinations and of much value in the way of education and increased interest among the men who do the work; but are evidently subject to the important objection that they are not apt to affect the work of officers; while, as the work must be done "out of hours," they impose a burden upon the men which is hardly justifiable. That the insufficiency of the different kinds of examinations just named is coming to be widely recognized is shown by the steadily increas- ing number of companies which either maintain a special auditing department or employ outside auditors or auditing companies to make thorough examinations of their work, some companies having even adopt- ed both plans. It is only by such means that anything like a satisfactory examination can be made, particularly of the larger institutions. The wonder is that the fact has been so long unrecognized, and that other corporations have preceded banks and trust companies in the adoption of thorough auditing systems. EXAMINATIONS, AUDITS, ETC. 399 As between the niaiiiteiiaiice of an auditing dei)artment and the employing of an outside audit company for the examination of the larger trust companies, not enough experience has been gained to deter- mine which is the better plan, and opinions naturally differ. If, as some large companies have found to be the case, under either plan it is necessary to have a permanent force engaged in auditing thrQughout the year, the choice is largely one of form, except perhaps as to cost. Of course, the smaller companies do not oiler work enough for a per- manent auditor, unless he puts in some of his time at other duties, in which case his value as an auditor is slight. Such companies should employ a competent and responsible accountant to put in such time as is necessary for the woi'k. He should make complete audits at intervals of six months or a year, and in addition step in without previous notice to make special examinations. His reports should be rendered to the board of directors in person, and never to an officer of the company; and the stockholders are entitled to an annual report giving at least his general conclusions. Whether an employee of an audit company or of the audit depart- ment of the trust company, the auditor in charge should be a man who thoroughly understands both the science of accounting and the busi- ness of the trust company. He must possess courage and force of char- acter, be not over-trusting or over-suspicious, and be endowed with more than the average amount of tact. If he has assistants, as he must in examining the larger companies, they should also be selected with a view to their fitness for this particular work. TiiK AfiuT Department. In 1903 a committee appointed by the Trust Company Section of the American Bankers' Association reported to that body, that while excel- lent systems of auditing were in use, there were but few companies which had established regular audit departments. Since that time the organiza- tion of such departments has been quite rapid, but as is natural in a new department, there is little uniformity in its conduct among different companies. In some cases a department is organized with an auditor and a innubcr of assistants; in others, there is a single official known as the auditor, or the controller, who in addition to the duties of auditor acts as chief of the clerical force or performs other duties. In such cases his work is usually supplemented by the periodical employment of an audit company. In the selection of an auditor favoritism should have no place. He should be appointed, not by an officer, but by the board of directors, and to them and them only, in regular session, should he make his reports. His work is quite as much a check upon the officers as upon the clerks, and for that reason it is manifest that he should not be in any way dependent u])on the officers. For a similar reason his appoint- ment should not be dictated by the executive committee alone, but by the full board of directors, and he should report also to the stockholders. 400 TRUST COMPANIES. As already indicated, an important part of the duty of the auditor is to devise or to perfect the system of the institution with the special purpose of guarding against carelessness or dishonesty. He will, for example, see that the officers or tellers who are authorized to sign or countersign drafts do not have also the right to make entries in the books; that the same employee does not both handle cash or securities and keejD the books; that where there is opportimity of collusion between tellers and bookkeepers, the latter are frequently shifted to other sets of books without previous notice; that the work is so subdivided that no one man can carry through all the details of any transaction. The exact methods followed in the work of auditing must depend upon the conditions existing in each institution, and it is impossible to devise a system which will be applicable to all companies. An attempt to do this was made by a committee appointed by the Trust Companj' Section of the American Bankers' Association, which reported in 1903; but the committee reached the conclusion that a system applicable to all trust companies was out of the question. The report of the com- mittee, however, and the three papers on the .subject contributed by prominent trust company auditors, contain many valuable and practical suggestions."" The Selection and Treatment of Employees. The success of many men prominent in the business world has been ascribed to their sagacity in the selection of the men who worked for and with them. The success of a trust company is often materially affected by the kind of judgment used in the selection and training of its employees as well as of its officers. The company whose entire work- ing force, from officers down to errand boys, is uniformly courteous, obliging, accurate and capable, has a tremendous advantage over a com- pany whose officers have these qualities, but some of whose employees are impolite, unaccommodating or prone to numerous errors. It is not always an easy matter, particularly in the larger companies where changes of employees are frequent and must often be made in a hurry, to find just the right person when a vacancy occurs. For this reason, if for no other, the officer in charge of the employment of the clerical force will do wisely to look up available timber before the moment it is needed, and always have on file information regarding a number of applicants whose record he has taken pains to learn. Most companies have more applications for positions than they have places to fill. Unless something appears at once that shows the applicant to be undesirable, he (or she) should be requested to write a letter of application stating his age, education, experience, present occupation, reason for proposed change, references, etc. It has been found useful to file such applications, together with other letters or memoranda relat- ing to the applicant, in a specially printed envelope, represented in Figure iJ86. These envelopes may be filed alphabetically or grouped according to 75 See Proceedings Trust Company Section American Bankers' Association, 1903. pp. 12-25. EXAMINATIONS, AL'DITS. ETC. un APPLICATION 37^ "^hct. /lyi^v^ nS^. RECOMMENDED RV -^^ AJaA^^#\aA>^ £ynnjyCa <^ PERSONAL APPEARANCE. ^?(i^.ce FAMILY PARENT BUSINESS ^^i^AjAc^iLzkaJo< JiJ PREVIOUS EMPLOYMENT OF APPLICANT 1. VA/iTM ( '^^^<-<^-<^C■ ^7>\X^ ) CLASS OF WORK. UNDER WHOM <2) WITH CLASS OF WORK. REASON FOR LEAVING- <3) WITH CLASS OF WORK . — PER MO. $ REASON FOR LEAVING ■ — REMARKS l-"iG. 2S6. — .Vppi.ic.vtios Exvei.opi:. 402 TRUST COMPANIES. positions for which the applicants are qualified. The officer notes upon the envelope the personal apearance of the applicant^ and adds further data obtained by correspondence with references given; so that after a personal interview he is usually able to form a pretty definite idea as to whether the candidate is worth placing in the eligible list. If the system is faithfully followed^ there will usually be on hand applications from pfersons about whom the officer in charge has some knowledge, and who will be available when a vacancy occurs. Of the qualifications required in an applicant who is to be considered favorably, honesty is the fundamental thing. The writer is aware that the remark is trite, but believes that there is as much appropriateness in the remark now as there ever was. The restless and hurry-to-get-rich disposition of the average American of to-day can not be seasoned too much with the good, old-fashioned virtue of absolute integrity; and cer- tainly the premium on that virtue" should nowhere be greater than in the trust company. Next to honesty and general good character, education is important. Boys who have not finished the grammar school are con- tinually applying for positions. Girls who have taken courses in stenog- raphy before they have learned to spell or to begin a sentence with a capital letter, want to become bank stenographers. Due consideration should be given to cases in which circumstances make it impossible for the apiolicant to continue at school; but as a rule the welfare of the applicant and of the company alike demand that boys and girls who have not had at least a high school education be discouraged from seek- ing permanent positions with trust companies. Particularly is this the case in companies whose aim is to develop men for its higher clerical or official positions from the ranks. In common with the business of the banks, the business of the trust company is in a state of evolution. Civilization is growing more complex, and the United States has taken its place among the "first powers" of the world, and the business of the trust company is coming to require more highly trained minds and a broader outlook. Undoubtedly the best material for trust company work, other things being equal, is found in the man with college training, pro vided, of course, he has used his opportunities and not merely "been to college." His mind is better trained, his outlook is broader, he puts more intelligence into his work, and he does not so soon reach the limit of his capacity. The qualities which go to make up an attractive personality are next in importance — neatness in person and in dress, a cheerful disposition, and a courteous and friendly manner. Ordinary ability and willingness to work arc of course assumed. If the position to be filled is advanced, previous technical experience is of course necessary; but in ordinary cases the man with the qualifications just named will pick up the tech- nical knowledge and in a few months be of more value to the company than the experienced man who has not these qualifications. In the matter of promotions civil service rules should be, and hap- pily in most companies are, in force. "Influence" is coming to have EXA>nNATl<)NS. Al'DlTS. FTC. U):i less and less powir in the matter, and should have none. The rilling of vacancies in the higher positions by promotion from the ranks wlien possible is demanded alike by justice to the employee and by the best interests of the company, for no one thing so tends to maintain a loyal spirit among the employees as the knowledge that a "square deal" in this matter is assured. This does not mean that every employee should be "moved up one peg" every time a vacancy occurs in one of the jjigher clerkships; nor does it demand that length of service sliould be a prime cousidrration. It means that the man who has shown his capacity and proved his merit in the service of the company should be given the pref- erence over an outsider if he is competent to rill the position which is vacant. It will of course occasionally happen tl)at no one of the em- ployees is capable of rilling the position; then and only then should an outsider be brought in. P'air and liberal treatment of employees in other matters is' dictated not only by the prineiphs of justice but by wise policy as well. Salaries should be reasonably liberal, and in their adjustment the ability re- quired, the responsibility assumed and the length of individual service should be among the matters considered. Vacations should be given to all en)j)loyees each year as a matter of course. They should be arranged according to a derinite plan and not be put off until asked for, and should be announced long enough in advance to enable each one to make his plans. The best-managed companies not only permit but re- quire every euiployee to take a vacation each year, not only because the vacation will enable the emjdoyee to do better work, but because it gives o})portunity to judge better the accuracy, faithfulness and integrity shown in his work. The average length of vacation for employees below official rank is about two weeks. In order to care for the work during vacations and during sickn«ss and unavoidable absences for other reasons, one or more general clerks who are able to step in and rill any position should be employed. In spite of a well-derined prtjudiee against them on the jiart of many officials, women have made their way into the ranks of trust com- pany workers and are rilling a variety of different positions, and in many cases filling them with exceptional merit. They are most fre- quently found in the position of stenographer, but there are many women who are eajiably rilling the positions of bookkeeper, teller, clerk, etc. .\I1 employees having any degree of responsibility — and this includes nearly all, if not quite all — should be bonded in reasonable amounts. Ex- cejit {)erhaps in the smallest towns, the practice is quite universal to use bonds of surety coni]>anies. the jiremiums for which are paid by the emj)loying comjiany. Every reasonable opj>ortunity should be given to employees to learn the business in other departments than the one in which their own work lies. Occasional sliifting of positions is a help in this direction, and on occasions when the work is especially heavy in any one department, 404 TRUST COMPANIES. employees of other departments may be encouraged to help out — no one being permitted, of course, to slight his own work. He is a short-sighted official who is not willing to answer questions and explain puzzling prob- lems to ambitious employees who are striving to become masters of different departments of the work. If an employee is lacking in education, he should be encouraged to utilize such opportuni- ties as are offered by the night schools or the classes conducted under the auspices of Young Men's Christian Associations in the cities. An especially valuable mediimi for the acquirement of knowledge and of training, the strengthening and broadening of character and the stimula- tion of ambition is found in the work of The American Institute of Bank- ing, of which local organizations or chapters are now found in most of the large cities, and in many Smaller ones. This institute, which was organized by and is conducted under the auspices of The American Bankers' Association, is doing a splendid work among bank and trust com.pany employees, both young and old, and should receive the most cordial support from every wide-awake trust company official. CHAPTER Xr. SUNDRY TOPICS. Fees. E.XCEPT in the few coniiuunities in which trust companies are so wrll cstablislicd that there is something approaching a standard sihtd- ule of fees, the question of the proper charges to make for services rendered by the trust department is often a difficult one. Tliis is due not only to the fact that in most communities there is no set standard for guidance, but also to the fact that a number of matters must be taken into consideration — the amount of clerical work involved, the knowledge and training, or in other words the professional skill, required, the value of the service to the customer, and most importaTit of all, the degree of re- sponsibility, legal and moral, assumed by the company. The charge may be tempered, too, by the probable incidental profits of the work due to new business obtained thereby. That there exists considerable difference of opinion among trust com- pany officials regarding the matter of fees has been shown by di.«cuss'o'iS at the conventions of the Trust Company Section of the American Bank- ers' Association.'" These discussions also demonstrated that it is quite impossible, even if desirable, to devise a uniform scale of charges Tor given kinds of services which could be made applicabh' throughout the country or even throughout a state. Local conditions vary so grcitly that a schedule of fees suitable for one locality would be too high for a second and too low for a third. Indeed, the actual value of the ser>ice and its cost in labor and in responsibility- assumed differ so much that even in two cases of the same kind of services rendered by the same com- pany there may justly be diffVrcnt scales of charges. So far as the ser- vice is professional in its character, the matter of fees is subject to about the same considerations as the determination of the fee of the lawyer, and is affected by the. customs of the community. The country lawyer expects to receive a smaller fee than the lawyer in the large city, and he often gauges its amount in part by the value of the service to the client, and in some cases takes into consideration the latter's financial ability The simplest element of the problem is the amount of clerical labor involved. This is not always easy to determine in advance; as, for ex- ample, in the work of transfer agent, in which the amount of work will depend, after the original issue, upon the activity of the stock. When possible, it is wise to defer the matter of fee until enough expericr.ce has been gained to form a somewhat reliable estimate of the amount of work required. But even when known with exactness, the amount of clerical labor involved should be a matter of minor importance in the determina- tion of the fee. 76 See Proceedings Tni-^t ("onirurv Sfotion. in p.irtloular 1904. 406 TRUST COMPANIES. The professional ability demanded is a matter of considerable weight, and this factor of the problem should ultimately result in larger fees than are prevalent for certain services. The trust company is held liable for sufficient legal and technical ability and carefulness to do the work cor- rectly, and is entitled to proper compensation therefor. The value of the service to the customer is an important consideration which should be given careful study; but it is not an exact means of de- termining the fee. A corporation may require the services of a trust com- pany as a sine qua non, but would hardly consent to pay a fee measured by the necessity of obtaining the service. The benefit which may accrue to the company in the way of new busi- ness resulting from the work is a matter worth consideration, especially by new companies and by companies located where the trust company is not firmly established; but it is evident that this consideration, like the cut-price sales of the merchant, can be operative only in exceptional cases. One can not always do business at less than cost for the sake of new business to be taken on the same terms. The most important matter of all is the responsibility, both legal and moral, which the company must assume. This is in some cases the hardest thing to determine, owing to the absence of either statutory laws or court decisions which clearly define the liabilities of trust companies acting in certain capacities, and owing to the ignorance of the public, which is apt to hold the trust company morally responsible in case of loss upon any document upon which the trust company's name appears in any capacity. Fees for Acting as Executor, Etc. Fees for services as executor, administrator, guardian, etc., are in maxix states fixed by statute, or are determined by the court, and are the same for a trust company as for an individual. In New York the statute fixes the fees at five per cent, upon the first $1,000, 2^ per cent, upon the next $10,000, and one per cent, upon all over $11,000 of the princi- pal, with an annual fee on the income at the same rates. No fee is al- lowed upon the value of the real estate unless same is sold under order of the court. In cases of extraordinary difficulty or responsibility the court may increase such fees. In Ohio the statute fixes the fees of executors and administrators at six per cent, upon the first $1,000, four per cent, upon the next $4,000, and two per cent, upon the excess over $5,000 of personal property. The Missouri statute allows executors and adminis- trators a commission of five per cent, upon disbursements of personal propei-ty. These rates usually serve as the basis for determining fees of testa- mentary trustees and fees in any trust coming through law or by appoint- ment of the court, and are guides in fixing the charges for the care of estates held in trust from whatever source. SL'XDRV TOPICS. 107 Fees for Care of Estates Under Private Agreement. When the trust comes by private agreement, the company is of course at liberty to make the best terms it can as to fees. In one large eastern city, the usual charges are one per cent, on the principal, often payable one-half at the beginning and one-half at the termination of the trust, and an annual fee of ^Y^ per cent, on the income if the funds are invested 01 to be invested in coupon bonds or stocks. If part is in real estate, some companies make the charge on income five per cent., handling the real estate themselves, wliile others keep the charge at 2l^ per cent., first deducting an outside real estate broker's charge for handling the real estate. In another city, common charges are two per cent, on the prin- cipal at tlie termination of the trust, with an annual commission on the income of three per cent, on that part derived from personal securities and five per cent, on that part derived from real estate. In some places the charge is five per cent, on the income without reference to whether the estate owns real property. Another scale of charges employed is a commission of from one-half per cent, to one per cent, for the investment or reinvestment of the principal, payable at the times such investments are made, and from three per cent, to five per cent, on the income accord- ing to the proportion of the principal invested in real estate. Fees of ax Assignee or Receiver. The fees allowed to an assignee or a receiver are fixed by statute or determined by the court. In New York the assignee's fee is five per cent, on the whole sum handled, and the receiver's fee is fixed by the court at a figure not exceeding five per cent. The receiver of a corporation may receive five per cent, on the first $100,000 received and disbursed, and S^A per cent, on the excess over $100,000; but the total fee may not exceed $12,000 for any one year, nor be greater than at the rate of $12,- 000 per annum for a fraction of a year. Fees as Tristee Under a Bond Issie. Fees for acting as trustee under a bond issue are generally based on a charge of a certain amount per bond, the amount in many cities being one dollar a bond for small issues and fifty cents a bond for large issues. The terms "large" and "small" are of course relative, and their interpre- tation differs according to local circumstances. In some places the dividing line is at about $200,000; in others, $500,000 or $1,000,000. Sometimes, especially in small issues, a special counsel fee is added, sometimes not. Some companies make a minimum charge of $100 cover- ing everything. There is a well-defined feeling in many quarters that the ]irevnlent fees for this work are much too small in view of the fact that the legal and moral liabilities assumed are not well determined, and may be much larger than is generally realized. There is considerable diff'erence of opinion regarding fees for the payment of coupons. In New York, where th< use of money for ten 408 TRUST companip:s. days is of more value than elsewhere, it is generally considered that if the money for the payment is deposited from ten to thirty days before the coupons mature, the use of the money is sufficient remuneration for the work and responsibility undertaken. If the money is not deposited in advance, many companies make a charge of from one-eighth to one- fourth of one per cent. In places where the use of money for short periods is not so valuable, some companies make the charge unless the funds have been on hand for a considerable period. Similar considera- tions hold in the matter of charge for the disbursement of a sinking fund. Fees as Transfer Agent. The fees for acting as transfer agent for stock depend upon the cap- italization and upon the activity of the stock. The latter element is often hard to determine in advance, though the character of the corporation gives some clue; the stock of a railroad, for example, being apt to be more active than that of a bank. By some it is recognized as a general principle that the fees of the transfer agent should be double those of a registrar. Minimum fees for very small and inactive issues range from $50 to $100 a year, the fees for large and active issues running into several thousand dollars. In view of the responsibilities assumed, and of the fact that a single clerical error in this work may prove very costly, the prevalent fees seem inadequate. The reader should bear in mind that the fees above stated are by no means universal, and are given here only to convey an idea of the charges made by some companies. The fees for other kinds of services vary so much and depend so largely upon the peculiar circumstances of each case^ that an attempt to state customary charges would be useless. Foreign Exchange. Most trust companies sell drafts on foreign countries, traveller's checks and letters of credit; but as most of them do so through banking houses which make a specialty of that class of business and which issue full instructions as to procedure, it is unnecessary to discuss the subject here. A few large trust companies conduct thoroughly equipped foreign exchange departments. Time-and-Labor-Saving Devices. The past generation has witnessed the introduction into the business world of a number of devices which save time and labor, and which are peculiarly useful to banks and trust companies. Manv of them are no longer classed as mere conveniences but have become absolute necessities for the larger companies. Among these are the typewriter, the telephone and the adding-machine. Except in very small companies, the tvpewriter is universally used for correspondence and similar work, and even book entries, especially for such records as the trust register, are being made by the use of the book typewriter. An increasing amount of business is being conducted by telephone, the larger companies maintaining private SUNDRY TOPICS. 