i|H|m|miiiil|i!iji||lHm^ lu ; ■> f .- ( > i ■ < j ; Hi||ij||lljii|H|y •njimiimijijllj -'PPIilliyiiillllpniiih m iiiiii!: ■'liliilliii' liiiiiiHillill IPL., ^Hiillj- ^!i!!! ^ jmiiiiiiiyiiiililli ^SHlHa- -Sl\Iif t>«2^ }\. UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY LIABILITIES OF TRUSTEES FOR INVESTMENTS GENERAL PRINCIPLES STATUTES AND DECISIONS OF THE VARIOUS STATES TYPICAL LIST OF INVESTMENTS LEGAL IN CONNECTICUT, MASSACHUSETTS MARYLAND AND NEW YORK BY FRANK C. McKINNEY OF THE NEW YORK BAR ROCHESTER. NEW YORK THE LAWYER'S CO-OPERATIVE PUBLISHING COMPANY 19U Copyright, 1914, by FRANK C^ McKINNEY 4] f' PREFACE A careful search has revealed the fact that there is no sepa- rate treatise in the United States dealing with the subject of investments by trustees. It has seemed advisable, therefore, to prepare a volume devoted to a discussion of general prin- ciples, a compilation of the statutes of the states, and a digest of the leading decisions in each state. For the benefit of trustees and for the purpose of indicating the extent to which some of the states have gone in extending the field of invest- ments, a list of securities which are legal in those states has also been added. Although the list may be revised slightly from time to time, the securities named are standard and are, with a few exceptions, likely to remain legal. Lack of uniformity in the laws of the various states is not- able, and the work will justify itself if it affords a present guide for the proper investment of trust funds and at the same time indicates the necessity for uniform laws on the subject and the creation of reliable sources of information for the benefit of trustees. The need for such a book has been evident in connection with the preparation of the legal discussions for Trust Com- panies Magazine, and the author wishes to express his appre- ciation for valuable suggestions made by the editor of Trust Companies Magazine, and ]\Ir. Orrin R. Judd, Assistant Trust Officer of the Columbia-Knickerbocker Trust Company. 59 Wall Street, New York. May 25, 1914. CONTENTS. PAGE Inteoduction ^" PAET I. General Principles ^ Investments legal in all states ^ Investments not legal in all states ■'■" PAET II. State Laws and Decisions ^^ Alabama Alaska ^^ Arizona ....••••••• 20 Arkansas California 22 Colorado ^^ Connecticut ....••••••*•'• Delaware District of Columbia ^5 Florida ^^ 71 Georgia Hawaii ^^ Idaho l'^ Illinois 79 Indiana ^^ 87 Iowa Kansas ^^ Kentucky ^^ Qfi Louisiana Maine 100 Marvland 104 Massachusetts -"-^ Michigan 1^^ 14Q Minnesota -^^^ Mississippi ^'^^ Missouri 1^^ Montana 1^'^ Nebraska 1^^ V VI CONTENTS. PAGE Nevada 161 New Hampshire . . . . • . • • • .163 New Jersey .......•••• 172 New Mexico ......•••• 183 New York 184 North Carolina 197 North Dakota 200 Ohio 202 Oklahoma 209 Oregon ........••• 211 Pennsylvania 213 Porto Eico 220 Ehode Island 221 South Carolina 223 South Dakota ,. . 226 Tennessee 228 Texas 231 Utah 234 Vermont 236 Virginia ......••••• -41 Washington .......••• 246 West Virginia 248 Wisconsin ......•,•••• 251 Wyoming .......••■• 256 PART III. Typical List of Legal Investments 258 Connecticut . 260 Massachusetts .......... 281 New York 300 INTRODUCTION There is no general rule governing the investment of trust funds in the United States. The trustee must look to the statutes and decisions of his own state and must exercise his best judgment. Too frequently the laws are not specific. He is then told to act in good faith and to exercise the care and prudence which the average man would exercise in his own like atfairs. But at the same time he may exercise this care and prudence in selecting only from such securities as are authorized by law. Consequently, no matter how careful and prudent he may be, he runs the risk of loss if he invests in other than legal securities. Neither may the trustee follow the laws of another state as his guide. The fact that the State of Massachusetts per- mits investment of trust funds in corporate stock is no argu- ment for the legality of such an investment in AVisconsin. The fact that New York permits a trustee to invest in certain rail- road bonds is no argument that a trustee in New :\Iexico may follow the New York rule. An investment in securities which are legal in other states may be evidence of the good faith and diligence of the trustee, but it is not a complete defense for the legality of the investment. The general impression, therefore, that an investment which is legal in New York, or the New England states, is also legal in the western states is false, for the western states have adopted the strict old Eng- lish rule more frequently than the Massachusetts rule. A common illustration of the lack of uniformity on the sub- ject and of the futility of attempting to formulate general rules is the diversity of statutes and decisions as to the right of a trustee to continue investments which have been made by the creator of the trust. ]\Iany well-informed trustees think that it is proper to continue investments which were made by the creator of the trust, whether such investments are legal for trustees or not. In some of the states this is the law ; but in others it is the duty of the trustee to call in so much of Vlll INTRODUCTION. the estate as is not invested in authorized securities and eon- vert it into investments which are legal. The states which permit the trustee to continue investments do so on the theory that the creator of the trust intended his own selections to remain. On the other hand, the states which require the trustee to call in the estate do so on the theory that in selecting the trustee the creator of the trust placed special confidence in him and, in the absence of specific authorization, intended that he should execute the trust in accordance with the law gov- erning investments. It is evident, therefore, that a trustee must look to the laws of his own state in deciding upon proper investments. But the discussion of general principles, which precedes the statement of the statutes and decisions of the various states, will be found helpful where a state has not provided definite rules for the guidance of trustees. AVe mention briefly the law of England relating to invest- ments of trust funds, because the rules which have been adopted by the various states have as their basis the principles which were worked out by the English courts of equity, and because England has adopted a uniform law governing the investment of trust funds. At one time the English courts were liberal in their treatment of trustees, permitting them to invest even in personal securities where it was shown that the trustee had exercised due diligence. But later the rules were restricted and it was even doubted whether a trustee could safely invest in mortgage security. Finally, in a leading case, Sir George Jessel said that, "A trustee ought to conduct the business of the trust in the same manner that an ordinary prudent man of business would conduct his own." This was the general rule, and in the application of this rule the courts restricted the trustee, in his choice of investments, to govern- ment securities and first mortgages on real estate. At last the English Trust Investment Act of 1889 was passed, prescribing definitely the securities in which a trustee might lawfully invest. AVith but few changes, made to suit changed conditions, the act remains. The second reason, then, for discussing briefly the English law is that it indicates how INTRODUCTION. 1^ effectively that countrj- has provided a simple rule for trustees to follow. Instead of uncertainty— the kind of uncertainty which exists in many of our states — there is a well-defined guide. A list of investments, sufficiently extensive and yet safe, allowing the trustee plenty of latitude, has been author- ized by the Trust Investment Act of England. The trustee is not compelled to guess at the value of the security or to take another's word for it. His problem has been simplified. It is unnecessary to set forth the English act in detail, but it provides for investment in parliamentary stocks or public funds; real or inheritable securities in Great Britain or Ire- land ; stock of the Bank of England or of the Bank of Ireland ; India stock; any securities, the interest of which has been guaranteed by Parliament ; consolidated stocks created by the Metropolitan Board of Works, or debenture stocks created by the Receiver for the Metropolitan Public District, and cer- tain railway stocks in Great Britain, Ireland and India. Defi- nite qualifications which a railroad must possess before its stock can be considered as an investment suitable for trustees are stated in the statute. Provision is also made for invest- ment in certain municipal stock and the stock of certain city water supply companies. A few of the states have provided for investments by trus- tees in a similar definite form, and have permitted invest- ments in railroad bonds, provided the road has fulfilled certain requirements as to financial condition. This is a step in the right direction, and to be perfect needs but the addition of a reliable source of information regarding the roads which fulfill the requirements of the statute. It is evident that if a uniform law for investment of trust funds were passed for all of the states, it would not only be progressive legislation, but would be a recognition of reforms which, for twenty-five years, have proved beneficial to the large number of trustees in England. Surely, if reference to the English law on the subject does no more than stimulate thought it will have justified this brief reference to it in a book which is to set forth the laws governing the investment of trust funds in the United States. PART I. GENERAL PRINCIPLES. 1. Necessity of Stating General Rules. Because of the lack of uniformity among the various states as to investments which are legal for trustees, and because many states have not formulated definite rules governing trustees in their investments, it is necessary to set forth, as accurately as may be, the investments which have been gen- erally recognized as legal for trustees and the principles Avhich have usually l)een applied to such investments. Some of the states, either by statutes or court decisions, have established rules for the investment of trust funds which are fairly definite; others have gone little further than to provide that the trustee must exercise the care and prudence of the average person, and still others have said nothing about the character of investments which a trustee may make. But this does not mean that in the states where the law is unsettled, the trustee may invest trust funds as he pleases. It does not mean that in the states wliich merely prescribe the rule of "good faith," the trustee may frame his own definition of "good faith." In such states, it is important, therefore, that the trustee keep well within the classes of investments which have been gen- erally recognized as legal. Both in England and the United States, the courts have agreed upon certain investments which, when honestly made, relieve the trustee from liability for loss. When in doubt, he should follow these rules, although they are not as liberal as one would desire in this day of increased opportunity for safe investments. 2. Continuing Investments made by Creator of Trust. The first duty of a trustee is to call in the estate prepara- tory to investment. The extent to which he must go in call- 1 2 GENERAL, PRINCIPLES. ing in the estate and converting it into investments which are legal, depends upon the provisions of the trust instrument, and the law of the state in which he acts. The instrument itself may authorize him to continue the investments made by the creator of the trust, or the law of the state may authorize a continuance of such investments. In the absence of one or the other of such provisions, it is the duty of the trustee to call in the estate and convert investments which are not legal for trustees into investments which are legal. In the absence of specific authority, he cannot safely continue an investment simply because it was made by the creator of tlie trust. The authorities are divided upon the question. Of the few states in which it has been definitely determined, the right to continue investments is recognized in Massachusetts,^ Con- necticut,- New Jersey,^ Kentucky,'' Illinois,^ New Hampshire," and apparently in Delaware.'' But the following states have decided that the investments made by the creator of the trust afford no criterion for the trustee, and that it is his duty to call in the estate and invest in authorized securities: New York,® Pennsylvania,^ Ohio,^*' South Carolina,^^ Virginia, ^^ ^nd AVest Virginia.^^ It is evident that in states where there are no statutes or decisions upon the question, the only safe course for the trustee is to call in the estate and invest it in legal securities. 1 Harvard College v. Amory, 26 Mass. 446. 2 General Statutes, Sees. 255, 496. State v. Washburn, 67 Conn. 187, 3 Statutes, 1910, Sec. 34. 4 Fidelity Trust Co. v. Glover, 90 Ky. 355. 5 Laws of 1905. Merchants Loan & Trust Co. v. Northern Trust Co., 250 111. 86. 6 Laws of 1907, ch. 16. 7 Statutes 1895. 8 Matter of Meyers, 131 N. Y. 409; Matter of Hirsch's Estate, 116 A. D. 367; Aflf'd. 188 N. Y. 584; Cannon v. Quincy, 65 Misc. 399. ^Skeer's Estate, 236 Pa. St. 404; Bartol's Estate, 182 Pa. St. 407. 10 Weyer v. Watt, 48 O. S. 545. 11 Nance v. Nance, 1 S. C. 218; Spear v. Spear, 9 Eich Eq. 184. 12 Miller v. Holcomb's Ex'r., 50 Va. 674, but the rule is modified in Patterson v. Horsley, 70 Va. 263 and Walkins v. Stewart, 78 Va. 111. 13 Anderson v. Piercy, 2.0 W. Va. 282. WORDING OF TRUST INSTRUMENT. O There is authority, however, for the rule that in states where there are no fixed funds or securities in which trustees shall invest, "the fact that a testator has invested his prop- erty in particular stocks, shares of corporations, mortgages, or other securities, thus indicating his confidence in such invest- ments, will go far to justify the trustees in continuing them."^ 3. Duty to Invest. A trustee may not permit the funds to lie idle. The rule is well settled that he must invest within a reasonable time and must keep the funds productive. This rule applies also to any interest or increase which comes to the estate. By negligently permitting the fund to remain idle the trustee renders himself liable for interest at the legal rate. 4. Must Obey Directions in Trust Instrument. A trustee is bound to follow strictly the provisions of the trust instrument. If the creator of the trust specifies the character of investments to be made and the security to be taken, his instructions must be followed, no matter what the law may recognize as legal investments. He may direct the trustee to continue a business or to invest without security of any kind. 5. Wording of Trust Instrument. The instrument creating the trust frequently provides that the funds may be invested by the trustee in accordance with his "best judgment" or "within his discretion," or as he shall deem for the "best interests of the estate," or in "good and safe security." The courts have generally decided that the use of such terms does not give the trustee authority to invest in unauthorized securities. Generally, these and like terms have been construed to mean that the trustee mav ex- 1 Perry on Trusts, Sec. 465. Norwood, Admr., v. Harness, 98 Ind. 134. 4 GENERAL PRINCIPLES. ercise his judgment or discretion in selecting investments from those which are recognized as legal. Only by clear and specific instructions in the trust instru- ment, and not in general terms, can a trustee be justified in investing in other than legal securities. 6. Must Exercise Ordinary Care and Prudence. The most common rule found in the decisions is that a trustee, in making investments, must exercise good faith and must use the care and prudence of ordinary men of affairs. This sounds easy, but it is not. The rule has been defined and limited in so many ways that a trustee cannot be safely governed by his own understanding of "care and prudence." For instance, he might very well believe that an investment in certain corporate bonds would be an exercise of the greatest care and prudence, but the courts in many states have refused to permit such investment of trust funds. Such terms as "care and prudence" and "good faith" do not apply to in- vestments generally, but merely to the selection by a trustee from the securities which are legal. If, after exercising ordinary care, he selects an authorized investment upon which there is ultimately a loss to the estate, he is not liable. But even if he has exercised ordinary care and prudence in selecting an unauthorized investment, he is not protected against loss. 7. Disposition of Funds Pending Investment. A trustee is allowed a reasonable time within which to invest the funds, before he is chargeable with interest. AVhat constitutes a reasonable time depends on the circumstances of each case and the availability of legal securities. Generally speaking, a trustee should not permit a fund to remain un- invested for a longer period than six months. But in Vir- ginia and "West Virginia a guardian must invest within thirty days. Pending investment a trustee may deposit the funds in a bank of good standing in his name as trustee. CONSENT OF ADULT BENEFICIARY. O 8. Trustee may not Profit from the Estate. It is well settled that a trustee may not obtain any per- sonal benefit either directly or indirectly from his dealings with the trust property. He is entitled to lawful com- missions and to compensation for his services, but this is all he should be allowed. So strictly has this rule been applied that the courts have generally decided that a trustee may not purchase, either directly or indirectly, at a sale of the trust property, and may not represent those whose interests are adverse to the beneficiaries. It is evident, therefore, that the only safe policy for a trustee is to have no personal interest whatever in his dealings with the trust funds. 9. Trust Funds must be Kept Separate. Since the trustee must have no personal interest whatever in his dealings with the trust property, it follows that if he would pursue a safe course he must keep the trust funds entirely separate from his own money, and if he acts as trustee for more than one estate, must keep each fund intact and not invested in common with the others. Occasionally there has been an exception where the trustee of a number of small funds has combined them in order to obtain one good mortgage. And there seems to have been no criticism of the practice of trust companies in providing for investment of small funds in participating mortgages. In fact, at least one state^ has provided by statute for this form of investment. 10. Effect of Consent of Adult Beneficiary. It happens occasionally that all of the beneficiaries of a trust are of full age and under no legal disabilities. "Where this is the case, the trustee may invest in other than legal securities, provided he obtains the consent of all the bene- ficiaries. While it is true that the beneficiaries may not com- bine to destroy the trust estate or defeat the will of the creator of the trust, still they are the only ones who may 1 Ohio. Sec. 9788 of the Code. GENERAL PRINCIPLES. complain of a loss due to improper investment, and if they agree upon the investment, they have waived the right to hold the trustee responsible for loss. But before such an invest- ment is made, the trustee should obtain the written consent of the beneficiaries. In order to bind a beneficiary by acquiesence in an un- authorized investment, it must appear that he knew all the facts, and was apprised of his legal rights, and was under no disability to assert them. The beneficiary must have acted freely, deliberately and advisedly, with the intention of con- firming a transaction which he knew, or with reasonable dili- gence ought to have known, to be impeachable. His acquies. cence amounts to nothing if a free disclosure of every cir- cumstance is not made to him, or if his right to impeach the investment is concealed from him. The trustee sustains the burden of proof and he must show that all the beneficiaries are competent to acquiesce, and that all have consented. Im- perfect information amounts to concealment. (White v. Sherman, 168 111. 589.) 11. Vigilance of Trustee Between Time of Examining Title to Property and Making a Loan upon it as Security. It has sometimes happened that a trustee, before making a loan of trust funds upon property, has had the title ex- amined for encumbrances a few days prior to making the loan and that during the intervening time a fraudulent borrower has encumbered the land. In such a case, to what extent is the trustee guilty of negligence? In Slauter v. Favorite, 107 Ind. 291, a guardian had al- lowed ten days to elapse between the time of examining the title and the time of making the loan. In the meantime, the mortgagor had encumbered the property. The court decided that the trustee acted in good faith and was not guilty of negligence ; that a lender cannot always be said to be negli- gent if he does not watch the records to the last day or hour on which negotiations are closed. It is evident that the case was decided upon the broad rule that a trustee who has exercised good faith should be PARTICIPATING MORTGAGES. * protected. While negotiations for loans may often be in progress for several days before they are concluded, this is no excuse for failure of a trustee to protect the estate. We doubt, therefore, the soundness of the rule in the Indiana case and are convinced that although a trustee may not be able to examine a title down to the last minute before making a loan, he can at least take such precaution that the bor- rower has little opportunity to perpetrate a fraud. A delay of ten days after examining title could not generally be con- sidered the exercise of due diligence. 12. Participating- Mortgages. A general practice among trust companies is to invest a number of small trust estates in a common mortgage and to issue participating certificates to the various beneficiaries. This method of investment is not only safe, but it is also ex- ceedingly advantageous to the beneficiary of a small fund. In New York City, for example, where real estate values are high, it is often well-nigh impossible for a trustee to in- vest safely a small estate in a mortgage. The result is that if he is bound by the strict rule that each trust fund must be kept entirely separate from every other fund,^ he may be put to great inconvenience and many small estates may remain unproductive for long periods of time. In answer to this it may be said that the trustee is bound to exercise due diligence in obtaining proper securities ; but it must also be remembered that he is allowed a reasonable time within which to obtain such securities, and that eighteen months has been held not to be an unreasonable time. Under the practice adopted by trust companies these small estates are invested at once and are kept continually productive. Although this particular method of investment does not appear to have been passed upon by the courts, it is reason- ably safe to say that if the question arises the practice will iDoud V. Holmes, 63 N. Y. 635; McCullough v. McCullough, 44 N. J. Eq. 313; Lewin on Trusts, Vol. I, p. 331; Perry on Trusts, Vol. I, Sec. 463. 8 GENERAL PRINCIPLES. be sustained. One case, at least, has gone so far as to pro- tect a trustee who mingled a small trust fund with his own funds in order to obtain a good mortgage.^ In another case a guardian was permitted to make a lo^in on the joint account of two wards.^ It is suggested that this highly desirable method of deal- ing with trust funds be settled beyond the peradventure of a doubt by a statute giving trust companies the power to in- vest a number of trust estates in a single mortgage, where such an investment would be to the best interests of the estate. Such a statute exists in Ohio ^ and California.* INVESTMENTS LEGAL IN ALL STATES It has been aptly stated that, "the trustee has not, in this country, the advantage of a precise standing rule, which has been long since adopted by the English Courts, indicating particular securities as safe ones, in the choice of which the trustee will be protected against loss." (Kimball v. Reding, 31 N. H. 352, 374.) But there are certain classes of investments recognized as legal in all of the states, and as long as a trustee exercises common intelligence and deals honestly, he is protected from loss when he invests the funds in these securities. When the trust instrument does not direct the securities in which the funds may be invested and when there are neither state statutes nor court decisions to guide a trustee, his safest plan 1 Graves' Appeal, 50 Pa. St. 189. 2 Nance v. Nance, 1 S. C. 209. 3 Sec. 9788 of the Ohio Code provides: "In the management of money and property held by it as trustee, under the power conferred in the foregoing sections, such trust com- pany may invest them in a general trust fund of the corporation. But the authority making the appointment, upon conferring it, may direct whether such money and property shall be held separately or invested in a general trust fund of the corporation; except that such corporation shall follow and be governed by all directions contained in any instru- ment under which it acts." * Savings Bank Law, Sec. 67. INVESTMENTS LEGAL IN ALL STATES. » is to invest in some of the following securities which are uni- versally recognized as legal for trustees: 1. Public Securities. United States bonds and state and county bonds of the state where the trust is created are legal investments for trust funds in all jurisdictions. The difficulty is that these bonds pay a low rate of interest and are not always readily obtainable. As a general rule a trustee may invest in bonds issued by other states, but there are a few exceptions. 2. First Mortgages on Real Estate. Although there was some doubt in the early English de- cisions, it is now the universal rule that a trustee may invest in first mortgages on unencumbered real property. He must see that the title to the property is good ; that the property is located in the state where the trust is to be administered; that the mortgage is a first lien upon the property ; that a fair appraisal of the value of the property has been made, and that the amount invested does not exceed sixty-six and twc thirds per centum of the appraised value. Some of the au- thorities make a distinction between "improved" and "unim- proved" property and require that a trustee may not invest an amount in unimproved property which shall exceed from forty to fifty per centum of its fair value. This distinction should be observed, for improved property is more desirable as an investment than unimproved or vacant land. But in neither case have the courts been strict in figuring exact per- centages, provided the trustee has exercised good faith and approximated the "sixty-six and two-thirds per cent rule." In other words, a trustee is allowed considerable latitude in select- ing such an investment, for the courts have not agreed upon a definite percentage, the "sixty-six and two-thirds per cent" rule being statutory in some states and not in others. It can be accepted, however, as a fairly uniform standard. It should be added that although a mortgage on unimproved property is a legal investment, it is not generally considered advisable, unless the land is actually producing an income. 10 GENERAL PRINCIPLES. INVESTMENTS NOT LEGAL IN ALL STATES. 1. Municipal Bonds. Perhaps it is hardly accurate to classify municipal bonds under investments which are not generally considered legal, for most of the states, as we shall see later, have specifically authorized such investments and when municipal bonds are legally issued they are practically as safe as public securities. It is also true that if a trustee, in the exercise of good faith, invests in apparently safe municipal bonds the courts will generally protect him against loss. But even so, in drawing a dividing line between investments which are unquestionably legal in all of the states and those which may or may not be legal, it is necessary to classify municipal bonds under the latter. 2. Corporate Bonds. The question of the right of a trustee to invest in cor- porate bonds is likewise not easily answered. In the first place, many of the states, recognizing the safety of the first mortgage bonds of standard corporations, have provided by statute for investment of trusts funds in such security.^ In the second place, the first mortgage bonds of long estab- lished corporations are becoming more and more desirable as investments. This is especially true in the large cities where it is frequently difficult for a trustee to place a small fund in first mortgages on real estate. Moreover, the states which follow the "good faith" rule and which have not ex- pressly provided for such investments by statute would prob- ably protect a trustee who selected the first mortgage bonds 1 California, Code of 1909, Art. V, See. 105; Connecticut, Statutes of 1905; Colorado, Statutes of 1891, Sec. 36; Delaware, Laws of 1909; Illinois, Laws of 1905; Kentucky, Statutes of 1909, Sec. 4168; Louisiana, Statutes of 1904, Sec. 8 of Savings Bank Law; Massachusetts, by im- plication. Sec. 17 of Trust Company Law; Minnesota, Statutes, Sec. €393; New Hampshire, Laws of 1907, ch. 15 Sec. 1 and ch. 114 Sec. 1; New York Savings Bank Law, Sec. 239; New Jersey, Statutes 1910, Sav- ings Bank Law, Sec. 33; Tennessee, Statutes of 1903, ch. 377; Vermont, Statutes, Sec. 4654; Wisconsin, Laws of 1909, ch. 462. INVESTMENTS NOT LEGAL IN ALL STATES. H of a leading railroad corporation. And yet, corporate bonds must be classified as investments not legal in all of the states. In fact, two states,^ by their constitutions, prohibit invest- ments by trustees in stocks and bonds of private corporations. Naturally, the states which permit a trustee to continue the investments made by the creator of the trust, would per- mit him to retain stocks and bonds of private corporations; but this exception applies to all the general rules herein stated, to the same extent as the exception that no matter what the legal requirements, a trustee is bound by the pro- visions of the trust instrument or an order of court. 3. Corporate Stock. There can be no question regarding the general rule gov- erning investments by trustees in corporate stock. "With a few exceptions,- notably Massachusetts, none of the states permit trustees to invest trust funds in the stock of private corporations. And even where an exception is made, the trustee is not permitted to invest too large a portion of the estate in such security.^ It is also true that where the trustee is given wide dis- cretion by the trust instrument, he may be permitted to in- vest in corporate stock,* but the general rule is that stocks of private corporations are not legal investments for trust funds.^ 1 Pennsylvania and Colorado. 2 Harvard College v. Amory, 26 Mass. 446; Green v. Crapo, 181 Mass. 55; Sheffield v. Parker, 158 Mass. 330; Scoville v. Brock, 81 Vt. 405; McCoy V. Horwitz, 62 Md. 183. 3 Appeal of Dickinson, 152 Mass. 184. 4 Willis V. Braucher, 79 O. St. 290. 'In re Potter's Appeal, 56 Conn. 1; Eeed v. Eeed, SO Conn. 401; Tucker v. State, 72 Ind. 242; Gilbert v. Welsch, 75 Ind. 557; Mattocks v. Moulton, 84 Me. 545; Cropsey v. Johnston, 137 Mich. 16; Estate of Millenovich, 5 Nev. 161; Kimball v. Reding, 31 N. H. 352; Stevens v. Meserve, 73 N. H. 293; Gray v. Fox, 1 N. J. Eq. 259; "Ward v. Kitchen, 30 N. J. Eq. 31; King v. Talbot, 40 N. Y. 76; Matter of Hall, 164 N. Y. 196; Eoach's Estate, 50 Oregon 179; Commonwealth v. McConnell, 226 Pa. 244; Allen v. Gaillard, 1 S. C. 279; Womack v. Austin, 1 S. C. 421. 12 GENERAL PEINCIPLES. 4. Personal Securities. Although in a few exceptional cases, trustees who invested the trust funds by lending to individuals without additional security, have been protected, the exceptions are so rare that they are negligible. In the absence of specific authorization in the trust instrument, a trustee should never lend the funds upon mere personal security. If he does so, he may expect to bear whatever loss results to the estate, not to mention the possibility of more serious consequences. And this is the rule, no matter what the financial standing of the borrower at the time the loan was made. 5. Second Mortgages. The decisions which approve the investment of trust funds in a second mortgage are rare indeed. One leading case^ seems to have sanctioned such an investment, but the rule is well-nigh universal that a trustee who invests in a second mortgage is liable for any loss to the estate.^ 6. Investment in Securities in other States. The general rule is that a trustee must invest in securities which are located in the state where the trust is to be ad- ministered. The reason given for the rule is that the courts which must enforce the trust should have jurisdiction over the subject of the trust. But there are exceptions, some of the states permitting trustees to invest in a limited way in other states^ and others allowing the practice in particular cases.* 1 Taft V. Smith, 186 Mass. 31. 2 Mattocks V. Moulton, 84 Me. 545; Gilbert v. Kolb, 85 Md. 627; Gilmore v. Tuttle, 32 N. J. Eq. 611; Mulford v. Mulford, 53 Atl. Kep. 79; Shuey v. Latta, 90 Ind. 136; Makin's Estate, 20 Pa. C. C. 587; In re Spencer's Appeal, 2 O. Dec. Eep. 510. 3 Laws of Massachusetts, 1910 ch. 411 Sec. 14; Statutes of New Hampshire, 1907 ch. 114 Sec. 1; Laws of Illinois, 1905. 4 Denton v. Sanford, 103 N. Y. 607; Eidley v. Dedman, 134 Ky. 146, where it was to the advantage of the beneficiary; Thayer v. Dewey, 185 Mass. 68, where the fund came to the trustee so invested; Stevens v. Meserve, 73 N. H. 293; Gouldley's Estate, 201 Pa. St. 491, where the INVESTMENTS NOT LEGAL IN ALL STATES. 13 But the weight of authority is against the right of a trustee to go beyond liis own state to secure investments.^ In the absence, therefore, of specific authority, either in the trust instrument or by statute, a trustee would not be safe in placing the trust funds in securities which are beyond the jurisdiction of the court. Naturally, this rule does not apply where the statutes of a state permit investments in rail- road bonds and bonds of municipalities in other states. 7. Purchasing Real Estate. A trustee has no power, unless authorized by the instru- ment creating the trust, to purchase land with the trust fund unless it is necessary for the protection of the beneficiaries. And even then, the only safe course is to obtain an order of court authorizing the purchase. In one of the leading cases, where the estate owned an undivided half interest in land, the court went so far as to say that it was the duty of the trustee to purchase the other half and thus protect the estate. (Pine V. "White, 175 Mass. 585.) Where it is necessary for a trustee to buy in at a mortgage foreclosure, this is not considered a purchase of property with trust funds. In such a case the land taken becomes in effect personal property and may be accounted for as such. 8. Certificates of Deposit. Although a trustee may deposit trust funds in a reputable bank for a reasonable time while he is securing legal invest- ments, the general rule seems to be that he may not invest the funds in certificates of deposit. The average trustee is likely to think that he may keep the fund on deposit in a savings bank where it draws a fairly good rate of interest. court allowed a Pennsylvania trustee to invest in Camden, New Jersey. But this was because of the proximity of Camden. The rule would not be extended. Kobert's Estate, 22 Pa. C. C. 4; Rush's Estate, 12 Pa. St. 375. 1 In re Potter's Appeal, 56 Conn. 1; Clark v. Beers, 61 Conn. 87; McCullough v. McCullough, 44 N. J. Eq. 313; Collins v. Gooch, 97 N. C. 186; Pabst v, Goodrich, 133 Wis. 43; Ormiston v. Olcott, 84 N. Y. 339. 14 GENERAL PRINCIPLES. But deposits, whether made in a savings bank, trust com- pany, or bank, are not proper as a permanent investment.^ There are a few contrary cases. For example, it has been decided that a trustee may invest in the certificate of deposit of a national bank,^ and that a trust company may make a deposit in its savings department,^ although it may not invest in its own certificates of deposit.* The case of Twittz v. Houser,^ seems to permit a trustee to deposit in a savings bank as an investment. 9. Trade or Business — Continuing Business. The rule is well settled in all of the states that a trustee may not invest trust funds in a trade or business. Such an investment would be mere speculation, and the law is strict in prohibiting the use of trust funds in a business chance which may fail. Even Massachusetts, where the laws govern- ing the investments of trust funds are liberal, does not ap- prove of such investments. (Trull v. Trull, 95 Mass. 407.) And although a few of the states permit a trustee to continue the investments made by the creator of the trust, whether they are authorized or not, none of the states permit a trustee to continue a business, unless there is specific authority in the trust instrument so to do. In the absence of such authority or an order of court, it is the duty of a trustee to close out a business within a rea- sonable time and invest the proceeds in legal securities. Many a trustee has fallen into error in attempting to carry on the business of an estate, and has done so innocently. Where the business is prosperous, he has reasoned that since he is the representative of the estate and has taken the place 1 Estate of Wood, 159 Cal. 466; Allen v. Leach, 7 Del. Ch. 83; In re Gramel's Estate, 120 Mich. 487; Collins v. Gooch, 97 N. C. 186; Baer's Appeal, 127 Pa. 3Q0; Frankenfield 's Appeal, 11 W. L. N. (Pa.) 373. 2 Appeal of Hunt, 141 Mass. 515. 3 Tucker v. New Hampshire Trust Co., 69 N. H. 187. 4 St. Paul Trust Co. v. Kittson, 62 Minn. 408. 5 7 S. C. 164. INVESTMENTS NOT LEGAL IN ALL STATES. 15 of the owner of the business, he should continue that which is profitable to the estate. Logical as this may appear to be, the legal situation is that the creator of the trust has placed special confidence in his. trustee. Had he desired the trustee to continue the risks of business, he would have so provided in the trust instrument. In the absence of such express authorization to continue a business or to invest in a business, the trustee is without power thus to employ the trust estate. The creator of the trust may have been a venturous speculator, but it does not follow that his trustee may take business risks. PART II. STATE LAWS AND DECISIONS. ALABAMA. TRUSTEES GENERALLY. Code of 1907. (With Amendments to 1914.) Sec. 6076. Trustees may invest in State or United States Securities. — ^A trustee, having moneys to invest or lend, may invest them in the purchase of the interest-bearing securities of the State, or of the United States ; but for such investment his liability is governed by the general rules of the law. Sec. 6077. Investment without the State. — If the cestuis que trust, or any of them, reside without the State, and the trustee has funds to lend or invest, the loan or investment whereof in the State of their residence is desirable, the trustee may there lend and invest them, under the authority of a decree of the Court of Chancery. Sees. 4376, 4395, 4411. Investments by Guardians.— It is the duty of the guardian to manage the estate of the ward frugally, and to improve it to the best of his skill and ability. He must, if practicable, lend out all surplus money of the ward on bond and mortgage, or on good personal security, and, if the bond is not renewed annually, require the interest to be paid at the end of each year. Guardians may invest the money of their wards in real estate situated in any part of the State; and the guardian, acting in good faith, shall not be individually responsible for a depreciation in value of the land purchased with the funds of the ward, when such depreciation may result from causes which cannot be prevented by the guardian. 16 ALABAMA. 17 The court of probate may authorize the guardian to sell any property of the ward and direct the investment of the proceeds in bonds, notes or bills of exchange at interest on mortgage security, or in other property or securities, in the name of the ward. Note. — There seems to be an inconsistency between the statutes gov- erning investments by trustees and the statutes providing for invest- ments by guardians. The former are required to invest in government securities. They would also be protected if an investment were made in first mortgages on real estate in accordance with the general rule. The latter, it seems, may invest in personal security. But guardians are subject to the directions of the probate court, and it is evidently the intention of the statute that their investments be made accordingly. Perhaps this accounts for the apparent inconsistency. In any case, the safe policy for the trustee is to invest in government securities or first mortgages on real estate. t Must Take Title in Name of Beneficiary. A guardian may invest the funds of his ward in real estate, as the statute provides, but the title must be taken in name of the ward. Eobinson v. Pebworth, 71 Ala. 240. And the guardian is liable if he takes property with a defective title. Scott v. Beeves, 131 Ala. 612. Trustee May Not Deal With Trust Property For His Own Benefit. The trustee is not permitted to traffic for his own benefit in prop- erty which he holds in trust; and if he does so the beneficiary may claim the profit. Hughes v. Hughes, 87 Ala. 652; Penny v. Jackson, 85 Ala. 67; Pearce v. Gamble, 72 Ala. 341; James v. James, 55 Ala. 525. He may not loan to himself on note and mortgage and he must not mingle trust funds with his own. De Jarnette v. De Jarnette, 41 Ala. 708. Purchase by Trustee at Sale. A purchase of trust property by a trustee at his own sale is voidable at the option of the beneficiary, but executors and administrators who have an interest in the property sold may purchase at a sale of the €state provided there is no unfairness. Bank of Wetumpka v. Walkley, 169 Ala. 648. Carrying on Business of Testator. A trustee has no authority to carry on the business of the creator cf the trust unless the power to do so is expressly given by the trust instrument. National Bank v. Manassas, 124 Ala. 379. ALASKA. Code. Sec. 866. Executors and Administrators. — This section provides that executors and administrators shall not make any profit by the increase in value of the estate, or suffer loss by the decrease in value, without their fault. They shall not purchase any claim against the estate. Guardians. — Guardians are subject to the supervision of the Commissioners, and must invest the funds of the ward in real estate or in such securities as the Commissioner directs. Code, Sec. 905. Deposit in Bank. — A guardian who deposits the funds of the ward in a reputable bank pending investment is not liable for loss, but if he deposits the fund for a fixed time and accepts a certificate of deposit, this amounts to an investment and he is personally responsible. Corcoran V. Kostrometinoff, 164 Fed. 685. Order of Court. — An order of court will protect a guardian in his in- vestments. So held where a guardian deposited funds in a bank under an order of court. In re Guardianship of Corcoran, 3 Alaska 263. Trustee may not Obtain Personal Advantage. — A trustee may not obtain any personal advantage in his management of the estate. Moore V. Moore, 1 Alaska 225. 18 ARIZONA. There are no statutes or decisions by the higher courts governing investments by trustees. Sections 1990, 1998 and 2000 of the Revised Statutes, relating to guardians, pro^^de that a guardian must manage the estate of his ward "frugally and without waste." When it seems advisable to sell prop-, erty of the ward and invest the proceeds, this may be done, provided a court order is obtained. When a sale is made, the guardian "must make the investment according to his best judgment, or in pursuance of any order that may be made by the probate court." _ .^ , , A trustee who would invest safely, therefore, is limited by the general rules stated in Part I. 19 ARKANSAS. Kirby's Statutes of 1904. (With Amendments to 1914.) Sec. 103. Executors and Administrators.— If, on the re- turn of any inventory, or at any other time, it shall appear to the satisfaction of the court that there is a surplus of money in the hands of any executor or administrator that will not shortly be required for the expenses of administration or the payment of debts, such court shall have discretionary power to order the executor or administrator to lend out such money on such time and on such security as may be approved by the court. Sec. 104. All interest received by executors and adminis- trators shall be assets in their hands; and if they lend the money of the deceased, or use it for their private purposes, they shall be chargeable with interest thereon for the use of the estate. Sees. 3804-3806. Guardians. — If at any time any guardian shall have on hand any money belonging to his ward, beyond what may be necessary for his education and maintenance, such guardian shall, under the direction of the court, loan the same to such person as will give security therefor, and such money shall be loaned on such time as the court shall direct. If any guardian fail to loan the money of his ward on hand, as aforesaid, under the provisions of this act, he shall be accountable for the interest thereon. Guardians and curators shall loan the money of their wards at the highest rate of interest prevailing in the community that can be obtained on unencumbered real estate security, and then not more than to the extent of one-half of the value thereof. The interest in all cases shall be paid annually, and 20 ARKANSAS. 21 if not then paid shall become a part of the principal and bear interest at the same rate. Trustee May Not Deal With Trust Property For His Own Benefit. The courts look with disfavor upon transactions in which the trustee deals personally with the estate. Such transactions will not be upheld unless it clearly appears that the beneficiary was fully informed as to the value of the property and the nature of his interests. The burden is upon the trustee to show good faith. The trustee cannot directly or indirectly purchase for his own benefit. Cornish v. Johns, 74 Ark. 231; McNeil V. Gates, 41 Ark. 264; Haynes v. Montgomery, 96 Ark. 573. CALIFORNIA. TRUSTEES GENERALLY. Code of 1906. (With Amendments to 1914.) Sec. 2258. Trustees Must Obey Declaration of Trust. — A trustee must fulfill the purpose of the trust, as declared at its creation, and must follow all the directions of the truster given at that time, except as modified by the consent of all parties interested, in the same manner, and to the same extent, as an employee. Sec. 2259. Diligence in Execution of Trust. — A trustee, whether he receives any compensation or not, must use at least ordinary care and diligence in the execution of his trust. Sec. 2261. Investment of Money by Trustee. — A trustee must invest money received by him under the trust, as fast as he collects a sufficient amount, in such manner as to afford reasonable security and interest for the same. Sec. 2262. Interest, Simple or Compound, and Omission to Invest Trust Moneys. — If a trustee omits to invest the trust moneys according to the last section, he must pay simple in- terest thereon, if such omission is negligent merely, and com- pound interest if it is willful. Sec. 2228. Trustee's Obligation to Act in Good Faith.— In all matters connected with his trust, a trustee is bound to act in the highest good faith toward his beneficiary, and may not obtain any advantage therein over the latter by the slightest misrepresentation, concealment, threat or adverse pressure of any kind. Sec. 2229. Trustee Not to Use Property for His Own Profit. — A trustee may not use or deal with the trust prop- erty for his own profit, or for any other purpose unconnected with the trust in any manner. Sec. 2230. Certain Transactions Forbidden. — Neither a trustee nor any of his agents may take part in any transaction 22 CALIFORNIA. 23 concerning the trust in which lie or anyone for whom he acts as agent has an interest, present or contingent, adverse to that of his beneficiary, except as follows : (1) When the beneficiary, having capacity to contract, with a full knowledge of the motives of the trustee, and of all other facts concerning the transaction which might affect his own decision, and without the use of any influence on the part of the trustee, permits him to do so ; (2) AVhen the beneficiary not having capacity to con- tract, the proper court, upon the like information of the facts, grants the like permission; or, (3) AVhen some of the beneficiaries having capacity to contract and some not having it, the former grant permission for themselves, and the proper court for the latter, in the manner above prescribed. Sec. 2236. Trustee Mingling Trust Property with His Own. — A trustee who willfully and unnecessarily mingles the trust property with his own, so as to constitute himself in appearance its absolute owner, is liable for its safety in all events, and for the value of its use. TRUST COMPANIES. Code of 1909. Banking Law, Chapter 76. (With Amendments to 1914.) Sec. 105. Every trust company shall, except as otherwise provided by law% invest its capital and surplus and any trust funds received by it in connection with its trust business, in accordance with the laws relative to the investment or loan of funds deposited with savings banks, unless a specific agreement to the contrary is made between the trust company and the party creating the trust, or unless it is otherwise or- dered by the court, in connection with any court trust. SAVINGS BANKS. Sec. 61. Any savings bank may purchase, hold and con- vey real or personal property as follows: 1. The lot and building in which the business of the bank 24 STATE LAWS AND DECISIONS. is carried on ; furniture and fixtures, vaults and safe deposit vaults and boxes necessary or proper to carry on its bank- ing business; such lot and building, furniture and fixtures, vaults and safe deposit vaults and boxes shall not, in the aggre- gate, be carried on the books of such bank as an asset to an amount exceeding its paid-up capital and surplus; and here- after, the authority of a two-thirds vote of all of the directors shall be necessary to authorize the purchase of such lot and building, or the construction of such building. 2. Such as may have been mortgaged, pledged or conveyed to it in trust for its benefit in good faith, for money loaned in pursuance of the regular business of the corporation. 3. Such as may have been purchased at any sales under pledge, mortgage or deed of trust made for its benefit for money so loaned and such as may be conveyed to it by borrowers in satisfaction and discharge of loans made thereon. No savings bank shall purchase, own, or sell personal property, except such as may be requisite for its immediate accommodation for the convenient transaction of its business, notes or bonds secured by trust deeds or mortgages on real estate, bonds, securities or evidences of indebtedness, public or private, gold or silver bul- lion and United States mint certificates of ascertained value, and evidences of debt issued by the United States. No savings bank shall purchase, own, hold or convey bonds, securities or evidences of indebtedness, public or private, except as follows: (a) Bonds or interest-bearing notes or obligations of the United States, or those for which the faith and credit of the United States are pledged for the payment of principal and interest ; (b) Bonds of this state, or those for which the faith and credit of the State of California are pledged for the payment of principal and interest; (c) Bonds of any state in the United States that has not, within five years previous to making such investment by such bank, defaulted in the payment of any part of either principal or interest; (d) Bonds of any county, city and county, city or school district of this state; bonds of any permanent road division in CALIFORNIA. 25 any county issued in pursuance of the provisions of article IX, chapter II, title VI, part III, of the Political Code; bonds of any sewer district, drainage district, reclamation district, protec- tion district, or sanitary district organized under the laws of this state ; and any irrigation district bonds which the law may now or hereafter authorize to be used as security for the deposit of public moneys; provided, that the total amount of bonds so issued by any such sewer district, drainage district, protection district, or sanitary district, does not exceed fifteen per centum of the value of the taxable property in said district as shown by the last equalized assessment roll of the county in which said district is located; and provided, further, that the total amount of bonds issued by any such irrigation district does not exceed sixty per centum of the aggregate market value of the lands within such district, and of the water, water rights, canals, reser- voirs, reservoir sites and irrigation works owned or to be ac- quired or constructed with the proceeds of any of such bonds, by said district, such facts in reference to bonds of irrigation districts to be determined by a commission now or hereafter au- thorized by law to ascertain and report upon such facts. (e) Bonds of any county, city and county, city or town, in ?iny state of the United States other than the State of Cali- fornia, issued under authority of any law of such state, which, county, city and county, city or town, had, as shown by the federal or state census next preceding such investment, a popu- lation of more than twenty thousand inhabitants; provided, however, that the entire bonded indebtedness of such county, citj'' and county, city or town, including such issue of bonds, does not exceed fifteen per centum of the value of the taxable prop- erty therein as shown by its last equalized assessment roll, and provided, further, that such county, city and county, city or town, or the state in which it is located has not defaulted in payment of either principal or interest due upon any legally authorized bond issue within five years next preceding such in- vestment. (f) (1) Bonds of any railroad corporation incorporated under the laws of the State of California and operating ex- clusively therein, provided said corporation has had, for its fiscal 26 STATE LAWS AND DECISIONS. year next preceding such investment, net earnings, after pay- ment of all maintenance charges, operating expenses and taxes sufficient to pay the interest on all of its outstanding mortgage indebtedness; or (2) Bonds of any railroad corporation incorporated under the laws of any other state in the United States, operating at least five hundred miles of standard gauge track, exclusive of sidings; provided, said corporation has had for its fiscal year next preceding such investment net earnings, after the pay- ment of all maintenance charges, operating expenses and taxes, amounting to at least one and one-half times the interest on all its outstanding mortgage indebtedness; or (3) Bonds of any railroad corporation, the payment of which has been guaranteed, both as to principal and interest, by a railroad corporation meeting the requirements of either sub- division (1) or (2) of paragraph (f) of this section; the income of which latter corporation, together with the income of any corporation whose bonds it has guaranteed, shall have been suf- ficient to pay all its maintenance charges, operating expenses, taxes and interest on all its outstanding mortgage indebtedness and, in addition thereto, interest on the total outstanding mort- gage indebtedness of any other corporation the payment of which it has guaranteed, for the periods specified in the re- spective subdivisions of this paragraph relating thereto; pro- vided, that the excess of income of any corporation whose bonds have been so guaranteed, over its maintenance charges, operating expenses, taxes and interest on its outstanding mortgage indebt- edness, shall not apply to or be included in determining the income so required. In determining the income of any cor- poration specified in paragraph (f) of subdivision three of this section, there shall be included the income of any corporation or corporations out of which it shall have been formed through consolidation or merger, and of any corporation or corporations, the entire business and income producing property of which the corporation issuing such bonds has wholly acquired. All bonds authorized for investment by paragraph (f) of subdivision three of this section must be secured by a mortgage or trust deed which is at the time of making such investment either a first mort- CALIFORNIA. 27 gage or deed of trust, a refunding mortgage or deed of trust providing for the retirement of all prior lien mortgage debts of said corporation, or an underlying or divisional closed mort- gage or trust deed of property which forms a part of the operat- ing system of the corporation then owning said propert3^ No savings bank shall purchase the bonds of any railroad corpora- tion deriving less than twenty per centum of its gross receipts from passenger revenues. The term "railroad corporation," when used in paragraph (f) of subdivision three of this section, shall have the meaning defined in the "Public Utilities Act" approved December 23, 1911. (g) Bonds of any street railroad corporation; or of any gas ; water ; pipe line ; light ; power ; light and power ; gas, light and power ; electrical ; telephone ; telegraph ; or telephone and telegraph corporation or of any other "public utility" incor- porated under the laws of the State of California ; and (1) Operating exclusively in the State of California; pro- vided, said corporation has had, for its fiscal year next preced- ing such investment, net earnings, after the payment of all maintenance charges, operating expenses and taxes, amounting to one and one-half times the interest on all its outstanding mortgage indebtedness ; or (2) Operating its property in part within the State of Cali- fornia ; provided, said corporation has had, for each of its two fiscal 3^ears next preceding such investment, net earnings, after the payment of all maintenance charges, operating expenses and taxes, amounting to one and one-half times the interest on all of its outstanding mortgage indebtedness ; or (3) The pajTnent of which is guaranteed, both as to prin- cipal and interest, by a public utility corporation meeting the requirements of either subdivision (1) or (2) of paragraph (g) of this section, the income of which latter corporation, together with the income of any corporation whose bonds it has guar- anteed, shall have been sufficient to pay all its maintenance charges, operating expenses, taxes and interest on all its total outstanding mortgage indebtedness, and in addition thereto^ in- terest on the total outstanding mortgage indebtedness of any other corporation the payment of which it has guaranteed, for 28 STATE LAWS AND DECISIONS. the period specified in the respective subdivisions of this para- graph relating thereto; provided, that the excess of income of any corporation whose bonds have been so guaranteed, over its maintenance charges, operating expenses, taxes and interest on its outstanding mortgage indebtedness shall not apply to or be included in determining the income so required. In determining the income of any corporation specified in paragraph (g) of sub- division three of this section, there shall be included the income of any corporation or corporations out of which it shall have been formed through consolidation or merger, and of any cor- poration the entire business and income producing property of which the corporation issuing such bonds has wholly acquired. All bonds authorized for investment by paragraph (g) of sub- division three of this section must be secured by a mortgage or trust deed which is at the time of making such investment; either I. A closed first mortgage or deed of trust; or II. A first mortgage or deed of trust containing provisions restricting the issuance of further bonds until such time as the income of said corporations shall have been at least sufficient, during the twelve months next preceding the issuance of any additional bonds, to pay all maintenance charges, operating expenses, taxes and one and one-half times the interest on all its mortgage indebtedness then outstanding and on the addi- tional bonds then proposed to be issued; or III. A refunding mortgage or deed of trust providing for the retirement of all prior lien mortgage debts of said corpora- tion, and restricting the issuance of further bonds until such time as the income of said corporation shall have been at least sufficient, during the twelve months next preceding the issuance of any additional bonds, to pay all maintenance charges, operat- ing expenses, taxes and one and one-half times the interest on all its mortgage indebtedness then outstanding, and on the additional bonds then proposed to be issued; or IV. An underlying or divisional closed mortgage or trust deed of property which forms a part of the operating system of the corporation then owning said property. In the case of bonds secured by an underlying or divisional closed mortgage CALIFORNIA. 29 or trust deed, the net income required by this section shall be based exclusively upon the income, maintenance charges, operat- ing expenses, taxes and mortgage indebtedness of or against the property covered by such underlying or divisional closed mortgage or trust deed, or on the proper proportionate share of such property in the general income, maintenance charges, oper- ating expenses, taxes and mortgage indebtedness of the cor- poration then owTiing such property ; provided, however, that if the payment of the bonds secured by such underljdng or divisional closed mortgage or trust deed shall be guaranteed or assumed by the corporation then owning the property securing the same, such bonds shall be legal investments for savings banks, if the net income of such corporation from all sources after paying all of its maintenance charges, operating expenses, taxes and mortgage indebtedness shall equal the amount herein re- quired, notwithstanding any insufficiency of the income derived from the property covered by such underlying or divisional closed mortgage or trust deed to meet the requirements of this section. The terms ''street railroad corporation," "pipe line corpora- tion," "gas corporation," "electrical corporation," "telephone corporation," "telegraph corporation," "water corporation," and "public utility," when used in paragraph (g) of subdivision three of this section, shall each have the meaning defined in the "Public Utilities Act" approved December 23, 1911. (h) Notes or bonds secured by first mortgage or deed of trust or other first lien upon real estate, improved or unim- proved; provided, that the entire note or bond issue shall not exceed sixty per centum of the market value of such real estate, or such real estate with improvements, taken as security; and provided, further, in case the said note or bond issue is created for a building loan on real estate, that at no time shall the entire outstanding note or bond issue exceed sixty per centum of the market value of the real estate and the actual cost of the improvements thereon taken as security. (i) Collateral trust bonds or notes when secured by either : (1) Deposit of bonds authorized for investment by this sec- 30 STATE LAWS AND DECISIONS. tion, of a market value at least fifteen per centum in excess of the par value of the collateral trust bonds or notes issued ; or (2) Deposit of bonds authorized for investment by this sec- tion, and other securities, of a combined market value at least twenty per centum in excess of the par value of the collateral trust bonds or notes issued ; provided, that the par value of said collateral trust bonds or notes shall in no case exceed the market value of that portion of the security represented by bonds authorized for investment by this section. (j) Bonds legal for investment by savings banks in the states of New York or ]\Iassachusetts ; provided, however, that as to bonds of the character specified in paragraph (c) or (e) of subdivision three of this section, such bonds shall also con- form to the requirements of either of such paragraphs. (k) Certificates issued by a corporation organized under the laws of this state with a paid-up capital stock of not less than one hundred thousand dollars, evidencing and conferring participation to an indicated amount in a first mortgage on real estate and the debt secured thereby, and guaranteeing the pay- ment of the principal of the mortgage debt at its maturity or within some specified time thereafter and agreeing to pay in- terest on the amount of the participation at some specified rate, the mortgage however and debt thereby secured to be assigned to a trust company and held by it as security for the payment of said mortgage certificates and for the performance of all conditions imposed thereby upon the corporation issuing the same, provided the said first mortgage indebtedness shall not exceed sixty per centum of the market value of the real estate taken as security and provided further that the trust company shall certify on each certificate that the aggregate amount of the certificates issued evidencing and conferring participation in any one such mortgage and mortgage debt does not exceed the principal of the said mortgage debt ; but provided, neverthe- less, that, unless such certificates are made legal investment for savings banks by other law of this state, no savings bank shall purchase any such certificates until the corporation issuing the same has first obtained the written approval of the superin- tendent of banks to such certificates as an investment for CALIFORNIA. 31 savings banks. The actual expense of investigating any issue of such certificates presented to the superintendent of banks for approval shall be paid by the corporation presenting the same, and the superintendent of banks, before making such investiga- tion, may require a cash deposit of such amount as he may deem necessary to cover such expense. The superintendent of banks may accept and act upon the opinions and appraisements of anj' title insurance or abstract company, attorneys or appraiser? which may be presented by such corporation so applying and the reports of any of the executive officers of the corporation issuing such certificates, on any question of fact concerning or affecting such certificates, the security thereof, or the financial condition of the corporation issuing the same. In lieu of or in addition to such opinions, appraisements and reports, the super- intendent of banks may, if he deems proper, have any or all such matters passed upon and certified to him by attorneys, appraisers or accountants of his own selection at the expense of the applicant. The superintendent of banks .shall keep an official list of all issues of such certificates approved by him. No notes, bonds, or other securities, the payment of which is secured by any mortgage or deed of trust executed after Sep- tember 1, 1913, shall be deemed to come within or conform to the requirements of either of paragraphs (f), (g) or (i) of sub- division three of this section, unless such notes, bonds or other securities shall, in the manner provided in this act, have been certified by the superintendent of banks, to come within and fully conform to the requirements of one or the other of said paragi^aphs. The legality of investments heretofoi"e lawfully made pur- suant to the provisions of this section, or of any law of this state as it existed on and subsequent to July 1, 1909, shall not be affected by any amendments to this section or this act ; nor shall any such amendments require the changing of investments once lawfully made under this act. Any bonds authorized by this section as a legal investment for savings banks may be carried on the books of said bank at their investment value based on their market value at the time they were originally bought, unless the superintendent of banks 32 STATE LAWS AND DECISIONS. shall require any or all of the honds which may thereafter have a market value less than the original investment value to be written down to such new market value, which shall be done gradually if practicable and in such manner as he may deter- mine; or he may, by a plan of amortization to be determined by him, require such gradual extinction of premium as will bring such bonds to par at maturity. No savings bank shall hereafter purchase or loan money upon any bond, note or other evidence of indebtedness, issued by any "public utility," subject to the jurisdiction, regulation or control of the railroad commission of this state under the provisions of the ''Public Utilities Act," approved December 23, 1911, unless each such bond, note or other evidence of in- debtedness was either: (a) Issued prior to the taking effect of the "Public Utilities Act"; or (b) Issued under authority of the railroad commission, in accordance with the provisions of said act; or (c) A note issued for a period not exceeding twelve months, in accordance with the provisions of subdivision (b) of section fifty-two of said act. No provision of this act, and no act, or deed, done or per- formed under or in connection therewith, and no finding made or certificate issued under any provision thereof, shall be held or construed to obligate the State of California to pay, or be liable for the payment of, or to guarantee in any manner what- soever, the regularity or the validity of the issuance of any stock or bond certificate, or bond, note, or other evidence of indebt- edness certified under any provision of this act, by the super- intendent of banks, as being in conformity with the requirements of any paragraph of subdivision three of this section. Sec. 67. 1. No savings bank shall loan money except on ade- quate security of real or personal property, and no such loan shall be made for a period longer than ten years ; provided, that no such loan shall be made on unsecured notes. . 2. No savings bank shall invest or loan more than five per centum of its assets on any one bond issue, except bonds of the United States, of the State of California, bonds for which the CALIFORNIA. 33 faith and credit of the United States or of the State of Cali- fornia are pledged, or bonds of any county, city and county, city or school district in this state, or bonds of any irrigation district such as are legal for investment by savings banks. 3. No savings bank shall loan money: (a) On bonds of the character specified in paragraphs (a), (b), (c) and (d) of subdivision three of section sixty-one of this act, unless such bonds shall have a market value at least ten per centum in excess of the amount loaned thereon; or, (b) On bonds of the character specified in paragraphs (e), (f) and (g) or on bonds or notes of the character specified in paragraph (i) of subdivision three of section sixty-one of this act, unless such bonds or notes shall have a market value at least fifteen per centum in excess of the amount loaned there- on; or, (c) On bonds legal for investment by savings banks in the states of New York or Massachusetts, unless such bonds shall have a market value at least fifteen per centum in excess of the amount loaned thereon; or, (d) On personal property unless such personal property shall have a market value at least fifty per centum in excess of the amount loaned thereon; or, (e) On other bonds, or on the capital stock of any corpora- tion, unless such bonds or stock shall have a market value at least fifty per centum in excess of the amount loaned thereon; provided, however, that no loan shall be made upon the capital stock of any bank unless such bank has been in existence at least two years and has earned and paid a dividend on its capital stock. 4. No savings bank shall make any loan on the security of real estate, except it be a first lien, and in no event to exceed sixty per centum of the market value of any real estate taken as security except for the purpose of facilitating the sale of property owned by such savings bank; provided, that a second lien may be accepted to secure the repayment of a debt pre- viously contracted in good faith ; aiid provided, also, that any savings bank holding a first mortgage or deed of trust on real estate may take or purchase and hold another and immediately 34 STATE LAWS AND DECISIONS. subsequent mortgage or deed of trust thereon, but all such loans shall not exceed in the aggregate sixty per centum of the mar- ket value of the real estate securing the same; provided, further, that a savings bank may loan not to exceed ninety per centum of the face value of a note or bond secured by a first mortgage or deed of trust on real estate, but in no event shall any such loan exceed ninety per centum of sixty per centum of the market value of the real estate covered by said mortgage or deed of trust. 5. No savings bank shall purchase, invest or loan its capital, surplus or the money of its depositors, or any part of either, in mining shares or stock. Any president or managing officer who knowingly consents to a violation of any provision of this section shall be guilty of a felony. Sec. 32. Any bank receiving trust funds in accordance with the provisions of this act relating to trust companies must not mingle such trust funds with the other assets of the corporation, and such funds shall not be carried or counted as any part of the lawful reserve provided for in this act. The officers of any bank who knowingly violate or consent to the violation of this provision shall be guilty of a felony. Sec. 34. No bank shall purchase or invest its capital or money of its depositors, or any part of either, in the shares of its own capital stock; nor loan its capital or the money of its depositors, or any part of either, on the shares of its own capital stock, unless such purchase or loan shall be nec- essary to prevent loss on debts previously contracted in good faith. Note. — By incorporating the savings bank provision, regarding in- vestments, in the trust company law, it seems that both trust companies and individual trustees are permitted to invest in the securities named. Sec. 67, of the savings bank law, seems to permit a loan upon personal property or upon stocks of corporations, subject to the limitations men- tioned. Whether or not this provision applies also to trustees does not appear to have been determined. Since California has adopted the "good faith" rule and has dealt liberally with trustees, it is probable that any loans made in accordance with the provisions of the savings bank law would be declared legal, provided the trustee had exercised due diligence. CALIFORNL\. 35 Purchase of Trust Property by Trustee. A trustee cannot purchase property for himself either directly or indirectly; but he may purchase from the beneficiary if the transaction is fair and honest. Golson v. Dunlap, 73 Cal. 157; Wickersham v. Crit- tenden, 93 Cal. 17. Good Faith Required. When trustees act in good faith courts of equity will be indulgent, especially when they act under the advice of counsel. Supine negligence or willful default will render them liable; but to make them liable for mere errors of judgment would tend to discourage good and prudent men from undertaking a trust. Ellig v. Naglee, 9 Cal. 684. Advice of Attorney Not a Complete Defense. The advice of an attorney does not necessarily shield a trustee where a loan is made on improper security. A will directed an executor to loan the funds upon first-class real estate security, and the executor loaned a thousand dollars upon realty valued at twenty-two hundred dollars. The property was already subject to a loan of two thousand dollars, and a search of the record would have revealed this fact. The attorney for the executor secured the loan without searching the record. The trustee was negligent in not having determined whether the title was clear. Estate of Holbert, 48 Cal. 627. Trustee Must Bear Expenses Resulting from Unauthorized Loan. When an executor makes an illegal or unauthorized investment, the expenses of litigation and attorney's fees cannot be charged against the estate. Estate of Holbert, 48 Cal. 627. Mingling Trust Funds and Using in Own Behalf. When a trustee mingles trust funds with his own and uses them in his own business he is not only liable for the loss of the fund, but the court has the right to deprive him of commissions, and to impose upon him interest compounded annually up to the time of the settle- ment of the accounts. Miller v. Lux, 100 Cal. 609; In re Thompson, 101 Cal. 349. A guardian who mingles the funds of his ward with his own is liable for the return of the principal with legal interest thereon, com- pounded annually, where it is not shown that larger profit was realized. Estate of Cousins, 111 Cal. 441. The same rule applies to executors, administrators and trustees. In re Dow, 133 Cal. 446; Bemmerly v. Woodward, 124 Cal. 568; Estate of Stott, 52 Cal. 403; Estate of Clark, 53 Cal. 359; Estate of Hilliard, 83 Cal. 423. But where an administrator does not use the funds of the estate in his own business, and does not make any profit from their use, the mere fact that he mingles the proceeds of a sale with his own funds 36 STATE LAWS AND DECISIONS. does not justify charging him with interest thereon since he had a right to the custody of the funds. Neither is the deposit of funds in a brother's bank sufficient to justify a finding of embezzlement against an administrator. Estate of Sarment, 123 Cal. 331; Estate of Marre, 127 Cal. 128. Must Invest in Authorized Securities. It is the imperative duty of a trustee to invest trust funds in au- thorized securities and keep them productive. Bemmerly v. Woodward, 124 Cal. 568. Carrying on Business of Testator. Unless specifically authorized by the instrument creating the trust, a trustee carries on the business of the creator of the trust at his peril. If profit is made it inures to the benefit of the estate; if there is loss the trustee must bear it. In re Eose, 80 Cal. 166. Giving Away Worthless Assets. An executor has no right to give away the assets of the estate, even though he may consider them worthless, and an attorney who rep- resents the executor has no right to receive such a gift. In re Eadovich, 74 Cal. 536. Investment in Bonds of a Corporation in Which Trustee Is Interested. A trustee who invests in the bonds of a corporation in which he is interested is in effect dealing with the funds of the estate for his own benefit, and the investment is illegal. Bermingham v. Wilcox, 120 Cal. 467. Trustee Responsible for Illegal Investments of His Co-Trustee. The creator of a trust had entrusted the management of his estate during his lifetime to two persons, each of whom managed certain por- tions of the property. The trust instrument did not authorize the trustees thus to divide the management of the estate. Each was respon- sible for the acts of the other in the investment of the trust funds. Bermingham v. Wilcox, 120 Cal. 467. Investment by Guardian. A guardian has power to invest the estate of his ward without an order of court, but if he does so, it may generally be said that he takes the risk. This rule was applied where a guardian invested his ward's money in notes secured by real estate the value of which was equal only to the face value of the notes. An order of court would have protected the guardian. In re Cardwell, 55 Cal. 137; Estate of Carver, 118 Cal. 73. CALIFORNIA. 37 There is no specific provision regarding investments by a guardian, but the statutes provide for the sale of a ward's property and the in- vestment of the proceeds under an order of court, when it is necessary for the interest of the ward. It would seem that a guardian who wishes to protect himself should obtain an order of court for investments or change of investments. Civil Code, Sees. 1780, 1792. Taking Loans in Individual Name. The words "trust property" in Sec. 2236 of the civil code are broad enough to include land as well as moneys. A trustee tvho will- fully and unnecessarily takes title to real property belonging to the trust in his individual name or takes a note with a mortgage as security for money belonging to the estate is guilty of mingling trust property with his own and is liable for its safety in all events. Matter of Bane, 120 Cal. 533. The same rule applies if he deposits money in bank in his own name. Estate of Wood, 159 Cal. 466. Temporary Deposit of Funds. A trustee may deposit trust moneys temporarily in a bank for safe keeping, and in selecting the bank he is required to exercise the care and prudence which a man of ordinary skill and ability would exercise, and he must mark the deposit in such a manner as to show its trust character. Estate of Wood, 159 Cal. 466. Funds Cannot be Left on Deposit in Bank as an Investment. A deposit in bank, savings or otherwise, is not warranted as an in- vestment, for such a deposit amounts to a mere loan to the bank on per- sonal security. Estate of Wood, 159 Cal. 466. Trustee Must Not Lose Control of Trust Funds. By depositing money in a savings bank and surrendering the bank book to a surety company, whose consent is necessary to the with- drawal of any of the fund, the trustee loses • exclusive control of the fund and thereby violates his legal duty. Estate of Wood, 159 Cal. 466; Forsythe v. Woods, 11 Wall (U. S.) 484; Perry on Trusts, Sec. 443. COLORADO. ^ TRUST COMPANIES. Statutes Annotated, 1910, (With Amendments to 1914.) Sec. 307. Investment of Trust Funds. — The trustees or board of directors shall have a discretionary power of invest- ing moneys received by them in trust in public stocks or bonds of the United States or of any individual state, or in the bonds or stock of any incorporated city or county of the state duly authorized to be issued, or in such real or personal securities as they may deem proper, but no trust company shall invest in the stock or bonds of any private incorporated company. Sec. 308. No Loans to Officers. — No loan shall be made by any trust company directly or indirectly to any trustee, director or other officer thereof and no loan shall be made upon stock of the company. Sec. 310. Governed by Same Laws as Individual Trus- tee. — In the exercise by said company of the powers herein au- thorized as guardian, executor, administrator, committee or conservator of lunatics, or of any office or duty imposed by any court, said company shall be subject to the same respon- sibilities, shall have the same powers, and shall receive the same compensation as fixed by law with relation to individuals holding similar offices or trusts, except as herein otherwise specially provided. The exercise of the other powers and the performance of the other duties by said company may be as to compensation and otherwise matters of contract with the parties interested. Sec. 311. Trust Funds and Investments Shall be Kept Separate. — The said company shall keep all trust funds and 38 COLORADO. 