40<> exchanges connecting cacli desk with the other desks in the office and with the outside world. The long-distance teki)]ione enables the official of a trust company in Chicago to transact business in New York in a few minutes, without leaving his desk. The adding-machine not only lists and adds long columns of figures more quickly and more accurately than can be done by the most expert bookkeeper, but has become indispensable in companies which handle large volumes of business. By its use the taking of trial balances of thousands of accounts is made a short and simple operation. Its value is increasing as new uses to which it may be put are discovered. The work of the teller is lightened by the use of coin counters and other conveniences. Duplicating machines enable the advertising depart- ment to send out duplicate letters which are hard to distinguish from originals. Commercial ))honogra])hs make it possible for an officer to dictate letters and other matter at such odd moments as he finds conven- ient, without wasting the time of the stenographer wliilc waiting during the numerous interruptions to which he is always subject. A more re- cently introduced device is the telautograph, which reproduces writing at a distance. By its employment the teller may write at his desk an in- quiry regarding an account which is reproduced immediately at the desk of the proper bookkeeper. The latter writes his reply, which is at once before the teller, who is thus enabled to get the needed information quickly, silently and without attracting the attention of the customer. Numerous other devices of greater or less importance are included in the equipment of the most progressive companies. A judicious use of these improvements enables the company to do better, neater and quicker work, st a saving over old methods. Branch Bankino. In a few places in wliieli tht laws of the state permit, trust companies- are conducting a branch banking business with such success as to make it highly jirobable that the plan will spread in the near future to other localities and to other companies. The same advantages are gained th^t are urged in favor of the Canadian branch banking system, except as to- currency, though of course on a much smaller scale. A central office is maintained in tiie down-town portion of a large city, and the branches are scattered through the outskirts of the city and through the suburban towns. In this way communities which are unable to support independent savings banks, or at best only small ones, are enabled to have all the ad- \antages afforded by the strongest companies. The confidence insjiired by such n strong institution attracts deposits which had not theretofore been in banks at all. Money is brought into communities needing it, while from those localities which have a surplus, funds are transferred to the central office or to the other branches where the money can be used to advantage. From the standpoint of the company, deposits are mate- rially increased, while the circle of friends who may furnish business for departments oth( r than the banking department is widened. 410 TRUST COMPANIES. Banking by Mail. Trust companies have been among the leaders in the promotion of the Lanking-by-mail business, which is really only a part of the growing sys- tem of "mail-order business." As applied to banking, this is not alto- gether recent in principle, since people have for many years occasionally sent deposits and made withdrawals from accounts through the mails. The conducting of regular banking-by-mail departments and the effort to build up this class of business are, however, phenomena which have ■originated during the past decade. The Pittsburgh Bank for Savings claims to have originated the first systematic banking-by-mail department in .the year 1898. Its deposits at that time amounted to $3,350,000, and in three and one-half years were increased to $12,250,000-; a considerable part of the increase being ascribed to advertising for mail business. A number of trust companies and savings banks are now conducting such departments and meeting with much success. Pittsburgh and Cleveland, because of their four per cent, interest rates paid by solid concerns, have some advantage in this class of business; but the possibility of getting mail business is by no means dependent upon the interest rate. It appeals to manj^ classes of people because of its convenience and because it offers one, no matter where located, the opportunity to leave his savings in charge of a strong institution. Even in the cities it is often more con- venient to mail a deposit than to carry or send it to a bank ; but the special advantage of course accrues to joersons more or less isolated, farmers and residents of small towns having no savings banks — which includes some- what over seventy per cent, of the people of this country. The extension of the rural free delivery of mail, and the general improvement of the postal system, are of course great aids to the business. The method employed in conducting the business is simple. Upon receipt of an inquiry, a letter is sent with which is enclosed a signature- card and a circular describing the method. If the inquirer decides to open an account, he has but to place his signature and address on the ■card and mail it with his initial deposit to the company. He receives in i;eturn a pass-book, which in future transactions can be mailed back and forth as deposits or withdrawals are made, or can be left at the com- pany's office. In the latter case, a separate receipt is sent for each de- posit. The pass-book is made light enough to be carried with a letter and a check for one stamp. The depositor may send his deposits in the form of New York draft, postal money order, personal check or in cur- rency by registered mail. As to the safety of such remittances, the large companies doing a banking by mail business advertise that so far as they know not a dollar has yet been lost in making them. Remittances to de- positors are made upon receipt of letters requesting same, by New York •draft; or, if specially requested, by postal money order. Trust Company Offices and Buildings. There is observable among trust companies a growing tendency to purchase or construct buildings of their own. Such a course assures a SUNDRY TOPICS. 411 permanent location, gives an impression of stability, and otton proves of value as an investment. Frequently it is the only means of getting the exact location desired, or of insuring the most convenient arrangement of the offices. Whether occu|)ying its own building or rented quarters, the progres- sive company finds it profitable to maintain offices which are attractive and convenient. The standard of office equipment is such that the public ex- pects a bank or trust company to occupy well furnished quarters, so that the cost of a good cquijiment is more than repaid in advertising value. The lobby should be provided with all possible conveniences for custom- ers, including writing-desks supplied with good ink, clean pens and blot- ters, comfortable chairs, etc. The larger comjianies often provide sepa- rate reading and lounging-rooms for customers, with current newspapers -and magazines, writing-desks and other conveniences, and committee- rooms for the use of customers who wish to meet to arrange details of Inisiness. In many cases there are special quarters for women, equipi)ed with numerous conveniences and in charge of a matron who looks after the comfort of jvitrons. The quarters of tellers, bookkee})crs and other employees should be arranged and equipped with a view to safety, neatness, convenience, sav- ing of time and labor and the health of the Avorkers. Attention to these -matters is amply repaid in better service. The matters of light and fresh air are of sj)ecial importance; when possible the arrangement should be such tliat the light comes from back of the workers, and a well-considered ventilating system should be adopted. There is economy in the use of up-to-date office furniture and conveniences. Steel is coming to take the place of wood in the construction of filing cases and cabinets for keeping pajiers and records Avhich are brought out of the vaults during the day. In the general arrangement of the offices the quarters of the banking and savings departments usually occujiy the location most convenient for customers. The trust and other dejiartments having fewer visitors are located at the rear of the room or on other floors if the company occupies more than the ground floor. The safe-deposit department is usually located in the basement, but is sometimes on the ground floor. In the large companies the equipment of this department is exjjensive and as nearly })erfect in the safeguards provided as modern science can make it. Besides being constructed of hardened steel with massive doors opened with time locks, the vaults are protected by watchmen on duty day and night and in many cities by electrical attachments which if tampered with sound an alarm at the offices of detectives who are prepared to investigate at once. EXCIASIVE TrIST C'oMPANV Brir.DINGS. In places where the price of land is not very high, it is generally agreed that it is of more advantage for a trust comjiany to occupy a build- ing devoted exclusively to its use than to have quarters in an office building. In large centres where the price of land is very high and the possibility 412 TRUST COMPANIES. exists of large ineonic from the rentals of an office building-, there is quite a wide difference of opinion as to whether the advantages gained by an' exclusive trust company building offset the giving up of opportunities for revenue from an office building. It is interesting to note that a number of prominent and successful trust companies, as well as banks, in several large cities have had faith enougli in exclusive bank buildings to make the investment, and that their success in the instances in which the buildings have stood for several years has justified their faith. Among the companies now occupy- ing such exclusive trust company buildings or having them in course of construction are: The Mississippi Valley Trust Company and the Mer- cantile Trust Company of St. Louis, both of which were pioneers in this movement; The Illinois Trust and Savings Bank, The Northern Trust Company and the Central Trust Company of Illinois, of Chicago; The Cleveland Trust Company of Cleveland; The Commercial Trust and Savings Bank of New Orleans; The People's Trust Company, The Title Guarantee and Trust Company and the Knickerbocker Trust Company of New York; The New England Trust Company of Boston; The Ameri- can Security and Trust Company of Washington; The Pennsylvania Company for Insurance on Lives and Granting Annuities, and The Girard Trust Company, of Philadelphia. Whether such magnificent exclusive trust company buildings as these companies and others have are profitable from the standpoint of the com- pany or not, there is no question that they add very materially to the beauty of the cities in which they are located, and reflect credit upon the public spirit of their builders. They mark a step toward the greater ap- preciation for art and architecture shown by the older cities of Europe,, whose banks in most large centres greatly excel ours in this respect. CHAPTER Xn. THE DUTIES AND LIABILITIES OF TRUST COMPANIES ACT- ING IN VARIOUS CAPACITIES." DiriEs AS Transfer Agent. THE duty of the transfer agent is to act for tlie issuing corporation in the matter of making transfers of the ownership of its stock from one holder to another. This involves the passing upon the regularity and legality of the assignment of title; the noting of the trans- action upon the transfer books of the corporation; the cancellation of the old certificates and the execution and delivery of new certificates. In- cidentally it involves the furnishing to the corporation of a certified list of the stockholders whenever the books are closed for the payment of dividends, and at otlu-r times as demanded. The performance of these duties requires that the transfer agent be the custodian of the stock books and the seal of the issuing corporation and of a supply of blank certificates. The certificates, bound in .book form so that each certificate and its stub form one page, and numbered consecutively, are before delivery to the transfer agent signed by the projH'r officers of the corporation. The face of the certificate usually con- tains the provision that it is not valid unless countersigned by the transfer agent. On its back is usually printed an assignment of the stock and an irrevocable power of attorney, of which the following is a common form: "For value received hereby sell, assign and trans- fer unto the shares of capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint .... attorney to transfer the said stock on the books of the with- in-named company, with full power of substitution in the premises. Dated IpO. .. In presence of 77 While tlio diitie.i; of trust companies acting in various fiduciary capacities are fairly well established by custom and in some cases by legislative enactment, their exact Uabilltlos. especially in corporate trusts, such as those of transfer agent and registrar, are sometimes undetermined either by statute or by court decisions, and are the subjects of wide differences of opinion among trust com- pany officials and among lawyers. In the following discussion, so far as it re- lates to liabilities, the writer has endeavored to state the various positions taken by different writers quoted, to whom he wishes to acknowledge his Indebtedness 41 i TRUST COMPANIES. Before making delivery of a certifieate, the transfer agent dates it^ fills in the name of the now holder and the number of shares represented, affixes the seal of the issuing corporation and attaches the proper signa- ture to the transfer agent's certificate. The form of this certificate rec- ommended by a committee of the Trust Company Section of the American Bankers' Association reads as follows:'^ "Countersigned: Trust Company, as Transfer Agent, By , Secretary." At the time of accepting an appointment as transfer agent, trust com- panies require certain information from the issuing corporation regarding its organization and the issue of its stock, the exact nature and amount of such information varying according to the polic}'^ of the trust company. The following are the requirements published by The Old Colony Trust Company of Boston: "Corporations desiring the trust company to act in either of these capacities (transfer agent or registrar) should submit the following papers. Additional j^apers will be called for if required: (ct) Certificate of incorporation of tl]e company, certified by the Sec- retary of State of the state where the corporation is domiciled. (6) Minutes of the organization meetings of the stockholders and directors of the company, showing compliance with the necessary formali- ties to make the incorporation legal, such minutes to be certified by the clerk or secretary of the company. (c) By-laws, similarly certified. (d) Copies, similarly certified, of ;'ll votes, both of stockholders and directors, authorizing the issue of stock of the company, together with the certificate of the treasurer or other proper officer stating the exact amount of stock outstanding, which was issued under each of such votes. If approval by the state is necessary in any form- — e. g., by railroad commis- sioners — formal evidence of svTch approval, and generally of compliance with all conditions precedent to the issue. (e) If the stock is issued as fully paid, evidence that such is the case, either in the form of a certificate of the treasurer to payment in cash at par, or, if the law of the state permits payment to be made otherwise than in cash, then satisfactory proof that payment has been made in compliance therewith. (,f)Copy of the form of stock certificate which is to be issued, and which the trust company is expected to sign. This should be submitted for approval before it is engraved. for the information given and for many of the opinions advanced. It is perhaps hardly necessary to remark that this discussion is intended merely to show the different views that are current on the subjects treated, and does not pretend to state conclusions ex cathedra, the writer making no claim to expert knowledge in the mattei-. In any ti-ansaction other than one which is absolutely plain and sim- ple, no trust company official or employee should proceed without competent legal advice. 7S Proceedings Trust Company Section, 1905. p. 7. DUTIES AND LIAIJILITIES OF TRUST COMPANIES, n.". (g) Vote of directors certified as in (h) approving the form of stock, certificate; also vote similarly certified appointing the transfer agent and agent to register transfers of the company. (/i) List similarly certified of the officers and directors of the com- pany, with sample signatures of such as may sign certificates." Tlie practical work of transferring stock requires a high degree of intelligence and care and a thorough kn wiedge of the law governing such transfers. The risks involved aside from possible clerical mistakes, er- rors in bookkeeping, dishonesty or gross carelessness on the part of the employees who actually do the work, include mistakes of law or of fact in making transfers on forged endorsements, or on insufficient authority, or in violation of law, especially in cases of certificates held by persons as trustees for others. Certificates endorsed in blank are often presented for transfer by persons other than the holders of record. The transfer agent must know the signatures of stockholders or otherwise identify them be- yond question. Where stock is held in fiduciary capacities, the agent must know the terms and powers under which it is held. When a certificate is presented for transfer, the transfer clerk should know that the certificate itself and the power of attorney accompanying it are genuine; that the transferrer is legally conijM ti nt to make the transfer: that no notiet- has been gixfn the cotn));Miy of any nntstanding claims against the stock: that, in the absence of direct notice, thfre is no implied notice of claims, such as the certificate itself may give when standing in the name of a trustee. LlAHIMTIKS AS ThAXSFER AgENT."" On the subject of the exact liabilities assumed by the transfer agent iji agreeing to perform these services, there is a considerable difference of opinion, which is readily accounted for by the fact that there is no statute law covering the case, and very little law in the shape of court decisions^ While the office is sometimes undertaken under special contract which do- tails the liabilities to the issuing eorjioration, the more common method of appointment is by a mere resolution of the directors of the issuing cor- poration appointing the Blank Trust Company as the transfer agent of its stock, and the acceptance of the apjiointment by the latter. This method assumes that the duties and liabilities of the position are so well known as to require no definition: an assumption which is justified so far as routine duties are concerned, but which as to liabilities seems inconsistent 79 Readers wishing to consult fuller discussions of this subject and of the lia- bilities of trust companies acting as registrars are referred to the following arti- cles, some of which are quoted herein: Proceedings Trust Company Section A. B. A. 1S96-1903, pp. 59-75. article by Felix Rackemann; pp. 184-199. article by Hen- ry J. r.owdoin and discussion of same. Proce«-dings Trust Company Section A. B. A. 1904. pp. 2S-41. article by Jordan J. Rc.lllns: pp. S5-S6. letter from Noble R Jndah, and discussion preceding. Proceedings Trust Company Section A. B. A. 1905. pp. 6-S. Report of Executive Committee. "The Banking Law Journal." Vol. XXII. pp. 717-720, article by C. F. Morris. "Trust Comp.inies" Vol. I, pp. 41S-421, 497-503. 609-613. articles by Ross Perry: pp. 9S9-990. article by E. C. Hebbard; Vol. II, pp. 416-41S. article by Willar^ V. King; Vol. III. pp. 12-14, article by Charles A. Greene. 416 TRUST COMPANIES. with the divergent opinions held by officers of banks and trust companies which act as transfer agents. The difference of opinion does not concern what the trust company accepting an appointment expects and intends to undertake, but has reference to possible imijlied and incidental obligations which it does not intend to assume, but for which, in the opinion of ■some writers, the courts may hold it responsible. "It is well understood in banking and trust company circles that the transfer agent undertakes to say to the purchaser of the stock which it has countersigned no more nor less than that such stock is a genuine portion of the capital stock of the issuing company, that the said company has been duly authorized to do business by the Secretary of the State in which the company is incorpor- ■ated, and that the signatures of the officers to the certificates of stock are genuine."^" XiABILITIES OF A CORPORATION AcTING AS ItS OwN TRANSFER AgENT. Before stating the variant views of different writers on the subject; in hand, it will be useful to inquire into the extent of the liabilities of cor porations when they transfer their stock through one of their own officers or employees. It is of course beyond the scope of ihis article to discuss the law of stock transfers, concerning which elaborate text-books may be read. A few instances showing the liabilities involved will be sufficient for the present purposes. In an able paper on the subject read before the Trust Company Sec- tion of the American Bankers' Association,^^ Jordan J. Rollins showed that improper transfers may arise "Equally through honest mistake, negligence ■or fraud." Illustrating the statement, he instances cases in which errors have occurred and the issuing corporations have been held liable : (a) Through a mistake of fact where the title to stock was affected by a law peculiar to a foreign state or country. He quotes the United States Court of Appeals that "The validity of a transfer of stock is gov- erned by the law of the place where the corporation is created." (b) Through a mistake of fact where the title to stock was affected by some complicated contractual relation. (c) Through a mistake of fact where a person acting as attorney for •another exceeded his authority in making a transfer. (^) Through fraud on the part of the officer in charge of transfers. As a brief statement of the responsibility of the issuing company, he quotes the United States Supreme Court (Telegraph Co. vs. Davenport, •97 U. S. 369, at p. 371) as follows: "The officers of the company are the custodians of its stock book, •and it is their duty to see that all transfers of shares are properly made, either by the stockholders themselves or persons having authority from them. If, upon the presentation of a certificate for transfer, they are at 80 C. F. Morris, in "Banking Law Journal," Vol. XXII, p. 718. 