39 investments separate and apart from the assets of the com- pany, and all investments made by said company as fiduciary shall be so designated that the trust to which such invest- ments shall belong shall be clearly known. TRUSTEES GENERALLY. Annotated Statutes, 1912. (With Amendments to 1914.) Sec. 7147. It shall be lawful for executors, adminis- trators, guardians or conservators to invest the moneys be- longing to their respective estates in the bonds of the United States, or in the bonds of this state, or upon mortgage security to be approved by order of the County Court to be made and entered of record. Every such investment or lend- ing shall be forthwith reported to the County Court and no loan of money shall be for a longer period than one year: Provided, that guardians and conservators may, by order of the County Court, made and entered of record in open court, make such loans for a longer period, not exceeding five years and not exceeding in any case the minority of the infant, and in all such cases the interest shall be made payable at least as often as once each year. Investment in Bonds or Stock of Private Corporations Prohibited. — Section 36, of Article 5, of the Colorado Consti- tution provides that, "No act of the general assembly sliall authorize the investment of trust funds by executors, ad- ministrators, guardians, or other trustees, in the bonds or stock of any private corporation." Liability for Purchase of Trust Property. "Where a trustee becomes the purchaser of trust property, the cestui que trust may set aside the sale or hold the trustee liable, and may require an accounting, without any further showing than the mere fact of the purchase during the continuance of the trust. French v. "Woodruff, 25 Colo. 339. Where the trustee without the full knowledge and consent of his cestui que trust, in dealing with the trust property, assumes to act as both vendor and vendee, the cestui que trust may 40 STATE LAWS AND DECISIONS. avoid the transaction. Glengary Consolidated Mining Company et al v. Boehmer, 28 Colo. 1. Trustee May Not Deal witli Trust Property for His Own Benefit. A trustee cannot deal with the trust property for his own benefit or become the owner of part of the estate through a settlement with the beneficiaries, unless he can show that the transaction was perfectly fair and free from suspicion. Lathrop v. Pollard, 6 Colo. 424; Loveland V. risk, 18 Colo. 201; Hallaek v. Traber, 23 Colo. 14. Mingling of Trust Funds. A trustee who mingles trust funds with his own must account for the profits. He must keep the funds separate and apart and must fol- low the directions of the trust instrument, making investments in his name as trustee. Hake v. Stott's Exr., 5 Colo. 140; Smelting Company V. Eeed, 23 Colo. 523. Importance of Authorization by Court. in Colorado the county court has very full control over executors, administrators and guardians. The management of the estate is a duty which belongs to the court, and a trustee who wishes to protect him- self completely when making investments should obtain a court order. Vandevier v. County Court, 3 Colo. App. 425. _BL CONNECTICUT.* TRUSTEES GENERALLY. Revised Statutes, 1902. (With Amendments to 1914.) Sec. 254. Investment of Trust Funds. — Trust funds, un- less it is otherAvise provided in the instrument creating the trust, may be loaned on the security of mortgages on unin- cumbered real estate in this state, double in value the amount loaned, or may be invested in such mortgages or in the bonds or loans of this state, or of any town, city or borough of this state, or in any bonds, stocks or other securities which the savings banks in this state are or may be authorized by law to invest in, or may be deposited in savings banks incor- porated by this state. Sec. 255. Continuing Investments as Received. — Trust funds received by executors, trustees, guardians, or conserva- tors may be kept invested in the securities received by them, unless it be otherwise ordered by the court of probate, or un- less the instrument under which said trust was created shall direct that a change of investments shall be made, and they shall not be liable for any loss that may occur by depreciation of such securities. Savings Banks. — Since it is lawful for trustees to invest in securities which are authorized for savings banks, it is neces- sary to give the provisions of the savings bank law relative to investments. It will be noted that section 30 of that law per- mits investments in personal securities. This section does not appear to have been construed by the courts, and we are of the opinion that it would be unwise for a trustee to invest in such, security. For list of legal investments in Connecticut see Part m. 41 42 STATE LAWS AND DECISIONS. Laws of 1913. Chapter 127. Sec. 1. Savings banks may invest their deposits and surplus only as hereinafter provided. Sec. 2. In the stock or bonds or interest-bearing notes or obligations of the United States, or those for which the faith of the United States is pledged to provide for the payment of the principal and interest, including the bonds of the Dis- trict of Columbia. Sec. 3. In the stock or bonds or interest-bearing obliga- tions of any state of the United States which was admitted to statehood prior to January 1, 1896, which has not, within ten years previous to making such investment by such corporation, defaulted for more than ninety days in the payment of any part of either principal or interest of any debt authorized by the legislature of such state to be contracted; and in the bonds or interest-bearing obligations of any such state of the United States which have been issued and outstanding for a period of at least ten years previous to making such invest- ment by such corporation, and which have been issued in pur- suance of the authority of the legislature of such state, (1) for the funding or settlement of any previous obligation of such state theretofore in default, or (2) for the refunding of such funding or settlement obligation of such state theretofore in default, and on which said funding or settlement obligation or obligation issued to refund the same there has been no de- fault in the payment of either principal or interest since its issue, provided the authorization of any obligation by the legislature of any such state hereinbefore referred to shall not have been in violation of any constitutional provision, and provided such bond or interest-bearing obligation shall be the direct obligation of such state and that the faith and credit of the state shall be pledged for its payment, principal and interest. Sec. 4. In the obligations of any county, town, city, borbugh, school district, fire district, or sewer district, in this state. CONNECTICUT. 43 Sec, 5. In the stock or bonds of any incorporated city situated in one of the states of the United States which was admitted to statehood prior to January 1, 1896, and which was incorporated as a city, under the same or a different name, at least twenty-five years prior to making such investment, and which has not less than twenty thousand inhabitants as ascertained by the United States or state census, or any municipal census taken by authority of the state, next pre- ceding such investment, provided the amount of the bonds of such city, including the issue in which such investment is made, and its proportion, based on the valuations of prop- erty therein for the assessment for taxation next preceding such investment, of the county and town debt, after deduct- ing the amount of its water debt and the amount of the sink- ing funds which are available for payment of its bonds other than water bonds, does not exceed seven per centum of the valuation of the taxable property in such city, to be ascer- tained by the valuation of property therein for the assessment of taxes, next preceding such investment, and provided the city issuing such bonds, or the state in which it is located, has not defaulted for more than ninety days in the payment of any of its funded indebtedness or interest thereon, within fifteen years next preceding the purchase of such bonds by the savings bank. The provisions of this section shall not authorize the investment of funds in any "special assessment" or "improvement" bonds, or other bonds or obligations which are not the direct obligations of the city issuing the same, and for Avhich the faith and credit of the issuing city are not pledged. A city or state shall be considered to be in default within the meaning of this act while any unpaid and overdue obligation, either principal or interest, shall be outstanding. Sec. 6. In the bonds or interest-bearing obligations issued by a railroad corporation organized under the laws of any of the New England states, and owning in fee not less than three hundred miles of railroad located in said states, and which has paid in dividends in cash an amount equal to not less than four per centum per annum on its outstanding shares of capital stock in each fiscal year for the five years 44 STATE LAWS AND DECISIONS. next preceding sucli investment, or in the bonds or interest- bearing obligations issued by a railroad, terminal, depot, bridge, tunnel, or street railway corporation, organized under the laws of any of the New England states or the state of New York assumed by a railroad corporation organized under the laws of any of the New England states and owning in fee not less than three hundred miles of railroad located in said states and complying with all the provisions of this section; if any such railroad corporation shall be leased to another railroad corporation organized under the laws of any of the New England states and owning in fee not less than three hundred miles of railroad located in said states, under a lease which provides for the payment by the lessee as rental of an amount sufficient to pay dividends on the capital stock of the lessor amounting in the aggregate in each fiscal year o'f said lessor corporation during the term of said lease to not less than four per centum on its outstanding shares of capital stock, such lessor shall be regarded as having paid its divi- dends within the meaning of this section, but in case the lessee shall hold any shares of the capital stock of the lessor such shares shall not be considered as outstanding within the meaning of this section. Sec. 7. In the bonds or debentures actually issued by a railroad corporation incorporated in any of the New England states, at least one-half of the railroad of which is located in said state, whether such corporation is in possession of and is operating its own railroad or such railroad is leased to another railroad corporation incorporated in any one of the New England states, provided such bonds or debentures shall be secured either by a mortgage which was at the date thereof, or is at the time of making the investment, a first mortgage on not less than seventy-five per centum of the railroad of such corporation owned in fee at the date of the mortgage, or by a refunding mortgage which provides for the retirement of all prior lien mortgage bonds of such railroad corporation, or by a mortgage which is a prior lien on some part of the raiload covered by a refunding mortgage which provides for the retirement of all outstanding prior CONNECTICUT. 45 lien bonds, or that if the railroad and railroad property of such corporation are unincumbered by mortgage, such bonds or debentures shall be issued under the authority of one of said states which provides by law that no such railroad cor- poration which has issued bonds or debentures shall subse- quently execute a mortgage upon its road, equipment, fran- chise, or upon any of its real or personal property, without including in and securing by such mortgage all bonds or debentures previously issued and all preexisting debts and liabilities, and provided such corporation has paid in divi- dends in cash an amount equal to not less than four per centum per annum on all its outstanding capital stock in each fiscal year for the five years next preceding such invest- ments. If any such railroad company shall hold the railroad of another such railroad corporation under a lease which pro- vides for the payment by the lessee as rental of an amount sufficient to pay dividends on the capital stock of the lessor amounting in the aggregate in each fiscal year of said lessor during the term of said lease to not less than four per centum on all its outstanding capital stock, such lessor shall be re- garded as having paid its dividends within the meaning of this section, but in case the lessee shall hold any shares of the capital stock of the lessor such shares shall not be con- sidered as outstanding within the meaning of this section. Sec. 8. No bonds or other interest-bearing obligations shall be made a legal investment by sections six and seven in case the authorized issue thereof, with all outstanding prior debts of the issuing or assuming corporation, including all evidences of debt that may legally be issued under any of its prior authorizations or under any of its assumed prior au- thorizations, after deducting therefrom, in case of a refunding mortgage, the bonds reserved under the provisions of said mortgage to retire prior debts at maturity, shall exceed three times the outstanding capital stock of said corporation at the date of such investment. Sec. 9. In the bonds issued by a railroad, terminal, depot, bridge, tunnel, or street railway corporation organized under the laws of any of the New England states or the state of 46 STATE LAWS AND DECISIONS. New York, the property of which is located wholly or in part in one of said states, or in the bonds issued by a railroad, terminal, depot, bridge, tunnel, or street railway corporation, organized under the laws of any of said states, assumed by a railroad, terminal, depot, bridge, tunnel, or street railway corporation organized under the laws of said states, provided such bonds shall be secured either by a mortgage which was at the date thereof, or is at the time of making the invest- ment, a first mortgage on not less than seventy-five per centum of the railroad owned in fee at the date of the mort- gage, in the case of a railroad or street railway corporation, or the fixed property, in the case of a terminal, depot, bridge, or tunnel corporation, owned by the corporation issuing the bonds, or by a refunding mortgage which provides for the retirement of all prior lien bonds of such corporation or by a mortgage which is a prior lien on some part of the property covered by a refunding mortgage which provides for the re- tirement of all outstanding prior lien bonds. No bond shall be made a legal investment under this section unless the bonds are guaranteed principal and interest by endorsement by, or guaranteed principal and interest by endorsement which guaranty has been assumed by a railroad corporation, owning in fee not less than three hundred miles of railroad in the New England states, whose bonds are made a legal investment under section six. No bonds shall be made a legal invest- ment by this section in case the mortgage securing the bonds shall authorize a total issue of bonds which, added to the total debt described in section eight, of the guaranteeing corporation, including therein the authorized amount of all previously guaranteed bond issues, shall exceed three times the outstanding capital stock of said guaranteeing corpora- tion at the time of making said investment. Sec. 10. In the mortgage bonds, as described in section fifteen, issued or assumed by any railroad corporation incor- porated under the laws of the United States, or any state, provided such railroad corporation owned in fee during each of the five fiscal years of such railroad corporation next pre- ceding the date of such investment not less than five liundred CONNECTICUT. 47 miles of standard gauge railroad, exclusive of sidings, within the United States, and provided such railroad corporation has complied during each of said fiscal years with the pro- visions of section fourteen, or if such corporation owned in fee less than five hundred miles of such railroad, the gross earnings of such corporation, as reckoned in section fourteen, shall have been not less than ten million dollars. Sec. 11. In the mortgage bonds, as described in section fifteen, issued or assumed by any railroad corporation incor- porated under the laws of the United States, or any state thereof, provided during each of the five fiscal years of such railroad corporation next preceding the date of such invest- ment, its railroad subjected to the lien of the mortgage secur- ing its bonds has been operated by a corporation described in, and which has complied with all the provisions of, sections ten and fourteen. No bonds shall be made a legal invest- ment by this section unless the bonds are guaranteed principal and interest by endorsement by, or guaranteed principal and interest by endorsement which guaranty has been assumed by, the corporation operating the railroad covered by the mort- gage securing the bonds and which has complied with all the provisions of sections ten and fourteen. Sec. 12. In the mortgage bonds as described in this act issued or assumed by any terminal, depot, bridge, or tunnel company, incorporated under the laws of the United States, or any state, provided the property of such terminal, depot, bridge, or tunnel company is used by one or more railroad corporations described in, and which have complied with all the provisions of, sections ten and fourteen. No bond shall be made a legal investment by this section unless the bond is guaranteed principal and interest by endorsement by, or guaranteed principal and interest by endorsement which guaranty has been assumed by, one or more railroad corpora- tions described in, and which has complied with all the pro- visions of, sections ten and fourteen. Sec. 13. In the mortgage bonds as described in section fifteen issued or assumed by any railroad corporation incor- porated under the laws of the United States, or any state. 48 STATE LAWS AND DECISIONS. provided, during each of the five fiscal years of such rail- road corporation next preceding the date of such investment, such railroad corporation owned in fee not less than one hundred miles of standard gauge railroad, exclusive of sidings, within the United States, and provided such railroad corpora- tion has complied during each of said fiscal years with the provisions of section fourteen. No bonds shall be made a Igeal investment by this section unless the bonds are guar- anteed principal and interest by endorsement by, or guar- anteed principal and interest by endorsement which guaranty has been assumed by, a corporation described in, and which has complied with all the provisions of, sections ten and four- teen, nor unless it complies with the provisions of section six- teen. Sec. 14, Any railroad corporation described in sec- tions ten and thirteen shall comply with the provisions of this section during each of the five fiscal years of such railroad corporation next preceding the date of such investment, before any of its mortgage bonds, as de- scribed in section fifteen, shall be made a legal invest- ment. Such railroad corporation shall have paid the ma- tured principal and interest of all indebtedness and shall have paid in dividends in cash to its stockholders an amount equal to at least four per centum upon all its out- standing capital stock; the gross earnings from the operation of the property of such railroad corporation, including therein the gross earnings of all railroads leased and operated or controlled and operated by said corporation, and the gross earnings from the sale of coal from mines owned or con- trolled by it, shall not have been less in amount than five times the amount necessary to pay the interest payable upon its entire outstanding indebtedness, the rentals of all leased lines, and the interest on all outstanding indebtedness of rail- roads controlled and operated which are not owned by said corporation, after deducting from said interest and rentals interest and dividends received from the stocks, bonds, or notes of railroad corporations not operated by said corpora- tion, which have been deposited with a trustee as the only CONNECTICUT. 49 security for the payment of bonds or notes issued by said corporation, but not in excess of the interest on said last named bonds or notes. Sec. 15. Whenever the term "mortgage bonds" is issued in sections ten to twenty, inclusive, it shall mean either (1) that the mortgage securing the bonds was at the date thereof, or is at the date of such investment, a first mortgage on not less than seventy-five per centum of the railroad, in the case of a railroad corporation, or the fixed property, in the case of a terminal, depot, bridge, or tunnel company, owned in fee at the date of the mortgage by the corporation which executed the mortgage and issued the bonds ; that seventy-five per centum of the railroad subject to the lien of said mortgage is connected; that the date of said mortgage is at least five years prior to the date of such investment ; unless the corpora- tion issuing, assuming, or guaranteeing the bond has com- plied with section fourteen for each of the ten fiscal years of such corporation next preceding the date of such investment; but a mortgage given in substitution for and not greater in amount than such mortgage, and covering the same railroad or property, shall be considered to be in accordance with this requirement; (2) that if the mortgage securing the bonds was at the date thereof, or is at the date of such investment, not a first mortgage on not less than seventy-five per centum of the railroad owned in fee at the date of the mortgage, it is a first mortgage on at least seventy-five per centum of the rail- road subject to the lien of said mortgage at the date thereof; but if any stocks or bonds are deposited with the trustee of said mortgage as part security therefor, representing or cov- ering railroad mileage not owned in fee, the bonds secured by said mortgage shall not become legal investments unless said corporation owns in fee at least seventy-five per centum of the actual mileage which is subject to the lien of such mort- gage, including the mileage which is represented or covered by said stocks or bonds: that seventy-five per centum of the railroad of said mortgage is at least five years prior to the date of such investment; unless the corporation issuing, as- suming, or guaranteeing the bond has complied with section 50 STATE LAWS AND DECISIONS. fourteen for each of the ten fiscal years of such corporation next preceding the date of such investment; but a mortgage given in substitution for and not greater in amount than such mortgage, covering the same railroad or property, shall be considered to be in accordance with this requirement; (3) that the mortgage securing the bonds was at the date thereof, or is at the date of such investment, a first mortgage, or a mort- gage or trust indenture which is in effect a first mortgage upon all the railroad, subject to the lien of said mortgage or trust indenture by virtue of the irrevocable pledge with the trustee thereof of an entire issue or issues of bonds which are a first lien, upon the railroad of a railroad corporation which is owned and operated, controlled and operated, or leased and operated by the corporation issuing or assuming said bonds ; that seventy-five per centum of the railroad sub- ject to the lien of said mortgage is connected; that the date of said mortgage is at least five years prior to the date of such investment, unless the corporation issuing, assuming, or guaranteeing the bonds has complied with section fourteen for each of the ten fiscal years of such corporation next pre- ceding the date of such investment ; but a mortgage given in substitution for and not greater in amount than such mort- gage, and covering the same railroad property, shall be con- sidered to be in accordance with this requirement ; (4) that the mortgage securing the bonds was at the date thereof, or is at the date of such investment, a refunding mortgage which provides for the retirement of all prior lien mortgage bonds of said corporation outstanding at the time of said invest- ment, and covering at least seventy-five per centum of the rail- road owned in fee by said company at the date of said mortgage. No mortgage is to be regarded as a refunding mort- gage under the provisions of this section unless the bonds which it secures mature at a later date than any bond which it is given to refund, or, in case bonds are issued to mature at an earlier date than any bond which it is given to refund, the mortgage contains the provision that bonds issued to mature at an earlier date may be retired by a like amount of bonds reissued under said mortgage; (5) that the mortgage CONNECTICUT. 51 securing the bonds is a prior lien to a refunding mortgage de- scribed above, on some part of the railroad or railroad prop- erty covered by said refunding mortgage, provided the bonds issued under such mortgage are to be refunded by said re- funding mortgage, and the property covered by said prior lien mortgage is operated by, and its operations included in, those of the railroad corporation issuing said refunding mortgage. Sec. 16. No bonds shall be made a legal investment by section ten in case the mortgage securing the same shall au- thorize a total issue of bonds, which, with all outstanding prior debts of the issuing or assuming corporation, includ- ing all bonds not issued that may legally be issued under any of its prior debts, or of its assumed prior debts, after deducting therefrom in case of a refunding mortgage, the bonds reserved under the provisions of said mortgage to re- tire prior debts at maturity, shall exceed three times the out- standing capital stock of said corporation at the date of such investment. No bond shall be made a legal investment by sections eleven, twelve, and thirteen in case the mortgage securing the same shall authorize a total issue of bonds, which added to the total debt, as defined in this section, of the guar- anteeing corporation, including therein the authorized amount of all previously guaranteed bond issues, shall exceed three times the capital stock of said guaranteeing corporation out- standing at the time of making said investment. In case of a mortgage executed prior to the passage of this act, under which the total amount of bonds which may be issued is not specifically stated, the amount of bonds outstanding there- under at the date of such investment shall be considered as the total authorized issue. Sec. 17. Bonds which have been or shall become legal in- vestments under any of the provisions of sections ten to twenty, inclusive, shall not be rendered illegal, although the corporation issuing, assuming, or guaranteeing such bonds, shall fail for a period not exceeding two successive fiscal years to comply with the requirements of sections ten and four- teen, but no further investment in the bonds issued, assumed, or guaranteed by said corporation shall be made after the 52 STATE LAWS AND DECISIONS. first fiscal year of such failure; but if, after the expiration of said period, said corporation complies for the following fiscal year with all the requirements of sections ten and four- teen it shall be regarded as having complied therewith during said period, and thereupon said bonds shall be legal invest- ments, but in case of any subsequent failure to comply with said sections ten and fourteen the bonds of said corporation shall not be purchased until said corporation shall have com- plied each year for five successive years with said sections ten and fourteen. Sec. 18. Bonds which have been or shall become legal in- vestments under any of the provisions of sections ten to twenty, inclusive, shall not be rendered illegal, because the property upon which they are secured has been or shall be conveyed to or legally acquired by another railroad corpora- tion, and the corporation which issued or assumed said bonds has been or shall be consolidated with another railroad cor- poration, if the consolidated or purchasing corporation shall assume the payment of said bonds and so long as it shall con- tinue to pay regularly interest, or dividends, or both, upon the securities issued against, in exchange for, or to acquire the stock of the corporation consolidated, or the property pur- chased, or upon securities subsequently issued in exchange or substitution therefor, to an amount at least equal to four per centum per annum upon the capital stock outstanding at the time of such consolidation or purchase, of said corpora- tion which issued or assumed said bonds. Sec. 19. If a railroad corporation which has complied with all the requirements of sections ten and fourteen ex- cept that the period of compliance is less than five years, shall be, or shall have been, consolidated or merged with, or its railroad purchased and all the debts of such corporation as- sumed by, another railroad corporation incorporated under the laws of the United States, or any state, the corporation so succeeding shall be considered as having complied with all the provisions of said sections during those successive years next preceding the date of such consolidation, merger, or purchase in which said consolidated, merged, or purchased corporations, CONNECTICUT. 53 if considered as one continuous corporation in ownership and possession, would, taken together, have so complied, provided in the case of a railroad corporation which has complied with all the requirements of said sections, except that the period of compliance is less than five years, said succeeding corporation shall continue so to comply for a further period which shall make such compliance equivalent to at least five successive years. Sec. 20. If, by means of consolidation, merger, or pur- chase, a railroad corporation shall own and possess the prop- erties and franchises which, prior thereto, belonged to similar corporations, and, during the years next preceding such con- solidation, merger, or purchase, one or more of said corpora- tions have regularly paid in cash to stockholders dividends in amounts equaling or exceeding four per centum per annum upon the entire capital stock of the successor corporation out- standing at the time of the investment, such successor cor- poration shall be considered as having paid such dividends during the same period of years. Sec. 21. Savings banks may invest not exceeding two per centum of their deposits and surplus in equipment trust notes, bonds, or certificates issued by, or which are guaranteed by endorsement both as to principal and interest by, or which are secured by lease of equipment to, a railroad corporation which, in case of a railroad corporation incorporated under the laws of any of the New England states, has complied with section six, or which, in the case of a railroad corpora- tion incorporated under the laws of any other state, or of the United States, has complied with all the provisions of sections ten and fourteen, provided said notes, bonds, or certificates are secured by a first lien on, or by a lease and conditional sale of, new standard railroad equipment free from other en- cumbrances, for the purchase of which said notes, bonds, or certificates were issued at not exceeding ninety per centum of the purchase price thereof, and provided the instrument under which such notes, bonds, or certificates are issued, or the lease of such equipment to the railroad corporation, provides for the proper maintenance of the equipment covered thereby and 54 - STATE LAWS AND DECISIONS. for the payment of the entire issue of such notes, bonds, or certificates in not exceeding fifteen annual or thirty semi- annual installments, without the release of any part of the lien or interest in any of the equipment securing such notes, bonds, or certificates until the entire issue of such series of notes, bonds, or certificates shall have been paid or redeemed. No equipment trust notes, bonds, or certificates shall be made a legal investment by this section in case the series authorizes an amount which, added to the total debt as defined in section eight in the case of a railroad corporation organized under the laws of any of the New England states, or section sixteen in the case of a railroad corporation organized under the laws of any other state or of the United States, which issued or guaranteed or is the lessee of the equipment trust notes, bonds, or certificates, including therein the outstanding amount of all previously issued series of such equipment trust notes, bonds, or certificates, shall exceed three times the capital stock of such railroad corporation outstanding at the time of making said investment. Sec. 22, Savings banks may invest not exceeding two per centum of their deposits and surplus in bonds issued by any street railway corporation incorporated in this state, the rail- way of which is located wholly or in part therein, provided such bonds are secured by a mortgage which was at the date of the mortgage or is at the date of the investment a first mortgage on not less than seventy-five per centum of the rail- way of such corporation owned in fee at the date of the mort- gage, and provided the gross earnings of said corporation each fiscal year for the five years next preceding the date of such investment, were not less than one hundred thousand dollars, and that said corporation in each of said years earned and paid in dividends in cash an amount equal to at least four per centum per annum upon the outstanding capital stock, and provided, at the date of any such dividend, the outstand- ing capital stock is equal to at least one-half of the debt of such corporation. Sec. 23. Savings banks may invest not exceeding two per centum of their deposits and surplus in mortgage bonds and COXXECTICUT. 00 other interest-bearing obligations of any water company sup- plying water for domestic use to communities in this state having a population of not less than fifty thousand whose franchise is an exclusive one and unlimited in time, provided the amount of all the outstanding debts of such company does not exceed its capital stock, and provided such water company has earned each year and paid in cash from its otlficially reported net earnings, as shown by its annual report or other sworn official statement, to municipal, state, or United States authorities, dividends of not less than four per centum per annum on its entire outstanding capital stock, for a period of four years next preceding the making of the investment. Sec. 24. Savings banks may invest not exceeding two per centum of their deposits and surplus in bonds of any tele- phone company incorporated in this state, whose property is located chiefly in this state, which are secured by a first mortgage upon at least seventy-five per centum of the prop- erty of such company, including its franchises, rights, and privileges, and limiting the amount of bonds issuable there- under to seventy-five per centum of the valuation of the property mortgaged, excluding any valuation of said fran- chises, rights, and privileges, and providing the gross income of such telephone company shall have been not less than two million dollars per annum during each of the five fiscal years of such telephone company next preceding the date of such in- vestment. Sec. 25. Savings banks may invest not exceeding two per centum of their deposits and surplus in bonds of any tele- phone company incorporated in any of the New England states, or in the state of New York, and secured by a first mortgage upon at least seventy-five per centum of the prop- erty of such telephone company, or by the deposit with a trust company incorporated under the laws of one of the New England states or of the state of New York of bonds and shares of stock of other telephone corporations under an indenture of trust which limits the amount of bonds so se- cured to seventy-five per centum of the value of the securities deposited as stated and determined in said indenture, and pro- 56 STATE LAWS AND DECISIONS. vided the gross income of such telephone company shall have been not less than twenty-five million dollars per annum dur- ing each of the five fiscal years of such telephone company next preceding the date of such investment. No bond of a telephone company shall be made a legal investment under sections twenty-four and twenty-five unless during each of the five fiscal years of such telephone company next preceding the date of such investment said telephone company shall have paid the matured principal and interest of all its indebted- ness, and shall have paid, during each of said years, in cash dividends an amount equal to not less than six per centum per annum on all its outstanding issues of capital stock, and the dividends paid on the capital stock of such telephone company shall not have been less than the total amount necessary to pay the interest upon its entire outstanding indebtedness. Sec. 26. Savings banks may invest in the capital stock of any bank or trust company located in this state, or in the city of New York, or in the city of Boston in the state of Massachusetts, but no savings bank shall hold by way of in- vestment and as security for loans, more than twenty per centum of its deposits in the stocks of such banks or trust companies, at par value, nor more than three per centum of its deposits, nor more than one hundred thousand dollars of par value in, nor more than one-quarter of the capital stock of, any such bank or trust company. The provisions of this section shall not render illegal any such investments now owmed by any bank or trust company. Sec. 27. Savings banks may invest in loans secured by first mortgage on unencumbered real estate, not to exceed fifty per centum of the value of such real estate, located in this state, or in the county of Providence or Washington in the state of Rhode Island, or in the county of Hampden or Berkshire in the State of Massachusetts, or in the county of Dutchess, Putnam, or Westchester in the state of New York. Sec. 28. When any loan is made by a savings bank upon real estate the security shall be appraised by two or more suitable persons, well known in the community where such loan is made, one of whom shall be a trustee of the bank CONNECTICUT. 57 making the loan. Such appraisal shall express upon its face the amount at which such property is appraised, and, -with a certificate of title or a title insurance policy, shall be lodged and kept with the institution making such loan. No loan shall be made by any savings bank to any corporation or association or ecclesiastical society secured by a mortgage upon its property, unless the same shall be accompanied by the individual guaranty of some responsible party or parties, or by other collateral security of value equal to the amount of the sum loaned. The directors or trustees of any bank con- senting to any loan contrary to the provisions of this section shall be individually responsible for any loss by reason of such loan. Sec. 29. Savings banks may invest not exceeding twenty per centum of their deposits and surplus in notes secured by pledge of stock or bonds as collateral, provided the corpora- tion issuing such stock or bonds shall have paid thereon divi- dends or interest at the rate of not less than four per centum per annum during the two years next preceding the time when such loan is made; or by the pledge of any stock or bonds or other obligations which under the provisions of this act may be purchased by savings banks; but the market value of any securities given to secure any collateral loan shall be at least twenty per centum in excess of the amount of the loan and not more than five per centum of the aggre- gate deposit in any savings bank shall be loaned on the stock, bonds, or other obligations of one corporation; or by the pledge of deposit accounts and books in savings banks in this state to an amount not exceeding the balance due from said savings banks on such deposit account. Sec. 30. Savings banks may invest not exceeding ten per centum of their deposits and surplus in notes, each of which shall be the joint and several obligation of two or more parties, all residents of this state, but no savings bank shall loan on personal security to one person more than three per centum of its deposits at the time of making such loan. No savings bank shall buy, or lend any money upon, any obligations on which only one person or firm shall be holden without taking 58 STATE LAWS AND DECISIONS. additional security for the same equivalent to the guaranty or endorsement of some other responsible party. Sec. 37. If any street railway company, the bonds of which are a legal investment, prior to the passage of this act, shall fail, in any fiscal year subsequent to the passage of this act, to pay dividends equal to four per centum upon its outstanding capital stock, the bonds of such railway company shall cease to be a legal investment, until such company has complied with all the provisions of section twenty-two of this act. Continuing Business. An executor who continues a business in which the deceased wag a partner becomes a co-partner and is liable personally for the debts of the partnership. Alsop v. Mather, 8 Conn. 584. Trustees Protected if They Invest in Authorized Securities. If trustees invest in the securities expressly allowed by statute they will, except under very extraordinary circumstances, be protected, no matter how the investment may result. Clark v. Beers, 61 Conn. 87. Investment in Individual Name. The law presumes that a trustee acts for the benefit of the estate and not in his individual capacity. To this extent the law presumes that a trustee acts for the estate, and he may be protected in his in- vestments although they have been made in his own name. Johnson v. Blackman, 11 Conn. 342. Corporate Stock. Corporate stock can never be a suitable investment for a trustee unless the trust instrument specifically provides for such security. Eeed V. Eeed, 80 Conn. 401. An executor who advised the widow of the testator to invest in certain stocks in which he was interested was guilty of a breach of con- fidence and the investment was illegal. In re Potter's Appeal, 56 Conn. 1. But this rule must now be subject to the exception of Sec. 26 of the law governing investments by savings banks, permitting investment in bank and trust company stock. Eailroad Bonds. A guardian has no right to invest funds of the ward in railroad bonds. In re Potter's Appeal, 56 Conn. 1. But the statutes now pro- vide for investments in certain railroad and corporation bonds. CONNECTICUT. 59 Trustee May Not Obtain Personal Benefit. A trustee is not permitted to receive any personal gain from his administration of the trust fund or from his investments. Looby v. Eedmond, 66 Conn. 444; Campbell v. Campbell, 8 Fed. Eep. 460. Investment in Chattel Mortgage. Trustees lent the fund upon notes secured by mortgage upon a vessel and certain corporate bonds. Such security was improper and inadequate. New Haven Trust Company v. Doherty, 75 Conn. 555. Must Comply With Statutes. In making a loan on security not authorized by statute, without ex- ercising the care and prudence of an ordinary man, trustees act wrong- fully and become personally liable for the loss. New Haven Trust Com- pany V. Doherty, 75 Conn. 555. Converting Existing Investments Into Authorized Securities. A testator directed his executors to convert his real estate into money and to invest the proceeds in securities which were legal for savings banks. Certain stocks and bonds owned by the testator were first class securities paying high dividends, but they were not legal for savings banks. Sec. 255 of the General Statutes permits a trustee to retain securities received as a part of the trust fund unless the in- strument under which such trust was created directs that a change of investment be made. In the present case the evident intention of the testator was to strengthen the security of the capital of the trust fund, and the trustees were bound to convert the securities into such as were legal for savings banks. Curtis v. Osborn, 79 Conn. 555. Bonds Purchased at a Premium. A trustee may purchase bonds which are legal for trust funds at a premium, but he should reserve enough out of the annual interest to meet the premium. Payment of premium is a payment from the capital of the estate. No part of the capital of the trust fund should go to life tenants. Curtis v. Osborn, 79 Conn. 555. Personal Securities. Unsecnred notes are not Legal Investments for Trustees. State v. Hunter, 73 Conn. 435. Due Diligence. The fact that other persons bought similar security is not sufficient to relieve a trustee. He is bound to make diligent inquiry- as to th« character and safety of the investment. State t. Washburn, 67 Coihi. 187. 60 STATE LAWS AND DECISIONS. Mortgages on Lands in Otter States. Loans on notes secured by mortgage of land in other states, and the purchase of such notes, cannot be regarded as prima facie a proper in- vestment of trust funds. If a trustee thus invests the funds he must prove not only good faith, but also due diligence in ascertaining the safety of the particular investment. Clark v. Beers, 61 Conn. 87, 89; State V. Washburn, 67 Conn. 187. An executor who advised the widow, who was also guardian of a minor, to invest in mortgages on western lands was guilty of breach of trust. In re Potter's Appeal, 56 Conn. 1. Retaining Investments. A conservator may keep his ward's estate invested in the securities received by him unless otherwise ordered by the court of probate and be exempt from liability by reason of depreciation of such securities. If he makes a change in the investment the burden is upon him tol prove a reasonable cause for such a change. State v. Washburn, 67 Conn. 187; Gen. Statutes, Sec. 255. Damages. As to measure of damages for improper investment see State v. Washburn, 67 Conn. 187; Gen. Statutes, Sec. 496. DELAWARE. TRUSTEES GENERALLY. Laws of 1909, Chapter 226. (With Amendments to 1914.) Excepting where instruments creating trusts prescribe otherwise, trustees named in wills or appointed by the Chan- cellor, may hereafter invest the funds of their trusts in securi- ties of the following classes and kinds, viz. : (a) Stocks and bonds and interest-bearing obligations of the United States, for which the faith and credit of the United States are pledged to provide for the payment of the interest and principal thereof, including the bonds of the District of Columbia; (b) Stocks and bonds and interest-bearing obligations of the State of Delaware and of any other state of the United States, issued pursuant to the authority of the law relating thereto ; (c) Stocks and bonds of any county of the State of Delaware and of any county of any state of the United States, issued pursuant to the authority of the law relating thereto ; (d) Stocks and bonds of any school district of the State of Delaware, issued for school purposes and pursuant to the authority of the law relating thereto; (e) Stocks and bonds and interest-bearing obligations of any incorporated city or town of the State of Delaware or of any of the states of the United States, issued pursuant to the authority of the law relating thereto, for the payment of which the faith and credit of the municipality issuing the same are pledged; (f) Bonds of either natural persons or corporations, se- cured by first mortgage on productive real estate, free from prior incumbrances ; 61 62 STATE LAWS AND DECISIONS. (g) Bonds of railroad, transportation and public service corporations, secured by mortgage upon the property, plants and systems of such corporations; (h) Collateral trust bonds of railroad, transportation and public service corporations, where the same are secured by guaranteed underlying stocks (or bonds secured thereby), where no default in the payment of installments or principal or of interest for more than ninety days after the same has become due, has occurred in connection therewith, within a period of ten years preceding the investment of trust funds therein ; (i) Car trust certificates and equipment trust bonds; (j) Underlying securities of railroad, transportation and public service corporations, bearing guaranteed dividends, where no default in dividends has occurred after the guar- anty; (k) Such other securities as may be approved by the Chancellor. By the laws of 1911, this section was amended by insert- ing a proviso that, "the foregoing specification of classes of securities in which trustees may invest the funds of their estates, shall not be construed to relieve said trustees from the duty of exercising due care in the investment of said funds." Continuing Investments. Sec. 1, Ch. 115, Laws of 1895. — In case the guardian of any minor, or the trustee under any will or any succeeding trustee shall be entitled to receive any legacy or distributive share from the executor or adminis- trator of any testator or intestate, such guardian, with the approval of the Orphan's Court, or any judge thereof, or such trustee, with the approval of the Chancellor, may re- ceive from such executor or administrator in payment of whole or any part of such legacy or distributive share in specie by assignment, transfer or delivery, according to the na- ture and character of the property, to be made by the ex- ecutor or administrator of any testator or intestate* to such guardian or trustee of any stocks, bonds, judgments, mort- gages, investments or other personal puoperty held or owned by such testator or intestate at the time of his death at the DELAWARE. 63 appraised value thereof and such assignment, transfer or de- livery shall vest the legal title to any such investments or property in such guardian and trustee. And such guardian or trustee shall not be accountable or liable for any loss or depreciation in the value of any such stock, bonds, judgments, mortgages, investments or other personal property so received and held by him, unless the same shall occur through the cul- pable act, neglect or default of such guardian or trustee. Pro- vided, that nothing herein contained shall be deemed to limit or restrict the right of such guardian or trustee at any time to alter or change the investment of such legacy or distribu- tive share, or any part thereof, with the approval as aforesaid. Guardian. — Upon application of a guardian, the court (Orphan's Court) may direct money in his hands to be in- vested by him, as guardian, in stocks in this state, or funded debt of the United States, to be designated by the court, or to be lent by him, as guardian, on security to be approved by the court, for periods not exceeding a year and one month; which loan may be continued, on his application, from time to time, for the same period; and a guardian, faithfully fol- lowing the directions of the court, shall not be liable for the failure of the security, or any loss resulting from any such investment: Provided, he shall have used due and reasonable care and diligence to prevent the same. If money cannot be so lent, or invested, the guardian shall not be charged with interest, unless he derives benefit from, or uses the money. Laws of Delaware, Ch. 96, Sec. IS. Power of Orphan's Court. The Orphan's Court in Delaware has the power to determine the amount and character of investment of a sum to be invested to secure an annuity for a widow who has relinquished her right of dower. Green V. Saulsbury, 6 Del. Ch. 371. Trustee May Not Use Trust Fund For His Own Benefit. Although a trustee may not use trust funds in his own business or for his own profit, the mere fact that he had such an investment under consideration is not ground for his removal. Massey v. Stout, 4 Del. Ch. 274; Downs v. Eickards, 4 Del. Ch. 416. 64 STATE LAWS AND DECISIONS. May Not Purcliase Trust Property. The principle upon whicli the disqualification of the trustee to buy the trust estate rests is a broad one, and extends as well to sales conducted by others as to those conducted by himself. Downs v. Bickards 4 Del. Ch. 416; Willey v. Tindal, 5 Del. Ch. 194. Liability of Co-Administrators. One co-administrator is not liable for the separate acts of the other who wasted the estate. State v. Belin & Breck, 5 Del. 400. Deposit in Bank in Own Name. If an executor, administrator or trustee deposits trust moneys in a bank in his own private name, or mingles the trust moneys with his own moneys, and the bank fails, he is personally liable and must bear the loss. Allen v. Leach, 7 Del. Ch. 83. Leaving Money in Bank. If a trustee leaves trust moneys in a bank for a longer time than is necessary for carrying out the purposes of the will or the adminis- tration of the trust, and the bank fails, he is personally liable for the loss. Allen v. Leach, 7 Del. Ch. 83. Even if the money is not lost, the trustee is chargeable with in- terest. Allen V. Leach, 7 Del. Ch. 83. Buying in at Mortgage Foreclosure. The Court of Chancery has power to authorize a trustee to buy in property at his own mortgage foreclosure sale. This may be done when it is clearly to the interest of the beneficiary, although the trust instru- ment did not authorize an investment in real estate. In re Bellah, « Del. Ch. 59; In re Baker, 8 Del. Ch. 355. DISTRICT OF COLUMBIA. Code of 1911. (With Amendments to 1914.) Sec. 369. Investment of Funds. — Whenever, under the provision of a will, it shall be necessary for an executor or an administrator cum testamento annexo to retain in his hands the personal estate or any part thereof after all just claims are discharged, as where money or some other thing is directed to be paid at a distant period or upon a contin- gency, the probate court shall have the power, on the appli- cation of such executor or administrator or of a party in- terested, to decree or give directions in relation thereto ; and it shall be the duty of said executor or administrator to apply to the said probate court, and the said court shall have full power to decree or direct Avhat part of the personal estate shall be retained or appropriated for the purpose and in what manner it shall be disposed of, and the legacy or benefit in- tended by the will shall be secured to the person to be entitled at a future period or contingency, and how the necessary part of the personal estate to be appropriated for the purpose shall be prevented from lying dead or being unproductive, and how it shall be applied, agreeable to the intent of the will or the construction of the law, in ease the contingency shall not take place. Purchase of Trust Property by Trustee. A trustee cannot become the purchaser of trust property directly or indirectly unless he can show absolute good faith and honesty in the transaction. Stephens v. Beall, 1 Mac A. 38; Beckett v. Tyler, 3 Mac A. 319. A purchase of the trust property by a trustee for his own use is not absolutely void, but voidable. It may be ratified by the parties. Quirk V. Liebert, 12 Appeal 394; Hammond v. Hopkins, 143 U. S. 224. 65 66 STATE LAWS AND DECISIONS. Must Act in Good Faith.. It is a settled rule that the trustee of a fund for management and investment must act in good faith and in the exercise of a sound dis- cretion. Johns V. Herbert, 2 Appeal 485. Sale of Non-Productive Securities. A testator left a trust estate consisting of bonds of the Chesapeake and Ohio Canal Company. The trustee retained the bonds, although they had produced no interest for a number of years. So far as the principal was concerned, however, they were considered safe. The mere fact that the trustee continued to hold the bonds after he had been requested by the life beneficiary to sell was not sufficient to render him liable for their depreciation in value. A trustee's conduct is to be judged by the situation as it appeared at the time of the transaction. Johns v. Herbert, 2 Appeal 485. Power to Sell. The power of a trustee to sell stocks and securities is not to be implied. Johns v. Herbert, 2 Appeal 485; Duncan v. Jandon, 15 Wall. 165. Duty to Apply to Court For a Change of Investment, Whenever a trustee has reason to believe that an investment may be unsafe or unprofitable, and in the absence of express authority in the trust instrument, he should apply to the court promptly for leave to change the investment. Johns v. Herbert, 2 Appeal 485; Mades v. Miller, 2 Appeal 455. Duty to Invest. When money remains in the hands of trustees beyond a reasonable time, the burden is upon them to explain and justify their failure to invest it, in order to relieve themselves from being made to account for the interest thereon. Mades v. Miller, 2 Appeal 455. Mingling Trust Funds. Trustees who mingle trust funds with their own or have made use of the money themselves, or have been negligent in not paying th^ money over or in not investing it so as to render it productive, are chargeable with interest. Mades v. Miller, 2 Appeal 455. Purchase at His Own Sale. A trustee may purchase at a judicial sale brought about by a third party, which he had taken no part in procuring, and over which he could not have had control. Starkweather v. Jenner, 27 Appeal 348; Twin-Lick Oil Co. v. Marbury, 91 U. S. 587. FLORIDA. TRUSTEES GENERALLY. Laws of 1906. (With Amendments to 1914.) Sec. 2717. Deposit in Bank — Bank Stock. — Executors, ad- ministrators, trustees or guardians may deposit the funds held by them with such company (Banking Company) or invest the same in its capital stock for the benefit of the estate of their testators, intestates, trusts or wards. Sec. 2433. Executors and Administrators. — Executors and administrators may, by leave of the court, retain in their possession the money of any minor, paying for the same lawful interest, or shall, under the direction of the court, put out the moneys of minors at interest, upon such mortgage se- curity, or on United States or state bonds, or stocks, as said court shall allow, and if such security be taken hona fide and without fraud, and shall prove insufficient, it shall be the loss of the minor ; but if no good security can be found on which to put out the said money at interest, the said executor or administrator shall only be responsible for the principal; and at the end of each year the interest due, if not paid, shall be made principal ; and when the executor or administrator retains the money on interest himself, the same rule shall be observed, the interest being added to the principal annually ; but executors and administrators shall not be liable to pay interest, except on the surplus of the estate of the deceased remaining in their hands and unemployed as aforesaid, after the settlement of their accounts. Sec. 2612. Guardians. Investment of Moneys. — Guar- dians may by leave of the court retain in their possession the money of any infant, paying for the same lawful interest, or shall under the direction of the court put out the money 67 68 STATE LAWS AND DECISIONS. of the infant at interest upon such mortgage security, or in United States bonds or state bonds of any state, as said court shall direct, and if such security be taken lona fide and without fraud, and shall prove insufficient, it shall be the loss of the infant ; but if no good security can be found on which to put out the said money at interest, said guardian shall only be responsible for the principal, but the day of payment of that money so put out at interest on private security at any time shall not exceed one year from the date of the obliga- tion or other security given for the same and also at the end of each year the interest due if not paid shall be made prin- cipal. When the guardian retains the money on interest him- self the same rule shall be observed, the interest being added to the principal annually, but guardians shall not be liable to pay interest except on the surplus of the estate remaining in their hands and unemployed as aforesaid, after the settle- ment of their accounts. Continuing Business, Laws of 1911, Ch. 6215. Sec. 1.— In all cases where a person shall have died while engaged in any trade or business, the Circuit Courts of this state are em- powered to authorize the curator, administrator or executor of the estate of such deceased person to continue and carry on such trade or business for a reasonable time, under the supervision of such court and to require such security or ad- ditional security of such curator, administrator or executor, as the Circuit Judge may deem proper. Sec. 2. Before any order shall be made authorizing the continuance of the trade or business of the deceased person, as provided for in Section 1 of this Act, the curator, admin- istrator or executor of such estate by a verified petition, shall affirmatively and clearly allege and set forth sufficient facts to make it appear to the court that to prevent great loss to the estate it is necessary to continue such trade or busi- ness of the deceased. FLORIDA. 69 TRUST COMPANIES. Laws of 1911, Ch. 6155. (With Amendments to 1914.) Investment of Trust Funds. — Part of Section 4, relating to investment of trust funds by trust companies, provides that no trust company shall have power to invest such funds or to make loans upon bills, notes or other evidences of debt, except to a county, city, town, municipality and county or school boards of this state, unless the same shall be secured by first mortgage upon real estate not to exceed sixty per centum of the value of such real estate, or by other approved securities, the actual value of which other approved securities shall at all times exceed by at least twenty per centum of the amount loaned on the same. And no moneys received in trust shall be mingled with investments of capital stock or other moneys or property belonging to such corporation. Statutes Mandatory. It will be observed that the statute not only restricts the powers of an executor, but as a further protection to the interests of minors requires the sanction and approval of the court of probate. Moore v. Hamilton, 4 Fla. 112. Section 2433 was intended to embrace all money belonging to an estate being in process of administration. The provision of the statute requiring loans to be secured by mortgage is mandatory, and if an executor disregards the requirements and makes a loan upon personal security he does so at his peril. Moore v. Hamilton, 4 Fla. 112; Moore V. Felkel, 7 Fla. 44. May Not Invest In Personal Security. Since the statutes of Florida are mandatory, it follows that a trustee may not invest the trust fund in personal security. Moore v. Hamilton, 4 Fla. 112. Failure to Obtain Approval of Judge of Probate. Investments which are not authorized by law or which have not been approved by the judge of probate may be accepted or rejected by the beneficiaries. Sanderson's Adm'rs. v. Sanderson, 17 Fla. 820. Trustee May Not Purchase at Sale of Estate. A trustee may not purchase at a sale of the estate of the bene- ficiary although the sale is at public auction. The beneficiary may 70 STATE LAWS AND DECISIONS. set aside the sale whether made in good faith or not. Bellamy v. Bel- lamy's Admr., 6 Fla. 62. Trvistee May Not Profit from the Estate. A trustee may not invest for his own interest or profit from the estate either directly or indirectly. Lainhart v. Burr, 49 Fla. 315. Remedy of Beneficiary in Case of Unauthorized Investment. Where a guardian invests in securities which are doubtful and not sanctioned by the court, a beneficiary may refuse to receive the securities and may rely on the bond. May v. May, 19 Fla. 373. Deposit in Bank. A trustee who deposits money in a bank and permits it to remain uninvested is chargeable with interest, unless it appears that no safe security could be found. Eppinger v. Canepa, 20 Fla. 262. GEORGIA. TRUSTEES GENERALLY. Code of 1911. (With Amendments to 1914.) Sec. 3758. Trustee to Report Sale and Reinvestment. — In all cases "where a judge in term by order, or by decree based on the verdict of a jury, or by order in vacation, shall order or allow any trust property to be sold, it shall be the duty of the court, or judge signing the order, to require the trus- tee, within sixty days from the date of said order, to file and have recorded in the office of the clerk of the superior court of the county having jurisdiction of said trust prop- erty, a written report on oath of his actings and doings under said order, with the name of the purchaser of the prop- erty, the price at which the same was sold, together with a description of the property in which the proceeds have been reinvested, the price paid, and the name of the person from whom the same was bought, if said proceeds have been re- invested, and if not, the reason therefor. If the proceeds havp been reinvested, the judge shall pass such order as to him shall seem best, confirming the same or ordering a new investment. If said proceeds have not been reinvested, the judge shall issue such or\he diligence will relieve the trustee from the penalty. Succession of Peytavin, 7 Eobinson 477. When trustees exercise reasonable care in selecting a solvent bank and depositing the funds, the protection of the law will be extended to them. Cooper v. Pellerin, 9 Eobinson 450. Duty to Invest. • The excess of revenues over the expenses of a minor are a part of the capital, and if the tutor fails to invest the excess over $500, LOUISIANA. 99 as directed by law, he is chargeable with interest. Glenn v. Elam, 3 La. Annual 611; Fuselier v. Babineau, 14 La. Annual 764. Persons holding money in a fiduciary capacity are not permitted to leave it with commission merchants merely because it is convenient and because they choose to deal with their own in that way. Suc- cession of Stone, 31 La. Annual 311. May Not Continue Business. Although an executor may cultivate a crop to fruition, he may not, without authority, carry on a plantation and contract with refer- ence thereto. Florsheim Bros. v. Holt, 32 La. Annual 133. Investments Made on Credit. Investments should be made out of surplus of a ward's estate. The heirs are not bound when investments are made on credit. This amounts to dangerous speculation. Eandlett v. Gordy, 32 La. An- nual 904. Family Meeting and Advice of Court. The old custom of a family meeting for consultation and advice to trustees is still retained in Louisiana. A tutor owes his wards in all cases the funds which he receives, together with legal interest, and he can shield himself from responsibility only by investing funds in their name, under a judgment of court rendered on the advice of a family meeting. Monget v. Walker, 4 La. Annual 214. But a trustee is not compelled to consult the family meeting to invest. Mather v. Knox, 34 La. Annual 412. MAINE. TRUST COMPANIES. Laws of 1907. (With Amendments to 1914.) Board of Investment. Section 12. — The board of directors or the executive board of such company shall constitute the board of investment of the company. Said directors or ex- ecutive board shall keep in a separate book, specially pro- vided for the purpose, a record of all loans and investments of every description made by said company, substantially in the order of time when such loans or investments are made, which shall show that such loans or investments have been made with the approval of the Investment Board of said com- pany, and which shall indicate such particulars respecting such loans or investments as the Bank Examiner shall direct. This book shall be submitted to the directors and stock- holders, and to the Bank Examiner whenever requested. Such loans or investments shall be classified in the book as the Bank Examiner shall direct. Trust Funds. Section 14. — All the property or money held in trust by any such company shall constitute a special de- posit, and the accounts thereof of said trust department shall be kept separate, and such funds and the investment or loans of them shall be specially appropriated to the security and payment of such deposits, and not be subject to any other liabilities of the company, and for the purpose of securing- the observance of this proviso, such company shall have a trust department in which all business pertaining to such trust property shall be kept separate and distinct from its general business. 100 MAINE. 101 TRUSTEES GENERALLY. Statutes of 1904. (With Amendments to 1914.) Sec. 9. Chapter 70. — Any judge of probate, having juris- diction of the trust, and the Supreme Judicial Court in any county, on application of the trustee, or of any person in- terested in the trust estate, after notice of all interest, may authorize or require him to sell any real or personal estate held by him in trust, and to invest the proceeds thereof, with any other trust moneys in his hands, in real estate, or in any other manner most for the interest of all concerned therein ; and may give such further directions as the case requires, for managing, investing and disposing of the trust fund, as will best effect the objects of the trust. Guardians. Sec. 20. — A guardian may sell the propertj^ of the ward and invest tlie proceeds of such sale, or any other moneys in his hands, in real estate or in any other manner as ordered by the court. Must Follow Provision of Trust Instrmnent. In making investments the trustee must follow strictly the pro- vision of the trust instrument and if the written consent of the cestui que trust is necessary, a failure to secure it renders the trustee liable. Crocker v. Pierce, 61 Me. 58. When Trustee May Sell. "When a specific bequest of the income of certain stocks is needed, the trustee has no power to sell such stock, but in case the stock is likely to depreciate in value to the injury of the income, the court, under its power to determine the expediency of making changes of investments, may order the trustee to sell and reinvest. Richardson v. Knight, 69 Me. 285, Power to Sell Does Not Give Power to Purchase on Credit. A trustee who is given power to sell parts of the estate and invest the proceeds does not have power to purchase lands on credit. Bowman v. Pinkham, 71 Me. 295. When Repairs May Be Considered an Investment. A trust deed gave the trustees power "To keep and maintain the principal of said trust estates safely invested according to their 102 STATE LAWS AND DECISIONS. best judgment." The estate owned mortgages on mill property and it was necessary for the trustees to take the property in payment of the debt. It was not a good investment and the trustees made necessary repairs and sold the property. The court decided that when real estate is purchased as an investment, or however obtained, if the trustees decide to keep it as such, they may make such repairs as they deem necessary to put it in good condition at the expense of the capital. After that they must keep it in repairs at the expense ofi income. Eepairs made at the expense of capital are to that extent an investment of the trust fund, and are therefore justifiable only when the realty itself is a proper investment for the fund. Veazie v. For- saith, 76 Me. 172. Rate of Interest. A trustee who had invested in United States bonds yielding less than three per cent was accused of an injudicious investment because some other more profitable investment should have been obtained. But investments carefully and judiciously made cannot be attacked because the yield is not high. Emery v. Batchelder, 78 Me. 233. Measure of Trustee's Duty. In measuring the duty of a trustee with the usual conduct of the man of average prudence in the case of his own estate, reference is to be had to the conduct of such a man in making permanent invest- ments of his savings outside of ordinary business risks, rather than to his conduct in business chances. A mere business chance or pros- pect, however promising, is not a proper place for trust funds. Second Mortgages. Second mortgages are unsuitable, for they subject the estate to the possibility of raising funds to pay off the first mortgage. Mattocks v. Moulton, 84 Me. 545. Stocks and Bonds. Stocks and bonds of a new corporation, where the success of the business is not established, are not suitable for investments of trust funds. Mattocks v. Moulton, 84 Me. 545. Personal Security. Trustees may not invest funds upon mere personal security. Mat- tocks V. Moulton, 84 Me. 545. Power to Sell. The Maine courts have gone far in giving a trustee power to sell, and have indicated that the words "invest and manage" properly impart and imply a power of sale unless a contrary intention on the MAIJIE. 103 part of the testator can be found in the will taken as a whole. Robin- eon V. Robinson, 105 Me. 68. May Not Invest for Personal Benefit. A trustee by investing trust funds in his own business, or for his own benefit or accommodation becomes an insurer of the fund and of its productiveness. It is only in making investments entirely outside of, and apart from, his own property or interest, that a trustee can have the approval of the court. Bangor v. Beal, 85 Me. 129. MARYLAND. Code of 1911. (With Amendments to 1914.) Sec. 167. The Orphans' Court, if they shall think such sale advantageous to the ward, may order any guardian to sell leasehold estates of his ward, and' shall order the pro- ceeds to be invested in bank stock or any other good security, in the name of the ward; and no sale, transfer or disposal of the said stock shall be made without the order of the court. The said court may also, if they shall think the same advantageous to the ward, order any guardian to lease any leasehold estates of the ward, for the whole or any part of the unexpired term, on such terms as may be deemed advan- tageous; provided, that such agreement for a lease shall not have any effect until reported to and approved by the court, and the rents arising on such lease shall be accounted for as other property or income of the ward. Sec. 168. The Orphads' Court may order any money be- longing to a ward to be invested in like manner and sub- ject to the same restrictions as prescribed in the preceding section. Sec. 172. Order of Orphans' Court. — They shall order the guardian who has received from any trustee of a court of equity any proceeds of real estate of his ward sold by such trustee, or the proceeds of the sale of leasehold estate of his ward, sold by order of the Orphans' Court, or moneys belong- ing to his ward, to invest the same in mortgages on unincum- bered real estate, worth at least double the amount loaned, or such public stock, permanent funds, or other good securities to be selected by said guardian, as will yield the highest rate of interest that can reasonably be had, or they may when it is clearly for the benefit of the ward, order the same to be in- 104 MARYLAND. 105 vested in land ; and the investment selected shall be reported to the Court for its approval before becoming permanent, and the increase or surplus income of such investment, after what may be necessary for the maintenance and education of the ward, shall be invested in like manner under the direction and ap- proval of the Court, and no part of the principal shall be applied to the maintenance and education of the ward without the order and consent of the Orphans' Court first had and ob- tained. Sec. 173. Must Invest in Name of Ward. — All moneys in- vested under the preceding section shall be invested in the name of the ward, and shall be transferable only under the order of the Orphans' Court; and all transfers without such order shall be void; and whenever the Orphans' Court shall in its discretion authorize a guardian to invest or mortgage the proceeds of the sale of real estate belonging to his ward and sold by a trustee in equity, the affidavit of consideration to such mortgage shall be made by the guardian of such ward. Sec. 242. Administrators and Guardians. — The Orphans' Court may, in their discretion, and whenever it shall seem proper to them, either ex-officio, or upon application, order any administrator to whom they may have granted administration, or any guardian whom they may have appointed, or whose bond they may have approved, to bring into Court, or place in bank, or invest in bank or other incorporated stock, or any other good security, any money or funds received by such ad- ministrator or guardian ; and the Court shall direct the manner and form in which such money or funds shall be placed in bank or invested, and the same shall at all times be subject to the order and control of the Court; and if the administrator or guardian shall not, within a reasonable time to be fixed by the Court, comply with the order, his administration or guardian- ship may be revoked. Rule Adopted by the Courts of Baltimore. The rule in Maryland is that any investment by a trustee must be approved by the court having jurisdiction of the trust. For the purpose of facilitating the work of trustees 106 STATE LAWS AND DECISIONS. the courts of Baltimore have adopted rules governing invest- ments, and if the trustee invests in the manner prescribed by the court, the investment will be approved. The courts of Baltimore have thus provided rules which in many other states have been made statutory. Because of the importance of these rules, and because they are undoubtedly a guide for trustees in the whole state, they are stated in full. In addi- tion to the rules and the specific securities mentioned, the court also prepares a list of securities which comply with the rules and this list is revised each year. Sec. 1. Investments of Trust Funds, unless it is otherwise provided in the instrument creating the trust, or except un- der extraordinary conditions set forth fully to the court, will be sanctioned by the Circuit Court of Baltimore City and the Circuit Court Number Two of Baltimore City only when made in the securities mentioned in the Third Section of this Rule. Sec. 2. The list of authorized securities mentioned in the foregoing, and set out in the succeeding section shall be an- nually revised by the Supreme Bench, and a Committee of Judges shall be appointed for that purpose at the general term held at the close of the September Term of the Common Law Courts, which Committee shall have power to appoint for its assistants such expert advisers as it may find expedient and practicable. The application to place upon the list of authorized invest- ments any investment which does not fully meet the require- ments set forth in this Rule will not be considered at any other time save at the time of the annual revision of the list, except under special circumstances, and with suitable provision for procuring impartial expert testimony at the ex- pense of the party making such application. Sec. 3. The following investments for Trust Funds will ordinarily be sanctioned by the said Courts upon petition, and subject to the limitations in this section, hereinafter set forth, until the further order of court, made in pursuance of the preceding section. (A) United States Bonds. — All Bonds for which the faith MARYLAND. 107 of the United States is pledged to provide for the payment of the interest and principal. (B) State and Territory Bonds. — All authorized Bonds of any State or Territory of the United States and of the Dis- trict of Columbia. (C) County Bonds.— (1) All duly authorized Bonds of any County in this State. (2) All duly authorized Bonds of any County of any other State of the United States having a population of not less than 40,000 persons, according to the last Federal Census, Provided such County has not defaulted in the payment of any part of the principal and interest of any of its indebt- edness within ten years prior to the making of the invest- ment; Provided also, that the net indebtedness of the said County does not exceed five per cent, of the last preceding valuation of property for taxation ; Provided also, that there is no obstacle by Constitutional or Legislative limitation, or otherwise, to the enforcement of the payment of the principal and interest of said Bonds by usual legal process. (D) City, Town and Other Municipal Bonds.— (1) Any duly authorized Bond issued by any municipality within the State of Maryland. (2) Any duly authorized Bond of any City in any other State of the United States of 25,000 or more inhabitants, ac- cording to the last Federal Census, Provided (in either case) that such bond is a direct obli- gation upon said Municipality or City, and that there is no obstacle by Constitutional or Legislative limitation, or other- wise, to the enforcement of the payment of the principal and interest of the said bonds by usual legal process. Special Assessment Bonds and Improvement Bonds which are not direct and primary obligations of the City issuing the same are not allowed. Provided also (in either ease) that such :\[unicipality or City has not defaulted upon any of its funded obligations for the next preceding ten years. 108 STATE LAWS AND DECISIONS. Provided also, that the net indebtedness of such Munici- pality within the State of Maryland, if of less than 25,000 in- habitants, according to the last Federal Census, does not ex- ceed five per centum of its last preceding valuation of prop- erty for taxes; and that the net indebtedness of any such Municipality or City situate in Maryland or elsewhere of more than 25,000 inhabitants, and less than 100,000 in- habitants, together with the indebtedness of any District, or other Municipal corporation, or subdivision, except a County which is wholly or in part within the limits of said City, does not exceed seven per cent, of such valuation ; and that the net indebtedness of any such Municipality or City situate in Maryland or elsewhere, if of more than 100,000 inhabitants, according to the last Federal Census, together with the indebt- edness of any District, or other Municipal corporation, or sub- division, except a county which is wholly or in part included within the limits of said City, does not exceed ten per centum of such valuation. Such net debt of any City or Municipality is to be determined by deducting from the gross debt the amount of its water debt and negotiable securities in its Sink- ing Funds, which are available for the payment of its Bonds. (E) Railroad Bonds. — (1) The mortgage bonds of any railroad corporation incorporated under the laws of the United States, or any of them, which either actually owns not less than 500 miles of standard gauge railroad, exclusive of sidings, in the United States, or the gross earnings of which in each year during the five years preceding the date of any such investment from the operation of said corporation, in- cluding the gross earnings of all lines leased and operated, or controlled and operated by it, shall not have been less than Ten Millions of Dollars. Provided, that at no time within five years next preceding the date of any such investment shall such railroad corpora- tion have failed regularly and punctually to pay the ma- tured principal and interest of all its mortgage and other fixed interest indebtedness, and in addition thereto regularly and punctually to have paid in cash out of income in divi- dends to its stockholders during each of said five years an MARYLAND. 