81 Proceedings Trust Company Section 1904, pp. 29-33. DUTIES AM) LIABILITIES OF TRUST COMPANIES. 417 iill doubtful of the identity of the party olfering it with its owner, or if not satisfied of the genuineness of a power of attorney produced, they cm require the identity of the party in the one case, and the genuineness of the document in the other, to be satisfactorily established before al- lowing the transfer to be made. In either case they must act upon their own re.s[)onsibility. In many instanc(rs they may be misled without any fault of their own, just as tlie most careful person may sometimes be in- duced to purchase property from one who has no title, and who may per- haj)s have .-icquiri'd its jjossession by force or larceny. Neither tlie ab- sence of blame on the part of the officers of the company in allowing un- authorized transfer of stock nor the good faith of the purchaser of stolen property, will avail as an answer to the demand of the true owner." He also quotes the Supreme Court of Massachusetts (Crocker vs. Old Colony R. R. Co., 137 Mass. 417) as follows: "^Vhen a transfer of stock is presented to a corporation it is bound at its j)eril to see that it is a genuine transfer by one who has power of dis- position over the stock. . . . If it issues a certificate upon a forged or unauthorized transfer, the real owner retains his property in tiie stock and the corj)oration may be liable to a bona-fide holder of the new cer- tificate." On the other hand, quoting the same case: "If a proper transfer is presented to a corporation it is its duty to issue a new certificate in accordance with it, and if it refuses, it is liable to the person to whom the transfer is made." Summing up this jiortion of his paper, Mr. Rollins concludes, "For all loss occasioned, whether by fraud, negligence or unavoidable mistake, by it or its agents in the transfer of its stock, such corporation is abso- lutely liable, and no excuse can mitig.ate its liability." Special risks are involved in the transfer of stock at the instance of executors, administrators, trustees or guardians. In a series of articles on this phase of the subject in "Trust Companies" magazine''- Ross Perry cites a number of cases showing the character of the risks. These include: (a) A case where stock held in trust under a will was ordered dis- tributed by a lower court and the corporation so distributing it was afterwards held liable l\v the Supreme Court of the state (Tennessee), notwithst.mding the instructions of the lower court, on the ground that the distribution was not in accordance with the terms of the will, of which the cori)oraticn had or ought to have had notice. (6) A case where the trustees under a will transferred stock in excess of their authority and used the ])roceeds for their own benefit, and the corporation jiermitting the transfer of its stock was held chargeable with a knowledge of the contents of the will which was spread on the public records, and was required to make good to the trust estate the value of the stock. (c) A case where stock held by executors under a will transferred same to themselves as trustees, and afterwards to "A. R., Trustee," the S2 Volume I. pp. 4 IS, 407 and 609. 418 TRUST COMPANIES. latter selling the stock and using the proceeds for his oi»'n purposes. In an action to recover the Court of Appeals (of Maryland) answered tlie plea of the defendant corporation that the mere word "trustee" gave them no notice of the trust, bj^ holding that having been once informed of the will and its provisions affecting the stock in question, that knowl- edge continued all the way down, and the company was bound to see that the trust property in their custody was protected and not misappropriated, and required it to make good the loss. (r/) A case where a transfer on the order of an executor caused loss to a corporation because the executor had not complied with the law of the. testator's domicile before selling the stock so transferred. a\Ir. Perry further shows that where stock is transferred to a trustee, executor, administrator or guardian in an investment of trust funds, the corporation permitting such transfer of its stock may be held liable in case such investment of trust funds is against positive prohibition of law. It must be evident, without further discussion of this topic, upon which volumes have been written, that the corporation which transfers its own stock is subject in the matter of such transfers to very grave re- sponsibilities. Rfsponsibiltty of the Separate Transfer Agent. How much of this responsibilitj^ does the trust comjiany— -or .^ny other separate transfer agent — assimie? Is the relation between the issuing corporation and the transfer agent that of simple agency, and the re- sponsibility of the agent limited to the exercise of good faith and ordi- nary skill and carefulness; or does the agent, in assuming the duties con- nected with the transfer of stock, also assume all of the responsibilities in conjiection with such transfers that the issuing corporation would itself have if no separate transfer agent were appointed } This is a question of most vital importance to the trust company — a question concerning which opinions differ widely, and upon which the courts have not passed. Those who incline to the opinion that the courts may hold the transfer agent liable for more than simple agency call attention to the causes which have brought about the emploj'ment of separate transfer agencies, to the purposes which they now serve and to the possible liability to two par- ties — the issuing corporation and the interested public. Recognizing the fact that convenience and the demands of business were jDotent factors in establishing the custom, they maintain that the demand of the public for additional safeguards, outside of any that the issuing corporation itself could furnish, was an important factor, and is to-day perhaps the strongest single reason why a corporation wishing to market its stock must have the same transferred by a responsible bank or trust company. They show that the stock exchanges generally require the appointment of such agen- cies as a prerequisite to the listing of the stock, and that the public would regard the omission of the appointment of a transfer agent as suspicious and irregular. They argue that it is evident that the general public looks upon the transfer agent as practically a guarantor, separate and aside DUTIES AND I.IAIHLITIKS OF TRL'ST COMPANIKS. ll<) from the issuiiif>; corporation, that a certificate of stock bearing its signa- ture is absolutely valid, and that the holder will be protected by it; and they think it a fair question whether the courts, when a test comes, will not hold to the public's view of the case. As between the principal and agent, tlicy point to the fact that one of the contributing reasons for the agency from the standpoint of the former is the supposition that the trust company is an expert in such work, possessed of superior facilities and endowed with thorough knowledge of the law, and therefore to be held accountable for more than ordinary skill; also to the fact that the prin- cipal ordinarily surrenders to the agent the entire control of the transfer of its stock, thereby i)laeing beyond its own reach any powei to prevent improper transfers, except of course in a few cases in which it may have special knowledge and instruct the agent. " . . . In view of the causes which have resulted in the office and custom, and of the practically absolute control exercised in most instances by the agent, it is certainly prudent for us to anticipate that the courts will decide, when a ))roper ease is jiresented. that the agent is responsible to its principal in the full measure of the consequences resulting to the principal for any acts of the agent. , . . Can it be successfully ar- gued that, while the agent agreed to perform the work, and accepted a cash consideration therefor, the responsibility for the conse(|uence of mistake, however innocent, impliedly remains where it formerly rested, upon the j)rineipal. it having parted with the control of the situation ? I apprehend not."'*'^ "The office not being a creation of tjie cori)oration by reason of any inability on its jiart to perform the duties involved, but being rather a system wliieh custom and stock exchange rules have forced upon it, there is reasonable ground for query as to whether the agent, intervening as it does between the corporation and the public, does not stand for the cor- poration in its relation to the public, and itself assume the liabilities for a careful and responsible handling of the stockholders' interests, for over-issues, and fraudulent issues of stock, and for the many other forms of fraud, the liability of which would fall on the corporation did it per- form these functions for itself. ... In this state of the law, then, forecasts as to how the courts will act on this question when it comes up for direct decision are largely speculative; but the trend of decisions which toueli the liorders of the niatter, and the application of established legal priiu'iples, would seem to indicate that the agent's liability to the interestv^'d j)ublic will be settled as is its liability to the corporation for winch it acts; that the injured party may look successfully for reim- bursement to either the ag«'nt or the corporation or both."''^ Those who hold to the opposite opinion are quite as decided in their views, and are perhaps more numerous. Their position is stated by Philip S. Babcock, as follows ("Trust Comjianies " magazine. \'ol. I. p. .s'j)) ; "I contend that the transfer agent is an agent, pure and simple; re- sponsible for gross and wilful neglect, but in other respects simply repre- ss Henry J. Bowdoin, Proceedings Trust Company Section 1S$I6-1903. p. ISS. 84 Charles A. Greene. In "Trust Companies" magazine. Vol. III. pp. 12. 13. 420 TRUST COMPANIES. senting its principal; and any claims against the agent are properly ans- wered by interposing the principal." Speaking of tlic liability to the principal, Felix Rackemann says in Proceedings Trust Company Section American Bankers' Association, 1896-1903, p. 62: "Lawyers and surgeons hold themselves out as competent and learned and skillful. Should either make a mistake from failure to properly apply some settled principle of his profession, he would be negligent. On the other hand, either might advise or act according to his best judgment in respect of some doubtful or unsettled point, and though in the end proved wrong, would not be guilty of negligence. So with the transfer agent. He is not an insurer and is not to be held to infallibility. He must, however, be cautious and vigilant. For an honest mistake in a matter where the law was unsettled, and in the absence of judicial deter- mination fairly open to different opinions as to true construction, it is hardly conceivable that the transfer agent could be liable to the company." The same writer says regarding liability to the public (page 66) : "There seems to be no ground whatever in the law for thinking that a trust company, acting as transfer agent, sustains toward the share- holder of the stock company any different legal relations than would exist between the shareholder and a small salaried clerk in the office of the company signing the same certificate as 'transfer clerk.' " After calling attention to the fact that formerly this work was done by such transfer clerks, Mr. Rackemann continues: "It was never suggested that such transfer clerk 'represented' any- thing or was legally liable to anybody, so he conducted himself honestly. . . . It would make no difference in the law whether the clerk under the old practice has signed himself clerk or agent. The only changes made under the modern system are that the word 'agent' has displaced the word 'clerk' and financial institutions of character and reputation have displaced the individual unfamed clerks. . . . The argument to the contrary must rest upon the theory that the signature of the trans- fer agent is to be treated as an authentication by one who has contracted with the company and impliedly imdertaken with each investor that only true and perfect instruments shall be authenticated, and although it must be admitted that the agent's signature is required on the instrument, yet it must at the same time be remembered that the object of the added signature has not been to gain added authenticity. The necessity for the agency led to the signature. It was not the desire for the signature as an authentication which led to the agency. A railroad ticket is not good until the agent has put his office stamp and date upon the back. . . . If a ticket proves bad and be rejected, would it be claimed by any one that the agent was individually liable because he had 'authenti- cated' the ticket, or jDcrsonally represented anything whatever about it in the act of stamping it? It is not easy to see any distinction between the two cases." Mr. Rackemann adds that in his discussion he has been referring "Only to those cases where there is merely the signature of the trust company, and the words 'transfer agent.' It may well be that the addition I DUTIES AM) I.IAHlLiriKS Ol IKLSr ( OM I' AM IS. 121 of some very simple aiitl harmless-sounding M-ords will lead to very impor- tant, further and diflerent results." He particularly warns against the use of the word "countersigned." calling attention to the fact that "It has been held in at least two cases that the execution of an instrument inider the word 'countersigned' was equivalent to a direct and positive representation, not only that each original signature was genuine, but that every legal formality esj^ential to the full legal effect of the instrument had been duly observed and performed." Methods of Safkguardi.xg the Transfer Agent. Whnti'ver view may be taken of the situatit)n, it is t\i(Kut that it 'S possible that the liability of the transfer agent might be held greater than trust companies acting in that capacity intend it to be, and that wisdom would dictate the taking of all possible measures to prevent such a possi- bility. A committee on the subject appointed by the Trust Company Section of the .\merican Hankers' Association rt))orted ( Froei < tlings Trust Company Section 1905, pp. 6 and 7): "Wliile the trust companies do not admit that in acting as transfer agent or registrar tluy assume any such measure of responsibility as that suggested by articles read be- fore the convention at various times, it would be desirable to eliminate absolutely the opportunity for any claim that the trust company serving in either capacity is liable save as an ordinary agent. Obviously, there are but two ways in which liability can be defined in advance; either by agreement between the principal and agent or by legislation. The latter was recommended in the article under consideration, since a statute would as clearly a fleet the investing public as the company issuing the stocks transferred or registered. The form proposed for New York was as follows: * * * (The trust company shall have power) 'To transfer, register and countersign certificates of stocks, bonds and other evidences of indebtedness of corporations, with liability to such corporations and to the owners or holders of such certificates of stock, bonds or other evi- dences of indebtedness solely for the negligence or wilful misconduct of its officers in reference to such certificates of stock, bonds or other evi- dences of indebtedness, or in the appointment or employment of its agents, clerks or employees dealing therewith.' If in any state it shall not Ik- possible or convenient to obtain legisla- tion of the character indicated then such protection as may be afl'orded by tlie adoption of appropriate endorsements is recommended." The form of endorsement, or certificate of transfer agents, recom- mended in this re])ort has already been given. ^■'' Other forms of protection that have been suggested are the taking of bonds of indemnity in doubtful cases, the making of special contracts for the agency and notifying all transferees of such contract, and having the transferees subscribe to the by-laws of the issuing company in cases where such by-laws define the responsibility of the transfer agent. 85 P.igo 414. 422 TRUST COMPANIES. The following "Suggestions about Stock Transfers" issued by the Old Colony Trust Company of Boston, and used here with its permission, contain valuable hints regarding the conduct of this business: "Suggestions About Stock Transfers. 1. Signatures of stockholders on stock transfers, when unknown, must be verified in some way satisfactory to the transfer agent. This will usually be by guarantee of some member of the Boston Stock Ex- change or some well-known bank, or by acknowledgment before a notary public. 2. If the holder's name is rightly given on the face of the certificate, he or his duly authorized attorney should sign the transfer exactly as the certificate is made out, without alteration or enlargement. 3. If an error was made in issuing the certificate, the transfer agent should be informed of the facts. Do not make corrections on the face of the certificate. If the assignment is filled out erroneously, alterations should be made in ink only, leaving the original writing legible. Do not use erasers of any sort. 4. Enter in the transfer space on the back of the certificate the full name of each person to whom the stock is to be assigned, writing out the number of shares to be so transferred, and the street or post-office ad- dress of the transferee. It is more convenient to leave the attorney space blank, if one is provided. 5. In transferring to individuals, use the full Christian name; and, if tJie transferee be a woman, the title "Miss" or "Mrs." Avoid using diminutives. 6. In transfers to a married woman, use her own Christian name, not her husband's. In case of a change of name by marriage, send the stock certificate to the transfer agent with the transfer filled out to the correct name, signed after this manner, — "Mrs. INIary James, formerly Mary Jones," having the signature properly verified. 7. Assignments to a corporation or association should give the com- plete legal title. 8. Certificates issued to a minor or an insane person should bear the guardian's name; for example, "John Jones, minor (or incompetent), under guardianship of Henry Jones." If a transfer is desired of stock so held, a recently certified copy of the guardian's appointment should be shown, together with the license of the court appointing the guardian, if such license is necessary under the laws of the state having jurisdiction. Termination of the guardianship should be shown by a certificate from the court, birth certificate, or other satisfactory evidence. 9- On certificates issued to trustees the trust must be fully described, exact reference being made to the will or other document creating the trust; and, whenever possible, the name of the beneficiary should be given. 10. Transfers by trustees, where a power of sale is not granted by the instrument creating the trust, cannot be made without license from the court or the consent of all the beneficiaries. In every case the instru- ment creating the trust and proper evidence of the trustee's appointment should be exhibited. If there is more than one trustee, all must sign transfers. DUTIES AM) I.IAHIl.ITIKS OF THLST COMPANIES. 123 11. Transfers niado by administrators or executors must be accom- panitd by a recently certified copy ot" court ajjpointuu-nt. Wlieii made by executors or adminstrators witlj the will annexed, of estates which have beeh in probate over three years, a certified copy of the will should be shown. It' there is more than one administrator or executor, a majority should sign. /2. Trustees, administrators, executors, guardians, and attorneys should not transfer to themselves individually ; nor should husband and wife transfer directly from one to the other, unless such transfers are authorized by the laws of the state when the transfer is signed. 13. Transfers from corporations or associations should be executed by their officials duly authorized for the purpose, and accompanied by a certified cojjy of the vote or by-law authorizing the transfer. Such vote or by-law should be certified to by an official other than the one signing the transfer. 11. Transfers by attorney must be accompanied by the original or a notarial copy of the power of attorney, and evidence should be given that the signature is genuine. Powers of attorney can be recognized only when the intent of the maker to authorize transfers is beyond doubt, and when the power is recent, or is shown to be still in force. 15. Papers left for record in connection with transfers by trustees, executors, etc., will be returned. 16. Prompt notice of any change of address should be given the transfer agent in writing, stating the name of the company in which stock is held. 17. If a certificate is lost, file notice to that effect with the transfer agent at once, giving, if possible, the certificate number and number of shares. IS. In transfers of stock in Massachusetts corporations by foreign executors, administrators, or trustees, evidence should be furnished that the transfer is not liable to the Massachusetts collateral inheritanee tax. or that such tax has been paid. The foregoing suggestions are subject to change, and should be con- sidered for guidance only." The following general rules written by Frederick \'ierling. Trust Officer The Mississipjii \'alley Trust Co. of St. Louis, also contain valu- able suggestions: "CiENKRAL Rl'LES FOR IsSl'E OF CERTIFICATES OF StoCK. (1) To a man, issue in his name, giving his first name in full and not merely his initial; (2) to two or more persons, issue in their full names, unless a firm: (3) to a woman, issue in her name, giving her first njtuie in full — and make record as to whether she is married or unmarried — the issue to a married woman to be in her own name and not that of her husband: i. c, Evelyn M. Blank, not Mrs. Frederick Blank; (1) to a co-partnersliip. issue in firm name; (5) to a corpora- tion, issue in corporate name — first requiring proof that corporation is authorized to hold shares in issuing company; (6) do not issue to any sole or joint fiduciaries acting under order of court, unless they first 424 TRUST COMPANIES. produce certified copy of order of court showing their authority to take and liold shares; (7) do not issue to any sole or joint fidu^ciaries acting under written instrument, unless they first produce the instrument or a certified copy, and unless under the instrument or the law relating to such trusts they have authority to take and hold the shares — if a recorded instrument keep reference to record, and if not recorded require certified copy for files; (8) do not issue to a fiduciary or to fiduciaries merely as such (as A. B. trustee), but issue to an authorized sole fiduciary or to joint fiduciaries in their names in full, followed by full designa- tion of their trusts — i. e., A. B., administrator of estate of C. D., deceased; A. B., executor under will of C. D., deceased; A. B., guardian of C. D., a minor; A. B., trustee for C. D., under will of E. F., de- ceased; A. B., trustee for C. D., under indenture of trust with him dated ^rarch 1, 1907; A. B., agent for C. D., imder agency agreement with him dated March 1, 1907; (9) no certificate should be issued to any fiduciary, unless appointed by order of court or in writing. General Rules for Transfers of Certificates of Stock. (1) Require surrender for cancellation of outstanding certificate representing shares to be transferred; (2) require execution of assign- ment and power of attorney on back of certificate to be transferred or have properly executed form attached, the signature or signatures to be in the exact name or names as written on face of certificate, and must be by the principals themselves or by their legal representatives formally appointed by order of court or in writing; (3) if signature to assign- ment is not known, require same to be acknowledged before a notary public, or better still, have it guaranteed by some responsible person or persons who are known; (4) require assignment of certificate issued to a firm to be executed in the name of the firm by a general partner; (5) require assignment of certificate by a corporation to be executed bv its president or a vice-president under corporate seal, attested by its secretary or assistant secretary, and accompanied by a certified copy of by-laws showing authority of officers or certified copy of resolution of its directors authorizing the officers named to assign certificates; (6) where there are joint fiduciaries, require all of the acting fiduciaries to join in the assignment; (7) where assignment of certificate is by a fiduciary or fiduciaries acting under order of court, require certified copy of order of court giving authority to make transfer; (8) where assign- ment of certificate is b}^ a fiduciary or fiduciaries acting under written instrument, require production of instrument and examine carefully and see if authority to make trsnfer is clearly given, and if not require in addition order of court authorizing the transfer and place certified copy on file— -if the instrument is recorded, keep reference to record and if not recorded require certified copy for files; (9) require proof that any fiduciary making an assignment of a certificate is at the time still acting DUTIES AND LIABILITIES OF TRUST COMPANIES. 4i>5 as suth fiduciary; (10) transfers by fiduciaries to themselves should not be allowed, unless at the time they are sole beneficiaries of the trust and the trust is termin;art does not exceed the total authorized is- sue. This is the limit of responsibility which a trust company in assuming the office of registrar intends to assume, and which many think the courts will rule it actually does assume. Yet there are a number of lawyers and trust company officials of experience who incline to the opinion that as in the case of the transfer agent, the courts may, when a case actually comes before them, hold the company acting as registrar to liability for inciden- tal and implied obligations which it has not intended to assume — some going so far as to believe that "The duties and liability of a registrar do not differ in any marked degree from those of a transfer agent."'"' As to the historical origin of the office of registrar and the original and present purpose of its employment, there seems to be no disagree- ment. The practice of employing registrars was a result of the disclos- ure in 18(5.'? of the "Schuyler Frauds." in which Robert Schuyler, wh') was president and also transfer agent of the New York and New Haven S6 Henry J. Bowdoln. Procepdlngs Trust Company Section 1896-1903. p. 194. 426 TRUST COMPANIES. Itailroad Company, fraudulently over-issued the stock of his company. As a safeguard against such frauds in the future, the New York Stock Exchange, in January, 1869, adopted a rule requiring all active stocks to be registered by an agency approved by it. "The danger of over-issue was, therefore, the single operating cause. To guard against such danger was the single object of the Stock Exchange rule, and of the subsequent practice adopted in compliance with that rule." (Rackemann, as above, p. 72.) It is evident that the function of the registrar could not in any case be exercised, as the function of the transfer agent could be, by the issuing corporation. The very nature of the office requires the services of a per- son or corporation entirely distinct from the company whose stock is to be registered. The liabilities involved are at the present purely a matter of opinion, as there is practically no law on the subject. The position of those who believe that the liabilities involved may be considerable is illustrated in the following passage (Bowdoin, as above) : "Since the function to be performed by the registrar, which it holds itself out as competent to discharge, is that of a check against the trans- fer agent, in guarding against an over-issue of stock, it becomes necessary for the registrar to scrutinize all transfers, since the issue of a certificate, except against one legally cancelled for the same number of shares, would necessarily result in an over-issue. This duty the registrar im- pliedly, by its acceptance of the office and fee, agrees to discharge. Obviously, if the registrar certifies the issuance of a certificate, thereby placing upon it the last and highest indicia of validity, and loss results to the principal therefrom, the registrar has failed to fulfill the purpose of its appointment; if, by such action, loss enures to a stockholder whose property rights have been wrongfully divested thereby, cannot such stock- holder recover from the registrar, the signature of the latter in accej^tance and approval of the evidences of the transfer being essential to the trans- fer and being the last act in consummation of the transaction by which the stockholder is injured? In the absence of an expressed agreement limiting the liability of the registrar, it would seem that the acceptance of the office carries an acceptance of responsibility for failure to properly perform the functions of the office, and that unless such limitation of liability is brought to the knowledge of the stockholder, and of those who may from time to time become such, the acceptance of the office would also imply an acceptance of responsibility for all acts of the registrar whereby the stockholder is wrongfully deprived of his property interest in the stock. Here again the case against the registrar is strengthened by the quite customary regulations of stock exchanges requiring the sig- nature or counter-signature of a registrar as essential to the validity of the certificate." Referring to the fact that the word "Registrar" appears in the opinion of some to be the equivalent of "Guarantor," Yir. Rackemann says (as above, p. 72) : "It is certainly a matter calling for consideration, because a popular notion, or conviction, though erroneous, is yet quite apt to have its natural DUTIES AND LIAHILITIES OF TRLST COMIWNIKS. u: <^ffVct upon the judicial mind." and In- suggests tlie avoidance of the wort! "Registrar," suggesting in its place "Agent to Register Transfers." He says further (p. 74, as above) : "If the registrar of stock hy the registration, makes a continuing representation to the public that the stock is valid and properly issued, or even within the authorized limit, the registrar is of course concerned to know tliat each transfer is properly made and not merely that a former stock certificate is mutilated in the jirocess known as cancellation. Be- cause it may well be that a stock certificate, mutilated in cancellation to the satisfaction of the most fastidious, would still remain as a matter of law a ])erfect]y valid stock certificate upon which th<- sliareholder named therein would continue to have all original rights and claims. . . . Should the transfer agent, therefore, accept an old certificate and 'punch' it in cancellation without the authority jiroperly given by the true owner, it would not be cancelled, and any stock certificate ))ut out by the trans- fer agent in its place would be .an over-issue, and the registrar, in sign- ing the new certificate, would be registering over-issue stock." Answering his own question, "What does such registration mean.'" Noble B. Judah says (Proceedings Trust Company Section 1904, p. 85): "To my mind, the answer to this question is that such registration means and intends more tlian simi)ly that the trust company, as agent for the company the stock of which is registered, has written some words on the certificate. It has been said in the ])ast that the trust company simply acied as the agent for the other comj)any, from time to time, in registering the respective certificates; and it seems to have been assumed, sometimes at least, that the trust company was under no responsibility to the person taking the registered certificates; but the company whose stock is registered has, if its affairs are honestly .administered, no need on its own part for such registration. Obviously the chief puqiose is to give the purchaser of the stock to understand that a third and disin- terested ])arty is looking after the stock issues. I do not doubt that the courts of some of the states, at least, will so hold. As soon as it is ad- mitted that the registration is jirocured for the pur]>ose of influencing third parties, it is very necessary that their rights be considered, for in such case there will be, sooner or later, decisions holding the registrar to financial resj)onsibility." That there are many who do not agree with these views is shown by the practice of different companies in the method of conducting the work of registration, and by opinions expressed in printed articles. Thus. Willard V. King says ("Trust Companies." Vol. 2, i)p. 416-418) that "We all do in New York" register stock "without looking into the formal- ity of the transfer." Referring to the contention that if the transfer agent improjierly cancelled a certificate and issued a new one the share- holder whose stock was illegally transferred could compel the transfer ."gent to reissue to him the shares illegally taken from him. thus jiroduc- ing an over-issue, he says: "But the answer to this is that the transfer agent, if comjicUed to make good in such a way. would go into the market and buy the necessary shares and cancel them in order to make the required issue to the ag- 428 TRUST CO:\rPANIES. grieved stoekholder. He could not issue them out of hand. It is quite inconceivable that there should be at any instant more stock outstanding than the corporation had authorized, the proper hypothesis being that the transfer agent (assuming that his guilt has been proved) is 'short/ just exactly like a speculator who has sold what he does not own, and is put to the necessity of buying the wherewithal to fulfill his obligations. There would be no over-issue at any stage of the proceedings, and therefore nothing for the registrar to concern himself about." Again, he says: "Moreover, on examination of the details of the procedure it will be found that the registrar has not the facilities for proving tlie jiropriety of the assignments. When a new stock certificate is delivered, the trans- fer agent takes the receipt, which in many cases is the only specimen on file of the new stockholder's signature. To this the transfer agent can refer by way of added verification of that signature when in the course of time the certificate is presented for transfer; but the registrar has not access to it. Powers of attorney, probate certificates, copies of deeds of trust, and other papers showing the authority of various persons to execute assignments of stock, are lodged with the transfer agent; and to suppose that the registrar must keep a duplicate file, or must examine the papers already accepted by the transfer agent, and require a second examination by coimsel of the doubtful cases, is quite absurd." Mr. King objects to the phrase "Countersigned and registered" on certificates, "because the word 'countersigned' is likely to imply something in addition to 'registered.' " The remedies proposed by those who think the situation serious enough to justify caution are practically the same as those already explained for the protection of companies acting as transfer agents. Even those who hold to the opinion of limited liability agree that it is important to ex- ercise great care in the form of the Registrar's certificate. The Commit- tee of the Trust Company Section, American Bankers' Association, al- ready mentioned, recommends '^'^ either of the following forms: "Registered this day of Trust Companj', as Registry Agent." "Registered this day of Trust Company, as Registration Agent." The duties and liabilities of trust companies as registrars of stock are more fully discussed in the list of articles given in the note to the heading, "Liabilities as Transfer Agents." Trustee Under B GNU Issues. When one wishes to borrow upon mortgage security a compara- tively small amount, such as he may obtain from a single lender, the loan may be negotiated upon a single note and mortgage. If, how- S7 Proceedings Trust Company Section 1905, p. 7. DITIKS AND I.IA15JL1TIKS Ol TRIST (O.MPANIKS. V29 ever, a corporation wishes to borrow a suiii ruiuiiiig into hundreds of thousands or millions of dollars, it uuist look to a number of ditf'erent investors to furnish the money, and must su|>ply a corresponding num- ber of notes or evidences of indebtedness, each of which nuist be secured by mortgage. It is manifestly impracticable to furnish each investor with a separate mortgage; and hence there has grown up the custom of issuing a single mortgage securing a number of sejjarate notes or bonds, of amounts (usually .^^lOOO or $:>()0) which are within the reach of the average investor. Jt then becomes necessary to select some one person or corporation to whom, as trustee, the mortgage may run in trust for the several bondholders, and who may identify the bonds issued upon the secnritv ot such mortgage. For these trusteeships the trust company has manifold qualitications, and has come to be generally used. What are its duties and liabilities when acting in this capacity .- In Ihe simplest case of such a trusteeship, if the issuing corporation meets its obligations promptly and regularly, the duties of the trustee may be no more than the holding of the mortgage as trustee, the certifi- cation of the bonds, and, at maturity, the satisfaction of the mortgage and cancellation of the bonds. In many cases, however, the duties of the trustee at the outset and during the life of the bonds are more exten- sive, while in any case the failure of the issuing corporation to comply with the terms of the nsortgage will impose added burdens upon the trustee. When the trust has been accepted the mortgage conveying title to the trustee in trust for the holders of the bonds is recorded, the seal of the •corjjoralion and the sign/itures of its proper officers are placed upon the bonds, and the latter are d<'livercd to the trustee for certification. Before the mortgage is executed or the bonds engr;ived both documents should be submitted to the trustee for examination and approval by its attor- ney. He should see to it that the d«\scriptions of the i)roj)erty to be mortgaged are definite and plain, and that the duties, limitations and liabilities of the trustee are set forth in the mortgage clearly and fully. Upon receipt of the l)onds tlie trustee examines each bond with care to see that all arc in comph te condition, properly signed and sealed, that the nmnber of the bonds is correct and that their wording is according to the form which should l)e gi\cn in full in the mortgage. Having •satisfied itself of these things, the trustee has its secretary sign the trustee's certificate on each bond, and is then ready to deliver the bonds according to the ))rovisions of the mortgage. The conditions to be inserted in the mortgage for the definilitm of the trustee's liability demand careful thought. The following are sug- gested by a Conunittee of the Trust romjiany Section. .Vmerican Hank- ers' Association,"** and will bo found very useful as guides: "As a condition jirecedent to the acceptance of the said trust by the trustee it is further slipidated and agreed by and between the parties SS rroooedlngs Trust Company Section i;>05. pp. 7-!*. 430 TKUST COMPANIES. hereto and all present or future liolders of bonds seeiircd by these pres- ents, that the trustee shall not be answerable for any act, default, neglect or misconduct of any of its agents, representatives or employees, by it appointed or employed in connection with the execution of any of the said trusts, nor in any other manner answerable or accountable under any circumstances whatsoever, except for gross negligence or bad faith; that the recitals contained herein, or in the bonds, as to priority of lien, due authorization or any other mutter whatsoever, are made by and on the part of the company, and the trustee assumes no responsibility for the correctness of the same; also, that it shall be no part of the duty of the trustee to file or record tliis indenture, mortgage, deed of trust, assign- ment or other instrument whatsoever that may be delivered to it under the terms of tliis instrument as a mortgage, deed of trust or conveyance of real estate, or as a chattel mortgage or conveyance of personal property, or to renew such deed of trust or mortgage, real or personal, or to pro- cure any further, other or additional instrument of further assurance, or to do any other act which may be suitable and proper to be done for the continuance of the lien or charge hereof, or for giving notice of the existence of such lien or charge, or for extending or supplementing the same; nor shall it be any part of its dut}' to effect insurance against fire or other damage on any portion of the premises or property hereby mort- gaged, or to renew anv policies of insurance, or to keep itself informed as to the payment of any taxes or assessments, or to require such pay- ment to be made; but the trustee may do any or all of these things. The trustee shall not be compelled to take any action as trustee under this mortgage unless first properly indemnified to its full satisfaction^ nor shall it be chargeable with notice of any default on the part of the coraiJany except upoii delivery to it of a distinct specification in Avriting of such default by some person or persons interested in the trust, whose interest, if the trustee shall require, must be proved to the reasonable sat- isfaction of the trustee. In case at any time it sliall be necessary and proper for the trustee to make any investigation respecting any fact or facts preparatory to taking or refraining from taking any action, or doing or not doing any- thing, as such trustee, the certificate of the company under its corporate seal, attested by the signature of its president or secretary, or the affi- davit of one or more directors, shall be conclusive evidence of such facts to protect the trustee in any action or position that it may take or assume by reason of the supjjosed existence of such facts. It is further covenanted and agreed that the trustee under this deed of trust is, and shall be, entitled to reasonable compensation for all ser- vices rendered liereinunder, or in connection with the trust, which com- pensation, together with any and all necessary and reasonable expenses, charges, counsel fees and other disbursements incurred by the trustee in the discharge of his duties as such, shall be paid by the company or out of the trust estate upon which they are hereby made a lien and charge superior and prior to those of the bonds secured hereby. The trustee shall be protected in acting upon any resolution, notice, request, consent, certificate, affidavit, voucher, bond or other paper or doc- ument believed by it to be genuine and to have been passed or signed by the proper party. DUTIES AND I.IAHII.ITIES OF TRUST COMPANIES. 4.51 Every trustee licreunder may at any time resign from the trust by mailing, at least sixty days before such resignation shall take effect, a duly addressed notice in writing to that effect to the company, and to all bondholders Avho may he known to the trustee to be such, and whose ad- dresses shall likewise be knoM-n to it." The form of the trustee's certificate should likewise be worded with care to avoid the incidental assumption of responsibility which the trus- tee does not intend to assume. For example, it has been held that the statement in the certificate that the bond is "secured" by the mortgage therein referred to may commit the trustee to a guaranty that the bond actually is secured. The committee already referred to suggests the fol- lowing form for the trustee's certificate: "It is hereby certified that this bond is one of the series of bonds mentioned and described in the mortgage or deed of trust herein re- ferred to. Trust Company, as Trustee, By Secretary." The pro\isions for the delivery of the bonds after certification vary greatly. Sometimes all of the bonds are to be delivered to the issuing corporation at once upon the recording of the mortgage; often some of them are to be withheld to take care of underlying bonds, or, as in the case of a railroad construction mortgage, the bonds are to be delivered in installments as the work progresses. Occasionally the entire issue is to be held in the custody of the trustee until the completion of certain work, or the fulfillment of certain conditions. \A'hen any conditions are at- tached to the delivery of the bonds, the mortgage should be absolutely clear as to the conditions, and should specify the evidence to be required that such conditions have been fulfilled. The responsibility of the evi- dence is ordinarily put upon the issuing corporation, the trustee being liable only for the exercise of good faith. After delivery of the bonds the trustee may be called upon to perform \arious duties, dejjending upon the terms of the mortgage and the char- acter of the property. If provision is made for the accumulation of a sinking fund, the trustee may liave divers duties in that connection. The trustee's ])owcrs may include that of releasing portions of the property from the lien of the mortgage. In the case of collateral trust bonds — which are practically long-time collateral notes — the mortgaged property consists of bonds and stocks, and the trustee may be called up to pass upon securities offered in substitution. Outside of its regular duties as trustee, the trust company may perform various services as fiscal agent. The management of a sinking fund involves varying degrees of re- sponsibility. Often the funds received are to be used for the retirt inent of a certain number of the outstanding bonds each year, according to the provisions containetl in the mortirage which secures the bonds. Some- times the particular bonds to be retired are selected by lot. and the result is advertised in the daily ])apers. Whether they are presented 432 TRUST COMPANIES. for redemption or not, they cease to draw interest at the period adver- tised. The bonds thus redeemed are often not cancelled, but are held by the trustee under the mortgage, and interest on them is added to the sinking fund for the further purchase of bonds. In the absence of provision for the retirement of bonds as above stated, they are somer' times to be purchased in the open market from the sinking fund. Occa- sionally the sinking fund is to be invested in other securities, either according to stipulated conditions or at the discretion of the trustee or tlie directors of the corporation. In case of default by tlie issuing corporation the trustee may find it necessary to foreclose the mortgage and sell the property. Not infre- quently various interests among the bondholders institute proceedings which of necessity involve the trustee and add to its duties; and in any case the trustee is obligated, within the limits which should be carefully laid down in the mortgage, to protect the interests of all bondholders alike. If a receiver for the corporation is appointed, and application made for the issue of receiver's certificates to be prior in lien to the bonds, the trustee for those bonds should, through its attorney, appear in court and look after the interests of the bondholders, either favoring or oppos- ing the issue of receivers' certificates as the welfare of the holders of the bonds may dictate. For all special services the trustee is of course entitled to reasonable compensation, the fees agreed upon at the start covering only the routine duties, of which the chief is the certification of the bonds. Regarding the liability incurred in the certification of bonds there are some differences of opinion, which concern chiefly the moral rather than the legal responsibility of the trustee. So far as the trustee is con- cerned the certification is intended for no more than the identification of the bonds as being the particular bonds referred to in the mortgage or deed of trust to which reference is made in said bonds. The trustee does not undertake to guarantee an3^thing regarding the value of the property alleged to be behind the issue, regarding the title to the property, or regarding the regularity of issue, validity or priority of lien of the mortgage. It merely certifies that it has in its possession as trustee a mortgage issued by the corporation whose name appears therein, that the bond' upon which its certificate appears is genuine, is one of the bonds re- ferred to in the mortgage, and that the number of such bonds certified by it is not greater than the number called for in the mortgage. In other words, the certificate intends only to identify the bonds and to prevent an overissue of them. Notwithstanding this very limited legal liability undertaken by the trustee, the company which accepts such trusts without a reasonably care- ful investigation runs the risk of having its reputation, and incidentally its business, seriously injured; and most comioanies recognize that their moral responsibility to the public requires care lest their names be al- lowed to appear in any connection with enteiqjrises regarding the legit- imacy and good faith of which there appears to be any question. There DUTIES AND LIABILITIKS OF TRCST COMPANIES. 