109 amount at least equal to four per cent, on all its outstanding capital stock; and further Provided, that all bonds authorized for investment by this clause shall be secured by a mortgage which is, at the time of making said investment, or was at the date of the execution of said mortgage, (1) a first mortgage upon not less than seventy-five per cent, of the railway actually owned by the company issuing said bonds, exclusive of sidings at the date of said mortgage, or (2) a general or consolidated mortgage issued to retire all prior lien mortgage debts of said company outstanding at the time of said investment, and covering at least seventy-five per cent, of the railway owned by said company at the date of said mortgage; but no one of the bonds so secured shall be a legal investment in case the mort- gage securing the same shall authorize a total issue of bonds, which, together with all outstanding prior debts of said com- pany, after deducting therefrom, in case of a refunding mort- gage, the bonds reserved under the provisions of said mort^ gage to retire prior debts at maturitj^ shall exceed three times the outstanding capital stock of said company at the time of making said investment; and no mortgage is to be re- garded as a Refunding Mortgage under the provisions of this rule unless the bonds which it secures mature at a later date than any bond which it is given to refund, nor unless it covers a mileage at least twenty-five per cent, greater than is covered by any one of the prior mortgages so to be re- funded. (2) Any Underlying Bonds to secure the retirement of which Refunding Bonds have been authorized under a mort- gage fully complying with the provisions of the First Sub- section hereof. (3) Any "Underlying" First Mortgage Bonds covering the whole of any railroad which has been consolidated with and made part of the main line of another railroad actually owning and operating not less than Five Hundred miles of standard gauge railroad, provided said last mentioned rail- road has issued and outstanding mortgage bonds, covering its whole trackage, including the road so consolidated with, 110 STATE LAWS AND DECISIONS. to such an amount that, dividing its whole mortgage indebt- edness by the whole number of miles of road, the quotient will be at least double the amount per mile of said First Mortgage Bonds which remain as an underlying lien prior to the mort- gage bonds so issued on the consolidated road. Provided neither of said railroads has failed to pay either the interest or principal of any of its mortgage or fixed in- terest indebtedness for ten years next preceding such invest- ment. (4) The following Steam Railroad securities specifically named : Alabama Central R. R. Co. First Mortgage 6% Bonds, due 1918. Alabama Midland Rwy. Co. First Mortgage 6% Gold Bonds, due Nov. 1, 1928. (Reduced to 5%.) Atchison, Topeka & Santa Fe Rwy. Co. Gen'l Mortgage 4% Gold Bonds, due Oct. 1, 1995. Atlantic Coast Line Railroad Company First Consolidated Mortgage 4% Gold Bonds, due July 1, 1952 ; and all securities underlying said mortgage. Atlantic Coast Line R. R. Co. of South Carolina, General First Mortgage 4% Bonds, due July 1, 1948. Baltimore & Ohio R. R. Co. 41/2% Equipment Trust Certifi- cates, due annually from April 1st, 1914, to April 1st, 1923. Baltimore & Ohio R. R. Co., Prior Lien, 31/0% Gold Bonds, due July 1, 1925. Baltimore & Ohio R. R. Co., 1st Mortgage 4% Gold Bonds, due July 1, 1948. Baltimore & Ohio R. R. Co., 1st Mortgage Southwestern Division 31/2% Gold Bonds, due July 1, 1925. Baltimore & Ohio R. R. Co.— Pittsburgh, Lake Erie and West Virginia System, Refunding jNIortgage 4% Gold Bonds, due Nov. 1, 1941 ; and all securities underlying this mortgage. Baltimore, Catonsville & Elliott's Mills Passenger R. R. Co. 1st Mortgage 5% Bonds, due July 1, 1916. Baltimore, Sparrows Point & Chesapeake R. R. First Mort- gage 41/2% Bonds. Baltimore Traction Co. 1st Mortgage 5% Bonds, due Nov. MARYLAND. Ill 1, 1929, and North Baltimore Division 5% Gold Bonds, due June 1, 1942. Brunswick & Western R. R. Co. 1st Mortgage 4fo Bonds, due Jan. 1, 1938. Burlington, Cedar Rapids and Northern Rwy. Co. Consoli- dated 1st Mortgage 5% Gold Bonds, due April 1, 1934. Carolina Central Railroad First Consolidated Mortgage 4% Gold Bonds, due Jan. 1, 1949. Central Pacific Railway First Refunding ^Mortgage 4% Gold Bonds, due Aug. 1, 1949. Central Railroad of New Jersey General Mortgage 5% Gold Bonds, due July 1, 1987. Central Railway Company Cons. 1st Mortgage 5% Gold Bonds, due May 1, 1932. Chesapeake & Ohio Rwy. Co.— Richmond & Alleghany Div.— 1st Cons. Mortgage 4fo Gold Bonds, due Jan. 1, 1989. Chicago & Alton R. R. Refunding Mortgage 3% Bonds, due Oct. 1, 1949. Chicago, Burlington & Quincy R. R. Co. General Mortgage 4% Bonds, due 1958. Chicago & Northwestern R. R. Co. General Mortgage 31/2% Bonds, due 1987. Cleveland, Loraine & Wheeling Rwy. Co. Consolidated Mortgage 5% Bonds, due Oct. 1, 1933; Refunding Mortgage 41/2% Bonds, due Jan. 1, 1930; General Mortgage 5% Bonds, due June 1, 1936. Cleveland Terminal & Valley R. R. Co. First Mortgage 4% Bonds, due Nov. 1, 1995. Colorado & Southern Rwy. 1st Mortgage 4% Gold Bonds, due Feb. 1, 1929. Columbia & Greenville R. R. Co. First :\Iortgage 6% Bonds, due Jan. 1, 1916. Durham & Northern Railroad First Mortgage 6% Bonds, due Nov. 1, 1928. East Tennessee, Virginia & Georgia Rwy. Co. Consolidated Mortgage 5% Gold Bonds, due Nov. 1, 1956, and First Con- solidated Mortgage 5% Gold Bonds, due July 1, 1930. 112 STATE LAWS AND DECISIONS. Florida Central & Peninsular Railroad First Mortgage 5^ Oold Bonds, due July 1, 1918. Florida Central & Peninsular Eailroad First Mortgage Ex- tension and Land Grant 5% Gold Bonds, due Jan. 1, 1930. Florida Central & Peninsular Railroad First Consolidated Mortgage 5% Gold Bonds, due Jan. 1, 1943. Georgia, Carolina & Northern Railroad First Mortgage 5% Gold Bonds, due July 1, 1929. Georgia and Alabama RAvy. Co. Consolidated Mortgage 5% Bonds, due Oct. 1, 1945. Georgia, Southern and Florida Rwy. Co. First Mortgage b% Gold Bonds, due July 1, 1945. Hocking Valley Rwy. First Consolidated Mortgage 41/0% Gold Bonds, due July 1, 1999. Huntington & Big Sandy R. R. Co. First Mortgage e% Gold Bonds, due July 1, 1922. Kansas City, Fort Scott & Memphis R. R. Co. Consolidated Mortgage 6% Bonds, due May 1, 1928. Kentucky Central Rwy. Co. First Mortgage 4% Gold Bonds, due July 1, 1987. Knoxville & Ohio R. R. Co. First Mortgage 6% Bonds, due 1925. Lake Erie and Western R. R. Co. First Mortgage 5% Bonds, due Jan. 1, 1937. Lake Roland Elevated Rwy. Co. First Consolidated Mort- gage 5% Gold Bonds, due Sept. 1, 1942. Lehigh Valley R. R. Co. General Consolidated Mortgage 4% and 41/2% Bonds, due 2003. Lehigh Valley of N. Y. First Mortgage Gold Guaranteed 41/2% Bonds, due July 1, 1940. Louisville & Nashville R. R. Co. Atl. Knoxville & Cin. Div. 4% Bonds, due 1955. Louisville & Nashville R. R. Co. Unified oO-year 4% Gold Bonds, due July 1, 1940. Missouri, Kansas and Texas Rwy. Co. First Mortgage 4fo Bonds, due June 1, 1990. Minneapolis, St. Paul and Sault Ste. Marie First Consoli- dated Mortgage 4% Bonds, due July 1, 1938. MARYLAND. 113 Monongahela River R. R. Co. First Mortgage 5% Gold Bonds, due Feb. 1, 1919. Nashville, Chattanooga and St. Louis Rwy. First Consoli- dated Mortgage 5% Gold Bonds, due April 1, 1928. New York, Chicago and St. Louis R. R. First Mortgage 4% Gold Bonds, due Oct. 1, 1937. New York, Ontario and AYestern Rwy. Refunding [Mort- gage 4% Gold Bonds, due June 1, 1992. North Eastern R. R. Co. Consolidated ^Mortgage 6% Bonds, ■due Jan. 1, 1933. Northern Central Rwy. Co. All issues secured by mort- gage. Northern California Rwy. First Mortgage 5%i Bonds, due June 1, 1929. Northern Pacific Rwy. Co. Prior Lien 4% Gold Bonds, due Jan. 1, 1997. Northern Railway First Mortgage 5% Gold Bonds, due •Oct. 1, 1938. Norfolk and Carolina R. R. First Mortgage 5% Gold Bonds, due April 1, 1939. Norfolk and Carolina R. R. Second Mortgage 5% Gold Bonds, due Jan. 1, 1946. Norfolk and "Western Rwy. Co. First Consolidated Mort- gage 4% Gold Bonds, due Oct. 1, 1996 ; and securities un- ^ierlying the same. Ohio & Little Kanawha R. R. Co. First Mortgage 5% Bonds, •due March 1, 1950. Ohio River R. R. Co. First Mortgage 5% Bonds, due June 1, 1936, and General Mortgage 5% Bonds, due April 1, 1937. Oregon Short Line Ry. First Mortgage 6% Bonds, due Feb. 1, 1922. Oregon R. R. and Navigation Co. Consolidated Mortgage 4% Gold Bonds, due June 1, 1946. Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Consoli- dated Mortgage 41/2% Bonds, due Oct. 1, 1940; 41/070 Bonds, -due April 1, 1942; 41/2^0 Bonds, due Nov. 1, 1942; 4% Bonds due Nov. 1, 1945; 31/0% Bonds, due Aug. 1, 1949; 4% Bonds, ^ue Dec. 1, 1953; 4% Bonds, due Nov. 1, 1957. 114 STATE LAWS AND DECISIONS. Pittsburgh, Cleveland & Toledo R. R. Co. First Mortgage 6% Bonds, due Oct. 1, 1922. Pittsburgh, New Castle & Lake Erie R. R. Co. First Mort- gage 4% Bonds, due July 1, 1917. Pennsylvania R. R. Co. All mortgage bonds of lines di- rectly operated by it, when the bonds are guaranteed by it. Raleigh & Augusta Air Line Railroad First Mortgage Q% Bonds, due Jan. 1, 1926. Raleigh & Gaston Railroad First Mortgage '5% Gold Bonds, due Jan. 1, 1947. Ravenswood, Spencer & Glenville Rwy. Co. First Mortgage 6% Bonds, due August 1, 1920. Reading Co. and the Philadelphia & Reading Coal and Iron Co. General Mortgage 4% Gold Bonds, due Jan. 1, 1997. Richmond & Danville R. R. Co. Consolidated Mortgage 6% Gold Bonds, due Jan. 1, 1915. Richmond & Danville R. R. Co. Debenture Mortgage 5% Bonds, due 1927. Richmond & Petersburg R. R. Co. Consolidated Mortgage 6%~and 7% Bonds, due May 1, 1915. Richmond, Fredericksburg & Potomac R. R. Co. Consoli- dated Mortgage 41/2% Gold Bonds, due April 1, 1940. Richmond — "Washington Co. 4% Guaranteed Coll. Trust Gold Bonds, due June 1, 1943. St. Louis, Iron Mountain & Southern Rwy. Co. General Consolidated Mortgage 5% Bonds, due April 1, 1931. St. Paul, Minneapolis & Manitoba Rwy. Co. Consolidated Mortgage 6% Gold Bonds, due July 1, 1933. Savannah, Florida & Western Rwy. Co. First Mortgage 6% Gold Bonds, due April 1, 1934. Seaboard and Roanoke R. R. Co. First Mortgage 5% Bonds, due July 1, 1926. Silver Springs, Ocala & Gulf R. R. Co. First Mortgage 6% (reduced to 4%) Gold Bonds, due July 1, 1918. South Bound R. R. Co. First Mortgage 5% Bonds, due April 1, 1941. Southern Pacific R. R. Co. First Refunding Mortgage 4% MARYLAND. 115 Gold Bonds, due Jan. 1, 1955, and First Consolidated Mortgage 5% Bonds, due Nov. 1, 1937. Southern Pacific Branch Rwy. Co. First Mortgage 6% Bonds, due April 1, 1937. Southern Rwy. Co. First Consolidated Mortgage 5% Bonds, due. 1994, and "East Tennessee" Reorganization 5% Gold Bonds, due Sept. 1, 1938. Texas and Pacific Rwy. Co. First Mortgage 5% Bonds, due June 1, 2000. Toledo, St. Louis and Western R. R. Co. Prior Lien 3i/2% Gold Bonds, due July 1, 1925. Union Pacific R. R. Co. First Refunding Mortgage 4% Bonds, due 2008, and First Mortgage Railroad & Land Grant 4% Gold Bonds, due July 1, 1947. Vandalia R. R. Co. Consolidated Mortgage 4:% Bonds, Series A, due Feb. 1, 1955, and Series B, due Nov. 1, 1957. Virginia Midland Rwy. Co. Serial Mortgage 6% Bonds, Se- ries C, due March 1, 1916. Serial Mortgage 5% Bonds, Series D, due 1921, Series E, due March 1, 1926, Series F, due 1931, and General Mortgage Bonds, due 1936. Washington Terminal Co. First Mortgage 4% and SYo^ Gold Bonds, due Feb. 1, 1945. Washington, Ohio & Western R. R. Co. First Mortgage 4% Bonds, due 1924. West Shore R. R. Co. Guaranteed First Mortgage 4:% Bonds, due Jan. 1, 2361. West Virginia & Pittsburgh R. R. Co. First Mortgage 4% Bonds, due April 1, 1990. Wilmington & New Bern R. R. Co. First Mortgage 4% Gold Bonds, due August 1, 1947. Wilmington & Weldon R. R. Co. General First Mortgage 5% Gold Bonds, due July 1, 1935. (P) Equipment Bonds. — Any "Equipment Bonds" which are the direct obligation of any railroad company actually operating its own road, in its own name, any of whose mort- gage bonds are authorized under Section E, sub-sections 1 or 2 of this Rule, or any Equipment Bonds secured by equipment leased to any railroad company actually operating its own 116 STATE LAWS AND DECISIONS. road, in its own name, any of whose mortgage bonds are good under Section E, sub-sections 1 or 2 of this Rule ; Provided, such bonds are issued against new rolling stock which shall actually cost said railroad company at least ten per cent, more than the amount of said equipment bonds, and of which issue of equipment bonds the deed of trust securing the same provides that at least one-tenth shall be called in and paid each year subsequent to the date of said bonds. (G) Street Railway Bonds.— (1) The following street railway securities specifically named: United Railways & Electric Company of Baltimore First Consolidated Mortgage 4% Bonds, due March 1, 1949, and underlying bonds of this corporation. Atlanta Consolidated Street Railway Company of Atlanta, Ga., First Consolidated Mortgage 5% Gold Bonds, due Jan. 1, 1939. Boston & Northern Street Railway Company First Refund- ing Mortgage 4% Gold Bonds, due July 1, 1954. Chicago City Railway Company First Mortgage 5% Gold Bonds, due Feb. 1, 1927. Chicago Railways Company First Mortgage 5% Gold Bonds, due Feb. 1, 1927. City & Suburban Rwy. Co. of Baltimore First Mortgage 5% Gold Bonds, due June 1, 1922. Georgia Railway & Electric Company First Consolidated Mortgage 5% Gold Bonds, due Jan. 1, 1932. Lindell Railway Company First Mortgage Extended 41/2% Bonds, due Aug. 1, 1921. Manhattan Rwy. Co. Consolidated Mortgage 4fo Bonds, due April 1, 1990. Milwaukee Electric Railway & Light Company Refunding and Extension Mortgage 41/2% Gold Bonds, due Jan. 1, 1931. Milwaukee Electric Railway & Light Company Consoli- dated Mortgage 5% Gold Bonds, due Feb. 1, 1926. Minneapolis Street Railway Company and St. Paul City Railway Company Consolidated Mortgage 5% Bonds, due Oct. 1, 1928. MARYLAND. 117 Minneapolis Street Railway Company First Consolidated Mortgage 5% Bonds, due Jan. 15, 1919. Portland Railway Company First and Refunding Mort- gage 5% Gold Bonds, due Nov. 1, 1930. St. Paul City Railway Company Cable Consolidated I\Iort- gage 5% Gold Bonds, due Jan. 15, 1937. Seattle Electric Company First Mortgage 5% Gold Bonds, due Feb. 1, 1930. Third Avenue Railroad of New York First ^^lortgage 5% Bonds, due 1937, and First and Refunding Mortgage 4% Bonds, due 1960. Wilmington City (Delaware) Railway Co. 5% Bonds, due September 1, 1951. (2) The Bonds of Street Railroad corporations located wholly or in part in cities of the United States having a popu- lation of not less than 50,000, according to the last Federal Census, which have a franchise to run their cars over such streets and roads as may be in use by them at the date of the mortgage perpetually or for a period of time ending at least fifteen years after the date of the maturity of said bonds. Provided, that the mortgage bond indebtedness of any such Street Railway does not exceed the amount of the Capital Stock of the corporation, and that such corporation has earned and paid regularly in cash out of income dividends of not less than 4 per cent, per annum on all of its Capital Stock for five years next preceding such investment, and provided also that any first mortgage bond, covering the whole of any street railway, which has been consolidated with and whose track has been made a part of the main line of another street railway, whose bonds would be good under the previous pro- visions of this section, shall be deemed also to be authorized hereunder. (H) Gas and Miscellaneous Securities. — Consolidated Gas Co. of Baltimore First Mortgage 5% Bonds, due 1939. Consolidated Gas Co. of Baltimore City General Mortgage 41/2^0 Bonds, due April 1, 1954. Milwaukee Gas Light Co. First Mortgage 4:% Gold Bonds, due 1927. 118 STATE LAWS AND DECISIONS. (1) Mortgage on Real Estate and Ground Rents. — (1) First Mortgage on real estate in ]\Iaryland to the extent of sixty per cent, of the value thereof if dwelling house, store, or office property and productive; fifty per cent, of its actual value if farm property and improved, or thirty per cent, of its actual value if unproductive, or manufacturing property. (2) Ground Rents on unincumbered real estate situate in Maryland where the amount of the rent capitalized at 6% is not over 50% of the value of the property from which they issue. ^ The valuation must be certified (under oath) by at least two persons familiar with the value of said property, and the title must either be certified by a member of the Baltimore City Bar of at least five years practice or must be guaranteed by a reputable title insurance company. General Provisions. No Trustee can sell bonds held by him individually to himself as Trustee. Unless by special order of Court upon petition plainly setting forth the fact, not more than 20% of any estate shall be invested in any one security. Should any fixed interest obligation of any corporation, the mortgage bonds of which are authorized as Trust Invest- ments upon this Rule, be defaulted upon, all bonds of such corporation or underlying issues upon its property shall be stricken from the list, and so remain until and unless such bonds shall be reinstated by special order. Trustee May Not Obtain Personal Benefit. A trustee may not obtain any personal interest in the trust estate or purchase at a sale thereof either directly or indirectly. Eicketts v. Montgomery, 15 Md. 46; Cumberland Coal Co. v. Sherman, 20 Md. 117; North Baltimore Bld'g Assn. v. Caldwell, 25 Md. 420; Pairo v. Vickery, 37 Md. 467. Good Faith the Controlling Factor. The Maryland courts have not followed the English rule. In fact, the courts of Maryland have been in the habit of promulgating their own rules regarding investments by trustees and these rules have been MARYLAND. 119 liberal. Discretion and good faith on the part of the trustee are the important requirements. Bank Stock. In Gray v. Lynch, 8 Gill 319, trustees vrho had invested in stock of the United States Bank were not held for the loss, but the trust instrument gave the trustees power to invest in "Some safe and profit- able stock." By section 237, Article 37, of the Code, administrators and guardians under order of the Orphans' Court are authorized to invest in "bank stock or any other good security." Gas Company Stock. The rule of discretion has been construed broadly in McCoy v. Horwitz, 62 Md. 183. A widow was given wide discretion as executor, but the will provided that security valued at $4,000 should be set aside, and the income applied to the support of grandsons until they became of age. The widow did not set aside the security, but in- vested in gas company stock which depreciated in value. Eefusing to follow the English law and the general rule in America, the court did not compel the trustee to make good the loss for such an in- vestment. Changing Investment. The early Maryland cases restrict the trustee as to his right to change investments. In Murray v. Feinour, 2 Md. Ch. 419, a testator bequeathed stock to a trustee for the benefit of certain children. The court decided that in the absence of specific power in the will or authorization by the proper court, the trustee had no power to change the investment. Order of Court. The Maryland courts have been strict in compelling trustees to invest trust funds under their supervision. A trustee who makes an investment without the sanction of the courts is liable for loss. At least this was the early rule. "Wayman v. Jones, 4 Md. Ch. 501. Although a trustee may act with the best intentions and the utmost good faith, and his not seeking the aid and instruction of the court may be no evidence to the contrary, if he wishes to avoid respon- sibility for losses by reason of investments which may prove to be unprofitable or worthless, he should first obtain authority from the court having jurisdiction over him, unless his discretion and powers are undoubted. Lowe v. Convention, etc., 83 Md. 409. Personal Security. A trustee has no right to invest trust funds in personal securi- ties, and if he does so he makes the investment at his peril. Even where the investment is left to his discretion, it is not a sound dis- cretion to invest in such securities. Hunt v. Gontrum, 80 Md. 64. 120 STATE LAWS AND DECISIONS. Beneficiaries May Consent. A trustee may invest in any security provided he receives the con- Bent of the beneficiaries and the beneficiaries are of age and are fully informed. Hunt v. Gontrum, 80 Md. 64. Discretion Where Testator Names Trustee. Where there are no instructions imposed by the testator, a trustee named by him is vested with a discretion which a conventional trustee does not ordinarily possess. A conventional trustee has limited dis- cretion and if loss is due to an act by him not permitted by the instrument and not sanctioned by the court, he is liable. But when the testator has selected a particular person as trustee, and has clothed him with a discretion in making investments, and such trustee, in good faith and with diligence, makes an investment of trust funds strictly in accordance with the power conferred upon him, or in any way that a court of equity would have sanctioned at the time, if advised of the circumstances, he will be exonerated should a loss ensue, though he failed to invoke the guidance of the court, or to procure its subse- quent ratification. Gilbert v. Kolb, 85 Md. 627. Value. The criterion by which the value is to be ascertained is the esti- mate of men of ordinary prudence who would deem it safe to make a loan of the same amount of their own money on the same property. Gilbert v. Kolb, 85 Md. 627. Second Mortgages. A trustee sold property belonging to the estate and took back a purchase money mortgage for the full price and a second mortgage on another small farm. The transaction resulted in a loss to the estate. This was not such an investment as a court would approve; conse- quently the trustee was liable for the loss. Gilbert v. Kolb, 85 Md. 627. Guardian. The statutes provide that an administrator or guardian may apply to the Orphans' Court for an order directing the manner and form of investment. Annotated Code, Vol. 2, Sec. 620. It is the duty of the guardian to apply to the court, although! it seems that he may receive the sanction of the investment after it has been made. Oesterla v. Gaither, 90 Md. 44; O'Hara v. Shepherd, 3 Md. Ch. 306. But the court has no authority to authorize an investment to be made to the guardian himself. Fidelity Co. v. Freud, 115 Md. 29. Corporate Stock. The Orphans' Court may order an investment in corporate stock. Ex Parte Stone, 2 Md. 294. MASSACHUSETTS. * TRUST COMPANIES. Laws of 1911. (With Amendments to 1914.) May Invest in Same Way as an Individual. — Every trust company is hereby authorized to invest the funds or estates which it may receive and hold as executor, administrator, ad- ministrator with the will annexed, receiver, assignee, guar- dian, trustee or conservator, in the same way, to the same extent, and under the same restrictions as an individual hold- ing a similar position may invest such funds or estates. Laws of 1910, Ch. 411. Loans Outside of State. — No trust company shall advance mone}^ or credits upon notes secured by deed of trust or by mortgage upon farms or agricultural or unimproved land out- side of this commonwealth, except upon land situated in the NeAv England States or the State of New York, nor invest in, nor make loans upon the bonds or other securities of a com- pany negotiating or dealing in such notes so secured or in such mortgages. Continuing Business of Deceased. — The probate court may, upon such notice as it considers reasonable, authorize an ad- ministrator or executor to continue the business of the de- ceased, for the benefit of his estate, for a period stated in the decree. Such period shall not extend more than one year beyond the final appointment and qualification of the adminis- trator or executor. Investments, Sec. 16. — This section provides that trust companies may receive money as court depositaries and may also hold money or property in trust, or on deposit from ex- ecutors, administrators, assignees, guardians and trustees. * For list of legal investments in Massachusetts see Part III. 121 122 STATE LAWS AND DECISIONS. Sec. 17. Money or property received under the provisions of the preceding section shall be loaned on or invested only in the authorized loans of the United States, or any of the New England States, the counties, cities or towns thereof, or of the states of Illinois, Iowa, Michigan, Minnesota, Wisconsin, or the counties or cities thereof, or stocks of state or na- tional banks organized within this commonwealth, or in the first mortgage bonds of a railroad corporation 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 issues of capital stock for two years last preceding such loan or investment, or in the bonds of any such railroad company unencumbered by mortgage, or in first mortgages 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 corpora- tions or of individuals with a sufficient pledge as collateral of any of the aforesaid securities ; but all real estate acquired by foreclosure of mortgage or by levy of execution shall be sold at public auction within two years after such foreclosure or levy. Sec. 23. Creator of Trust May Authorize Investments in General Trust Fund. — A person creating a trust may direct whether money or property deposited under it shall be held and invested separately or invested in the general trust fund of the corporation; and such corporation acting as trustee shall be governed by directions contained in a will or instru- ment under which it may act. Sec. 24. Money or Property Received in Trust Must Be Kept Separate.— Money, property or securities received, in- vested or loaned under the provisions of Sections 16 to 18 (where company acts as trustee), inclusive, shall be a special deposit in such corporation, and the accounts thereof shall be kept separate. Such funds and the investment or loans thereof shall be specially appropriated to the security and payment of such deposits, shall not be mingled with the investments of the capital stock or other money or property belonging to such corporation, or be liable for the debts or obligations MASSACHUSETTS. 123 thereof. For the purpose of this section, such corporation shall have a trust department in which all business authorized by said Sections 16 to 18, inclusive, shall be kept separate and distinct from its general business. Sec. 25. Trust Guaranty Fund. — The directors may from time to time set apart as a trust guaranty fund such por- tion of the profits as they may consider expedient. Such fund shall be invested in such securities only as the trust deposits may be invested in. The accounts of its investment and man- agement, and the securities in which it is invested, shall be kept in the trust department. Savings Banks. — Since Section 17 provides that money re- ceived by a trust company as a court depositary or on deposit from executors, administrators, assignees, guardians and trus- tees, may be invested in any securities in which savings banks may invest, and since trustees Avho select such securities in good faith would undoubtedly be protected by the courts, it is advisable to include Section 68 of the Savings Bank Law, as amended to date. SAVINGS BANK LAW. Sec. 68. Deposits and the income derived therefrom shall be invested only as follows: FIRST MORTGAGES OF REAL ESTATE. First. In first mortgages of real estate located in this com- monwealth not to exceed sixty per cent of the value of such real estate ; but not more than seventy per cent of the whole amount of deposits shall be so invested. If a loan is made on unimproved and unproductive real estate, the amount loaned thereon shall not exceed forty per cent of the value of such real estate. No loan on mortgage shall be made ex- cept upon written application showing the date, name of ap- plicant, amount asked for and security offered, nor except upon the report of not less than two members of the board of investment who shall certify on said application, according to their best judgment, the value of the premises to be mort- 124 STATE LAWS AND DECISIONS. gaged ; and such application shall be filed and preserved with the records of the corporation. At the expiration of every such loan made for a period of five or more years not less than two members of the board of investment shall certify in writing, according to their best judgment, the value of the premises mortgaged; and the premises shall be revalued in the same manner at intervals of not more than five years so long as they are mortgaged to such corporation. Such report shall be filed and preserved with the records of the corporation. If such loan is made on demand or for a shorter period than five years, a revaluation in the manner above prescribed shall be made of the premises mortgaged not later than five years after the date of such loan and at least every fifth year thereafter. If at the time a revaluation is made the amount loaned is in excess of sixty per cent, or in the case of unimproved and unproductive real estate in excess of forty per cent, of the value of the premises mortgaged, a sufficient reduction in the amount of the loan shall be required, as promptly as may be practicable, to bring the loan within sixty per cent, or in the case of unimproved and unproductive real estate within forty per cent of the value of said premises. Whenever in the opinion of the Commissioner an excessive loan has been made, or is about to be made, upon real estate, he shall have authority to cause an appraisal of said real estate to be made at the expense of the bank making the loan. One appraiser shall be named by the Commissioner, one by the bank making the loan, and a third by the two thus named. Said appraisers shall determine the value of said real estate and certify the same in writing to the Com- missioner and to the bank. If it shall appear from said ap- praisal that said loan is in excess of the amount allowed by the provisions of this section, the Commissioner may make such order in relation thereto as he may deem advisable. PUBLIC FUNDS, Second, (a) In the public funds of the United States, or of any of the New England states. MASSACHUSETTS. 125 (b) In the bonds or notes of a county, city or town of this commonwealth. (c) In the bonds or notes of an incorporated district in this commonwealth whose net indebtedness does not exceed five per cent of the last preceding valuation of the prop- erty therein for the assessment of taxes. (d) In the bonds or notes of any city of Maine, New Hampshire, Vermont, Rhode Island or Connecticut, whose net indebtedness does not exceed five per cent of the last pre- ceding valuation of the property therein for the assessment of taxes; or of any county or town of said states whose net indebtedness does not exceed three per cent of such valua- tion; or of any incorporated water district of said states which has within its limits more than five thousand in- habitants, and whose bonds or notes are a direct obligation on all the taxable property of such district, and whose net indebtedness does not exceed three per cent of such valua- tion: provided, that there is not included within the limits of such water district, either wholly or in part, any city or town the bonds or notes of which are not a legal invest- ment. (e) In the legally authorized bonds of the states of New York, Pennsylvania, Ohio, Indiana, Illinois, jMichigan, "Wis- consin, Minnesota, Missouri and Iowa, and of the District of Columbia, and in the legally authorized bonds for municipal purposes, and in the refunding bonds issued to take up at maturity bonds which have been issued for other than munici- pal purposes, but on which the interest has been fully paid, of any city of the aforesaid states which has at the date of such investment more than thirty thousand inhabitants, as established by the last national or state census, or city census certified to by the city clerk or treasurer of said city and taken in the same manner as a national or state census, preceding such investment, and whose net indebtedness does not exceed five per cent of the valuation of the taxable prop- erty therein, to be ascertained by the last preceding valua- tion of property therein for the assessment of taxes; and of any city of the aforesaid states or of any of the New England 126 I STATE LAWS AND DECISIONS. states or of the states of Maryland and Kentucky, which has at the date of such investment more than two hundred thou- sand inhabitants, so established, and whose net indebtedness does not exceed seven per cent of the valuation of the taxable property therein, established and ascertained as above pro- vided. • In subdivisions (d) and (e) of this clause the words "net indebtedness" mean the indebtedness of a county, city, town or district omitting debts created for " supplying the in- habitants with water and debts created in anticipation of taxes to be paid within one year, and deducting the amount of sinking funds available for the payment of the indebted- ness included. RAILROAD BONDS. Massachusetts Railroads. Third, (a) In the bonds or notes, issued in accordance with the laws of this commonwealth, of a railroad corpora- tion incorporated therein the railroad of which is located wholly or in part therein, which has paid in dividends in cash an amoupt equal to not less than four per cent per annum on all its outstanding issues of capital stock in each fiscal year for the five years next preceding such investment, or in the first mortgage bonds of a terminal corporation in- corporated in this commonwealth and whose property is located therein, which is owned and operated, or the bonds of which are guaranteed as to principal and interest, or as- sumed, by such railroad corporation. Any shares of the cap- ital stock of a railroad corporation leased to such railroad corporation, which are owned by said lessee coporation, shall not be considered as outstanding within the meaning of this subdivision. New England Railroads. (b) In the bonds or assumed bonds of a railroad corpora- tion incorporated in any of the New England states, at least one-half of the railroad of which is located in said states, whether such corporation is in possession of and is operating MASSACHUSETTS. 127 its own road or is leased to another railroad corporation : pro- vided, either that such bonds shall be secured by a first mort- gage of the whole or a part of the railroad and railroad prop- erty of such corporation or by a refunding mortgage as de- scribed in paragraph (3) or (4) of subdivision (g), or that if the railroad and railroad property of such corporation are unencumbered by mortgage sueli bonds shall be issued under the authority of one of said states which provides by law that no such railroad corporation which has issued bonds shall subsequently execute a mortgage upon its road, equip- ment and franchise or upon any of its real or personal prop- erty, without including in and securing by such mortgage all bonds previously issued and all its preexisting debts and liabilities, which provision, so enacted in such state, shall have been accepted by the stockholders of such corporation; and provided, that such corporation has paid in dividends in cash an amount equal to not less than four per cent per annum on all its outstanding issues of capital stock in each fiscal year for the five years next preceding such investment. (c) In the first mortgage bonds or assumed first mortgage bonds or in the bonds secured by a refunding mortgage as described in paragraphs (3) or (4) of subdivision (g), of a railroad corporation incorporated in any of the New England states, the railroad of which is located wholly or in part therein, Avhich have been guaranteed as to principal and in- terest by a railroad corporation described in subdivisions (a) or (b) which is in possession of and is operating its own road. (d) No bond shall be made a legal investment by sub- division (b) unless the corporation whicli issued or assumed such bond has, during its fiscal year next preceding the date of such investment, paid in dividends on its capital stock an amount equal to one-third of the total amount of interest paid on all its direct and assumed funded indebtedness. No bond shall be made a legal investment by subdivision (c) unless the corporation which guaranteed such bond has, during its fiscal year next preceding such investment, paid in dividends on its capital stock an amount equal to one- 128 STATE LAWS AND DECISIONS. third of the total amount of interest paid on all its direct, assumed and guaranteed funded indebtedness. Otlier Eailxoads. Description of Corporation. (e) In the mortgage bonds, as described in any of the following subdivisions of this clause, of any railroad corpora- tion incorporated under the laws of any of the United States : Provided, that during each of the ten fiscal years of such railroad corporation next preceding the date of such invest- ment, — (1) Such railroad corporation owned in fee not less than five hundred miles of standard gauge railroad, exclusive of sidings, within the United States, or if such corporation owned in fee less than five hundred miles of such railroad, the gross earnings of such corporation, reckoned as hereinafter pro- vided, shall have been not less than fifteen million dollars ; (2) Such railroad corporation shall have paid the ma- tured principal and interest of all its mortgage indebtedness ; (3) Such railroad corporation shall have paid in divi- dends in cash to its stockholders an amount equal to at least four per cent upon all its outstanding capital stock; (4) The gross earnings from the operation of the prop- erty of such railroad corporation, including therein the gross earnings of all railroads leased and operated or controlled and operated by said corporation, and the gross earnings from the sale of coal from mines owned or controlled by it, shall not have been less in amount than five times the amount necessary to pay the interest payable upon its entire out- standing indebtedness, the rentals of all leased lines, and the interest on all the outstanding indebtedness of railroads controlled and operated which is not owned by said corpora- tions after deducting from said interest and rentals interest and dividends received from the stocks, bonds or notes of railroad corporations not operated by said corporation, which have been deposited with a trustee as the only security to secure the payment of bonds or notes issued by said corpora- MASSACHUSETTS. 129 tion, but not in excess of the interest on said last-named bonds or notes; And further provided, that, — (5) No bonds shall be made a legal investment by sub- division (g) in case the mortgage securing the same shall authorize a total issue of bonds which, together with all out- standing prior debts of the issuing or assuming corporation, including all bonds not issued that may legally be issued under any of its prior mortgages or of its assumed prior mortgages, after deducting therefrom, in case of a refunding mortgage, the bonds reserved under the provisions of said mortgage to retire prior lien debts at maturity, shall exceed three times the outstanding capital stock of said corpora- tion at the date of such investment; (6) No bonds shall be made a legal investment by sub- division (i) or (j) in case the mortgage securing the same shall authorize a total issue of bonds which, added to the total debt of the guaranteeing corporation as defined in para- graph (5), including therein the authorized amount of all previously guaranteed bond issues, shall exceed three times the capital stock of such guaranteeing corporation outstand- ing at the date of such investment; nor in case at said date the total debt of the corporation which issued said bonds shall exceed three times its outstanding capital stock; In the case of a mortgage executed prior to the passage of this act, under which the total amount of bonds which may be issued is not specifically stated, the amount of bonds out- standing thereunder at the date of such investment shall be considered, for the purposes of paragraph (5) and of this paragraph, as the total authorized issue; (7) Any railroad corporation which is mentioned in sub- division (c) of clause fourth of section twenty-six of chapter one hundred and thirteen of the Revised Laws shall be con- sidered as having complied with all the requirements of this subdivision preceding paragraph (5) up to and including the fiscal year of said corporation in which this act is passed. 130 STATE LAWS AND DECISIONS. Description of Bonds. Definition of First Mortgage. — (f) Whenever the term "first mortgage" is used in the following subdivisions, it shall mean, unless otherwise qualified, a first mortgage on not less than seventy-five per cent of the railroad owned in fee at the date of the mortgage by the railroad corporation on the rail- road of which said mortgage is a lien, but in no case on less than one hundred continuous miles of standard gauge rail- road, exclusive of sidings : provided, that, — Seventy-five per cent of the railroad subject to the lien of said mortgage is connected ; For five years prior to the date of investment therein all the railroad subject to the lien of said mortgage at the date of execution thereof has been operated by, and its opera- tions included in, the operations of the railroad corporation which issues, assumes or guarantees said bonds;' The date of said mortgage is at least five years prior to the date of such investment ; except that a first mortgage given in substitution for and not greater in amount than such a first mortgage, and covering the same railroad property, shall be considered to be in accordance with this require- ment. Direct Obligations. — (g) Bonds issued or assumed by a railroad corporation described in subdivision (e), which are secured by a mortgage which was at the date thereof or is at the date of such investment : — (1) A first mortgage on a railroad owned in fee by the corporation issuing or assuming said bonds, except that, if it is not a first mortgage on seventy-five per cent of all such railroad owned in fee by said corporation, it shall be a first mortgage on at least seventy-five per cent of the railroad subject to the lien of said mortgage at the date thereof; but if any stocks or bonds are deposited -^ith the trustee of said mortgage as part security therefor, representing or covering railroad mileage not owned in fee, the bonds secured by said mortgage shall not become legal investments unless said cor- poration owns in fee at least seventy-five per cent of the total MASSACHUSETTS. 