433 is of course no oblijfation on tlie i)art of the trustee to feel assured that the enterprise will he successful; that is a risk which the investor must take for himself, and besides, it may well be that enterprises which do not look promisinpf to the trustee may meet with great success and be exceedingly profitable to the investors. But if an undertaking proves to have been from its very incej)tion a "fake," the trust comjiany whose name appears upon the bonds as trustee is very certain to suffer in public esti- mation, no matter how innocent of wrong intention it may have been. The degree of care exercised and the particular matters investigated before accepting an appointment of this kind of course vary with dif- ferent companies. Some do no more than satisfy themselves that the undertaking is legitimate and that the men behind it are acting in good faith. They argue that for the meagre comjjensation received they can afl'ord to do no more, that they are living up to the full measure of their contract; and further, that their doing more would tend to mislead the public. Those who go to the other extreme take pains to verify the cor- rectness of everything leading up to the bond issue, though not admitting legal responsibility for such verification. They satisfy themselves that the issuing corporation actually owns jiroperty which may b« mortgaged (but do not attempt to pass upon the value of such property) ; that the title to the projjerty is good ; that the company has been properly incor- porated and that its acts le;uling up to the l)ond issue have been legal; that the mortgage is properly drawn, contains no glaring faults and actu- ally covers the property which it purports to mortgage. If it is stated in the bonds that the mortgage is a first mortgage, they take pains to ascer- tain that such is the fact. An instance of extreme care in this matter is found in the following list of papers required, prepared by Frederick Vierling, Trust Officer of The Mississippi Valley Trust Co., St. I/)uis, fir the guidance of his com})any: "List of papers to be furnished Trustee in re Bonds to be issued; all jjapers to be certified under seal of Company. Copies of official docu- ments need not be certified by State officials, if Company certifies under seal that same are true copies of official documents and certificates thereto. 1. Articles of Association. 2. Certificate of Incorporation. 3. All amendments to either of above, and minutes and documents in re changes of capital stock, or, if there have been no amenduients, certificate to that effect. 4. By-laws of Company. o. Minutes of stockholders electiui; jiresent directors, with all »>x- liibits. Attach certified list of stockholders with numlx'r of shares each. 6. Minutes of directors electing present officers, with all exhibits. 7, Certificate containing specimen signatures of officers who will sign mortgage, bonds and coupons. 434 TRUST COMPANIES. 8. ^Minutes of stockholders authorizing mortgage, bonds and coupons, with all exhibits. 9. Minutes of directors approving action of stockholders in author- izing mortgage and bonds, with all exhibits attached. 10. Opinion of attorney of Company as to its legal incorporation and existence and that proceedings authorizing mortgage, etc., were duly had according to law, also that form of mortgage, bonds and coupons are valid . in form and when duly executed will be legal and binding obligations of Company. 11. Certificate of title of regular abstractors showing that mortgage has been duly filed for record and is first lien on all property; or in lieu, an abstract of title with opinion of attorne}' based thereon to like eitect. 12. Afhdavit of President and two Directors of Company showing that property mortgaged at fair and- reasonable value is at least as much as amount of bonds forthwith to be issued. 13. General inventory of tangible and intangible property, each separate. 14. Financial statement of Company, showing assets and liabilities. Also, statement of earnings and expenses per year for past five years. 15. Agreement of Company at least annually on demand of trustee hereafter to send statement as in No. 14 and to furnish additional inventories, as in No. 13 on demand of trustee. 16. If principal owners of Company are not known to trustee, let- ters from responsible persons who are known, identifying o\vners. 17. Letter from banker of Companj^ as to its reputation for financial responsibility, etc. 18. Certificate showing fact that each bond signed by officers of com- pany and the seal attached is signed in genuine handwriting of officers purporting to have signed same and that seal affixed is the corporate seal of the compan}^ 19. Copies of all existing franchises of company with certificate showing that all payments thereunder required have been made and that ether conditions thereby required of company to be kept have been per- formed. 20. If mortgage has no specific provisions for delivery of bonds by trustee after authentication, resolution of directors authorizing certain officer or officers of company to receive bonds with specified coupons and give proper receipt. 21. Copy of underlying mortgages Avith certificates as to outstand- ing bonds issued thereander." Between the extremes there are companies which assume varying degrees of moral responsibility. Those who incline to put considerable stress upon the matter of the moral responsibility point to the fact that, however unjustified it may be in so doing, the public does actually attach DUTIES AND I.I AHII.ITIES OK TUL'ST COM I»AMi:S. l:ij a great deal of importance to the trustee's certirioate, and that the eertiri- cate of a reputable trustee is a prerequisite to tlie satisfactory financing of a bond issue. It is a frequent occurrence for the bond seller to clinclj his argument with the statement that the Blank Trust Companv, a rep- utable concern, is trustee for the issue. Some comj)anies, in their adver- tisemcTits for this kind of business, point to the advantages, other than the identification of the bonds, gained by their trusteeship. For exam- ple, a large Eastern company says in a circular, "It adon A's order, the instrument is not an escrow, for its delivery is not dependent upon conditions to l)e fulfilled by B, and the company is not acting as the holder of an escrow, but merely as the agent of A. The duty of the holder of an escrow is to deliver the instruuKnt to the grantee upon his performance of his part of the contract, or to withhold the instrument if the contract be not fulfilled; the one obligation being as important as the other. The holder's liability is measured by the degree of his faithfulness to such duty. If he wrongfully deliver the instrument when the conditions are unfulfilled, he may be liable to the grantor; while upon fulfillment of the conditions, the grantee may compel delivery. It is evident, therefore, that a trust company in under- taking the holding of an escrow* should be sure that the contract is clear and definite and is thoroughly imderstood by both parties. While an oral contract may in some cases lie leijal, the only safe rule is to have the eon- tract in writing and signed by both parties. Particular care should be taken by the trust com]>any to avoid accepting an escrow whose condi- tions are so vague that (juestion may arise as to whether they have been fulfilled, putting the holder in the position of an arbiter of a question whose decision might be a matter of doubt. The holder might then find himself in a very unenviable position, liable to prosecution by either party; or, if not legally liable, at least incurring the ill-will of one or both of the parties. Detositahy Un'oer Pi.axs of Reoroamzatiox. A common function of trust companies, especially in the larger cities, is that of acting as depositary of securities when u corporation is to be 438 TRUST COMPANIES. reorganized or when two or more corporations are to be consolidated — the procedure being practically the same in the two cases. Here the depos- itary is practically the holder of escrows. In the case of a reorganiza- tion, the reorganization committee details in writing the plan proposed, and the security holder, by the act of depositing his securities, enters into the contract. Upon receipt of the securities the depositary issues temporary receipts, which are later replaced by engraved and negotiable certificates of deposit, after the depositary has had time to examine the securities to make sure that they are genuine and are "good deliveries." The exact wording of the certificates varies according to the conditions, but there is an exact description of the documents deposited, a reference to the agreement under which the deposit is made, a statement that the depositor assents to the agreement and that the depositary holds the securities subject to the provisions of such agreement. Each lot of securi- ties as deposited is given an accession number corresponding to the num- ber of the temporary receipt, and is filed away to await the progress of the reorganization. Whenever assessments are to be paid by or distri- butions are to be made to the depositors, the certificates are presented and endorsements of the transactions are made thereon. After the reorgan- ization is complete and the new securities are engraved and ready for delivery, the depositors bring in their certificates of deposit and receive their proper share of the new securities. EXECTITOR OR ADMINISTRATOR. The duties and liabilities of a trust company as the executor or the administrator of an estate do not differ in any wise from those of an individual acting in like capacity, and are quite definitely fixed by law. The employment of the trust company for such services is steadily increasing, and will increase more rapidly as the public be- comes educated to the very superior qualifications of the trust company for this work. An executor is a person or corporation appointed by the will of a decedent to carry out the provisions of such will; and his duties are in general to secure and preserve the assets of the decedent, to protect and pay creditors and to distribute the balance of the property as the will provides or the law dictates. The office is a sacred one, the executor standing as the representative of the deceased and the agent of the liv- ing — the creditors and the heirs. There is a personal element in the office which even a corporation cannot and ought not to overlook. Appointments of trust companies as executors come most often from among those who have during their lives been customers in one or more of the de})artments, though others often make such appointments. The services of the company's attorney are usually offered without charge for the drawing of wills in which the company is named as executor, and the comjiany takes charge of such wills also without charge. Upon the death of the testator, the first step is the probating of the will. The DUTIES AND LIABILITIES OF TRL'ST COMPANIES. 439 court appointed by law to receive wills and have jurisdiction over the estates of the deceased is known in various states as the Probate Court, the Surrogate's Court and the Orphan's Court. After the probating of the will, the executor named therein qualifies before the court according to the state laM'S, and receives from the court letters testamentary, au- thorizing him to proceed with his duties. Then follow the gathering together of the assets, the filing of an inventory, the advertising for claims against the estate. The allowances of the widow or widower and the minor children, if any, are set aside; and if the estate is solvent, and funds are in hand, the preferred claims, such as expenses incurred dur- ing the decedent's last illness, funeral expenses, taxes, etc., are paid. The claims of other creditors arc examined, and those which are allowed may be paid at once or deferred as circumstances dictate; but the executor is of course not protected in paying them unless the estate is evidently sol- vent. If the estate appears insolvent, the fact is reported to the court, and notice of the probable insolvency is published. A part at least of the persona] property is usually to be converted into cash as soon as expe- dient. Real property may not ordinarily be sold unless the will express- ly so provides or such sale is necessary to pay debts; and in the latter case an order of court is obtained. The executor renders statements to the court as circumstances or the law may require. When his work is practically complete with the exception of the final distribution of the propel ty, a statement is rendered and an order from the court is obtained for the distribution of the balance in the hands of the executor. The latter then makes the distribution, files a final account and is discharged. The procedure is practically the same in all the states, the differences being chiefly in matters of detail. Sometimes the trust company is one ■of two or more co-executors, the family lawyer often acting with the company. In such case the trust company usually keeps the accounts and is custodian of the securities, the duties of the other co-executors be- ing chiefly advisory. The trust officer in charge of this work should be well versed in the law of administration, and often special legal advice is needed. Careful judgment is called for in many cases, and the skill of experienced trust companies has often saved large amounts for estates that were threatened with insolvency. Often where debts are j)ressing the company may make temporary advances of money, thus preserving the property. The passing upon claims is a task requiring judgment and a knowledge of the law. Care should be taken not to pay claims barred by the statute of limitations. All records and reports should be full and accurate and one point of tiie trust company's superiority for such work lies in its ability to attend to these matters with skill and care. Getting ))ossession of the assets is sometimes a matter requiring tact and industry. The duties of the administrator are very similar to those of the ex- ecutor. The executor is appointed by the testator and his duties are usually detailed in the will. The administrator's appointment comes from 440 TRUST COMPANIES. the court, and his duties are detailed in the laws of the state, except in the case of an administrator Avith the will annexed. As in the case of the executor, he is charged with the duty of gathering the assets, paj'ing- the debts and distributing the property. His distribution may be deter- mined by the laws of descent instead of by the provisions of a will. The administrator is rarely charged with the sale of real property, and may not make such sale except on order of the court. An administrator is appointed when the deceased has made no will, or has made a will and appointed no executor, or when an executor has failed to qualify, re- fused to act, or died. Trustee. The trust company which is named as executor of a will is also often made trustee under the will ; and in such case after its discharge a& executor it continues the management of specified property in the ca- pacity of trustee. Tnisteeships under wills are also frequently re- ceived independently of executorships. The most common purposes leading to the creation of such trusteeships are the keeping all or part of the estate intact for the benefit of heirs and the endowment of some charitable or educational enterprise. The law limits the duration of trusts for the benefit of persons to the life of two persons in being and twenty-one years thereafter; but trusts for charitable purposes may be in perpetuity. The duty of the trustee involves the entire management of the prop- erty entrusted to his care. The title is vested in him, and his first step is to obtain possession. He is held to diligence, intelligence and good faith in the exercise of his powers, and is responsible for failure to do things necessary to the good of the estate as well as for the doing of illegal or unauthorized acts. He must invest idle funds within a reason- able time and exercise care to make the income of the estate as large as- is consistent Avith the entire safety of the principal. He is under obli- gation to examine the investments held by the estate when he assumes control, to see that they are safe and reasonably productive; and to dis- pose of any that appear unsafe or that are declining in value, as soon as may be expedient, but not so hastily as to cause loss thereby He must, in short, do and refrain from doing things which a prudent man would do or refrain from doing with his own estate; save that he may not take the risks which even a prudent man might take with his own- property, and he must follow to the letter any specific and lawful instruc- tions contained in the will. In matters not covered by directions in the will, he is bound to know and to follow the provisions of the specific or general laws relating to his duties and limitations. The routine duties of the office ordinarily include the preservation and if possible the in- crease of the estate, the investment of funds, the collection and dis- bursement of income, and at the termination of the trust the final dis- tribution of the estate according to the terms of the will. DUTIES AND LIABILITIES OF TRUST COMPANIES. 411 Trusteeships under spet-ial agreement, taking effect during the grant- or's life, may be undertaken for the same purposes for whicli testa- mentary trusts may be created — for any lawful purpose — and may be of the same duration. In case the trust becomes in force at once, the grantor may reserve tlie right to general oversight of the management of the property and the power to alter or revoke the trust instrument during liis or her life, or the trust may be irrevocable. Trusts of this kind are created to establisli a fund for charitable purposes, to provide for support of inconipetent individuals or of individuals who do not wish to manage their own business affairs. Sometimes the trust is created by the grantor for his om'u benefit, to avoid care and res])onsibilitv. The variety of trusts of this character is increasing as the adaptability of the trust company to their handling becomes better understood. A plan that is growing in favor is that of appointing a trust company as trustee of the proceeds of life insurance jDolicies. By this means the insured is enabled to direct the disposition of such funds after his death as he wishes, and at the same time place the funds in the hands of a company amply able to manage them in a business-like manner. The company col- lects and invests the proceeds of the policy or policies, and pays to the beneficiaries the income; or if the amount is not sufficient to provide the income needed for support of the beneficiaries, arrangement may be made for the payment of an annuity for a certain number of years, using the income and gradually reducing the principal. In order to keep the re- maining part of the fund always invested, the trust may be given partici- pation in a mortgage or group of mortgages. In the creation of such a trust, the trust company is named in the policy as beneficiary in trust for whomsoever the grantor may wish, and at the same time there is executed a deed of trust vesting title in the trustee and directing the use of the funds. Another form of trust made possible by the development of the trust company is the accumulation of a fund for the purchase or building or maintenance of a home for the wife or cliildren or other beneficiaries of the donor. In a similar way, churches and educational or charitable institutions may choose a trust company as trustee for the accumulation and invest- ment of an endowment or building fund, thereby being relieved of the care of the moneys and being assured of speedy and safe investment thereof. The trust company is able to invest the funds in small and odd amounts, interest included, by means of participations in mortgages or other securities. The instrument creating a trusteeship by agreement specifies in detail the duties of the trustee, which may be much the same as those of a testamentary trustee. GrAROiAN, C'oNsrnvATon, Etc. As guardian of the estates of minors, or conservator, committee or curator of the estates of the incompetent, the duties are similar to those 442 TRUST COMPANIEIS. of testamentary trustee, tliougli in many states the provisions of law, especially as to investments, are more stringent. In general, the guardian or conservator is obligated to })reserve the property, to keep it on a safe income-producing basis, to use the income discreetly for the benefit of the ward, and at the termination of the trust to turn over the balance on hand. The guardianship of a minor is terminated when the ward be- comes of age; that of a person of unsound mind terminates at death, or may be terminated if the ward regains his reason. The duties require an intimate knowledge of the needs of the ward as to living expenses, education, etc. Guardianship by trust companies is in most states limited to the estate, but in a few states may be either of the person or of the estate or of both. When of the person, the duties involve close personal supervision of the ward, as in the case of an individual acting as guar- dian. The gviardian or conservator is under the jurisdiction of the court, and as in the case of the testamentary trustee makes frequent state- ments to the court. The Investment of Trust Funds. The investment of the funds held in trust in various fiduciary capaci- ties is a matter requiring intelligent judgment. In most states the laws on the subject are quite fully developed both as to the investments au- thorized and those forbidden, and the first duty of the trust company imdertaking such work is to thoroughly inform itself as to the laws of the state or states which govern in the case of each of its trusts. The executor and the administrator are not, as a rule, called upon to invest funds, their duties being rather to convert personal property into cash. Yet there are instances in which the court may authorize them to invest idle funds. On the other hand, trustees, guardians and conservators often find the investment of funds one of their principal duties. The general principles governing such investments are well estab- lished. The fiduciary is plainly under tlie duty of making the estate produce an income, of keeping the funds invested and not allowing them to remain for an unreasonable length of time merely on deposit, even if drawing interest. Yet the security of the principal must be the first •consideration, and the amount of income second. In most states the fiduciary may not take risks in the matter of investments that even a prudent man might take with his own money. Unless specific authority is given in the instrument creating the trust, the funds may not be in- Tested in personal securities, in manufacturing concerns, in trade or business, or in speculation. Investments may not be made in imimproved real estate so as to tie up the funds for long periods. Any specific in- structions as to investments in the will or other instrument creating the trust must be followed. The fiduciary may not derive profit from the investment of the trust funds. In many states the classes of investments permitted are specified by the laws; and in such states the laws must of course be strictly fol- IHTIKS AM) LIAHII.ITIKS Ol TKLST tO.Ml'ANIKS. 