131 mileage which is subject to the lien of said mortgage and which is represented or covered by said stocks or bonds; (2) A first mortgage, or a mortgage or trust indenture which is in effect a first mortgage upon all the railroad sub- ject to the lien of said mortgage or trust indenture by virtue of the irrevocable pledge with the trustee thereof of an entire issue or issues of bonds which are a first lien, upon the rail- road of a railroad corporation which is owned and operated, controlled and operated or leased and operated by the cor- poration issuing or assuming said bonds; (3) A refunding mortgage which covers at least seventy- five per cent of the railroad owned in fee by said corpora- tion at the date of said mortgage and provides for the re- tirement of all outstanding mortgage debts which are a prior lien upon said railroad owned in fee and covered by said re- funding mortgage at the date thereof; but if any of the bonds which said refunding mortgage is ^given to refund are secured on a railroad not owned in fee by the corporation executing said refunding mortgage, there shall be conveyed and assigned to the trustee of said refunding mortgage either At least seventy-five per cent of the railroad on which each issue of bonds to be refunded is secured, free from any mort- gage lien except that of the mortgage or mortgages securing the bonds to be refunded, or At least seventy-five per cent of the outstanding bonds of each issue Avliich is secured by a mortgage lien upon such railroad; and all of said railroad not owned in fee which is so subjected to the lien of said refunding mortgage shall be the railroad of one or more railroad corporations which are owned and operated, controlled and operated, or leased and operated by the corporation issuing or assuming said refund- ing mortgage bonds; But in no case shall the bonds secured by said refund- ing mortgage become a legal investment unless they ma- ture at a later date than any bonds which said refunding mortgage is given to refund, nor unless the total mileage sub- jected to the lien of said refunding mortgage in accordance with the requirements of this paragraph is at least twenty- 132 ■ STATE LAWS AND DECISIONS. five per cent greater than the mileage covered by any one of the mortgages securing bonds which said refunding mort- gage is given to refund; (4) A mortgage upon not less than ten per cent of the railroad, exclusive of sidings, owned in fee at the date of said mortgage by the corporation issuing or assuming said bonds, but in no case on less than five hundred continuous miles of standard gauge railroad: provided, that, — Said mortgage is a first or second lien upon not less than seventy-five per cent of the total railroad covered by said mortgage at the date thereof, and which provides for the re- tirement of all mortgage debts which are a prior lien upon said railroad owned in fee and covered by said mortgage, at the date of the execution thereof; The bonds secured by said mortgage mature at a later date than, and cover a mileage at least twenty-five per cent greater than is covered by, any of the bonds secured by a prior lien mortgage so to be retired ; The date of said mortgage shall be at least five years prior to the date of such investment. Bonds Underljdng Refunding Mortgage. — (h) IMortgage bonds or bonds secured by mortgage bonds which are a direct obligation of, or which have been assumed, or which have been guaranteed by endorsement as to both principal and in- terest, by a railroad corporation whose refunding mortgage bonds are made a legal investment under paragraphs (3) or (4) of subdivision (g) : provided, that: — Said bonds are prior to and are to be refunded by such refunding mortgage ; Said refunding mortgage covers all the real property upon, which the mortgage securing said underlying bonds is a lien; In the case of bonds so guaranteed or assumed the cor- poration issuing said bonds is owned and operated, controlled and operated, or leased and operated, by said railroad cor- poration. Guaranteed Obligations. — (i) Bonds which have been- guaranteed by endorsement as to both principal and in- MASSACHUSETTS. 133 terest by a railroad corporation which has complied with all the provisions of subdivision (e) : provided that, — Said bonds are secured by a first mortgage on the railroad of a railroad corporation which is owned and operated, con- trolled and operated, or leased and operated, by the corpora- tion guaranteeing said bonds; In the case of a leased railroad, the entire capital stock of which, except shares qualifying directors, is not owned by the lessee, the rental includes an amount to be paid to the stock- holders of said leased railroad equal to at least four per cent per annum upon that portion of the entire capital stock thereof outstanding which is owned by the lessee. (j) First mortgage bonds of a railroad corporation which during each of its ten fiscal years next preceding the date of such investment has complied with all the requirements of paragraphs (2), (3) and (4) of subdivision (e), provided that said bonds are guaranteed by endorsement as to both prin- cipal and interest by a railroad corporation which has com- plied with all the requirements of subdivision (e) preceding paragraph (5), notwithstanding that the railroad of said issuing corporation is not operated by said guaranteeing cor- poration. Corporations Not to Lose Credit by Temporary Disturbance of Relation of Gross Earnings to Fixed Charges. (k) Bonds which have been or shall become legal in- vestments under any of the provisions of this act shall not be rendered illegal although the corporation issuing, assum- ing or guaranteeing such bonds shall fail for a period not ex- ceeding two successive fiscal years to comply with the re- quirements of paragraph (4) of subdivision (e) ; but no fur- ther investment in the bonds issued, assumed or guaranteed by said corporation shall be made during said period. If after the expiration of said period said corporation complies for the following fiscal year with all the requirements of sub- division (e), it shall be regarded as having complied there- with during said period. 13-i STATE LAWS AND DECISIONS. Bonds Not to Become Illegal on Account of Consolidation. (1) Bonds which have been or shall become legal invest- ments under any of the provisions of this act shall not be rendered illegal, although the property upon which they are secured has been or shall be conveyed to or legally acquired by another railroad corporation, and although the corpora- tion which issued or assumed said bonds has been or shall be consolidated with another railroad corporation, if the con- solidated or purchasing corporation shall assume the payment of said bonds and so long as it shall continue to pay regu- larly interest or dividends, or both, upon the securities issued against, in exchange for, or to acquire the stock of the corporation consolidated, or the property purchased, or upon securities subsequently issued in exchange or substitution therefor, to an amount at least equal to four per cent per annum upon the capital stock outstanding at the time of such consolidation or purchase of said corporation which issued or assumed said bonds. Credit of a Corporation Not to "be Lost by Consolidation. (m) If a railroad corporation which has complied with all the requirements of subdivision (e) preceding paragraph (5), except that the period of compliance is less than ten, but not less than five successive years, shall be, or shall have been, therevipon consolidated or merged with, or its railroad pur- chased and all of the debts of such corporation assumed by, another railroad corporation incorporated under the laws of any of the United States, such corporation so succeeding shall be considered as having complied with all the provisions of subdivision (e) preceding paragraph (5) during those suc- cessive years next preceding the date of such consolidation, merger or purchase in which all said consolidated, merged or purchased corporations, if considered as one continuous corporation in ownership and possession, would have so com- plied: provided, that said succeeding corporation shall con- tinue so to comply for a further period which shall make MASSACHUSETTS. 135 such compliance equivalent to at least ten successive years, but which shall be in no case less than the two fiscal years next following said consolidation, merger or purchase. Street Railway Corporations Are Not Railroad Corporations. (n) In this act, unless the context otherwise requires, "railroad corporation" means a corporation which owns or is in possession of and operating a railroad or railway of the class usually operated by steam power. Street railway cor- porations are not railroad corporations within the meaning of this act. Present Investments Not to Become Illegal. Fourth. The provisions of this act shall not render illegal the investment in any mortgages of real estate held by such corporation at the time of its passage, nor the investment at such time or thereafter in any issue of bonds or notes dated prior to its passage, in which such corporation was then au- thorized to invest, so long as such bonds or notes continue to comply with the requirements of law then in force. STREET RAILWAY BONDS. Fifth. In the bonds of any street railway company incor- porated in this commonwealth, the railway of which is located wholly or in part therein, and which has earned and paid in dividends in cash an amount equal to at least five per cent upon all its outstanding capital stock in each of the five years last preceding the certification by the board of railroad commissioners hereinafter provided for. No such investment shall be made unless said company appears from returns made by it to the board of railroad commissioners to have properly paid such dividends without impairment of assets or capital stock, and said board shall on or before the fifteenth day of January in each year certify and transmit to the bank com- missioner a list of such street railway companies. Dividends paid by way of rental to stockholders of a leased 136 STATE LAWS AND DECISIONS. street railway company shall be deemed to have been earned and paid by said company within the meaning of this clause, provided that said company shall have annually earned, and properly paid in dividends in cash, without impairment of assets or capital stock, an amount equal to at least five per cent upon all its outstanding capital stock in each of the five fiscal years next preceding the date of the lease thereof. If two or more street railway companies have been con- solidated by purchase or otherwise during the five years prior to said certification, the payment severally from the earnings of each year of dividends equivalent in the aggre- gate to a dividend of five per cent on the aggregate capital stocks of the several companies during the years preceding such consolidation shall be sufficient for the purpose of this act. TELEPHONE COMPANY BONDS. Sixth. In the bonds of any telephone company subject to the provisions of section thirty-seven of chapter fourteen of the Revised Laws, and of which a majority of the directors are residents of the commonwealth: — Provided, that during each of the five fiscal years of such telephone company next preceding the date of such invest- ment — (1) The gross income of such telephone company shall have been not less than ten million dollars per annum. (2) Such telephone company shall have paid the matured principal and interest of all its indebtedness. (3) Such telephone company shall have paid in dividends in cash an amount equal to not less than six per cent per annum on all its outstanding issues of capital stock. (4) The dividends paid on the capital stock of such tele- phone company shall not have been less than the total amount necessary to pay the interest upon its entire out- standing indebtedness. And further provided, that such bonds shall be secured either (a) by a first mortgage upon at least seventy-five per cent of the property of such telephone company, or (b) by MASSACHUSETTS. 137 the deposit with a trust company incorporated under the laws of this commonwealth of bonds and shares of stock of other telephone corporations, under an indenture of trust which limits the amount of bonds so secured to seventy-five per cent of the value of the securities deposited as stated and deter- mined in said indenture, and provided that during each of the five years next preceding such investment the annual in- terest and dividends paid in cash on the securities deposited have amounted to not less than fifty per cent in excess of the annual interest on the bonds outstanding and secured by said deposit. Not more than two per cent of the deposits of any savings bank shall be invested in the bonds of telephone com- panies. BANK STOCKS AND DEPOSITS IN BANKS. Seventh. In the stock of a banking association located in the New England states and incorporated under the au- thority of the United States, or in the stock of a trust com- pany incorporated under the laws of and doing business within this commonwealth, but such corporation shall not hold, both by way of investment and as security for loans, more than twenty per cent of its deposits in the stock of such associations or companies, nor in any (fae such association or company more than three per cent of its deposits in, nor more than one hundred thousand dollars nor more than one- quarter of the capital stock of, such association or company. Such corporation may deposit not more than two and one- half per cent of its deposits in any banking association incor- porated under the authority of the United States and located in this commonwealth, and in any trust company incorporated in this commonwealth; but such deposit shall not in any case exceed five hundred thousand dollars nor tAventy-five per cent of the capital stock and surplus fund of such depositary. LOANS ON PERSONAL SECURITY. Eighth. In loans of the classes hereafter described, pay- able and to be paid or renewed at a time not exceeding one 138 I STATE LlA.WS and DECISIONS. year from the date thereof; but not more than one-third of the deposits and income shall so be invested, nor shall the total liabilities to such corporation of a personal partnership, association or corporation for money borrowed upon personal security, including in the liabilities of a partnership or com- pany not incorporated the liabilities of the several members thereof, exceed five per cent of such deposits and income ; but said limitations, except as to time in which said loans shall be paid or renewed, shall not apply to loans made under the provisions of paragraph (2) of subdivision (e) of this clause. (a) A note which is the joint and several obligation of three or more responsible citizens of this commonwealth : pro- vided, that the total liabilities to such corporation of a person, partnership or association, for money borrowed under this subdivision, including in the liabilities of a partnership or company not incorporated the liabilities of the several mem- bers thereof, shall not exceed one per cent of the deposits of such corporation. (b) A note, with one or more substantial sureties or endorsers: (1) Of a corporation incorporated in this common- wealth; or (2) Of a manufacturing corporation with a com- mission house as surety or endorser, provided that such com- mission house is incorporated in this commonwealth, or has an established place of business and a partner resident therein; or (3) Of an association or corporation at least one-half of the real and personal property of which is located within the New England states, provided that at least one such surety or endorser shall be a citizen of or corporation incorporated in this commonwealth : provided, that no such loan shall be made or renewed unless within eighteen months next preceding the making or renewing of such loan an examination of the affairs, assets and liabilities of the borrowing corporation or associa- tion has been made, at the expense of such borrowing cor- poration or association, by an accountant approved by the commissioner. The report of such examination shall be made in such form as the commissioner may prescribe. A copy of the report certified to by the accountant shall be delivered by the borrowing corporation or association to the savings bank MASSACHUSETTS. 139 before such loan or a renewal thereof is made, and a copy so certified shall be delivered by the accountant to the commis- sioner within thirty days after the completion of said ex- amination. (c) A bond or note of a gas, electric light, telephone or street raihvay corporation incorporated or doing business in this commonwealth and subject to the control and supervision thereof; provided, that the net earnings of said corporation after payment of all operating expenses, taxes and interest, as reported to, and according to the requirements of, the proper authorities of the commonwealth, have been in each of the three fiscal years next preceding the making or renewing of such loan equal to not less than four per cent on all its capital stock outstanding in each of said years ; and provided, that the gross earnings of said corporation in the fiscal year next preceding the making or renewing of such loan have been not less than one hundred thousand dollars. (d) A bond or note issued, assumed, or guaranteed by endorsement as to both principal and interest, by a railroad corporation which complies with all the requirements of sub- division (b), or of subdivision (e) preceding paragraph (5) of clause Third: provided, that the principal of such bond or note described in either this or the preceding subdivision is payable at a time not exceeding one year after the date of investment therein. (e) A note of a responsible borrower in such form as the commissioner may approve, with a pledge as col- lateral of: — (1) One or more first mortgages of real estate situated in this commonwealth; provided, that the amount of such note is not in excess of sixty per cent, or in the case of un- improved or unproductive real estate in excess of forty per cent, of the value of the property or properties mortgaged; that the value of each of said properties has been certified in accordance with the provisions of clause First; and that the assignment of each of said mortgages has been recorded in the proper registry of deeds. 140 , STATE LAWS AND DECISIONS. (2) Bonds or notes authorized for investment by clauses Second, Third, Fourth, Fifth or Sixth at no more than ninety, per cent of the market value thereof, at any time while such note is held by such corporation; or (3) Deposit books of depositors in savings banks at no more than ninety per cent of the amount of deposits shown therein; or (4) Shares of railroad corporations described in sub- divisions (a), (b) or (e) of clause Third at no more than eighty per cent of the market value thereof, at any time while such note is held by such corporation ; or (5) Such other bonds, notes or shares of corporations or associations and at such percentages of their market values as the board of investment shall approve; provided, that if the commissioner shall disapprove any such bonds, notes or shares, he shall make such recommendations in writing to the board of investment of such corporation as the case may re- quire, and shall include in his annual report a statement of the facts in each case in which such board of investment has not complied with his recommendations in a manner satis- factory to him. (f) Whenever used in this clause, the word ''association" means an association the business of which is conducted or transacted by trustees under a written instrument or declara- tion of trust. Section Fourteen, added by the laws of 1913, provides that bonds which have been legal investments for ten successive years under the provisions of subdivisions (a), (b), (c) or (d), of clause Third, Fifth or Sixth, shall not be rendered illegal for failure of the corporation to comply with the dividend requirements for two years. But no further purchases of such bonds shall be made until the corporation has complied with the provisions of the law. Investments Outside of tlie State. From the early case of Harvard College v. Amory, 26 Mass. 446, the courts of Massachusetts have been reasonable in approving investments made by trustees in good faith. Corporate stocks and bonds and, in especial cases, real property without the state have been MASSACHUSETTS. Ul held to be proper investments. But an investment in real estate out- side of the commonwealth should not be sustained unless, first, the trust funds were so invested when they came into the custody of the trustees; second, where the will authorizes such an investment; third, in exceptional cases where such an investment may be necessary to "J)rotect or secure other investments involved in the trust. In Amory v. Green, 95 Mass. 413, trustees were permitted to invest in a home- stead in another state for the benefit of the cestui que trust, because the authority given in the will was broad enough to justify it. And where such an investment constitutes a small part of the estate and the trustees have exercised good faith, the legality of the investment will be upheld. Thayer v. Dewey, 185 Mass. 68. Second Mortgage. Investment in a second mortgage may not be inconsistent with sound discretion on the part of trustees. Taft v. Smith, 186 Mass, 31. Corporate Stock. A testator devised funds to trustees to invest in "safe and pro- ductive stock, either in the public funds, bank shares or other stock according to their best judgment and discretion." The trustees re- tained certain shares of bank stock, shares in an insurance company and in a manufacturing company. The court decided that the words used in the will were broad enough to give the trustees authority to make such an investment. Harvard College v. Amory, 26 Mass. 446. A trustee invested at one time $3,573 in Union Pacific stock and later $2,475. This amounted to more than one-third of the estate. The Union Pacific was then a new road. The second investment in such stock was not approved, because it was not made in the exercise of sound discretion. Trustees are permitted to invest portions of a trust fund in stocks of private business corporations when the cor- porations have acquired, by reason of the amount of their property, and the prudent management of their affairs, such a reputation that cautious persons commonly invest in such securities. Appeal of Dick- inson, 152 Mass. 184. Shares of stock in a corporation were turned over to trustees in 1870. In 1881 the stock was at par, but from that time on it de- preciated in value until the corporation failed in 1885. Upon these facts the court refused to say that the trustees, who were men of good business capacity, lacked sound discretion simply because their judgment was wrong. Green v. Crapo, 181 Mass. 55. A guardian loaned his ward's money upon an individual note secured by stock at the rate of three-fourths of its value. There being no bad faith, the investment was proper for a guardian. The English rule does not apply. Lovell v. Minot, 37 Mass. 116. 142 STATE LAWS AND DECISIONS. Trust Company Stock. A trustee may invest the funds in trust company stock. Shefl&eld V. Parker, 158 Mass. 330. Bonds. Where trustees sold government bonds and invested in bonds of a small railroad which were guaranteed by two large railroads, they were not chargeable with mismanagement. Green v. Crapo, 181 Mass. 55. A will authorized trustees to "use their own judgment as to in- vesting the moneys," but at the same time recommended the propriety of keeping at least half of the estate invested in mortgages on un- encumbered realty. The trustees sold United States bonds and invested practically all of the funds in railroad bonds which depreciated in value. Since the will gave the trustees wide discretion and since they had acted in good faith, they were not chargeable with the loss. Brown v. French, 125 Mass. 410. Percentage of Fund Which May Be Invested in Fluctuating Securities. Where the trust estate amounted to $30,000, and the trustees in- * vested at one time $6,500 in the stocks and bonds of a railroad com- pany, and at another, over $5,000, the court decided that the second investment was improperly made, because the first investment in such securities represented about one-quarter of the estate. Davis, Appellant, 183 Mass. 499. In the appeal of Dickinson, 152 Mass. 184, evidence was given to show that conservative trustees did not invest more than one-third of a trust fund in fluctuating securities, including all kinds of stocks, and did not place more than five per cent of the money in one class of such securities. But in Brown v. French, 125 Mass. 410, where a trustee invested practically all of the estate in railroad bonds, no mention was made of the fact. Apparently the right of trustees to use their own judg- ment in good faith absolved them from the rule requiring only a por- tion of the money to be invested in fluctuating securities. Retaining Investments Made by Testator. If a testator has invested funds to remain permanently in stock, that fact may well be considered by the trustee when called upon to exercise his best judgment and discretion. This may always be con- sidered as tending to the discharge of the trustee. Harvard College v. Amory, 26 Mass. 446. Stock of a railroad which was depreciating in value came into the hands of a trustee. He continued the investment in good faith, think- ing it would be a sacrifice to sell. There was no liability for the loss. Bowker v. Pierce, 130 Mass. 262. MASSACHUSETTS. 143 Manufacturing Business. A trustee invested funds in machinery, fixtures and patent rights of a manufacturing concern. This amounts to a misappropriation of funds and makes all persons -n-ho knowingly engage in it accountable as trustees. Trull v. Trull, 95 Mass. 407. Purchasing His Own Mortgage. A trustee purchased from himself with the trust funds a mort- gage upon property which, at the time, was worth less than the fund. Such an investment was improper and the trustee was liable. Appeal of Nichols, 157 Mass. 20. See also McKim v. Glover, 161 Mass. 418. Must Appropriate the Investment to the Trust. When an investment is made, the trustee must, by act, appro- priate it to the trust. He cannot purchase and retain in a doubtful capacity. Sheffield v. Parker, 158 Mass. 330. Time of Judgment as to Value. The question of the lawfulness and fitness of an investment must be determined as of the time when it is made, and not by subse- quent facts which could not have been anticipated. Brown v. French, 125 Mass. 410. Purchasing Half of Property When Estate Owns the Other Half. Where the trust estate owns an undivided half interest in prop- erty and the property is to be sold at a sacrifice, it is the duty of the trustee, if he has money of the estate for investment and can buy at a low price, to purchase the property and thus protect the estate. Pine v. White, 175 Mass. 585. Effect of Words Giving Full Power to Invest. The words "with full power to make purchases, investments and exchanges in such manner as to thorn shall seem expedient; it being my intention to give my said trustees the same dominion and control over said trust property as I now have" are enabling words, giving the trustees full power to deal with the estate, but they do not release the trustees from the duty to exercise sound judgment and discretion in selecting investments. Davis, Appellant, 183 Mass. 499. If instructions regarding investments in certain securities are con- tained in the trust instrument, they must be followed explicitly. City Missionary Soc. v. Memorial Church, 186 Mass. 531. Purchase of Certificate of Deposit. A trustee who purchases a certificate of deposit, issued by a na- tional bank in good standing, is not liable for loss due to failure of the bank before the certificate is due. Hunt, Appellant, 141 Mass. 515. 144 STATE LAWS AND DECISIONS. Consent of Widow to Investment Not Waived by Waiver of Her Per- sonal Rights Under Will. Where a widow renounces her rights under a will and takes under law, her waiver does not abrogate a clause which provides that no change in investments shall be made without her consent. Plympton v. Plympton, 88 Mass. 178. Improvements and Repairs. The general rule is that repairs must be made out of income, and substantial improvements out of capital. When repairs and substan- tial improvements are so closely related as to be inseparable, the expense should be apportioned by the trustee according to his best judgment. Little v. Little, 161 Mass. 188. The expense of putting property in condition to be leased may be considered a part of the original purchase price, while the expense of keeping it in repair would in general be chargeable to income. Parsons v. Winslow, 16 Mass. 361. Where rents are increased as a result of repairs and the beneficiary reaps the benefit, the trustee should be allowed the expense of making the repairs. Eathbun v. Colton, 32 Mass. 471; Eoot v. Yeomans, 32 Mass. 488. Where the trustee has full power to invest, reinvest and change any and all property of the estate, he may repair the property in such a manner as to increase the value of the estate. Sohier v. Eld- redge, 103 Mass, 345. A trustee is justified in tearing down an old building and erect- ing a new one where a prudent business man would do so to secure a fair income, having regard to the amount which such investment would bear in relation to the trust fund as a whole. But unless the trust instrument exempts the trustee from liability, an investment in such a manner of $850,000, out of an estate of $920,000, is too large a pro- portion. Warren v. Pazolt, 203 Mass. 329. Where a trustee having wide discretion makes extensive repairs of a large estate for the purpose of keeping the income at a fixed standard the expenses should be allowed out of the income. Jordan v. Jordan, 192 Mass, 337. Guardians. With reference to guardians the laws provide that the court may make such order for the management and investment of the estate as the case may require. Revised Laws, 1902, Guardianship, Sec. 35. Another section of the statutes provides for a sale of the ward's property and investment by the guardian "according to his best judg- ment." Revised Laws, Vol. 2, p. 1319. It would seem, therefore, that a guardian may follow the general Tules governing trustees in the investment of trust funds. MICHIGAN. TRUST COMPANIES. Howell's Statutes, 1913. Part of Section 6486, Relating to Trust Companies.— And such board of directors may invest or loan the balance of its capital stock and other moneys received by such corpora- tion in trust, in bonds secured by mortgages, or notes and mortgages on unencumbered real estate within the State of Michigan, worth double the amount secured thereby, or in public stocks and bonds of the United States, or any state of the United States that has not defaulted on its principal or interest within ten years; or of any organized county or township, or incorporated city or village, or school district in this state, or in any other such state, duly authorized to be issued, or in such real or personal securities as they may deem proper. TRUSTEES GENERALLY. Sec. 12139. Whenever it shall become necessary or con- venient in the settlement or distribution of the estate of a de- ceased person, to appoint a trustee to take charge of or invest and distribute any portion of such estate, the judge of probate shall have power, and it shall be his duty, on the application of any person interested in the estate, to appoint such trustee. Sec. 12142. It shall be the duty of such trustee to invest or distribute the estate which shall be received by him, ac- cording to the direction of his warrant of appointment, and to account for such estate and the interest thereon, in such manner and at such times as the judge of probate shall order. Guardians. — Section 11578 provides for the sale or transfer of property of the ward, under supervision of the judges of probate, with the right to invest the proceeds of such sale, to- 145 146 STATE LAWS AND DECISIONS. gether with any other money, in real estate or in any other manner that shall be for the best interest of all concerned. Sec. 12068, Relating to the Sale of Property by Executors.— The court shall make all proper orders and directions from time to time for the management, investment and disposition of the moneys received from such sale, and the interest and income therefrom. Trust to Carry on Business. Where a trust is created for the purpose of carrying on a busi- ness for the benefit of creditors, the trustee should not assume ex- traordinary risks or depart radically from the provisions of the trust instrument. Enlarging the business and creating obligations not neces- sary for the business constitute a breach of duty. Loud v. Winchester, 52 Mich. 174; 64 Mich. 23. Neglect to Invest. Where a trustee has misappropriated a fund or neglected to invest it, the beneficiary will be presumed to have lost at least the lawful interest. Perrin v. Lepper, 72 Mich. 454. Duty in General. It is the duty of a trustee to work for the best interests of the estate, and to keep, manage and invest the property in such a manner that it can be turned over to beneficiaries within a reasonable time, free from any complications with his own property. Perrin v. Lepper, 72 Mich. 454. Care Req,uired. The law requires trustees to exercise sound discretion and good faith in the investment of funds. Caspari v. Cutcheon, 110 Mich. 86. When Chargeable With Interest. Trustees are chargeable with interest only when they have re- ceived interest, or have used the money or have been negligent in paying over or have failed to invest. Calkins v. Bump, 120 Mich. 335, Purchase by Beneficiaries From Trustee. Where intelligent beneficiaries of mature years and fully informed of all the circumstances authorize the trustee to use trust money in the purchase of property which he owns, they cannot later claim that the transaction was invalid. Skelding v. Dean, 141 Mich. 143. MICHIGAN. 147 3VIiiigling Funds. Where a trust company holding money received from the sale of bonds in trust mingles it with general funds which it loans at in- terest it is liable for the legal rate of interest. Union Trust Co. v. Preston Nat. Bank, 144 Mich. 106. Corporate Stock. A devise by a testator of "five thousand dollars in cash arising from my property, such as windmill stock or any other source," to be held and controlled by F, trustee, and providing for payment of a specified yearly amount whether arising from dividends or interest, does not give the trustee, who received the money in cash, power to purchase stock from another son at excessive value. Cropsey v. Johnston, 137 Mich. 16. Unsecured Notes. In one respect the decisions are reasonably uniform. It is a gen- erally accepted rule that it is not prudent to invest trust funds in un- secured notes of an individual or of a partnership. Mich. Home Miss. Society v. Corning, 164 Mich. 395. Guardian. Public securities have always been held lawful. A guardian can- not be censured for investing in these or in any legal interest, when it is the best which he finds readily obtainable. In the absence of contract he cannot be held for neglect beyond seven per cent, the legal rate. Gott v. Culp, 45 Mich. 265. Personal Benefit, Kate of Interest. A guardian may not reap any personal benefit from the manage- ment of the estate. When he neglects to keep funds separate from his own, he is chargeable with simple interest. When he is guilty of fraud or gross misconduct, he may be charged with annual or semi- annual rests. Moyer v. Fletcher, 56 Mich. 508. Deposit in Savings Bank. The length of time that a trustee should allow a fund to remain in a bank depends upon circumstances and the opportunity to invest. A guardian who permits money to remain in a savings bank at four per cent for over six months cannot for that reason be said to be negligent. In re Grammel's Estate, 120 Mich. 487. Purchasing a Business. When a trustee, with the consent of the beneficiary who is twenty years of age, purchases a business with trust funds and the beneficiary 148 STATE LAWS AND DECISIONS. continues to run the business for two years after she becomes of age, she ratifies the act of the trustee. In re Shailer Estate, 172 Mich. 600. Comtinuing Business. The law requires that an administrator shall take charge of all the personal estate, collect and convert it into money ready for dis- tribution. He is required to exercise ordinary skill and prudence. Loomis V. Armstrong, 63 Mich. 355. It follows that a trustee may not continue the testator's business unless authorized so to do. Frey v. Eisenhardt, 116 Mich. 160. Even where they are expressly authorized to carry on a business, the trustees must follow strictly the provisions of the instrument. Packard v. Kingman, 109 Mich. 497, MINNESOTA. TRUST COMPANIES. General Statutes, 1913. Sec. 6412. Trust Company. — It may invest all moneys re- ceived by it in trust in authorized securities and shall be re- sponsible to the owner or cestui que trust for the validity, reg- ularity, quality, value, and genuineness of such investment and securities so made, and for the safe keeping of the securities and evidences thereof. Whenever special directions are given in any order, judgment, decree or will, or any other written in- strument as to the particular manner or particular class or kind of securities or property in W'hich any investment shall be made, it shall follow such directions, and in such case it shall not be further responsible by reason of the performance of such trust. In all other cases it may invest the same in any of said other securities, using its best judgment in the selection thereof, and shall be responsible for the validity, regularity, quality and value thereof at the time made, and for their safe keeping. It may, in its discretion, retain and continue any investment and security or securities coming into its possession in any fiduciary capacity. Sec. 6415. Trust Funds, Investments of Accumulations. — Any amount not less than one hundred dollars, received by it as executor, administrator, or guardian, or other trustee, or by order of court, not required for the purposes of such trust, or not to be accounted for within one year, it shall invest as soon as practicable in authorized securities either then held by it or specially procured by it; and the income, less its proper charges, shall become part of the trust estate, and the net accumulations thereof shall be likewise invested, ac- counted for, and allowed in settlement of such trust. Sec. 6393. Authorized Securities. — The trustees of any 149 150 STATE LAWS AND DECISIONS. savings bank shall invest the moneys deposited therein only as follows : 1. In the bonds or other interest-bearing obligations of the United States, or in securities for the payment of which and interest thereon the faith of the government is pledged. 2. In the bonds of any state which has not defaulted in payment of any bonded debt within ten years prior to the making of such investment. 3. In the bonds of any county, city, town, village, school, drainage, or other district created pursuant to law for public purposes in Minnesota, or in any warrant, order, or interest- bearing obligation issued by this state, or by any city, city board, town, or county therein, provided that the net indebted- ness of any such municipality or district, as net indebtedness is defined by Revised Laws 1905, Sec. 777, and its amend- ments, shall not exceed ten per cent of its assessed valuation, or in the bonds of any county, city, town, village, school, drainage, or other district created pursuant to law for public purposes in Iowa, "Wisconsin and North and South Dakota, or in the bonds of any city, county, town, village, school district, drainage, or other district, created pursuant to law for public purposes, in the United States containing at least thirty-five hundred inhabitants; provided, that the total bonded indebt- edness of any such municipality or district shall not exceed ten per cent of its assessed valuation. 4. In notes or bonds secured by mortgages on unencum- bered real estate in Minnesota, Wisconsin, Iowa, North Da- kota, South Dakota and Montana, worth when improved at least twice, and when unimproved at. least three times the amount loaned thereon. But not more than seventy per cent of the whole amount of the moneys of the bank shall be so loaned, and such investments shall be made only on report of a committee directed to investigate the same and report its value, according to the judgment of its members, and its re- port shall be preserved among the bank's records. 5. In notes secured by such bonds or mortgages as the bank under this section is authorized to invest in, but no such bond or mortgage shall be taken as collateral security for MINNESOTA. ' 151 more than its par value, nor shall the aggregate amount of securities taken be less than the full amount loaned thereon, and no such loan shall be made for a longer time than one year, nor to a greater amount to any one person than three per cent of the total deposits of the bank. No such bank shall loan in the aggregate, on the security specified in this para- graph, more than one-fourth of its deposits. 6. In the bonds of any railroad company, or the successor of any railroad company, which has received a land grant from the government, and whose bonds are secured by a first lien upon its railroad. 