1 kS lowed. In some states only general principles are laid down, while in several tlie matter is left to the discretion of the trustee. But in any case the investments are subject to the approval of the court; and the trustee may be coni])elh'd to make good the loss and pay interest if in- vestments have been made which the court cannot approve. In determin- ing what securities tlie court will approve, where the classes of invest- ments are not specified in the laws, the fiduciary may often \>e guided by the classes of investments permitted for savings banks. It sometimes hajipens tJiat classes of investments are specified for guardians, but not for trustees; in which case the latter may be guided by the rules laid down for the former. It is usually possible, and in the case of guardians often obligatory, to obtain an order of court authorizing certain invest- m<'nts. The most common forms of investments authorized are United States, state and city bonds and first mortgages on productive real estate, and where there is doubt these may be relied ui)on. The field is gradu- ally widening, however, and some statis specifically authorize other forms of investments, including loans on collateral, land, bank stocks and rail- road bonds and stocks. A fundamental principle is that investments of trust funds must not be mingled with the assets of the company, and the investments belong- ing to each trust must be kept separate, so that the owner may be readily identified. The fiduciary is, of course, responsible for the safe-keeping of the securities. It is common to allow access to trust securities only to two officers of the company jointly, and removal of such securities from the vault only upon written requisition duly signed. The troublesome problem of the investment of odd amounts and of amounts too small to permit of the purchase of a bond or a mortgagee is being solved satisfactorily by giving the estate a participation in a mort- gage or in a group of securities. IJy this means any amount tliat an estate may have in hand may be made to produce an income without great delay. When securities are purchased at a premium over their face value, the interesting question arises whether the present beneficiary is entitled to the full income, or whether a portion of the income must be reserved as a sinking fund, so that at maturity of the security the princii)al will be intact. The question is of great importance where there is a life tenant to whom the income is to be paid, the principal at the death of the life tenant to go to another party. The question is sometimes settled in ad- vance by the provisions of the instrument under which the fiduciary acts; but when it is not so settled, the safer jil-in is to withliold enough of the income to keep the principal intact. CHAPTER XFII. TRUST COMPANIES OUTSIDE OF THE UNITED STATES. THE trust company has attained its greatest development, by far, in the United States, and in the form in which it exists here may with propriety be looked upon as peculiarly an American institution. The germ of the trust company idea, however, has not been altogether lacking in other parts of the world ; and Australia has developed corpora- tions which adhere strictly to the original and distinctive function of the trust company — fiduciary business. As far back as the beginning of the nineteenth century, the idea of providing corporate agencies for the transaction of business as trustee and agent was put into practice in India by the "Agency Houses." "These were concerns organized to transact biisiness for trustees or indi- viduals, to receive monej'S on deposit, and to administer estates;" and a knowledge of their operations inspired the undertaking of this class of business, as early as 1836, by one of the earliest of American trust com- panies.'"^ During their second occupation of Cape Colony, South Africa, at the beginning of the nineteenth century, it appears that the Dutch estab- lished public corporations for the management of the estates of deceased persons; an idea which the English adopted, after their reoccupation of the Cape, by the establishment of their first "Trustee and Executor Com- pany" in 1832. This company had a capital of X29,100, divided inta 168 shares of <£l75 each. "It combined a purely trust business with a form of banking, and apparently had power to allow interest on trust funds, and to trade with them.°- There are now four trust companies in Johannesburg, South Africa, two of which also do a life insurance business, like the early trust companies of the United States.^^ The Australian Trustee Company. Trust companies, as corporations for the transaction of trustee busi- ness, pure and simple, are well established in Australia, and their business is steadily growing. They appear to have been uninfluenced by the trust companies of the United States, partaking of none of the characteristics of the "financial department store," but adhering to one general line of business. The records of the first of these companies — The Trustees, Executors and Agency Co, Ltd., of Melbourne — show that its organization Avas 91 Sketch of The Pennsylvania Company for Insurance on Lives and Granting Annuities, Philadelphia, pp. 32-35. 92 The Age. Melbourne, Australia, January 21, 1907. See also "Dalgety's Review," Melbourne, August, 1906. 93 Ernest Heaton: The Trust Company Idea and Its Development, p. 34. TRUST COMPANIES OUTSIDE OF THE U. S. nr, inspired by a knowledge of the success of the trustee and executor com- panies of Soutli Africa. It was established in 1878, making progress ratluT slowly for the first few years, during which it had practically no competition. About 1885 the public began to awaken to the value of such institutions, and between that date and 1893 thirteen more coujpanies were organized in various parts of the Conunonwealth, all of which are still in existence, making a total of fourteen companies now doing busi- ness in Australia. Of these, seven are located in \'ictoria, two each in New South Wales and Tasmania, and one each in Queensland, South Australia and West Australia. The table presented herewith, taken from the Year Book of Australia for 1907, gives a list of these companies, with the latest available statistics. The amounts of the estates which are held under administration is published by only seven of the companies, the total for the seven being £';?1 ,1'29,~K). The Year Book estimates the total for the other companies at from i:8.0()(),000 to £10,000,000, mak- ing a probable total of estates held for administration by all the trustee companies of Australia of about £30,000,000. As will be seen from the table, the dividends ranged from 4VL' P<^i" cent, to 11 per cent. — averaging over 8 per cent. — while in some cases the excess of the net earnings over the amounts of the dividends permitted substantial additions to the ■"reserve funds" and undivided profits. The statistics given in the table reflect the different character of the Australian trustee company as compared with the American trust com- pany in one important particular — there are no deposits. The Australian trustee company does not receive deposits, and does neither a counner- cial nor a savings banking business. Nor does it exercise any of the other auxiliary powers common to trust companies in the United States, except that in a few cases safe dej^osit vaults are maintained, which are found unprofitable because the banks do such business free of charge. As will be seen below, the functions of these companies are practically limited to those exercised by the probate division of the trust department of the American trust company. The fourteen companies arc chartered and their jHiwers and limita- tions are defined in every case by private act ; but in Victoria there is also some general legislation designed to regulate the business. The acts are all essentially the same, and their general character may be seen from an outline of the act conferring powers upon the original company — The Trustees, Executors and Agency Company, Limited, of Melbourne, which is also the largest Australian trustee company, and probably the largest com})any in the world carrying on exclusively the administration of estates. It has a })aid-up capital of i;;)0.000, reserve fund and undi- vided profits of £56,8'2(i, and the amount at credit of estates, trusts and clients on December ."^l, 1906, was i:8,754,;>")l. The act conferring powers upon this company starts with a preamble setting forth tiiat, "Wliereas, from the uncertainty of human life and from other causes great ditfieulty often arises in s«-euring the services of suit- 446 TRUST COMPANIES. I c i^nnotuv '^ l°/o?Wll O -lO O «o o § §g ^ w o oo joj lyoaj ^^N: O (^ o ! -PV ^ USTJO -loat ! 'RJ8SSV Jsi^o irv 's;tsoda(i paxij I'saijiJiioas oncin o I ins gs ►^ o u;a TO « f? to cJ c c Hill g«ss >. c o o o a> jD X o ■ E ce CU .5 ■= X S S i H C fc- H 11 S i CO . .a TRUST COMPANIES OL'TSIDE OF THE V. S. 4t7 able persons for the office of trustee, executor and other similar offices; and wliereas, in order to secure the more certain discharge of tl»e duties of such offices a company has been formed and incorporated," etc. Tlie powers granted in this and suceetding acts or by the general statutes of Victoria are (as stated in the couipany's circular) to act a* executor under wills alone or jointly, as administrator in intestate es- tates, as administrator with the will annexed, as trustee under marriage and other settlements, as trustee in eases of settlement of property for the benefit of women and children, as temporary executor, administrator or trustee, as receiver and committee of estates under the Lunacy Statute, as agent for absentees or others, as guarantor or surety for the proper administrator of estates; to take over existing trusts from individual trus- tees, to collect income, invest funds, manage or realize estates and per- form general agency business, and to invest its own funds on clearly defined lines. To the powers specifically granted the company is strictly held by the Trustee Companies Act of 1890, which says (section .385) that a trustee company "Shall not engage in, carry on or be concerned in any business trade venture or undertaking of any kind whatsoever other than such as is expressly authorized by the special act or acts relating to such trustee company, and other than general agency business, and other than the deposit of its own funds with a company or person carry- ing on the business of a bank of deposit, and other than the investment of such funds in the stock debentures or marketable securities of any Gov- ernment corporation or company or on mortgage of real property or Crown leasehold. Provided, that any such company may guarantee the safety of the princi))al and the regular payment of the interest of trust funds committed to its management as executor, administrator or trustee, and provided that any such company may give or enter into any l>ond or guarantee for the purpose of enabling any person or persons to obtain administration of the estate of any deceased person or persons in any case wl'.cre such estate shall be placed under the management or control of such company by the administrator." The section closes wilh these words: "Any director, member (stockholder) or officer of a trustee com- pany wl'.o is shown to be concerned in or a party to any wilful breach of tJie provisions of this section shall be guilty of a misdemeanor." The special, act provides that £10.000 of the capital of the company shall be invested in debentures or inscribed stock of the colony, to stand in the name of the Treasurer of the colony in trust for said comi)any. but transferable only upon the joint consent of the Treasurer of the Colony and the said conipany, or upon the order of the Supreme Court or of a judge of said Court. This fund, together with the balance of the cap- ital, "Iwth jiaid and unpaid," and the other assets of the company, stand in lieu of special bonds in cases of administration. The amount of this deposit for the other companies varies from .£5,000 to £20,000. accord- ing to the size of the company. The stockholders are subject to double liability. 448 . TRUST COMPANIES. The act provides for careful supervision and holds the company and its officials to strict accountability. It is "subject in all respects to the i?ame control and liable to removal as private individuals" acting in sim- ilar capacities. Any person legally interested in an estate under the company's administration may through the Supreme Court compel an accounting. The Treasurer of Victoria may likewise compel the render- ing of an account. The Supreme Court may at any time require an audit of any estate in the hands of the company, by an auditor appointed by said court. The following provision, similar to that already quoted from the general statutes, is significant: In every case where the company acts as administrator, trustee, receiver or committee, "The managing di- rector, manager and directors shall be individually and collectively in their own proper persons responsible to the court, and shall in their own proper persons be liable by process of attachment commitment for con- tempt or by other process to all courts having jurisdiction in that behalf for the proper discharge of their duties and for obedience to the rules, orders and decrees of such courts in the same manner and to the same extent as if such managing director, manager and directors had personally obtained probate or letters of administration," etc. This does not, however, release the assets of the company from liability for pe- cuniary loss occasioned by imperfect or improper discharge or neglect ■of duty. Moneys remaining unclaimed for a period of five years by the person entitled to same are to be paid by the company to the Receiver of Rev- enue in Melbourne, and by him be placed in "The testamentary and trust fund," which is invested in Government debentures or stock. The com- pany is required to deliver to the Treasurer at the end of every six months a statement of all such unclaimed moneys; and for default in compliance with the provisions of this section is liable to a penalty not exceeding five pounds for every day while such default continues, "and every director and manager of the company who knowingly and wilfully authorizes or permits such default shall incur the like penalty." A similar penalty is imposed for failure to render the regular reports to the Government, which must be rendered according to a prescribed form on the first Mon- day in February and the first Monday in August every year. Considering the limitations placed upon the companies, the supervision maintained over them, and the penalties to which the companies them- selves and their officers individually are subject in case of violation of law, one is not surprised at the statement of a recent writer that "Not one of the fourteen trust companies has lost a single penny of its capital or of the money of its beneficiaries, or has ever been removed from trusteeship, or held liable for any neglect, wrong-doing, or breach of trust by any court in the Commonwealth during the whole time they have been in existence." Reference to the table given above discloses the fact that in no case is the subscribed capital paid up, while in most cases the uncalled capital TRUST COMPANIES OL'TSIDK OF THK L. S. 449 far exceeds the paid up capital. Tlie total subscribed capital is £3,253,- 555, the paid up capital £404,422, leaving the uncalled capital £2,849,- 133. This is regarded as a very strong feature of the companies, the uncalled capital being looked upon as a great protection to the creditors. "It is almost unnecessary to point out that this (the uncalled capital) represents a very considerable security for the proper administration ot estates, especially as the companies are generally very conservative with their share lists, refusing to accept as shareholders any who cannot sat- isfy them as to their financial soundness. There is generally a limit to the number of shares which may be held by each shareholder, this being 2,000 in the case of the Perpetual, and there is with most of the compa- nies a provision that a large i)ortion of the capital can only be called up in the event of liquidation, such portion being, therefore, practically earmarked as. security to the trusts.''* The scales of charges for services varies somewhat with the different companies. Those of The Trust Perpetual Tru.«tee Co.. Ltd.. S.vdney, Jn "Trust t."om- panles" magazine. Vol. II. p. 676. 29 450 TRUST COMPANIES. Any person may appoint the Public Trustee a trustee, executor, ad- ministrator, guardian, committee, agent or attorney — subject, of course, to the consent of the Public Trustee — and the duties and rights of the latter are the same as if a private person had been appointed. Trustees may, with the consent of the court, appoint the Public Trustee sole trus- tee in their places, while executors and administrators are expressly au- thorized to appoint the Public Trustee sole executor or administrator. No vesting order is required, as all the property by virtue of the appoint- ment, and without any conveyance or assignment thereof, becomes vested in the Public Trustee. Any testator may deposit his will in the Public Trust Office. Upon the death intestate of an}^ person domiciled or having property in New Zealand, the Public Trustee is entitled to administration as of right, and is not bound to give notice to any person who but for this provision would be entitled to the grant, though power is reserved for the court to make a grant to such person if it sees fit. Where an intestate estate is under £250 the Public Trustee can administer without even getting a grant, and where an}"^ person dies testate, and application for a grant is not made Avithin three months, the Public Trustee can apply for and obtain a grant of letters of administration, unless the executor can satisfy the court that the delay has been unavoidable or accidental. In the matter of procedure, special privileges are allowed to the Public Trustee. The provisions for the disposition of the funds are of peculiar inter- est. A testator or settler may direct special investments for his moneys, in which case the directions are followed, at the risk, of course, of the estate. All other capital moneys, however arising, and whether directed to be invested or not (unless expressly forbidden to be invested) become one common fund, and are invested in certain securities defined in the act. From the income on this common fund interest is paid to the several estates at a rate to be determined from time to time by the Governor in Council, and is credited quarterly. The rate to be allowed is limited to 5 per cent, on amounts not exceeding £3,000, and on larger amounts must not exceed 5 per cent, on the first £3,000 and 4 per cent, on the excess over £3,000. The common fund is practically guaranteed by the state; if the fund is insufficient to meet the lawful claims thereon, the Colonial Treasurer shall pay such sums out of the consolidated fund as may be necessary to meet such deficiency. "The charges for realization of any estate, whether of lunacy, intes- tacy, wills, or agency, are: Any sum up to £1,000, 5 per cent.; on the next £3,000. 3 per cent.; on the next £6,000, 2 per cent.; on all over £10,000, iVi' per cent.; provided that with respect to cash or balances at the bank, or mone}'^ received under any policy of insurance, there shall be charged a percentage of only half the above." These are maximum charges, and may be and often are reduced under special circumstances. With regard to income, as soon as all the property has been realized and TRL'ST COMPANIES OUTSIDE OE THE V. S. I'.l the money has been transferred to the common lund of the office, thr income is as a matter of practice paid to the beneficiaries free of all office commission, though there is a provision for a charge not exceeding 5 per cent, upon such income. The office pays expenses and makts a small profit. The office appj-ars to be of tlie greatest benefit to the connnunity in the handling of small intestate estates. By the Lunacy Act of 188'2, the Public Trustee is authorized to undertake tlie administration of the estates of lunatics in every case where no comniittec may be appointed for tlie estate, and 90 per cent, of estates of lunatics in the asylums are administered by him. According to the New Ztajand Year Hook, the total vahic of the estates in the hands of the Public Trustee in 1903 was as follows: Wills and trusts, £\, 279,7 i3; intestate estates, £197 MS; real estates, .£7,585; lunatic estates, ,£170,585; native reserves, £375,000; West Coast settle- ment reserves, £655,000; xniclaimed lands, £21,501; making a total of £2,706,785. (The population of Xtw Z.aland is about 800,000.) Cax.\diax Thi'st Companies. The Canadian trust companies, as to their powers and limitations, occupy a position between those of the Australian trustee company and the American trust company. While they differ somewhat among them- selves, none of them exercise the wide powers of the latter, and none are so closely restricted as the trustee companies of Australia. Some of the charters under which the difl'erent companies act permit of rather wide powers; but in practice many of the powers have not been exercised, and the business of the companies is mainly confined to the duties of trustee, administrator, the management of estates and the investment of funds. They do not undertake a comnu-rcial banking business, nor do they as a rule take ordinary savings deposits, although three or four of them have in very recent years established savings dej)artments, and one at least is advertising "banking by mail." Until within very recent years ihey have not undert.-iken to do corporate trust work, such as receiving and alloting sub'^criptions for stock, acting as transfer agents, etc.: but a few companies are now doing that class of work. A few of the com- panies are closely associated with loan companies, and trust and loan companies appear under the same headings in the (Jovernment reports — as is the case in several st;»tes of tlu- Union. The number of separate companies now in existence is thirteen, their aggregate resources, including trust funds and estates, being in the neighborhood of eighty million d«»llars. Of these thirteen companies, the main offices of five are located in Toronto, of one in Halifax, of two in London, Ontario, of two in Montreal, of one in Vancouver and of two in Winnipeg. S«'vcn of the companies maintain branches in other cities, the total number of such branches bt ing eighteen. Some of the companies maintain safe dejiosit departments. 452 TRUST COMPANIES. Ontario and New Brunswick have general laws affecting trust com- panies, but the laws are of incomplete character. The Ontario Trust Company Act (18P7, Cap. 206) provides that the High Court may- appoint a suitable person to investigate the affairs and management of a trust company, and the Lieutenant-Governor may appoint an inspector to examine the affairs of such company and report on the security af- forded to those for whom its engagements are held. Applications for trust company charters may be referred by the Lieutenant-Governor to the High Court of Justice for an opinion as to the necessity for incorporation of the company, having regard to the business to be done and companies already incorporated and doing busi- ness, and whether the public convenience and advantage would be pro- moted. If the opinion is unfavorable, the application shall not be pro- ceeded with. The New Brunswick statute (1902, Cap. 106) authorizes the appoint- ment as trustee of a trust company which is approved by the Lieutenant- Governor. The company is subject to inspection at any time, and is re- quired to deposit with the Receiver-General such sum of money or amount of securities as he may deem sufficient as security for the proper per- formance of its trusts within the province. The statutes of both provinces prohibit trust companies from issuing debentures, and authorize them to receive as deposits the sinking funds of municipalities and corporations. Seven of the Canadian trust companies have been established since the year 1900; five were established during the nineties. The first trust company in the Dominion,^ — ^The Toronto General Trusts Corporation, — which is also considerably the largest trust company there, began busi- ness in 1882, under a special charter granted by the Government of Ontario. On December 31, 1907, it reported total liabilities of $32,909,- 902.68, of which the principal items were Capital and "Reserve" (Sur- plus), $1,400,000; Trust, Guarantee and Agency Funds, $16,654,332; Trust Estates and Agencies, $14,785,702. The company confines itself chiefly to trustee business, though its charter grants wider powers. It does not receive deposits, nor underwrite securities. It transacts con- siderable business for the Government of the Provinces, invests court funds, and has control and management of lunatic estates in Ontario. Following is a list of the trust companies in Canada: — The Toronto General Trusts Corporation, Toronto. (Branches at Ottawa and Winnipeg.) The Imperial Trust Company of Canada, Toronto. The National Trust Company, Toronto. (Branches at Montreal, Winnipeg, Edmonton [Alberta], and Saskatoon [Sask].) The Trusts and Guarantee Company, Toronto. (Branch at Calgarv, Alberta.) The Union Trust Company, Toronto. (Brandies at Winnipeg, Ham- ilton [Ont], Regina [Sask.], and London, England.) The Canada Trust Company, London. TRUST COMPANIES OUTSIDE OF THE U. S. 453 The Easttrii Trust Company, Halifax. (Branch at St. John, N. B.) The London and Western Trust Company, London. The Montreal Trust and Deposit Company, Montreal. (Branch at Halifax.) The Royal Trust Company, Montreal. The British-American Trust Company. Vancouver. (Branches at Clrand I'orks, B. C., Victoria, B. C., Winnipeg; Agency at Spokane, Wash.) The Western Trust Company, Winnipeg. The Standard Trusts Company, Winnipeg. Othf.ii CouNTniES. Outside of the United States, Australia and Canada there are no coun- tries in which the trust company has made enough progress to be con- sidered an established institution. Within the past ten years, however, beginnings have been made •which indicate the probability that the trust company movement, in somewhat varying forms, will soon have a firm foothold in a number of foreign countries. Prior to its admission as a territory of the United States, the trust company had been established in Hawaii, and there are now four such corporations in the Islands, all located at Honolulu — The Hawaiian Trust Company, organized in 1898; The First American Savings and Trust Company; The Henry ^^^1terhouse Trust Company and The Bishop Trust Comj)any. The trust functions exercised by these companies include all the ordinary trust powers, and the right "To transact as agents any other business or imdertaking. trust, mercantile or otherwise, which may be necessary, useful or convenient to the main purpose of the corpora- tion." They handle as general agents all kinds of insurance. They have not banking powers, the statute speeitically prohibiting the transac- tion of both a general banking and a savings banking business. There are trust companies operating in Porto Rico, devoted specially to developing the resources of the island. An American company has been formed, with headquarters at Pittsburg, to ojierate in the Philippines. In Cuba a beginning was made by the establishment in January. 1{)06, of The Trust Company of Cuba, located at Havana. It has a paid-up capital of $J00,000, and in June, 1907, had surplus and undivided profits of !f!.*n ,()<)], and deposits of .t.S'2;i.87'-'. It is closely patternt d after the trust companies of the United States, maintaining Ivinking, savings, trust and real estate departments. The laws do not permit the company to act as executor, but an executor may appoint it to act for him. There is a considerable field for the company in the management of property owned by parties who reside in Spain, a large amount of property in Havana being so held. In Mexico there have l>een started several enterprises under the name of trust companies which were organized for speculative purposes by Americans, usually as branches of concerns in the United States, which 454 TRUST COMPANIES. have gone out of existence. Effort has been made to obtain general legis- lation providing for the organization of trust companies, but thus far without success. The only existing trust company incorporated under the laws of the Republic of Mexico is The Mexican Trust Company (Com- pania Fideicomisaria Mexicana) of Mexico City, which has"^ capital of $250,000 ($125,000 United States money), and which includes in its directorate a number of prominent Mexicans. The powers conferred by its charter are exceedingly wide, including the right to do a banking business, to perform all the ordinary trust functions, "To promote the incorporation of all kinds of companies in the form it may deem fit, and to deal in their stocks; to buy and sell securities of all kinds; to buy and sell mines and to work them on its own account; * * * to hold, acquire, transfer or lease concessions granted by the National Government for the exploitation of all kinds of natural products as well as for those which have an industrial object; * * * and in general all such business as the company's board of directors may determine." Plans are on foot for the establishment of other companies, presumably along the same lines. In October, IPOS, a company known as the Banco Fomento Indus- trial Americano was organized at Buenos Ayres, Argentine Republic, with an authorized capital of $5,000,000 — of which at last advices, however, only a small part was paid up. The company numbers among its di- rectors several of the prominent men of Buenos Ayres, which is a pro- gressive city of over 1,100,000 people. It has as its avowed object "The development and enlargement of the established industries in the country or out of it and the introduction of new ones that it is thought advisable and opportune to establish and all the operations that the North Ameri- can trust companies carry on." The powers granted are very wide, in- cluding some of a speculative nature, in addition to the more conserva- tive powers of the trust company as we know it. Japan entered into the field in 1902 by the establishment under Gov- ernment auspices, after an official investigation of the trust companies of the United States, of The Industrial Bank of Japan, Ltd. (Nippon Kogyo Ginko). It had an authorized capital of 10,000,000 yen, which was in- creased to 17,500,000 yen in 1906, and of this at last advices 13,750,000 yen were paid up. The company is fostered by tlie Japanese Govern- ment, which guarantees dividends of 5 per cent, for the first five years. Some of the shares have been placed in England and in the United States, and the stock sells at a good premium. In its first year the company successfully floated in London an issue of 50,000,000 yen of national bonds, a task entrusted to it by the Government. The powers of the com- pany have been considerably enlarged since its organization, and it now advertises its lines of business as follows: 1. Loans on the security of national or local loan bonds, or deben- tures and shares of companies. 2. Subscriptions for or taking over by transference, national or local loan bonds, or the debentures of companies. TRUST COMPANIES OUTSIDE OF THE U. S. 455 3. General deposit and safe deposit business. 4. Business of a trust company. 5. Discounts of bills on SL'curity of national or local loan bonds, or debentures and shares of companies. 6. Loans on mortgage of railway, factory and mine. 7. Banking and attendant business in forcig^i countries. The by-laws of the company define its trust business as follows: "Article 39- The trust "business to be undertaken by this bank shall be in general as follows: 1. To be intrusted with the administration, settlement, etc., concerning money, securities, movable and immovable jjrojjcrties and other prop- erties. 2. To deal in matters relating to public loans, and the loans and shares of companies; such as issuing bonds or del)entures, paying prin- cipal, interest, profit, etc. 3. To deal in matters relating to mortgaging debentures or to giving guarantees on behalf of debtors." England and Scotland. Notwithstanding the fact that since the year 1886 repeated efforts have been made to establish the idea of the corporate trustee in Great Britain, the progress of the movement has been exceedingly slow. Two very formidable obstacles arc yet to be overcome — the excessive conserva- tism of the people, which results in a decided lack of interest in the movement, and numerous legal restrictions which confine corporate un- dertakings of this kind within very narrow limits. Yet the shortcomings of the individual acting in fiduciary capacities are quite generally appre- ciated, and a number of plans designed to remedy the conditions have been proposed in Parliament. One of these was the Judicial Trustees Act of 1896, which after over ten years has failed to interest the public and does not solve the problem. On January 1, l^OS, howevtr. The Pub- lic Trustee Office, authorized by The Public Truster Act of 1}>()7. Ugan business in London, and is meeting with success. On the whole, tlie trust company movement in (ireat Hritain is mak- ing prt)gress, at least eight eor|)i>rations being at present engaged in trying to build up this kind of business. Of these the earliest was The Public Trustee, Limited, of Edinburg, which was established in 1886. This company is strictly limited to the undertaking of trusts. In 1SS7 w.as established the Trustees. Executors and Securiti«-s Insurance Corporation, Ltd., and in 1888 the Law Guarantee and Trust .^(>ci«ty. Ltd.. Ixith located in London. The latter has some eight or ten branelns scattered over Eng- land and Scotland, maintains a trust department, writes fidelity insurance and guarantees the payment of debentures and mortgages. The insurance companies have begun to give their attention to the possibilities of the trust business, the Ocean Accident and Guarantee Cor- poration of London having taken on trust jiowers in the early nineties. 456 TRUST COMPANIES. while more recently the Royal Exchange Assurance Company of Liver- pool, the Commercial Union Assurance Company of London, and some others, have entered the field. There is evidence, too, that the banks may undertake the transaction of formal trust business. The Union of London and Smith's having already done so. European Countries. The trust company idea cannot be said to have gained a foothold as yet in any company in continental Europe. The nearest approach to it is in Germany, where there are some companies of very recent origin which undertake certain trust company functions with regard to the handling of corporations. These have been organized by several of the large banking interests as auxiliary institutions. The first, and for some time the only one of these, The Deutsche Treuhand Gesellschaft of Ber- lin, was organized in 1890 by the Deutsche Bank and the banking-house of Jacob Stern at Frankfort-on-Main. Its business consists chiefly of corporate trust work — the formation an.d reorganization of joint-stock companies, dealing in their shares, acting as agent for the redemption of dividend warrants, transfer agents, etc. The mortgage banks of Germany and Austria, the Credit Foncier, Credit Lyonnais and other companies in France, and similar institutions in some other European countries, perform functions analogous to the lending and savings banking operations of the American trust company,'"' but these are not peculiarlj^ trust functions, and the institutions named da not partake of the distinctive features of the trust company. 96 See Proceedings Trust Company Section, A. B. A. 1896-1903, pp. 243-253, ar- ticle by Charles F. Phillips on "The Business in Foreign Countries Analogous to That of Trust Companies in the United States" . ,/»: BIBLIOGRAPHY. BOOKS AND PAMPHLETS RELATING DIRECTLY TO TRUST COMPANIES. Co.MPAitATiVE Statements of Trust Companies in the State of New York, 1894-1904. New York: George W. Young & Co., 1905. pp 81. Digest of Laws Relating to Trust Companies of the United States. New York: George W. Young & Co., 1905. pp 98. A classified digest of State laws relating to trust companies. Modern Trust Company, The. F. B. Kirkbride and J. E. Sterrett. New York: The MacMillan Co., 1905. pp 309. Up to the present this is the only general work on the subject published. Contains discussions of functions, methods of organiza- tion, duties of ofliccrs and employees, methods of accounting, depart- ments of work, Stock Exchange rules, bibliography. Illustrated with forms. Pennsylvania Company for Insurance on Lives and Granting Annuities. A Sketch of the. Philadelphia: J. B. Lippincott Co., 189G. pp 168. An historical and descriptive sketch of the oldest company in the United States now doing a trust business. Trust Companies in the United States. George Cator. Baltimore: The .Johns Hopkins Press, 1902. pp 113. One of the Johns Hopkins University Studies, and intended to give "a general outline of the subject". Contains historical sketches, discussions of functions, causes of development. State regulation, schedules of State laws. Trust Companies or the United States. New York: Published an- nually (since 1903) by The United States Mortgage and Trust Co. Contains individual statistics of trust companies in the United States, Canada and Cuba. Gives for each company the statement of assets and liabilities, date of organization, quotations of stock, dividends, list of officers and directors. Trust Company Idea and Its Development, Thl. Ernest Heaton. Buffalo: The White-Evans-Penfold Co., 1904. pp 45. Discusses the growth of the trust company idea, advantages and functions of trust companies, sketches of the progress of trust com- panies in the United States, Canada, .\ustralia and other countries. Trust Co.mpanv Question, The. Breckenridge .Tones. St. Louis: The Mississippi Vnlley Trust Co.. 189-. pp ~l-. 458 TRUST COMPANIES. This was the first published pamphlet on the subject, and has not been excelled for a clear statement of the functions and advantages of the trust company, and of the differences between banks and trust companies. The Circulars Published by Various Trust Companies furnish a good source of general information regarding the functions they exercise and the advantages they off"er. PROCEEDINGS, REPORTS AND PERIODICALS. Bankers Magazine, The. New York. Published monthly. $5.00 a year. Has a Trust Company Department, and contains numerous notes and articles regarding trust companies. Publishes annually the pro- ceedings of the Trust Company Section of The American Bankers Association. For an historical study of the subject, the files of this magazine, which run back to 1846, are valuable. Banking Law Journal, The. New York. Published monthly. <$4.00 a year. Has a Savings and Trust Department, gives legal decisions aff'ect- ing banks and trust companies, with discussions of same. Banking Periodk^als. In addition to those named here, most banking periodicals contain occasional articles relating to trust companies. Bulletin of the American Institute of Banking. New York. Pub- lished monthly. $2.00 a year. Frequently contains articles on trust companies. •Commercial and Financial Chronicle, The. New York, Published weekly. $10.00 a year. Contains occasional articles on trust companies, and weekly gives news items regarding same. Publishes annually the proceedings of The Trust Company Section of The American Bankers' Association, Good for statistics of New York trust companies. Comptroller of the Currency, Reports of the. Washington. Pub- lished annually. Beginning with 1875, these reports contain statistics of "Loan and Trust Companies", and frequently contain general information and discussions regarding same. Each report gives a resume of the statistics for the previous years. Ji'oRMs Compiled Under the Supervision of the Trust Company Section of the American Bankers Association. New York: Pub- lished by the Association, IPOS. pp 30, Contains about forty forms for the use of trust companies. The selections were good, but some of the forms have since been ma- terially improved upon. The Section now keeps at its office (5 Nassau St., New York), a collection of forms contributed by its members. HIHr.KKlRAI'IIV. 459 Law Society, Tiik: Procefm)ixgs Twkntv-Nintii Phovintiai, Mektixg, 190;;. London. England. Contains, pp -2ti\r to 26^, a paptr on Trusttc Companies by Robtrt C. Ntshitt. Dtscribts tht- trust.-.- cKuipanirs of Australia and tlu- Public- Trust Ortit-t- of N.-w /t-.il.irid. an.l discusses somewhat analoijous institutions in England. New Zeai.am) Oiikim Yeak Book, 189S. Pages i'>l-i6-i contain a discussion of tin Public Trust Oftiei-, with statistics. New Zealand, Statistics of the COi.ow ok, l!)o;i. (Jives statistics of the Public Trust Office, I8St)-l9()l. Printep I'oK.Ms. Published by The Savings Hank S.etion .»f The .Vuuri- can Ha!iUers' Association. New York. 1 })()(>. A book of forms used by savings banks, taken from sauipl.-s sub- mitted and used by nu-mb.-rs. Contains al>out (JOO forms, arranged under the following headings :---l)eposits, ^^'ithdrawals, Signature and Index Cards, Bond and Mortgage Loans, I)ejM)sitor's Ledgers, Loans, Miscellaneous Notices and Advices, Passbooks. Safe Deposit Co.mi'Axies, The Leoai. RuiiiTs and Dities of. A pami)Iilet containing the reports of special committees of 1901 and 19<>"» of The Trust Com])any Section of The American Bankers Association. Published by the Associati.»n, New York, 19()'>. Be- sides discussion of the matters indicat»-d by its title, the work includes practical suggestions as to rules and other matters, and sonic thirty forms. Savings I^ank Sfctiox ok tiik Amkhk ax Bankehs Association. Pho- CEEDiNGs OF THE. Published annually by the Association. New York. Contain much that is useful for the savings departnu-nts of trust com panics. .State Bankeks' Assoc iai ions, Phoc eedixcjs ok. Tins.- often contain papers regarding trust companits. Tluy an- usually published in local banking periodicals. Stvte Bankin(5 Dei'aktments, Rki'okts .»k. In .States which are strong in trust companies, these reports often contain instructiv.- matter, in addition to statistics. Those of New York are «-spc-cially us«-ful. See also those of >L-issachusetts and Pennsylvani.-i. TiU'.sT Companies. New York. Published ninthly. -t.S.OO a year. A niaga/ine ])ublished monthly sinc-e .Marcli, 19^h^ s \Nork. August, 1902, Vol. IV, pp 2463-5. Public's Stake in the Trust Companies, Thk. World's Work, .him . 1905, Vol. X. pp 6237-9. PiHi.u TiMsTKK, TiiK. Henry D. Ll(\vd. Currrnt Literature. Vol. XXIX, pp 671-2. December, 1J)0(). (Subdivision of article on Some New Zealand Experiments.) Public Trustee, The. E. K. Allen. Niii.temth rintury. \'oI. I.XIII. pp 297-301. February, 1908. Puni.ic Trustee, Some Commfnts on the. William Schooling. Nine- teenth Century. \'oI. I XFFF. pp ifv'. -^:.-.. \Fir.li loos. 462 TRUST COMPANIES. Relation of Trusi Companies to Banks, The. J. Barton Townsend.. Bulletin, Sept. 1, 1904, p 373. Relation of Trust Companies to Industrial Combinations, as Illus- trated BY The United States Shipbuilding Co. L. Walter Sammis. Annals of the American Academy of Political and Social Science, Vol. XXIV, pp 239-270. July, 1901. Reserves of Trust Companies. Festus J. Wade. Bulletin, Oct. 15,^ 1901, p 521. Safeguarding the Trust Companies. C. M. Keys. World's Worky February, 1908, Vol. XV, pp 9907-9912. Stock Transfers. James S. Carr. Bulletin, April 1, 1903, p 10. Supervision of Trust Companies. World's Work, November, 1904, Vol. IX, pp 5457-8. Title Insurance. J. Smith Christy. Bulletin, June 1, 1905, p 23. Trust Accounts in Savings Banks. William Hanhart. Proceedings Savings Bank Section of the American Bankers' Association, 1903. Trust and Title Insurance Companies. Thomas Leaming, Lippin- cott's Magazine, Vol. XLII, pp S;'/i-893, December, 1888. (An early view.) Trust Companies. W. F. Mackay. By.]{f?tin, Aug. 1, 1905, p 266. Trust Companies: Is There Danger in the System? A. D. Noyes» Political Science Quarterly, Vol. XVI, pp 248-261. June, 1901. Trust Companies. Chas. E. WiUock. Bulletin, March 1, 1903, p 7. Trust Companies. Guy Morrison Walker. A pamphlet published by Moore, Baker & Co., Boston, 19('' '~'ontains a discussion of the earning power of trust companies, ;: *^''!' 'asons for their growth. Trust Companies and the Clearik ^^ouse. Horace White. The Nation, Feb. 12, 1903, Vol. LXX'^,!jl, p 126. Trust Companies and the Panic. .William Justus Boies. American Review of Reviews, December, 1907, Vol. XXXVI, pp 680-83. Trust Comp\nies and Reserves. A. S. Frissell. Annals of the Ameri- can Academy of Political and Social Science, Vol. XXXI, p 463. Trust Companies and Their Functions. Samuel ]M. Hahn. Bulletin,. July 1, 1902, p 10; July, 15, 1902, p 11. Trust Companies: Their Organization, Growth and ]\Ianagement. Clay Herrick. Bankers INIagazine, 1904-1907, inch Vols. LXVIII- LXXV. Trust Company Association of the State of New York, The. The Banking Law Journal, Vol. XXI, pp 419-20. Trust Company, The. Arthur H. Coolcy. Bulletin, Feb. 15, 1903, p 9. Trust Company, The. Charles AV. Stevenson. The Bankers' [Monthly, July, August, September and October, 1903, Vol. XXV. BIBLIOGKAI'UV. 463 Trust Company of To-Day, The. Virgil M. Harris. The Banking Law Journal, February, 1905, Vol. XXII, pp 97-101. Tut'ST Estate Max vfJF.MKNT. Joliii W. Marshall. Bulletin, January, 1909, p 51. Trlst Estates. H. B. Loud, Bulletin, October, 190(i, p 1018. WonKiKG Force of a Trlst Company, The. Albert S. Abbott. Bul- letin, Jan. 1, 190r.. p 8t>y. Working For( e of a Trist Company, The. Geo. D. Sears. Bulletin, Dee. 15, 190.1-, p ?()'(). HANKINCi, TKCIINICAL AND GENERAL. (Most tiu.«;t eompanlt's do either a savings or commercial banking business, or both, and a thorough understanding of trust companies Involves an understand- ing of the principles and practice.s of banking and of financial matters in general. In these fields the number of books is quite large, and only a few are included here.) A. B. C. OF Banks anu Bankinc;, The. George M. Coffin. New York: S. A. Nelson, 1903. pp 136. Explains banking theory and })racticc in a simple way. A. B. C. OF Stock Specilati, ;, The. New York: S. A. Nelson, 1903. pp 232. Useful for an underst ling of current methods of dealing in stocks. A, B. C. OF Wall .Street. The. Edited by S. A. Nelson. New York: S. A. Nelson, 1900. pp l6i. E.xplains methods of trading, and gives general information as indicated by title. Include? '•i dictionary of Wall Street terms. AccorNT.\\(Y OF Invest.\ The. Charles Ezra Sprague. New York, 190I'. pj) 9:5. Includes a treatise on ct ,)ound interest, annuities, .imortiz.ition and the valuation of securiti s. Discusses theory of accounts, their form and application to different kinds of investments. American Law Relating to Income A\n Principal, The. Edwin A. Howes, Jr. Boston, 1.005. pp 101. Discusses the legal rules for the guidance of trustees in separating funds derived from investments into income and principal. Bank Systems. Boston: Library Bureau, 1901. pp 40. Practical accounting systems for trust companies and other banks. Care of Estates, The. Frederick Trevor Hill. New York, 1901. pp 176. Practical questions regarding tln' rights, duties and liabilities of fiduciaries. Clearing Hoises: Their History, MnTHons and Administration. James G. Cannon. New York: D. .Vpjileton Ct Co., 190O. pj) 383. A standard work on the subject. 464 TRUST COMPANIES. CoRPOuATioN Finance. Thomas I.. Greene. New York. A study of the principles and metliods of management of the finances of corporations in the United States^ with special reference to the valuation of corporation securities. Foreign Exchange. New York: The Financier Co., 1902. pp 184. Reprint of a series of articles treating the subject in an element- ary way. Funds and Their Uses. F. A. Cleveland. New York: D. Appleton & Co., 1902. pp 297. Describes the methods, instruments and institutions employed in modern financial transactions. Illustrated. History of Banking in the United States, A. John J. Knox. New York: The Bankers' Publishing Co., 190S. pp 902. Gives the history of banking in the United States, with sketches of banking in each of the States. Makes some mention of trust companies. History of Savings Banks in the United States. Emerson W. Keyes. New York: Bradford Rhodes & Co., 1876. Vol. I, pp 438. Considers the subject in a general way and by States. Internationai. Exchange. Anthony W. Margraff. Chicago, 1904. pp SOO. A practical work on the foreign banking department and its administration by American bankers. Laws of the States, The, relating to trust companies. In many States the banking laws, including those relating to trust companies, are printed in separate pamphlets. They may be obtained from the State banking department, if any, or from the Secretary of State. Methods and INIachinery of Practical Banking. Claudius B. Patten. New York: Bankers' Publishing Co., ninth edition, 1901. pp 520. Originally published in 1891 and revised to date. Treats in a very interesting and instructive way of the practical details of the ostal savings banks. With a bibliography. State Bankin(: in the United States Since the Passage of thk National Bank Act, George E. Barnett. Biltinu^re: The Johns Hopkins Press, 1902, pp 117- 466 TRUST COMPANIES. One of the Johns Hopkins University Studies. Treats the sub- ject from the economic standpoint. Theory and History of Banking, The. Charles F. Dunbar. New York: G. P. Putnam's Sons, 1891. Revised edition, 1904. Explains the theory of banking operations, and sketches the prin- cipal foreign banks and the National banks of the United States. Trust Finance. Edward S. Meade. New York: D. Appleton & Co., 1907. pp 387. A study of the genesis, organization and management of industrial corporations. Origin, methods, promotion, sale of stock, U. S. Steel Corporation, capitalization, suggestions for reform and legislation. Trustee's Handbook, A. Augustus Peabody Loring. Boston, 1900. pp 191. States the rules governing the management of trust estates and the relationship between trustees and beneficiaries. Wall Street and the Country. Charles A. Conant. New York: G. P. Putnam's Sons, 1904. pp 247. Chapter VI, pp 205-235, The Growth of Trust Companies. Work of Wall Street, The. Sereno S. Pratt. New York: D. Apple- ton & Co., 1903. pp 286. ExjDlains the subject in theory and practical detail with clearness and interest. Specially valuable for an understanding of financial methods. GENERAL INDEX. • References are lo paces. See aUo Index of Kormsi Accoimtin<;, system of 17-^, 3^5 Accounts, opening of '250, 340 Administrator. dcHnition of. ,'?7; duties of. l.iS; power to act as 79 Advantages of trust companies 3'2. 