7. In the bonds of any other railroad company which are secured by first lien upon a railroad within the United States, or in the mortgage bonds of any such company, of an issue to retire all prior mortgage indebtedness thereof, or in the bonds of any railroad company in the United States which are guaranteed or assumed by another railroad company within the United States : Provided, that the railroad company, ex- cept one whose bonds are so guaranteed or assumed, either issuing, guaranteeing or assuming any of such bonds, has not within five years prior to such investment failed in the pay- ment of a dividend upon its entire capital stock outstanding of not less than four per cent per annum each fiscal year, and has not within such time defaulted in the payment of any part of the principal or interest of any debt incurred by it and secured by trust deed or mortgage upon its road or any part thereof, or in the payment of any part of the principal or interest of any bonds guaranteed or assumed by it. But no such bank shall loan upon or invest in railroad bonds to an amount exceeding in the aggregate twenty per cent of its deposits, nor exceeding five per cent of its deposits in the bonds issued, guaranteed or assumed by any one railroad com- pany. 8. In the debenture stock of any railroad company own- ing and operating a line of road in whole or in part within the state, provided that such stock shall bear interest at the rate of at least four per cent per annum, and shall be secured by trust deed as a first lien upon such line of railway, and 152 STATE LAWS AND DECISIONS. that not more than five per cent of its deposits shall be in- vested in such stock. The term "authorized securities," whenever used in the Revised Laws, shall be understood as referring to the se- curities specified in this section. Transfer by Trust Company of Its Own Mortgages. The statutes authorizing trust companies to invest in certain se- curities do not abrogate the rule that a trustee may not deal with himself. Therefore, such companies may not transfer their own mort- gages to themselves as trustees, even if such mortgages are legal in- vestments. St. Paul Trust Co. v. Strong, 85 Minn. 1. But in 1903, sec- tion 6415 of the Statutes (supra) was passed permitting a trust company to invest in securities "held by it — or specially procured by it." Interest Chargeable When Trustee Mingles Funds. In the absence of fraud or flagrant breach of trust, simple interest only is chargeable against a trustee when he mingles the funds with his own or uses them in his private business. St. Paul Trust Co. v. Strong, 85 Minn. 1; St. Paul Trust Co. v. Kittson, 62 Minn. 408. But a trustee is not to pay interest solely because he has deposited trust funds with his own or used them in his business. There must be in addition a breach of trust. The rule is discussed in re Shotwell, 49 Minn. 170. Trustee May Not Acquire Property for His Own Benefit. A trustee is utterly disabled from acquiring property for his own benefit, and it makes no difference whether there is fraud in the transaction or not. Gilbert v. Hewetson, 79 Minn. 326. Certificates of Deposit. Investments by a trust company in certificates of deposit issued by city banks and paying four per cent interest have been upheld, but the company may not invest in its own certificates of deposit. St. Paul Trust Co. v. Kittson, 62 Minn. 408. Neglect to Invest. A guardian who neglects to invest the funds of his ward is charge- able with interest at the legal rate after a reasonable time (six months). Crosby v. Merriam, 31 Minn. 342. MISSISSIPPI. GUAEDIANS. Code of 1906. (With Amendments to 1914.) Sec. 2416. "Wlienever the guardian shall have money of his ward not needed for current expenditures, or directed to be invested for the ward, he shall apply to the court, or chan- cellor in vacation, for directions as to the disposition he shall make of it; and the court or chancellor shall determine whether he shall lend it at interest, and upon what security, or how he shall dispose of it; and if the court or chancellor designated the person to whom the loan shall be made, or the security on which it shall be made, and the loan be so made, responsibility shall not attach thereafter to the guar- dian; but if the court or chancellor shall intrust him with discretion in the matter, he shall be bound for the exercise of sound judgment; and the court or chancellor may direct an investment in the bonds of the state or of any county or municipality thereof, or of a levee board, or of the United States. Any guardian who fails to report to the court the fact that he has money of his ward not needed or alloAved to be used for current expenditures, and to ask the order of the court as to the disposition of such money, shall be charge- able with interest on the same, at the rate of ten per centum per annum during the time of failure. Sees. 2419 and 2420 provide that the guardian may im- prove the land of the ward and change investments witli the approval of the court of chancery. Reasonable Diligence Eequired.. Trustees are required to use reasonable care and diligence in the management of the estate. If they mingle trust funds with their own they are chargeable with the loss. Coffin v. Branilitt, -12 Miss. 191. 153 154 STATE LAWS AND DECISIONS. Order of Probate Covirt. If a guardian loans his ward's money without an order of the probate court, he does so at his own risk. Coffin v. Bramlitt, 42 Miss. 194. Duty to Invest. If a trustee does not loan money he is chargeable with interest at ten per cent. Code of 1906, section 2416. This provision of the code seems to have been added to meet the rule in the earlier decisions and especially in Reynolds v. Walker, 29 Miss. 250, in which it was . decided that a guardian is not liable for interest unless he has been directed by the probate court to invest, or has invested, or has used the funds in his business. The effect of the statute is to require invest- ment under a court order. Liability for Compovuid Interest. Trustees are not liable for compound interest unless they have been guilty of fraud or have secretly made large profits in the use of the fund, or have mingled it with their own. Crump v. Gerock, 40 Miss. 765. The beneficiary may elect to take the profits or the principal with compound interest. Troup v. Eice, 55 Miss. 278. Stocks. Where an executor retained railroad stocks under an honest mis- take of judgment he is not liable for loss. Troup v. Rice, 55 Miss. 278. May Not Acciuire Interest in the Estate. A trustee may not acquire directly or indirectly any personal in- terest in the estate. Joor v. Williams, 38 Miss. 546 j Scott v. Freeland, 7 S. & M. 409. One Year Allowed Administrator. One year is allowed an administrator to collect the estate and make distribution. After one year he is chargeable with interest. If he makes any profit during the year he must account for it. Anderson V. Gregg, 44 Miss. 170. MISSOURI. TRUST COMPANIES. Statutes of 1909. (With Amendments to 1914.) Sec. 1132. Investments. — The directors of corporations created under this article shall have power of investing the monej^s placed in their charge in loans secured by real estate or other sufficient collateral security, in public bonds of the United States, or of this state, or in the bonds or stocks of any incorporated city or county in this state. Such corporations shall owm only such real estate as may be required for the transaction of their business, and such as they may require in the enforcement and collection of debts or liabilities due to them. Sec. 111. Executors and Administrators — Order of Court. — If, on the return of the inventory, or at any other time, it shall appear to the satisfaction of the court that there is a surplus of money in the hands of the executor or adminis- trator that will not shortly be required for the expenses of administration, or payment of debts, it shall have discretion- ary power to order him to lend out the money on such terms and fdr such time as may be deemed best. Order of Court. If an administrator loans funds of the estate Tvithout an order of court, he and his sureties are liable for all losses growing out of such loan. Garesehe v. Priest, 9 A. 270; affirmed, 78 Mo. 126. When Chargeable With Interest. Interest may not be compounded for a simple breach of trust. Cruce V. Cruce, 81 Mo. 68-1. But when the trustee has speculated with the funds and the profit cannot be ascertained, or where he has used the money for his own purposes, the highest rate of interest may be charged. Bobb v. Bobb, 89 Mo. 421; In re Davis, 62 Mo. 454. 155 156 STATE LAWS AND DECISIONS. And where he mingles the funds with his own he is chargeable with interest although he has made none. Bates v. Hamilton, 144 Mo. 1;- In re Murdock, 129 Mo. 499. Must Comply Strictly With Provisions of Trust. Where a trustee is directed to invest money in lands, he is not warranted in investing part as directed and expending the remainder in improving the land. Gates v. Hunter, 13 Mo. 511. Donation to Induce Improvement of Surrounding Property. Where a testator created a reserve fund to guard against loss, and authorized the trustees to invest and reinvest, it was proper for them to make a donation to a corporation preparing to erect a hotel near the property which would be of benefit to the estate. Drake v. Crane, 127 Mo. 85. Guardian. The power of a guardian to sell property of a ward and invest the proceeds must be obtained by an order of the probate court. Woods v. Boots, 60 Mo. 546. The statutes do not require a guardian to invest in government securities, nor until 1865 did they require an investment in real estate securities. Taylor v. Hite, 61 Mo. 142. It seems that a guardian, under an order of court, may invest in public securities or upon real estate security at least double in value the amount loaned. Statutes of 1906, sections 3510, 3513, 3517. Care Req.uired. A trustee must employ such diligence and prudence in the invest- ment of funds as men of discretion and intelligence exercise in the man- agement of their own affairs. Taylor v. Hite, 61 Mo. 142. May Not Change Character of Property Unless it is Perishable. Trustees have no power to change the character of trust property Txnless it is of a perishable nature. In such a case it must be con- verted into a permanent investment. Garesche v. Levering Inv. Co., 146 Mo. 436; Gamble v. Gibson, 59 Mo. 595. May Not Incorporate the Estate. The power to sell and reinvest does not give trustees the right to convert the estate into a corporation. Garesche v. Levering Inv. Co., 146 Mo. 436. Depreciation of Securities. A trustee who has invested in sufficient security is not responsible for later depreciation. State v. Slevin, 93 Mo. 253. MONTANA. TRUST COMPANIES. Statutes of 1907. (With Amendments to 1914.) Sec. 3930. The board of directors of any such corpora- tion are hereby authorized to invest the capital of said cor- poration, and keep the same invested, in good securities, and it is lawful for said corporation to make such investments of its capital, and the funds accumulated by its business, including money deposits, or any part thereof, in notes or bonds and mortgages on unencumbered real estate, within the state of Montana, and also on any and all stocks or bonds of this state, or any other state or territory of the United States, or the bonds of any county, city, town, or school district, of this state, legally authorized to issue such bonds. TRUSTEES. Sec. 5396. Investment of Money by Trustee.— A trustee must invest money received by him under the trust, as fast as he collects a sufficient amount, in such manner as to afford reasonable security and interest for the same. Sec. 5397. Interest, Simple or Compound, on Omission to Invest Trust Moneys. — If a trustee omits to invest the trust moneys according to the last section, he must pay simple in- terest thereon, if such omission is negligent merely, and com- pound interest if it is willful. Mingling Funds. "Where a trustee mingles trust funds with his own, the entire fund will be impressed with a trust for the benefit of the cestui que trust. Yellowstone County v. First etc. Savings Bank, 46 Mont. 439. 157 158 STATE LAWS AND DECISIONS. Care Required. A trustee should exercise tlie same care and prudence in the man- agement of the estate that men of ordinary diligence and prudence exercise in the management of their own affairs. Eoush v. Fort, 3 Mont. 185. Rate of Interest. An executor who retains trust funds which he should have de- posited in bank at interest cannot be compelled to pay arbitrary- rates of interest or compound interest, especially when there is no fraud and he has returned the money and accounted for a higher rate than the banks would have paid. In re Kicker's Estate, 14 Mont. 153. NEBRASKA. TRUST COMPANIES. Statutes of 1911, Ch. 31. (With Amendments to 1914.) Sec. 6. Subdivision 7. Trust companies have power to loan money upon real estate, not to exceed forty per cent of ap- praised value, and upon collateral security, but no property shall be taken as collateral except such property as would it- self be a legal investment for the said Corporation under this Act; and to borrow money and to execute and issue its notes payable at a future date, and to pledge its real estate, securi- ties, or other securities therefor. But no loan shall be made to any officer or director of the said Corporation. 8th. To buy, own, hold and sell Government, State, County and municipal bonds and stocks, warrants, bills of exchange, notes, mortgages and other investment securities, negotiable and non-negotiable. But it shall be unlawful for any Corporation organized under this Act to buy or own the bonds of any incorporation (other than municipal) or company, the interest on which has been in default for a period of two years next preceding the date of purchase, and it shall be unlawful for it to buy the stocks of any corporation except those that have earned annual dividends of at least four per cent per annum for at least three years just prior to the date of such purchase. No trust company shall buy, own or accept as collateral the stock of any Corporation organized under this Act. EXECUTORS AND ADMINISTRATORS. Annotated Statutes, 1909. Sec. 5141. The executor or administrator shall not make profit by the increase, nor suffer loss by the decrease or de- 159 160 STATE LAWS AND DECISIONS. stmction without his fault, of any part of the personal estate, and he shall account for the excess when he shall sell any part of the personal estate for more than the appraisal, and if he shall sell any for less than the appraisal, he shall not be responsible for the loss if it shall appear to be beneficial to the estate to sell it. Guardians.— Sections 5394 and 5397 provide that a guar- dian must manage the ward's estate frugally and without waste and that the probate court may authorize a sale of the personal property and investment of the proceeds and any other money in real estate or in such other manner as shall be to the interest of the ward. Deposit in Private Account. Deposit of trust funds to the private account of a trustee amounts to a conversion to Ms own use. Dirks v. Juel, 59 Neb. 353. Mingling Funds. When a trustee mingles funds with his own, the trust attaches to the whole fund. State v. Bank of Commerce, 61 Neb. 181; City of Lincoln v. Morrison, 64 Neb. 822. Purchasing Trust Property. If a trustee purchases the trust property, the sale is voidable. The beneficiary may affirm or repudiate. Shelby v. Creighton, 65 Neb. 485. Guardian. Section 27, Chapter 34, of the laws of 1907, requires a guardian to obtain an order of court authorizing him to loan the ward's money. If he neglects to do this, he is liable for any loss. In re Estate of O'Brien, 80 Neb. 125. NEVADA. TRUST COMPANIES. Laws of 1911. (With Amendments to 1914.) The laws of 1911 provide for the incorporation of banking corporations. The corporation organized under the act may state in its articles of incorporation that it "will carry on a trust company business, and such corporation in addition to the powers conferred upon the banks shall have power to act as trustee under bonds and mortgages and to execute cor- porate or individual trusts, to act as executor, administrator, guardian or receiver. The same law under Section 6 provides for the following investments for savings banks and is ap- parently controlling with regard to trust companies. The funds of any savings bank, except the reserve provided for in this act, shall be invested in bonds of the United States, or of any state of the United States, or in the public debt or bonds of any city, county, township, village or school district of any state of the United States which shall have been law- fully issued; or may be loaned on negotiable paper secured by any of the above mentioned classes of security; or upon notes or bonds secured by mortgage lien upon unencumbered real estate ; provided, that second mortgage loans may be made upon improved farm lands, but no loans shall be made upon such lands or other real estate which, including the aggregate amount of all encumbrances, shall exceed fifty per cent of the cash value thereof; or upon notes secured by col- lateral security of known marketable value; or shall be de- posited in good solvent banks or held as cash ; provided, also, that chattel mortgages shall not be deemed collateral security, and savings banks are prohibited from investing their funds in them. 161 162 STATE LAWS AND DECISIONS. Sec. 2964. Executors and Administrators. — Every execu- tor and administrator shall be chargeable in his account with the whole of the estate of the deceased which should come to his possession at the value of the appraisement contained in the inventory, except as hereinafter provided, and with all the interest, profit and income of the estate. Sec. 2965. He shall not make profit by the increase nor suffer loss by the decrease or destruction of any part of the estate without his fault. He shall account for the excess when he shall sell any part of the estate for more than the ap- praisement, and if any be sold for less than the appraisement, he shall not be responsible for the loss if the sale has been justly made. Sec. 2968. No administrator or executor shall purchase any claim against the estate he represents ; and if he shall buy any claim for less than its nominal value, he shall not charge in his account more than he has actually paid. Repairs. An executor will be allowed the expenses of reasonable repairs and improvements. Estate of Millenovich, 5 Nev. 161. Renting. When an executor has exercised proper diligence and good faith, he is not chargeable with loss to the estate. Renting property of the estate at a reasonable value, with a view to the desirability of the tenant, is all that can be expected of him. Estate of Millenovich, 5 Nev. 161. Corporate Stock. Corporate stock of doubtful value which comes into the hands of a trustee should be disposed of under an order of the probate court. Estate of Millenovich, 5 Nev. 161. Guardian. It seems that a guardian, if he would protect himself, should act only in accordance with an order of the probate court. Henderson v. Coover, 4 Nev. 429. NEW HAMPSHIRE. TRUSTEES GENERALLY. Public Statutes, 1901. (With Amendments to 1914.) Chapter 198. Sec. 11. Trustees shall be accountable for and may be licensed to sell stocks, bonds, and other written evidences of debt, and shall, when not otherwise authorized, or directed, invest money and the proceeds of all real and personal property the same as prescribed for guardians. Sec. 9. Every guardian of a minor shall invest, in the name of his ward, or in his own name as guardian, the money and the proceeds of all real and personal property of his ward — except stocks, bonds and other evidences of debt re- ceived as provided in the preceding section (permitting the retention of such securities) — in notes secured by mortgage of real estate at least double in value of the notes, in some in- corporated savings bank in this state, or in the bonds or loans of this state, of some town, city, or county of this state, or of the United States, and in no other way. (1895, Chapter 71. Sec. 1. Trustees and guardians shall be authorized to invest funds in their hands in the bonds or direct obligations of any county, city, town, school, fire, or water district in New England, when the net debt of said municipality does not exceed five per cent of the last assess- ment of taxes for the purpose of taxation. The term "net debt" shall be construed to denote the indebtedness of any municipality, omitting debt created for supplying the in- habitants with water, and deducting the amount of sinking funds available for the payment of the indebtedness of the municipality.) Sec. 10. Every such guardian shall return to the probate court a statement of the property of his ward. If it is in- 163 164 STATE LAWS AND DECISIONS. vested as provided in the preceding section, and the invest- ment is approved, he shall be accountable for it, and the income thereof, only as he is accountable for real estate of his ward. Laws of 1907. Chapter 15. Sec. 1. In addition to the authority now existing for investing trust funds in the hands of guardians and other trustees, such guardians and trustees are hereby authorized to invest said trust funds in such other stocks and bonds as are and may from time to time become legal in- vestments for savings banks in this state, with the exception of stocks in banking corporations and trust companies, unless forbidden so to do by the instrument creating the trust. Chapter 16. Sec. 1. Any guardian or trustee who now holds or shall hereafter hold any stock, bonds or other written evidence of debts which he shall have received from an ad- ministrator by order of the judge of probate, or from his ward or cestui que trust, or from any one in behalf of said ward or cesttii que trust, as a part of the estate of said ward or cestui que trust, may with the approval of the judge of probate continue to hold the same and be accountable for the same and the income thereof, only as he is accountable for real estate of his ward or cestui que trust. Sec. 2. Nothing herein contained shall relieve any guar- dian or trustee from liability on account of his want of due care and diligence in dealing with any property so held by him. SAVINGS BANKS. Since trustees may invest in securities which are legal for savings banks, it is necessary to add the statutes relating to such investments. Chapter 114. Sec. 1. On and after the passage of this act, savings banks and savings departments of banking and trust companies shall make investment of their funds in the following classes of securities only: 1. In notes secured bv first mortgage of real estate situ- NEW HAMPSHIRE. 165 ated in New Hampshire ; but not over seventy per cent of the value of the property covered shall be so loaned, and not exceeding seventy per cent of the deposits shall be so invested. 2. In notes secured by first mortgage of real estate situ- ated outside of New Hampshire which is at the time im- proved, occupied, and productive; but not over fifty per cent of the value of the property covered shall be so loaned, and not exceeding twenty-five per cent of the deposits shall be so invested. 3. In notes secured by collateral in which the bank is at liberty to invest of a value at least ten per cent in excess of the face of the notes. The amount of any one class of securities so taken as collateral, added to that which the bank may own at the time, shall not exceed the total limit of that class of security; but not exceeding twenty-five per cent of the deposits shall be so invested. 4. In notes secured by collateral securities which are dealt in on the stock exchanges of Boston and New York, the stock exchange price of which shall at all times be at least twenty per cent in excess of the face of the note, while held by the bank; but not exceeding twenty-five per cent of the deposits shall be so invested. 5. In notes of individuals or corporations with two or more signers or one or more indorsers ; but not exceeding five per cent of the deposits shall be loaned any one person or corporation in this class of securit3% and not exceeding twenty-five per cent of the deposits shall be so invested. 6. In the public funds of the United States, or those for which the faith of the United States is pledged to provide for the paj^ment of the interest and principal. 7. In the bonds and notes of this state or of any county, city, town, precinct, or district of this state. 8. In the authorized bonds or notes of any state or terri- tory of the United States ; and in the bonds or notes of any city of the states of Maine, Vermont, Massachusetts, Rhode Island, Connecticut or New York, whose net indebtedness does not exceed five per cent of the last preceding valuation of the propertj^ therein for taxation, or of any county, town, 166 STATE LAWS AND DECISIONS. village, precinct, or district in said states whose net indebted- ness does not exceed three per cent of such valuation. 9. In the authorized bonds of any county, city, town, school district, or other municipal corporation of any other of the United States or territories whose net indebtedness at the time of such investment does not exceed five per cent of the last preceding valuation of the property therein for taxa- tion; and in the authorized bonds of any city of one hundred thousand inhabitants of any of said states whose net indebt- edness does not exceed seven per cent of the last preceding valuation of the property therein for taxation. The term "net indebtedness" shall be construed to denote the indebt- edness of any city, town, or other municipal corporation, omitting the debt created for supplying the inhabitants with water and deducting the amount of any sinking fund avail- able for the payment of the municipal indebtedness. Pro- vided, however, that such bonds sliall not have been issued in aid of railroads or for special assessment purposes. Pro- vided, also, that the bonds of any county, city, or town of less than ten thousand inhabitants, or of any school district or other municipal corporation of less than two thousand inhabitants, in any state or territory other than those named in paragraph eight of section one of this act, shall not be authorized investments. Provided further, that such bonds are issued by municipalities that are permitted by law to levy taxes sufficient to pay the interest and to provide sink- ing funds for their debt; otherwise such bonds shall not be authorized investments. But not exceeding fifty per cent of the deposits shall be so invested. 10. In the bonds or notes of any railroad company, ex- cept street railways, incorporated under the laws of this state, whose road is located wholly or in part in the same; but not exceeding twenty-five per cent of the deposits shall be so invested. 11. In the bonds of any railroad company, except street railways, incorporated under the authority of any of the New England states, whose road is located wholly or in part in the same, and which is in possession and operating its own NEW HAMPSHIRE. 167 road, and has earned and paid regular dividends for the two years next preceding such investment ; or in the bonds guar- anteed or assumed by such railroad company ; but not ex- ceeding twenty-five per cent of the deposits shall be so in- vested. 12. In the bonds of any railroad company, except street railways, incorporated under the authority of any of the United States or territories, which is in possession of and operating its own road and has earned and paid regular divi- dends of not less than four per cent per annum on its capital stock for the three years next preceding such investment; provided-, such capital stock on which it earns and pays divi- dends equals in amount one-third of the entire bonded in- debtedness of said road; or in the bonds guaranteed or assumed by such railroad; but not exceeding twenty-five per cent of the deposits shall be so invested. 13. In the first mortgage bonds of corporations of this state, except street railways, located and doing business therein whose net indebtedness at the time of such investment does not exceed its capital stock actually paid in and re- maining unimpaired; but not exceeding ten per cent of the deposits shaU be so invested. 14. In the bonds of street railway corporations incor- porated under the laws of this state and located wholly or in part in the same, and in the bonds of street railway corpora- tions located wholly or in part in cities of thirty thousand inhabitants or more in any of the other New England states, and in the bonds of street railway corporations located wholly or in part in cities of fifty thousand inhabitants, or more, in any of the United States; provided, that the net indebted- ness of any of such street railway corporations mentioned in this paragraph does not exceed the capital stock actually paid in and remaining unimpaired at the time of such in- vestment, and that such corporation has earned and paid regular dividends of not less than four per cent per annum on its capital stock for five years next preceding such invest- ment; but not exceeding ten per cent of the deposits shall be so invested. 168 STATE LAWS AND DECISIONS. 15. In the bonds of telephone, telegraph, or express com- panies doing business in the United States or territories ; pro- vided, the total indebtedness of such company does not exceed its capital actually paid in and remaining unimpaired, and provided, such company has earned and paid regular divi- dends of at least four per cent per annum upon its capital stock of shares for five years previous to such investment; but not exceeding ten per cent of the deposits shall be so invested. 16. In the capital stock of any banking or trust com- pany incorporated under the laws of this state and doing business therein, but the amount of such stock held by any savings bank as an investment and as collateral for loans shall not exceed one-tenth of the total capital stock of such banking or trust company, and not exceeding ten per cent of the deposits shall be so invested. 17. In the stock of any national bank or trust company located in the New England states or the state of New York, but not exceeding ten per cent of the deposits of a savings bank shall be invested in such stock; the amount of stock in any national bank or trust company in this state which may be held by any savings bank as an investment or as collateral security for loans shall not exceed twenty-five per cent of the capital stock of said national bank or trust company ; and the amount of stock in any national bank or trust company out- side of this state which may be held by any savings bank as an investment or as collateral for loans shall not exceed one-tenth of the capital stock of said national bank or trust company. 18. In the stock or notes of any railroad corporation, ex- clusive of street railways, located in any part of the United States or territories that has earned and paid regular divi- dends of not less than four per cent per annum on its capital stock for five years next preceding such investment; pro- vided, such capital stock on which it pays dividends equals in amount one-third of the entire bonded indebtedness of said corporation; or in the stock of any other railroad cor- poration whose railroad and railroad property are leased to NEW HAMPSHIRE. 169 such railroad upon an annual rental of not less than four per cent per annum upon the capital stock of the leased railroad ; provided, said leased railroad shall have earned dividends of not less than three per cent upon its capital stock for a period of three years immediately preceding said lease; but not ex- ceeding twenty-five per cent of the deposits shall be so invested. 19. In the stock or notes of any manufacturing company in the New England states that has paid regular dividends on its capital stock for five years previous to such investment, and whose net indebtedness does not exceed the amount of its capital stock fully paid in; but not exceeding ten per cent of the deposits shall be so invested. 20. In the stock or notes of any parlor car or sleeping car company incorporated and doing business in the United States, and whose cars are in actual use upon any railroad whose stock is a legal investment for New Hampshire savings banks, and that has earned and paid regular dividends of not less than four per cent per annum on its capital stock for five years next preceding such investment; but not exceeding five per cent of the deposits shall be so invested. 21. In land and building suitable and actually used by it in part for its banking room, the total cost of which shall not exceed ten per cent of its deposits. 22. In the stock of any real estate trust company of this state and whose property is occupied and improved and is located in this state, whose capital stock is one hundred thou- sand dollars or more, provided the total indebtedness of such company does not exceed one-half of the capital stock actually paid in and remaining unimpaired, and provided such com- pany has earned and paid regular dividends of at least four per cent per annum upon its capital stock or shares for five years previous to such investment; but not exceeding five per cent of the deposits shall be so invested. Loan and Investment Book Must be Kept. — There shall be kept by every savings bank, state bank and trust company in this state, in a separate book especially provided for that purpose, a record of all loans and investments of every de- 170 . STATE LAWS AND DECISIONS. scription made by said institution, substantially in the order of the time when such loans or investments are made, which shall show that such loans or investments have been made with the approval of the investment committee of such insti- tution, and which shall indicate such particulars respecting such loans or investments as the bank commissioners shall direct. This book shall be submitted to the trustees and to the bank commissioners at each examination required by law. Such loans or investments shall be classified in this book in such a manner as the bank commissioners shall direct. Guardians. — Prior to 1866, there was no statute specify- ing the nature of investments for guardians. An act passed in that year provided for investments in notes secured by mortgage of real estate at least double the value of the notes, •or in some incorporated savings bank in the state, or in the bonds of the United States, of this state, or some town, or county within the state, and in no other way whatever. It was made lawful for a guardian to receive bonds, stocks, or other evidence of debt, wherever invested, from any adminis- trator, and to hold the same with the approval of the probate court. These provisions now exist in General Laws, Chapter 185, Sections 10 and 11, and in Public Statutes, Chapter 178, Sections 8 and 9. Must Invest. A good reason must be shown for failure to invest, but small sums for expenses may be retained. Knowlton v. Bradley, 17 N. H. 458. Mingling Funds with His Own. A trustee who mingles funds with his own is chargeable with in- terest at five per cent. Gordon v. West, 8 N. H. 455; Knowlton v. Bradley, 17 N. H. 458; Stark v. Gamble, 43 N. H. 465. Personal Security. Prior to the statutes of 1866, it seems that the rule which pro- hibits trustees from investing in personal securities was not strictly enforced, although it was said that for any but small sums, the funds should be deposited in savings banks or invested in mortgages or upon a note with a surety. Knowlton v. Bradley, 17 N. H. 458. NEW HAMPSHIRE. 171 Corporate Stock. A trustee may not invest in corporate stock unless he is expressly authorized to do so in the trust instrument. This rule is not changed by words in the instrument giving the trustee discretion in the selec- tion of investments, "according to his best skill and judgment." Kim- ball V. Reding, 31 N. H. 352. But the statute now provides for in- vestments in stocks of corporations, excepting banks and trust com- panies, which fulfill certain specified conditions. Even if he has power to invest in stocks, they must appear to have been productive at the time of investment. Kimball v. Reding, 31 N. H. 352. It seems that where a guardian receives stocks as a part of his ward's estate, he may hold and account for them. French v. Currier, 47 N. H. 88; Stevens v. Meserve, 73 N. H. 293. Continuing Business of Testator. Unless specifically authorized so to do, trustees have no power to continue the business of a testator. Raynes v. Raynes, 54 N. H. 201. Executors and Trustees Generally. Executors and trustees are under the same duties and obligations in making investments as guardians. They are therefore subject to the provisions of section 9^ chapter 178, of the Public Statutes. Bell v. Sawyer, 59 N. H. 393. Mortgages in Other States. It seems that no objection has been raised by the New Hamp- shire courts to investments in mortgages on property located in other states, provided it is of the required value. Stevens v. Meserve, 73 N. H. 293. Value. The exercise of reasonable care and diligence in determining value of an investment relieves the trustee from liability for subsequent de- preciation. And when he settles a desperate claim by taking security which he knows is less than the required value, but which he takes to save something for the estate, he will be protected. Stevens v. Meserve, 73 N. H. 293. Deposit in Savings Department by Trust Company. Deposit of trust funds by a trust company in its savings depart- ment is legal. Tucker v. New Hampshire Trust Co., 69 N. H. 187. NEW JERSEY. TRUSTEES GENERALLY. Statutes of 1910. (With Amendments to 1914.) Sec. 34. Investment by Testator, Continuance by Executor, Trustee or Administrator with Will Annexed.— Sec. 1. When- ever any testator shall have made, in his lifetime, any in- vestment of money in municipal bonds or on bond secured by mortgage, or in the bonds or stock shares of any corpora- tion, and the same bonds, mortgages or stock shares shall have come into the hands of the executor of or trustee under the will of such testator or of the administrator with the will annexed, to be administered, and such executor, administrator or trustee may, in the exercise of good faith and reasonable discretion, have continued such investment, or may hereafter continue the same, he shall not be accountable for any loss by reason of such continuance. Sec. 35. Investments by Executor, Administrator, Guar- dian or Trustee, Securities Specified.— Sec. 2. Any executor, administrator, guardian or trustee, whose duty it may be to loan the money intrusted to him, may invest the same in any of the following securities: (1) Bonds issued by the United States of America; (2) Bonds issued by this state; (3) Bonds of any county, city, town or township of this state, issued pursuant to the authority of any law of this state where the total indebtedness of said county, city, town or township does not exceed in the aggregate fifteen per centum of the assessable valuation of taxable property within such county, city, town or township ; (4) Bonds secured by mortgage which shall be a first lien upon real estate estimated to be worth at least twice the 172 NEW JERSEY. 173 amount loaned at a rate of interest not less than three per centum, nor greater than six per centum per annum. Sec. 36. Act Not to Apply Where Deed, Will, or Court Di- rects Manner of Investment.— Sec. 3. This act shall not apply where the deed of trust, or the last will and testament of any testator, or any court having jurisdiction of the matter spe- cially directs in what manner the trust fund shall be in- vested. Sec. 37. Investments by Executors, Administrators, Guar- dians or Trustees, Additional Securities. — Sec. 1. Any execu- tor, administrator, guardian or trustee whose duty it may be to loan money intrusted to him, in addition to the securities in which he may invest the same under the provisions of the act to which this is a supplement, may invest the same in any loans or securities in which savings banks of this state may invest their funds by the provisions of any general law of this state. Orphans' Courts — Order of Court. — In addition to the above authorized investments, there are statutory provisions relating to investments under the supervision of Orphans' Courts. Sec- tion 136 provides that executors, administrators, guardians and trustees may invest under the direction of the Orphans' Court and Section 137 enumerates the securities in which such trustees may invest without an order of court. Although the statutes are not in complete harmony, they are sufficiently definite to furnish a guide to trustees. Section 137, relating to Orphans' Courts, is as follows: Sec. 137. Investments. — Any executor, administrator, guar- dian or trustee whose duty it may be to loan or invest money intrusted to him as such, may, without any special order of any court, invest the same or any part thereof in any of the following securities : United States Bonds. — In bonds or interest-bearing notes or obligations of the United States, or those for which the faith of the United States is distinctly pledged to provide for the payment of the principal and interest thereof. State Bonds. — In bonds of any state in the Union which has not within ten years previous to the making of such in- 174 STATE LAWS AND DECISIONS. vestment defaulted in the payment of any part of either principal or interest on any of its bonds issued by authority of the legislature of such state. Municipal or School Bonds. — In the bonds or interest- bearing notes or obligations of any county, city, town, town- ship, borough, village or public school district of this state, or of the City of New York or of the City of Philadelphia; provided, the indebtedness of the county, city, town, town- ship, borough or village does not exceed in the aggregate fifteen per centum of the assessable valuation of all taxable property within such county, city, town, township, borough or village, exclusive of obligations issued for public school pur- poses. Railroad Bonds. — In first mortgage bonds of any railroad company which has paid dividends of not less than four per centum per annum regularly, on its entire capital stock, for a period of not less than five years next previous to the pur- chase of such bonds, or in any consolidated mortgage bonds of any such company authorized to be issued to retire the entire bonded debt of such company. Mortgages on Real Estate. — In bonds secured by first mortgage upon real estate; provided, the amount loaned upon any such bond and mortgage shall not at the time of making such loan exceed sixty per centum of the estimated worth of the real estate covered by such mortgage; provided, also, that the rate of interest upon any of the above enumer- ated securities in which such investments may be made shall not be less than three per centum nor more than six per centum per annum ; this act shall not apply where the deed of trust, or the last will and testament of any testator, or any court having jurisdiction of the matter specially directs in what securities the trust funds shall be invested, and every such court is hereby given power to specially direct by order or orders, from time to time, additional securities in its dis- cretion in which trust funds may be invested and any invest- ment thereof made in accordance with any such special direc- tion shall be legal, and no executor, administrator, guardian NEW JERSEY. 