45 Advertising, cliapter XIII 379 Advertising campaign, 382; copy, j)re))aration of. ;{<>*2 ; for trust business, 390; manager, 170; mi-diums of, 384; reasons for 379 Agency houses in India K i44 Agent for cor]iorations, business as 41 Alabama, 28 ; trust company laws of 90 American Institute of Banking, The 404 Arizona, 28; trust company laws of 91 Arkansas, 28 ; trust company laws of 91 Assignee, duties of, 40; fees as K)7 Attorney of company 171 Audits (sec Chapter XIV). 39"); |)urposc of, 39<); auditing department. 399; duties of auditor 171 Australian trustee companies H4 Babcock, Philip S., quoted n9 Baltimore 12 Bangs, Francis S 3 Bank of England 15 Bankers Magazine, (jiiot. d 7.9. H. 12. 13. 14, l.'>.31.32 Bankers Monthly, quoted 32 Banking by mail HO l^mking departujent, forms and records for. ( li.ij)t«T IX. . . 2 t9 Hanking ))owcrs of trust companies SI Banks and trust companies, comparative growth of. 1}>: com- parison of. 47; competition betw«-en 14 Barnett. George E.. quoted l6 Bibliography ^•''7 Bills discounted 317 lioard of directors or trustees .'>9. 6(). 7''. 3S7 Bond issues, duties and liabilities as trustee under JJS Bond trusts, forms for, 209; recpiisitcs in accvpting ^."!'? lio.)kkeepers. duti«s of I(i7. n)9 Boston 9.11.1^ Jioston ledger. 2()7 ; for general accounts. . 289 Boston Safe Deposit and Trust Company. . 11 468 GENERAL INDEX. PAGE Bowdoin, Henry J., quoted 419, 425 Bradstreet's, quoted 22, 23 Branch banking 409 Brooklyn (N. Y.) Trust Company 11, 13 Buenos Ayres, trust companies in 454 Buildings and offices 410, 411 By-laws 58 California, 20, 28 ; trust company laws of 92 California Safe Deposit and Trust Company 24 Camden Safe Deposit and Trust Company 11 CajDital stock 75, 84 Canadian trust companies 451 Cape Colony, Trustee and Executor companies in 444 Card records 174, 200, 250, 351 Cator, George, quoted 2, 6. 8, 10, 14, 15 Certificates of deposit 330 Certified checks 332 Charter, special 68, 72 Checks, forms of, 253 ; voucher 255 Chicago 12, 17 Chicago Fidelity Safe Depository 12 Chicago Loan & Trust Company 8 Chicago Tribune 17 Chief clerk, duties of 166 Cincinnati, 12 ; Cincinnati ledger 271 Cities, number and resources of trust comjDanies in the larger. 29, 30 Civil War, 8; organization of trust companies after 10, 30, 31 Clearance clerks, duties of 167 Clearing checks 324 Collections 325 Colorado, 28 ; trust company laws of 93 Commercial and Financial Chronicle, quoted 13, 14 ComjDarative growth of banks and ti'ust companies 19 Comptroller of the Currency, quoted, 9, 13, 14, 17, 19, 20; reports of l6 Connecticut 11, 14, 17, 28 Connecticut, Bank Commissioners of, 14; trust company laws of ' 95 Connecticut Trust & Safe Deposit Companj^, Hartford 11 Conservator, duties of 441 Corporations division of trust department, The 33, 185, 199 Coupon clerk, l68 ; ledger and record, 189; record 215 Coupons, handling of, 218; payment of 436 Cremation of securities 211 Customers, forms for the use of, 250, 344; treatment of . . . . 389 Cuba, trust companies in 453 GEXERAI. JNDKX. * ^^jj Daily statement ^,„^ Delaware, 28; trust eompany laws of ' " ' *Qg Departments of trust eompanies .33 Depositary under reorfjanization plans, duties as 437 Deposit with state '^_ D.posits of banks and of trust eompanies, table showing, -Jo; eliart Diputy, safe deposit, appointment of ...^g Development of trust companies ~j ,j Directors, selection of, 66; numlxr r<(,uired, 75; as sources of business ^og Discount powers „., District of Columbia. -2S; trust company laws of 97 Duties of trust companies actin^r i„ various capacities. Chan- ter XVI ' ^,3 Double liability of stockholders j-5 Earning power of trust companies, sources of 52 Employees, qualifications of. 402; duties «.f the various. Chapter VI, l62; selection and treatmoit of u)0. 40.S England and Scotland, trust companies in 455 Escrows ,3- Estates division of the trust department IS."). ][)0. 220 Europe 3. European countri»s, trust companies in 456 Examinations, legal requirements for, SS; discussion of, .-iy.j; various kinds .jn-j Examining conmiittee gl Executive conmiittee gQ Executor, definition of, :i~ ; duties of, kJS; pow«r to act as. . 79 Exj)ense records ^^^ Express packages, record of 218 I'ailures of various classes of financial institutions -22 Farmers' Eire Insurance & Loan Company 2. >{. 1 Farmers' Loan & Trust Company J. (J. 9 Fees, problem of determining, iO.) ; as executor, adminis- trator, guardian, 4()(); as assignee and receiver, K)7; as trustee under bond issues, 407; as transfer agent, 40S : for car«' of estates, 407; ledger for jl8 Fidelity insurance 44, si Fidelity Trust Company. Philadelphia 11 Financing and reorganizlion of corporations 43 Florida, 2S ; trust company laws of 98 Foreign countries, trust eomi)anies in. Chapter XN'II 444 Foreign exchange 408 Formative period, trust companies still in 53 Free Banking Law in New York 7 470 GENERAL INDEX. PAGE Freedman's Savings & Trust Company 12 Functions of trust companies, 1 ; Chapter II 33 Gage, Lyman J 8 General books, 283 ; general bookkeeper 167 General statutes relating to trust comjDanies l6 Georgia, 10, 28; trust company laws of 98 Girard Life Insurance, Annuity & Trust Company 5 Girard Trust Company 6 Greene, Charles A., quoted 419 Greene, Frank 23 Greene, Thomas L., quoted 435 Growth of trust companies, l6; charts showing, 18; causes of. 31 Guarantee & Investment Association, Chicago 12 Guardian, duties of, 441 ; power to act as 79 Hartford 12 Hartford Trust Company 11 Hawaii, 28; trust companies in, 453; trust comjDany laws of. 99 History of the trust company movement in the United States, Chapter I 1 Idaho, 28; trust company laws of 100 Illinois, 10, 16, 28; early trust companies in, 8; trust com- pany laws of 102 Illinois Trust & Savings Bank, Chicago 11 Incorporation of trust companies, 55; in various states, (see Chapter V) 90 Increasing business, methods of. Chapter XIII 379 Indian Territory 28 Indiana, 28 ; trust company laws of 103 Individual books 265 Individual deposits, growth of, 19; chart showing 21 Individual trusts, nature and variety of 34 Industrial Bank of Japan 454 Insolvency business 40 Interest on checking accounts 276 Investment of trust funds 442 Investment business, 38 ; records 220, 321 Iowa, 10, 28 ; trust company laws of 104 Jackson, President 8 Japan, trust companies in 454 Joint tenants of safe deposit box 237 Jones, Breckenridge 12, 48 Journals, individual, 270; general, 284; savings, 348; trust. 182, 190, 197 Judah, Noble B 427 Kansas, 20, 28 ; trust company laws of 105 Kentucky, 20, 28; trust company laws of 106 Kentucky Trust Company 7 GENERAL INDEX. 471 PAGE King, Willard V., quoted 427 Knickerbocker Trust Company, New York 24 Knox, John J., Comptroller, quoted 13 Labor saving devices j t'). 108 Laws of the various states relating to trust companies. Chapter V yO Lawyers and trust companies 52, 392 Ledgers for general accounts, ii84; for individual accounts, '267; for savings accounts, 350; for trust accounts 181. 193 Legislation, trust company, Chapter IV 74 Letters of remittance, etc 326 Liabilities of trust comi)anies acting in various capacities. . . 413 Life insurance companies 9, 10 Life insurance trusts 36 Lincoln, President 8 Loan clerk, duties of, I()5 ; loan departnunt 292 Loans, restrictions regarding 86 Loose-leaf books 1 73, 190 Louisiana, 28; trust company laws of 107 Mail, banking by 410 Maine, 28 ; trust company laws of 109 Managers bond, safe deposit and real estate departments. . . 170 Maryland, 10, 28; trust company laws of Ill jNIassachusetts, 11, 17, 28; trust company laws of Ill ^L'lssachusetts Trust Co., IJoston II Merchants' Loan & Trust Company, Chicago 8 Mexico, trust companies in 1.''3 Michigan, 28; trust company laws of 115 Miimesota, 28; trust company laws of 1 l6 Miscellaneous functions of trust companies ;j1 Mississippi, 28; trust company laws of 117 Missouri, 15, 28; trust com])any laws of Ill' Montana, 28; trust company laws of 120 Morris, C. F., quoted H6 Mortgage deed, form of •'^09 Mortgage loans ^^03 National banks, l(j, 21; growth of deposits, 1>), 20. 21 ; num- ber in 1875, 17; suspensions of 22, 23 National Park Hank, New York 12 National Trust Company, New York 11.13 Nebraska, 28 ; trust company laws of 122 Nevada, 28; trust company laws of 122 New accounts clerk 1^' New England States New England Trust Company, Boston 1 1 New Hampshire, 28; trust company laws of 122 10 472 GENERAL INDEX. PAGE3 New Jersey, 10, 28; trust company laws of . . 123 New Mexico, 28 ; trust company laws of 126 New York, 10, 11, 12, 13, 16, 17, 26, 28, 29, 65; Bank Sup- erintendent of, 13, 14, 15, 16, 24; early trust companies in, 2, 9; incorporation of trust companies in, 55; powers of trust companies in, 77 ; trust company failures in, 24 ; trust company laws of New York Guaranty & Indemnity Company New York Life Insurance & Trust Company New York Mercantile & Trust Company New Zealand Public Trust Office North American Trust & Banking Company, New York. . . . North Carolina, 28; trust company laws of North Dakota, 28 ; trust company laws of Northern Trust Company, Philadelphia Number of trust companies, 16, 17, 18, 19; in various states, 28 ; in various cities Officers and employees Officers, duties of the various Offices and buildings Official checks Ohio, 20, 28 ; trust company laws of Ohio Life Insurance & Trust Company, Cincinnati Oklahoma, 28 ; trust company laws of Old Colony Trust Company, Boston, stock transfer rules of. Opening accounts Oregon, 28 ; trust company laws of Organization of trust companies. Chapter III Panic of 1907 Pass-books, commercial, 251 ; savings, Pennsylvania, 10, 11, 15, l6, 17, 28, 29; trust company laws of ^ Pennsylvania Company for Insurance on Lives and Granting Annuities Perry, Ross, quoted "Pet banks" Philadelphia, 9, 12, 13; first trust company in Porto Rico, trust companies in Powers of trust companies, 76; in New York Private banks, suspensions of Probate business, 37; Probate claim docket, 227; Probate set- tlement docket Proceedings Trust Company Section, American Bankers' As- sociation (See Trust Company Section) Proofs, bookkeepers', 266; tellers' 260 Provident Life & Trust Company, Philadelphia 10 128 11 , 6, 9, 10 11 449 7 133 134 11 29 61 162 410,389 327 136 7 138 422 250, 340 141 54 24 344 142 4,5,6 417 8 4 453 77 22,23 181 (.km: HAL INDEX. 173 PAGE Racktmanii, Felix, (luottd i-*{\, i^o Real estate business, K); trust eonipany holdings of, 80; real estate mortgage loans, 303; real estate department, Chapter XI ;;;,(j Real Estate Eoan & Trust Company, Cliicago 8 Receiver, duties of ; U) Records, remarks concerning 1 7'2 Registering trusts 1 75 Registered mail and express, record of -21$ Registrar of stock, V2; duties and liabilities as 4'i5 Regulation of trust companies, st itutory S3, 89 Rents, record of -i-iS Reorganization and financing 13 Reports S8 Reserves of trust ct)mpanies 26, '2~. S6 Resources and liabilities of trust companies, 1 875-1 y08 25. '26 Rhode Island, 17, -28; trust company laws of 1 U Rhode Island Hospital Trust Company, Providence 10 Rollins, Jordan J H 6 Safe deposit business, 1'), 81, 170; department. Chapter VIII ; 2;Jt Safe deposit companies, early 11 Safe Deposit Company, New York 11 Safe Deposit & Trust Company, Baltimore 11 Safe Deposit & Trust Company, Pittsburg 10 Savings banks, iil ; growth of deposits, 19, 20, -21 ; number in 1830, 9; in 187"), 17; suspensions of, 2-2, 23; progress relative to that of trust companies :) Savings department. Chapter X :H0 Scotland and England, trust companies in i55 Secretary and Treasurer, duties of l63 Securities, records of J-iO. .■^21 South Carolina, 2B; trust company laws of 1 id South Dakota, 28 ; trust company laws of MO State banks, -2i; growth of deposits, 19. 21 ; number in 187'). 1 7 ; suspensions of 22. 23 State regulation (see Chapter IV) 2i Statement of accounts -SO States, statistics of trust com})anies in 28. 30 Statistics of trust companies, 1()-.'J0; tables of 25. 26 Stevenson, Charles W., quoted ■<2 Stewart, John A S Stock, duties and liabilities of registrar of. i2.'> ; of agent for transfers of, US; rules for issue and transfer of 122 Stock ledgers, 209 ; registers 206 Stockholders 38. 388 474 GENERAL INDEX. PAGE Stonc^ Ralph, quoted 2 Stop payments on checks 282 Storage department 244 Sumner, Charles 12 Sundr}^ topics, Chapter XV 405 Superiority of trust companies over individuals in trust ca- pacities 45 Supervision of trust companies 14 Supply de^Dartment records, 337; clerk l66 Surplus fund, accumulation of 84 Surplus and undivided profits, groAvth of, 27, 28; chart show- ing 27 Suspension of banks and trust companies 22-24 Tellers, duties of, 167; records 260 Tennessee, 28 ; trust company laws of 148 Texas, 28 ; trust company laws of 149 Ticklers ". 200,201,210,220,226 Time and labor saving devices 249, 408 Title insurance, 44, 81 ; department. Chapter XII, 369; pol- ic3^, conditions of 373 Transfer agent, 42; duties as, 413; liabilities as, 415; meth- ods of safe-guarding, 421 ; transfer clerk l68, 203 Transfer of stock, methods and forms used, 203; rules for. . 422 Trial balance 277 Trust, definition of 33 Trust & Deposit Company of Onondaga, Syracuse 10 "Trust Companies" magazine, quoted 24 Trust companies in foreign countries. Chapter XVII 444 "Trust Companies of the United States," quoted 10, 17, 19, 20, 28 Trust Company Section of The American Bankers' Associa- tion 24, 32, 47, 74, 84, 175, 405, 414, 416, 421, 428, 436 Trust department, work of, 168; forms and records for. Chapter VII, 1 72 ; methods of increasing the business of. 390 Trust funds, 24.; the investment of 442 Trust officer, duties of l69 Trustee under bond issues, duties and liabilities of 4'28 Trustee, duties of, 41, 209, 440; various functions as, 34-37; power to act as 80 Undivided profits and surplus 27, 28 Union Trust Company, New York 10, 13 Union Trust Company, Providence • 24 United States Mortgage & Trust Company, New York 17 United States Trust Company, New York 7, 9, lO Utah, 28 ; trust company laws of 151 Vermont, 28 ; trust company laws of 152 Vierling, P'rederick 423 GENERAL INDEX. 475 Virginia, 28; trust comp.iny laws of 1 J4 Voucher chocks \t'>5 Vouchers, trust department J-iP Walker, (Juy Morrison 5S Warehouse Security Company, New York 13 Washington, 28; trust company laws of 155 West Virginia, 28; trust company laws of 137 Williams, Clark '. 54 Wills, record of 232 Wisconsin, 28; trust company laws of 159 ^^'ithdrawals on savings accounts 'MS Women as employees ^03 Worcester Safe Deposit ^t Trust Company, Worcester. Mass. 11 Working force, organization of. Chapter Vl 1()2 Wyoming, 28 ; trust comjiany laws of 1()0 Young Men's Christian Association 10 1 INDEX TO FORMS. FIGURES PAGES Advertising list, card for 284,285 382,383 Affidavit to loss of pass-book 251 354i Application for draft 215 331 Appointment of deputy (safe deposit) .... 90 237 Authority to hypothecate securities ... 302 Balance ledger 130 272 Bond memorandum card 43 212 Bond, mortgage 183 308 Bond register 39-42 210-212 Bonds, record of 57,61 221,222 Bonds, registered, record of 46, 47 214 Bonds, requisition for 44 213 Boston ledger 128 268, 269 Boston ledger for general accounts 155-157 289, 290 Cash book, safe deposit 9S 240 Certificate of authority for joint control. . . 234 344 Certificate of authority to draw funds 233 344 Certificate of deposit 2l6 331 Certificate of deposit record 219 333 Certificate of deposit register 21 7^ 218 332 Certificate of deposit of pkge., safe deposit. 100 244 Certified check '. 220 333 Certified check, debit slip for 222 335 Certified check ledger account 223, 224 335 Certified check register 221 335 Check 113 254 Check, counter 115,116 256 Check, official 212 329 Check on savings account 239 347 Check scratcher or journal 132 273 Check, trust department 82 231 Check-stub 1 13, 1 14 254, 255 Check, voucher 117-123 257-259 Check and deposit journal 131, 134 273, 274 Claim docket. Probate 79 229 Clearing House list 203 322, 323 Collateral line ledger 169-171 298,299 Collateral loan envelope 174 302 Collateral note 172 300 Collateral register 175, 176 303 Collection register 204, 205 325 Collection report 209 328 IXDl.X TO roUMS. 47^ FIGfREiJ Collfotion return slip ^.'10 ColK'ctioti tickler vjOCi Collection tracer 'Jl 1 Coupon enclosure form 'lO. 51 Coupon, interest 181, 18^2 Coupon record 12, 18, 41) Credit slip 83, IT)'), Kio Cremation certiHcate ... Daily report, banking department 1()'2 Daily report, safe d»'posit department.... 10.") Daily statement Ifiti-loi Dibit slip 158, 1(J0 Debit slip for certified cluck 'J-2'2 Demand loan ledger Kik 1()5 Deposit slip IDS, iOJ) Deposit slip, duplicate 1 TJ Deposit slip, savings i.'.'{(j Deposit scratcher or journal lliS Deputy, appointment of. safe deposit }>() Deputy-ship, safe deposit, form for revok- ing pl Discount register 1 9 i Discount tickler 195 Draft, application for 215 Draft, New York 21S Draft register 214 Employment application envelope 28() Kndorsement stamp, loan payment IS? Kxpi'use voucher, petty U>1 Expense voucher record 225. 22t) Express and registered mail record 53,51 Eee ledger 52 (ieneral bookkeeper's proof 146 (ieneral cash summary 12(> (ieneral journal 1 47-149 Clener.al ledger 150, 151 Idcutitication card, safe deposit 89 Income on investments, record of 202 Index of inquirers (Real Estate Dept.) . . . 259 Index of owners (Real Estate Dept.) 258 Index of pro})erties (Real Estate Depi.) . . 254,255 IniUx of securities held in trust t)i Inilex of t.iiants 25(5. 257 Iiuiiv idual bookkeeper's proof 127 Inilividual journal 129. 1S1-KS4 Individual ledger 135, IS7, 138 P.VGES 329 326 329 216 .217 307 189 .215 231,291 ,292 211 293 247 286-288 291 -292 335 29'» 251 , 2.'»2 254 346 .273 237 238 317 318 331 330 330 401 313 292 336 218 218 283 265 284 ,285 285, ,286 236 321 360 360 . 358 223 359 266 271.273, 274 274, 276, 277 478 INDEX TO FORMS. FIGURES PAGES Insurance record 74^ 271 219, S66 Insurance tickler 73 227 Interest coupon, mortgage note 181, 182 307 Interest notice 189, 190 311, 315 Interest on loans, record of 63 222 Interest, sheet for figuring 191 315 Interest statement 136 275 Investment ledger 201 321 Investments, record of income on 202 321 Journal, general 147-149 284, 285 Journal, individual 129, 131-134 271, 273-274 Journal, loan l63 294 Journal, Real Estate Dept 274 368 Journal, savings 242-244 349, 350 Journal, trust 7,8,13-15 Tipt-igS Journal and ledger, trust 22 197, 198 Ledger, balance 130 272 Ledger, Boston 128 268, 269 Ledger, Boston, for general accounts 155-157 289,290 Ledger, coupon 12 189 Ledger, fee 52 218 Ledger, general 150, 151 285, 286 Ledger, individual 135, 137, 138 274, 276, 277 Ledger, line 65,169-171 223,298 196-198 299,318 Ledger, loan 164-168 jg. ,... ,311 ■'^1 295-297 185J ^ ^' Ledger, safe deposit 94, 95 241 Ledger, savings 245-249 351-353 Ledger, trust 9-11, 16-22 {\^Jl\ll Ledger and journal, trust 22 197, 198 Line ledger, collateral ' 169-171 298, 299 Line ledger, discount 196-198 318 Line ledger of securities held in trust 65 223 Loan application, mortgage 177,178 304,305 Loan book 192 316 Loan ledger 164-8, 184-5 295-297, 311 Loan payment endorsement stamp 187 313 Loan and income journal l63 294 Lost pass-book, affidavit to 251 354 Memorandum of new tenant 263 363 Memorandum of sale 260 361 Mortgage bond 183 308 Mortgage deed ... 309, 310 INDEX TO FORMS. iTi) FIGURES Mortgage ledger 1 81, 1 85 Mortgage loan applieation 177, 178 Mortgage loan envelope 18() Mortgage loans, record of 59, 6-2, 66, 67 Mortgage note 1 79, 1 80 Mortgage note interest coupon 181, 18'2 Xew York draft *213 Note, collateral 172 Note, common form 1 99 Note, mortgage 1 79. 1 80 Official check 212 Owners of property, index of 238 Package record 1 03 Package, certificate of deposit of 100 Pass-book 110.111 Pass-book, savings 2:5.1 Pass-book, affidavit to loss of 251 Paying teller's proof 125 Pay-roll slip 227 Permission to inspect j)roperty 2(v2 Power of attorney for transfer of stock. . . . 173 Probate claim docket 79 Probate settlement docket 6 Proof, general bookkeeper's 146 Proof, general cash 126 Proof, individual bookkeeper's 127 Proof, paying-teller's 125 Proof, receiving teller's 12 1 Property, index of 251, 255 Property, list of 269 Property listed, description of 253 Real Estate Department journal 271' Real estate loans, record of 59, 62, 66. 67 Real estate loan api)Iication 177, 178 Real estate record 68, 69 Receipt for bonds 45 Receipt for certificate of storage 102 Receipt for coupons 50 Receipt for package left for storage 100 Receipt for rent 265 Receipt for safe rent 88. 101 Receipt for savings book 250 Receipt for stock certificate 30, 31 Receipt for stock left for transfer 27, 28, 29 Receipt and identification card, safe deposit. 89 Receiving teller's proof 121 PAGES 311 301 ,305 313 221 -221 306 307 330 300 319 306 3'29 360 216 21 i 2 .") 2 . 253 :M3 ■a:> t 26.> . 261 338 36s 301 229 182 283 265 266 263 . 261 261 ,262 358 365 357 368 221 -221 301 .305 2 1 9 . 225 211 215 216 211 361 235, . 215 351 201 202. 203 2.36 261, ,262 480 INDEX TO FORMS. FIGURES Register of trusts 1-5 Registered mail and express record 53, 54 Release from mortgage ... Remittance letter 207-209 Removal memorandum 264 Rent book 70, 71, 275 Rent notice 266, 267 Rent, receipt for 265 Rent record 72 Rent roll-book 270 Rental, renewal and surrender book 104 Rents collected, statement of 273 Report, daily 105, 162 Report of sale 26l Report to Executive Committee 193 Requisition for bonds 44 Requisition for supplies or repairs 268 Return slip 210 Safe deposit department cash-book 93 Safe deposit ledger 94, 95 Safe deposit register 92 Safe deposit tickler 96 Safe register 97, 98 Safe rent, receipt for 88, 101 Sale agency contract 252 Sale, memorandum of 260 Sale, report of 26l Savings account, check on 239 Sa\'ings book, receipt for 250 Savings deposit journal 243, 244 Savings deposit slip 236 Savings ledger 245-248 Savings ledger trial balance 249 Savings pass-book 235 Savings vi'ithdrawal journal 242 Savings withdrawal slip 237, 238 Securities, record of 56-62, 66, 67 Settlement docket, probate 6 Signature card 106-7, 230-2 Statement, daily 152-154 Statement of account 140-143 Statement of borrower, form for 200 Statement of rents collected 273 Statement to beneficiaries 84-86 Stock ledger 35-38 Stock, record of 58, 6l PAGES 175 -181 218 312 326-328 363 226, 368 364, 365. 364 227 365 246 368 247 293 362 316 213 365 329 240 241 239 242 242 243 235 245 356 361 362 347 354 349 ,350 346 351 ,352 353 345 346 349 ,347 219,221 -224 182 250,341 ,342 28fi -288 278 -281 319 ,320 368 232 207 221 -209 IN DFX TO FORMS. 481 FIG i; RES Stock transfer book or register 3:2-34 Stop-payment nieniorandinii 11-4, li5 Siihstitution of collateral, form for l66 Supplies, record of 228 Tax book 75-78 _ Tax record 272 Tenant, memorandmn of new 263 'I'eiiants, index of 2:')6, 257 Tickb-r, collection 206 Tickler, discount 195 Tickler, insurance 7.S Tickler, safe deposit yfi Tickler, time loan 188 Tickb-r. trust department 2.S-2(). a J Time loan ledger Ifi7, l()8 Title, application for guarantee of 276 Title insurance policy 277-282 Title insurance policy register 28.S Tracer, collection 211 Transfer of stock, power of attorney for. . \~:i Trial balance book l.'jj) Trust regist»T 1-.') Visitors' register, safe deposit 99 Voucber cbeck 1 17-12.S \'ouclier, petty expense l6l \'oucb«'r, trust department 80, 81 \'oucber record, «xpense 225, 226 Wills on Hie, record of 87 A\'itlidrawal, ackn«)wledgment of notice of. . 211 NN'itlidrawal journal, savings 2I'2 Withdrawal, notice of 2iO Witbdrawal slip, savings 2.S7, 2.S8 PAGES 205, 206 282 296 838 228 867 S6S 859 826 818 227 242 3\S 199-201,220 296, 297 .S70 .S7 1-377 378 329 301 277 175-181 244 257-259 292 229, '2S0 336 288 348 349 347 346, 3 t7 ^"^^ ' -I OCT 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. This book is due on the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. «Apf6l©F 1^^^ 2 7 mi uweiss ^o\.o ■W#4^ mi LD21A-507n-12,'60 (B6221sl0)476B General Library University of California Berkeley YD 05517 « Ul^IVERSITY OF CALIFORNIA UBRARY