175 or trustee shall be held liable for any loss resulting in any such case. SAVINGS BANKS. Savings Banks. — Since trustees are authorized to invest in securities which are legal for savings banks, it is necessary to set forth the portions of Section 33, of the Savings Bank Law, which relate to legal investments. Sec. 33. No savings bank shall invest the moneys de- posited with the same in any manner except as follows, to wit : United States Securities. — 1. In stocks or bonds or inter- est-bearing notes or obligations of the United States, or those for which the faith of the United States is distinctly pledged to provide for the payment of the principal and interest thereof; State Bonds. — 2. In the interest-bearing notes of this state; or in any bonds authorized by the laws of this state to be issued by any commission appointed by the Supreme Court of this state, by virtue of any law of this state; Bonds of Foreign States. — 3. In the bonds of any state in the Union that has not, within ten years previous to mak- ing such investment by any such bank, defaulted in the pay- ment of any part of either principal or interest in any debt authorized by any law of such state to be contracted; Municipal Bonds. — 4. In tlie bonds of any county, town- ship, municipality or school district of this state issued pur- suant to the authority of any law of this state ; provided, such county, township, municipalitj' or school district shall not, within the five years next preceding, have defaulted in J:he payment of any part of either principal or interest of any legal debt or obligation thereof; and provided further, the total indebtedness of any borough or village does not exceed ten per centum of its assessed valuation, and such school dis- trict bonds are by law charged upon all the property of the inhabitants of such district ; or in any interest-bearing obliga- tion issued by any city, town, township, borough or village in such county. City or County Bonds of Other States. — n. In the bonds 176 STATE LAWS AND DECISIONS. of any city or county of any other state of the Union issued pursuant to the authority of any law of any such state; pro- vided, no such city or county has, within ten years previous to making such investment, defaulted in the payment of any part of either principal or interest of any debt authorized by law of such state to be contracted; and provided further, the total indebtedness of any such city or county is limited by law to ten per centum of its assessed valuation. Railroad Bonds. — 6. In first mortgage bonds issued, guar- anteed, or assumed by any railroad company, which has paid dividends of not less than four per centum per annum regu- larly, on its entire capital stock, for a period of not less than five years next previous to the purchase of such bonds, or in any consolidated mortgage bonds issued, guaranteed, or as- sumed by any such company, authorized to be issued to retire the entire bonded debt of such company; or in the bonds of any railway terminal or dock company of this state, secured by first mortgage on terminal or dock property fronting on the Hudson River and having an assessed value for the pur- pose of taxation in excess of the amount of the entire issue of bonds, and used and occupied as a dock or terminal by any railroad company now operating in this state ; Bond and Mortgage. — 7. In bonds secured by mortgages which shall be a first lien on real estate situate in this state, and worth at least double the amount loaned thereon, but not to exceed eighty per cent of the whole deposits shall be so loaned or invested; but in case the loan is on unimproved or unproductive real estate, the amount loaned thereon shall not be more than thirty per centum of its actual value ; and no investment in any bond and mortgage shall be made by any savings bank, except upon the report of a committee of at least three of the managers, and two members of which committee shall certify in writing to the value of the prem- ises mortgaged, or to be mortgaged, according to their best judgment ; such report shall be filed and preserved among the records of the bank. Real Estate. — 8. In real estate strictly in accordance with the following provisions: NEW JERSEY. 177 Bank Building. — (a) A plot whereon is erected, or may be erected, a building or buildings requisite for the con- venient transaction of its business, and from portions of which not required for its own use, a revenue may be derived; the costs of such building or buildings and lot shall in no case exceed fifty per cent of the net surplus of such bank, except with the written approval of the commissioner of banking and insurance ; provided, the limitations as to the cost of such lot and building contained in this subdivision shall not apply to or affect any such investment heretofore made by a savings bank organized under a special charter; Property Acquired by Foreclosure, etc. — (b) Such as shall have been purchased or acquired by it at sales upon the foreclosure of mortgages owned by such corporation, or upon judgments or decrees obtained or rendered for debts due to it, or in settlements effected to secure such debts or in satisfaction of such mortgages; and all such real estate shall be sold by such bank withiu five years after the same shall have been so purchased, unless, upon application by such cor- poration to the commissioner of banking and insurance, he shall extend the time within which such sale shall be made ; the provisions of this section shall apply to all funds of any savings bank, including its reserve fund, and all investments of money and sales and transfers of securities may be made in the manner provided and made lawful in this act, notwith- standing any provision in any special charter contained limit- ing the number of trustees or managers who shall act in the investment of moneys and the sale or transfer of stocks or securities. 34. Loans on Collateral Security. — No savings bank shall loan the money on deposit with the same, or any part thereof, upon notes, bills of exchange or drafts, except upon the addi- tional pledge of collateral security, which shall be of the same nature and character as those in which the money deposited may be invested as directed in the preceding section, or the capital stocks of national and state banks, or the capital stock or bonds of other corporations of this state, which have not defaulted in the payment of interest or dividends, upon the 178 i STATE LAWS AND DECISIONS. collateral loaned upon, within two years next preceding the time of such loan, and then only to the extent of eighty per centum of the market value of such collaterals ; provided, the total amount of such loans shall not exceed fifteen per centum of the total deposits held by such savings bank. 35. Penalty. — A violation of any of the provisions of the two preceding sections by any of the managers or other officers of any savings bank shall be a misdemeanor, and upon con- viction thereof any person so offending shall be punished by a fine of not less than two hundred and fifty dollars nor more than one thousand dollars, or imprisonment for a term not exceeding two years at the discretion of the court. Trust Companies — Ming-ling Funds — Loans to Officers. — The trust company law of New Jersey provides that "no money, property or securities received or held by any trust company in its capacity of assignee, receiver, executor, admin- istrator, guardian or trustee shall be mingled with the in- vestments of the capital stock or other moneys or property belonging to or deposited with such corporation." The law also provides that no trust company shall make any loan to its president, vice-president, treasurer, secretary, cashier, or to any of its directors, or any of its clerks, tellers, book- keepers, agents, servants or other persons in its employ until the proposition to make such loan, stating the amount, terms and security, if any, offered therefor, shall have been sub- mitted in writing by the person desiring the same to a meet- ing of the board of directors of such company, or of the executive committee of such board, if any, and accepted and approved by the vote of a majority of those present constitut- ing a quorum. Section 18 of the Trust Company Law provides that no trust company shall make any loan on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith ; and stock so purchased or acquired shall within one year from the time of its purchase be sold or disposed of at public or private sale ; provided, that nothing in this sec- NEW JERSEY. 179 tion contained shall apply to any loan made before the passage of this act. Personal Securities. It is well settled that trustees render themselves liable for loss if they loan funds on mere personal security. Brewster v. Demarest, 48 N. J. Eq. 559; Sherman v. Lanier, 39 N. J. Eq. 249; Gray v. Fox, 1 N. J. Eq. 259; Vreeland v. Vreeland's Adra'r., 16 N. J. Eq. 512, 530. Stock of Private Companies. Investment in the stock of private corporations is not considered safe. Gray v. Fox, 1 N. J. Eq. 259. When the direction is to invest in "bonds and mortgages, or in productive stocks," the trustee must invest in bonds and mortgages, and if these cannot be obtained, in stocks or bonds of this state or the United States or in railroad bonds authorized by statute. May Not Purchase Property. TruPt money may not be invested in the purchase of real estate. Quicks Exr's. v. Fisher, 9 N. J. Eq. 802. Trustee May Not Purchase His Own Property as an Investment. A trustee, although authorized by the will to purchase real estate as an investment, may not sell his own property to the estate. Holcomb V. Holcomb 's Ex'rs., 11 N. J, Eq. 281. If the discretion given by the will or deed, as to investments, is in general words, such as "good security," "stocks," "produc- tive stocks," "public stocks" or "at discretion," without stating any particular security or stock, trustees are permitted to exercise their dis- cretion only as to the kind of legal security which they will select. It does not leave them free to invest as they choose. Ward v. Kitchen, 30 N. J. Eq. 31; Ashhurst v. Potter, 29 N. J. Eq. 625. Even a clause that the trustee is not to be liable or responsible for any cause except his own willful and intentional breach of trust will not exonerate him. Gilmore v. Tuttle, 32 N. J. Eq. 611. Mortgage or Government Securities. It is the duty of trustees to invest upon bond and mortgage or in the securities of this state or of the United States, and the fund must be invested, if on mortgages, at the highest rates allowed by law, if such investment can be procured, and, if possible, in such a way as not to be subject to taxes. Lathrop v. Smalley's Ex'rs., 23 N. J. Eq. 192. But the statutes now permit investments in certain rail- road bonds. 180 STATE LAWS AND DECISIONS. Business, Trade or Speculation. When a trustee has invested funds in trade, business or specula- tion, he must account for the profits or pay compound interest at the highest rate, at the option of the beneficiary. McKnight's Ex'rs. v. Walsh, 23 N. J. Eq. 136; affd., 24 N. J. Eq. 498. Duty to Invest. It is the duty of a trustee to invest the trust funds in legal securities, but when he simply neglects to withdraw funds from a business in which they had been invested by the testator, it seems that he cannot be made to account for the profits of the business. McKnight's Ex'rs. v. Walsh, 23 N. J. Eq. 136; affd., 24 N. J. Eq. 498. He must invest the interest which he receives and which is not used. Voorhees v. Stoothoff, 11 N. J. L. 145. Continuing Investments Made by Creator of Trust. It is the duty of a trustee, within a reasonable time, to call in the estate and convert the unauthorized securities into legal invest- ments. Babbitt v. Fidelity Trust Co., 72 N. J. Eq. 745. Eetaining Improper Investments amounts to the same thing as mak- ing them. Ashhurst v. Potter, 29 N. J. Eq. 625. But where the trust instrument makes a specific bequest of stocks, the income to be disposed of in a certain manner, it is the duty of the trustee to retain such stocks unless a threatened depreciation should render it prudent for him to sell. Ward v. Kitchen, 30 N. J. Eq. 31. But the statutes now permit a trustee to continue investments which have been made by the creator of the trust. Trustee May Not Have Individual Interest in Dealings. The rule that a trustee may not make any personal profit or obtain any advantages to himself from the trust estate either directly or indirectly by using the trust money or by purchasing the property in his own name, is well settled by numerous decisions. He may be charged with the amount used and interest or be held accountable for the profits. From the early case of Voorhees v. Stoothoff, 11 N. J. L. 145, to the recent decision in Hill v. Hill, 79 N. J. Eq. 521, this rule has been rigidly enforced. When a trustee has violated the trust by using the funds in his own business, he is not entitled to commissions, and must account for the profits or pay compound interest at the highest rates, at the option of the beneficiary. McKnight's Ex'rs. v. Walsh, 23 N. J. Eq. 136; affd., 24 N. J. Eq. 498. Improvements. Under order of court a part of the trust fund may be used in erect- ing buildings on the land. Matthews v. Dellicker, 39 N. J. Eq. 90. NEW JERSEY. 181 Six Months Allowed to Make Investments. After the manner of the Civil law, it seems that six months should be allowed for receipt and investment of funds. Voorhees v. Stoothoff, 11 N. J. L. 145. Second Mortgages. Second mortgages are not proper security, and the fact that they were taken merely as temporary investment and by advice of counsel does not protect the trustee from liability for loss. Gilmore v. Tuttle, 32 N. J. Eq. 611; Mulford v. Mulford, 53 Atl. Eep. 79; Monroe v. Osborne, 10 Atl. Kep. 267. Must Invest in New Jersey. Ordinarily the court will not approve an investment of the funds outside of the state. McCullough v. McCullough, 44 N. J. Eq. 313. Even when the trustees resided in another state and the mort- gages which the testator had held were on property in that state, the court decided that as these mortgages were paid ofE the trustees should reinvest in New Jersey. Administrator Pending Litigation. An administrator pendente lite should not suffer trust funds to lie idle without sanction of the orphans' court, neither should he mingle the funds with his own or use them for his own benefit. If he sells railroad stock and uses the money, he will be charged with the amount he received and for the difference between that price and the price which a prudent trustee would have received, together with interest upon the amount received by him. Fluck v. Lake, 54 X. J. Eq. 638. Ac«LUiescence of Creator of Trust. Where a trustee invests funds in the purchase of a farm with the acquiescence of the creator of the trust, he is not personally liable. James v. Aller, 66 N. J. Eq. 69. Creation of Trust. Although the creation of a trust is usually by will or deed or order of court, it may arise where one has placed confidence in another for a long time, and has allowed him complete control of affairs. In such a case, the strict rules applicable to investment of funds apply. Wieters v. Hart, 67 N. J. Eq. 507. Municipal Bonds and Bank Stock. An executor has no authority to invest any part of the estate in municipal bonds or bank stock. Tucker v. Tucker, 33 N. J. Eq. 235. But the right to invest in municipal bonds is now given by Statute. 182 STATE LAWS AND DECISIONS. Protected "by Order of Court. Trustees may obtain the direction of the orphans' court as to investments and thus protect themselves. Tucker v. Tucker, 33 N. J. Eq. 235. Interest. When an executor receives the funds in various sums from time to time and settles his accounts promptly, and could not well make permanent investments, he is not chargeable with interest. WyckoflE v. O'Neil, 71 N. J. Eq. 729. Investing Cash Dividends in Stock. When trustees are given power in the will to continue investments, and part of the estate consists of stock, they are entitled to use a two hundred per cent cash dividend to purchase two new shares for each share they own, thus preserving the proportionate interest of the estate in the property. Ballantine v. Young, 79 N. J. Eq. 70. Carrying on Business. When a testator directs his business to be carried on by the trustee, prima facie, only the fund employed in the business is liable for the debts of subsequent creditors. If the estate is to be liable gen- erally, the intention must clearly appear in the will. Laible v. Ferry, 32 N. J. Eq. 791. NEW MEXICO. Statutes of 1897. (With Amendments to 1914.) Sec. 1453. Guardians. — If, at any time, any guardian shall have on hand any money belonging to his ward beyond what may be necessary for his education and maintenance, such guardian shall, uiider the direction of the court, loan the same to such persons as will give good security therefor, and such money shall be loaned on such time as the court shall direct. Sec. 1454. If any guardian fail to loan the money of his ward on hand as aforesaid, under the provisions of this act, he shall be accountable for the interest thereon. Trust Companies.— By the laws of 1903, Ch. 52, Section 8, trust companies are prohibited from making loans on their own capital stock as security. But there are no specific pro- visions regarding investment of trust funds. General Principles Applicable. The Statutes and decisions in New Mexico being few, a trustee should observe the general principles discussed in Part I. Deposit in Bank to Personal Credit. A trustee who deposits trust funds in bank to his own credit is liable, especially when it is evident that he intended to use the money. Perea v. Harrison, 7 New Mex. 666. Good Faith Eeciuired. The law requires the utmost good faith and diligence of trustees. They will not be permitted to derive any personal advantage from the trust. Perea v. Borela, 5 New Mex. 458. 183 NEW YORK.* TRUSTEES GENERALLY. Personal Property Law, Section 21. A trustee or other person holding trust funds for invest- ment may invest the same in the same kind of securities as those in which savings banks of this State are by law au- thorized to invest the money deposited therein, and the in- come derived therefrom, and in bonds and mortgages on un- encumbered real property in this State worth fifty per centum more than the amount loaned thereon. A trustee or other person holding trust funds may require such personal bonds or guaranties of payment to accompany investments as may seem prudent, and all premiums paid on such guaranties may be charged to or paid out of income, providing that such charge or payment be not more than at the rate of one-half of one per centum per annum on the par value of such invest- ments. But no trustee shall purchase securities hereunder from himself. TRUST COMPANIES. Banking Law of 1914. Investment of Trust Funds. — All investments of money re- ceived by any such corporation, and by any trust company chartered by special act, prior to May 18, 1892, as executor, administrator, guardian, personal or testamentary trustee, re- ceiver, committee or depositary, shall be at its sole risk, and for all losses of such money the capital stock, property and effects of the corporation shall be absolutely liable, unless the investments are such as are proper when made by an indi- vidual acting as trustee, executor, administrator, guardian, re- ceiver, committee, depositary, or such as are permitted in and by the instrument or words creating or defining the trust. For list of legal investments in New York see Part III. 184 ' NEW YORK. 185 Interest. — On all sums of nione}' not less than one hundred dollars, which shall be collected and received by a trust com- pany acting as executor, administrator, guardian, trustee, re- ceiver or committee under the appointment of any court or officer, or in any fiduciary capacity under such appointment, or as a depositary of moneys paid into court, interest shall be allowed by such trust company at not less than the rate of two per centum per annum until the moneys so received shall be duly expended or distributed. If such interest moneys, or any part thereof, shall not annually be expended or dis- tributed pursuant to the terms or provisions of the trust under which such moneys are held, the amount thereof not so ex- pended or distributed shall be accumulated by such trust com- pany for the benefit of the parties interested in such trust fund, and shall be added to the principal to constitute a new principal upon which interest shall thereafter be computed. SAVINGS BANKS. Since all trustees may invest in securities which are legal for savings banks, it is necessary to set forth the provisions of the new banking law relating to investments by such banks. Investments of deposits and guaranty fund and restrictions thereon. A savings bank may invest the moneys deposited therein, the sums credited to the guaranty fund thereof and the in- come derived therefrom, in the folloAving property and securi- ties and no others ; and subject to the following restrictions : 1. The stocks or bonds or interest-bearing notes or obli- gations of the United States, or those for which the faith of the United States is pledged to provide for the payment of the interest and principal, including the bonds of the District of Columbia. 2. The stocks or bonds or interest-bearing obligations of this state, issued pursuant to the authority of any laAv of the state. 3. The stocks, bonds or interest-bearing obligations of 186 STATE LAWS AND DECISIONS. any state of the United States, upon which there is no de- fault and upon which there has been no default for more than ninety days ; provided that within ten years immediately preceding the investment such state has not been in default for more than ninety days in the payment of any part of principal or interest of any debt duly authorized by the legis- lature of such state to be contracted by such state since the first day of January, eighteen hundred and seventy-eight. 4. The stocks, bonds, interest-bearing obligations, or revenue notes sold at a discount, of any city, county, town, village, school district, union free school district or poor dis- trict in this state, provided that they were issued pursuant to law and that the faith and credit of the municipality or district that issued them are pledged for their payment. 5. The stocks or bonds of any incorporated city situated in one of the states of the United States which was admitted to statehood prior to January first, eighteen hundred and ninety-six, and which since January first, eighteen hundred and sixty-one, has not repudiated or defaulted in the pay- ment of any part of the principal or interest of any debt authorized by the legislature of any such state to be con- tracted, provided said city has a population, as shown by the federal census next preceding said investment, of not less than forty-five thousand inhabitants, and was incorporated as a city at least twenty-five years prior to the making of said investment, and has not, since January first, eighteen hundred seventy-eight, defaulted for more than ninety days in the pay- ment of any part either of principal or interest of any bond, note or other evidence of indebtedness, or effected any com- promise of any kind with the holders thereof. But if, after such default on the part of any such state or city, the debt or security, in the payment of the principal or interest of which such default occurred, has been fully paid, refunded or compromised, by the issue of new securities, then the date of the first failure to pay principal or interest, when due, upon such debt or security, shall be taken to be the date of such default, within the provisions of this subdivision, and subsequent failures to pay installments of principal or in- NEW YORK. 187 terest, upon such debt or security, prior to the refunding or final payment of the same, shall not be held to continue said default or to fix the time thereof, within the meaning of this subdivision, at a date later than the date of said first failure in payment. If at any time the indebtedness of any such city, together with the indebtedness of any district, or other municipal corporation or subdivision except a county, which is wholly or in part included Avithin the bounds or limits of said city, less its water debt and sinking fund, shall exceed seven per centum of the valuation of said city for pur- poses of taxation, its bonds and stocks shall thereafter, and until such indebtedness shall be reduced to seven per centum of the valuation for the purposes of taxation, cease to be an authorized investment for the moneys of savings banks. 6. Bonds and mortgages on unincumbered real property situated in this state, to the extent of sixty per centum of the appraised value thereof. Not more than sixty-five per centum of the whole amount of deposits and guaranty fund shall be so loaned or invested. If the loan is on unimproved and un- productive real property, the amount loaned thereon shall not be more than forty per centum of its appraised value. No in- vestment in any bonds and mortgages shall be made by any savings bank except upon the report of a committee of its trustees charged with the duty of investigating the same, who shall certify to the value of the premises mortgaged or to be mortgaged, according to their judgment, and such report shall be filed and preserved among the records of the corporation. 7. The following bonds of railroad corporations: (a) The first mortgage bonds of any railroad corpora- tion of this state, the principal part of whose railroad is located within this state, or of any railroad corporation of this or any other state or states connecting with and con- trolled and operated as a part of the system of any such railroad corporation of this state, and of which connecting railroad at least a majority of its capital stock is owned by such a railroad corporation of this state or in the mortgage bonds of any such railroad corporation of an issue to retire all prior mortgage debt of such railroad companies respec- 188 STATE LAWS AND DECISIONS. tively; provided that at no time within five years next pre- ceding the date of any such investment, such railroad corpora- tion of this state or such connecting railroad corporation respectively shall have failed regularly and punctually to pay the matured principal and interest of all its mortgage indebt- edness, and in addition thereto regularly and punctually to have paid in dividends to its stockholders during each of said five years an amount at least equal to four per centum upon all its outstanding capital stock; and provided, further, that at the date of every such dividend the outstanding capital stock of such railroad corporation or such connecting rail- road company respectively shall have been equal to at least one-third of the total mortgage indebtedness of such railroad corporations respectively, including all bonds issued or to be issued under any mortgage securing any bonds in which such investment shall be made. (b) The mortgage bonds of the following railroad cor- porations: The Chicago & Northwestern railroad company; Chicago, Burlington and Quincy railroad company, Michigan Central railroad company, Illinois Central railroad company, Pennsylvania railroad company, Delaware and Hudson com- pany, Delaware, Lackawanna and Western railroad company. New York, New Haven and Hartford railroad company, Bos- ton and Maine railroad company, Maine Central railroad com- pany, the Chicago and Mton railroad company, Morris and Essex railroad company. Central railroad of New Jersey, United New Jersey railroad and canal company, also in the mortgage bonds of railroad companies whose lines are leased or operated or controlled by any railroad company specified in this paragraph if said bonds be guaranteed both as to principal and interest by the railroad company to which said lines are leased or by which they are operated or controlled. Provided that at the time of making investments authorized by this paragraph the said railroad corporations issuing such bonds shall have earned and paid regular dividends of not less than four per centum per annum in cash on all their issues of capital stock for the ten years next preceding such investment, and provided the capital stock of any said rail- NEW YORK. 189 road corporations shall equal or exceed in amount one-third of the par value of all its bonded indebtedness; and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is a first mortgage on either the whole or some part of the railroad and railroad property of the company issuing such bonds, or that such bonds shall be mortgage bonds of an issue to retire all prior mortgage debts of such railroad company; provided, further, that the mortgage which secures the bonds author- ized by this paragraph is dated, executed and recorded prior to January first, nineteen hundred and five. (c) The mortgage bonds of the Chicago, Milwaukee and Saint Paul railway company, and the Chicago, Rock Island and Pacific railway company, so long as they shall continue to earn and pay at least four per centum dividends per annum on their outstanding capital stock, and provided their capital stock shall equal or exceed in amount one-third of the par value of all their bonded indebtedness, and further provided that all bonds of either of said companies hereby authorized for investment shall be secured by a mortgage which is a first mortgage on either the whole or some part of the railroad or railroad property actually in the possession of and operated by said company, or- that such bonds shall be mortgage bonds of an issue to retire all prior debts of said railroad company; provided, further, that the mortgage which secures the bonds authorized by this paragraph is dated, executed and recorded prior to January first, nineteen hundred and five. (d) The first mortgage bonds of the Fonda, Johnstown and Gloversville railroad company, or in the mortgage bonds of said railroad company of an issue to retire all prior mort- gage debts of said railroad company, and provided the capital stock of said railroad company shall equal or exceed in amount one-third of the par value of all its bonded indebted- ness, and provided also that such railroad be the standard gauge of four feet eight and one-half inches, and in the mort- gage bonds of the Buffalo Creek railroad company of an issue to retire all prior mortgage debts of said railroad company, provided that the bonds authorized by this paragraph are se- 190 STATE LAWS AND DECISIONS. cured by a mortgage dated, executed and recorded prior to January first, nineteen hundred and five. (e) The mortgage bonds of any railroad corporation incorporated under the laws of any of the United States, which actually owns in fee not less than five hundred miles of standard gauge railway exclusive of siding, within the United States, provided that at no time within five years next preceding the date of any such investment such rail- road corporation shall have failed regularly and punctually to pay the matured principal and interest of all its mort- gage indebtedness and in addition thereto regularly and punctually to have paid in dividends to its stockholders dur- ing each of said five years an amount at least equal to four per centum upon all its outstanding capital stock; and pro- vided further that during said five years the gross earnings in each year from the operations of said company, including therein the gross earnings of all railroads leased and operated or controlled and operated by said company, and also includ- ing in said earnings the amount received directly or indi- rectly by said company from the sale of coal from mines owned or controlled by it, shall not have been less in amount than five times the amount necessary to pay the interest payable during that year upon its entire outstanding indebt- edness, and the rentals for said year of all leased lines, and further provided that all bonds authorized for investment by this paragraph shall be secured by a mortgage which is at the time of making said investment or was at the date of the, execution of said mortgage (1) a first mortgage upon not less than seventy-five per centum of the railway owned in fee by the company issuing said bonds exclusive of sidings at the date of said mortgage or (2) a refunding mortgage issued to retire all prior lien mortgage debts of said company out- standing at the time of said investment and covering at least seventy-five per centum of the railway owned in fee by said company at the date of said mortgage. But no one of the bonds so secured shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which together with all outstanding prior debts of said NEW YORK. 191 company, after deducting therefrom in case of a refunding mortgage, the bonds reserved under the provisions of said mortgage to retire prior debts at maturity, shall exceed three times the outstanding capital stock of said company at the time of making said investment. And no mortgage is to be regarded as a refunding mortgage, under the provisions of this paragraph, unless the bonds which it secures mature at a later date than any bond which it is given to refund, nor unless it covers a mileage at least twenty-five per centum greater than is covered by any one of the prior mortgages so to be refunded. (f) Any railway mortgage bonds which would be a legal investment under the provisions of paragraph (e) of this subdivision, except for the fact that the railroad cor- poration issuing said bonds actually owns in fee less than five hundred miles of road, provided that during five years next preceding the date of any such investment the gross earnings in each year from the operations of said corpora- tion, including the gross earnings of all lines leased and operated or controlled and operated by it, shall not have been less than ten million dollars. (g) The mortgage bonds of a railroad corporation de- scribed in the foregoing paragraph (e) or (f) or the mort- gage bond of a railroad owned by such corporation, assumed or guaranteed by it by endorsement on said bonds, provided said bonds are prior to and are to be refunded by a general mortgage of said corporation the bonds secured by which are made a legal investment under the provisions of said para- graph (e) or (f) ; and provided, further, that said general mortgage covers all the real property upon which the mort- gage securing said underlying bonds is a lien. (h) Any railway mortgage bonds which would be a legal investment under the provisions of paragraph (e) or (g) of this subdivision except for the fact that the railroad cor- poration issuing said bonds actually owns in fee less than five hundred miles of road, provided the payment of principal and interest of said bonds is guaranteed by endorsement thereon by, or provided said bonds have been assumed by a 192 STATE LAWS AND DECISIONS. corporation whose first mortgage is, or refunding mortgage bonds are, a legal investment under the provisions of para- graph (e) or (f ) of this subdivision. But no one of the bonds so guaranteed or assumed shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which, together with all the outstanding prior debts of the corporation making said guarantee or so assuming said bonds, including therein the authorized amount of all pre- viously guaranteed or assumed bond issues, shall exceed three times the capital stock of said corporation, at the time of making said investment. (i) The first mortgage bonds of a railroad the entire capital stock of which, except shares necessary to qualify directors, is owned by, and which is operated by a railroad whose last issued refunding bonds are a legal investment under the provisions of paragraph (a), (e), or (f) of this sub- division, provided the payment of principal and interest of said bonds is guaranteed by endorsement thereon by the com- pany so OAvning and operating said road, and further pro- vided the mortgage securing said bonds does not authorize an issue of more than twenty thousand dollars in bonds for each mile of road covered thereby. But no one of the bonds so guaranteed shall be a legal investment in case the mortgage securing the same shall authorize a total issue of bonds which together with all the outstanding prior debts of the company making said guarantee, including therein the authorized amount of all previously guaranteed bond issues, shall ex- ceed three times the capital stock of said company, at the time of making said investment. Bonds which have been or shall become legal invest- ments for savings banks under any of the provisions of this section shall not be rendered illegal as investments, though the property upon which they are secured has been or shall be conveyed to another corporation, and though the railroad corporation which issued or assumed said bond has been or shall be consolidated with another railroad corporation, if the consolidated or purchasing corporation shall assume the payment of said bonds and shall continue to pay regularly NEW YORK. 193 interest or dividend or both upon the securities issued against, in exchange for or to acquire the stock of the com- pany consolidated or the property purchased or upon securi- ties subsequently issued in exchange or substitution therefor to an amount at least equal to four per centum per annum upon the capital stock outstanding at the time of such con- solidation or purchase of said corporation which has issued or assumed such bonds. Not more than twenty-five per centum of the assets of any savings bank shall be loaned or invested in railroad bonds, and not more than ten per centum of the assets of any savings bank shall be invested in the bonds of any one railroad corporation described in paragraph (a) of this sub- division, and not more than five per centum of such assets in the bonds of any other railroad corporation. In deter- mining the amount of the assets of any savings bank under the provisions of this subdivision its securities shall be esti- mated in the manner prescribed for determining the per centum of par value surplus by section [257] of this article. Street railroad corporations shall not be considered rail- road corporations within the meaning of this subdivision. 8. Promissory notes payable to the order of the savings bank upon demand, secured by the pledge and assignment, if necessary, of the stocks or bonds or any of them enumerated in subdivision one, two, three, four and five of this section or by the railroad bonds or any of them mentioned and de- scribed in subdivision seven of this section, but no such loan ' shall exceed ninety per centum of the cash market value of such securities so pledged. Should any of the securities so held in pledge depreciate in value after the making of such loan, the savings bank shall require an immediate payment of such loan or of a part thereof or additional security there- for, so that the amount loaned thereon shall at no time ex- ceed ninety per centum of the market value of the securities so pledged for such loan. 9. Real estate as follows : (a) A plot whereon there is or may be erected a building or buildings suitable for the convenient transaction of the busi- 194 STATE LAWS AND DECISIONS. ness of the savings bank, from portions of which not required for its own use a revenue may be derived. (b) Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its business. (c) Such as it shall purchase at sales under judgments, decrees or mortgages held by it. The trustees of a savings bank shall not be held liable for investing in state or municipal bonds named in the last list furnished by the Superintendent of Banks pursuant to section [52] of article two of this chapter, or in any railroad bonds mentioned in such list, which have been legally issued and properly executed, unless such savings bank shall have been notified by the Superintendent of Banks that, in his judg- ment, such bonds do not conform or have ceased to conform to the provisions of this section. Deposit in Bank. Trust funds may not be kept on deposit in a bank for a longer period than is reasonable while a proper investment is being obtained. Matter of Wotton, 59 A. D. 584; aff'd., 167 N. Y. 629 j Matter of Knight, 21 Abb. N. C. 388. But a small fund may be deposited in a savings bank. In re Wiley, 98 A. D. 93. Personal Security. It is clear, both from the wording of the statutes and from the decisions, that a trustee may not invest trust funds in personal securi- ties. King v. Talbot, 40 N. Y. 90; Wilmerding v. McKesson, 103 N. Y. 336; Deobold v. Opperman, 111 N. Y. 531. "Whether Section 8, of the Savings Bank Law, above quoted, changes this rule is a question. The section being new has not yet been con- strued, but it will probably be held to apply only to savings banks. Speculations or Business Ventures. Trust funds may not be employed in speculations or business ven- tures. In re Hirsch's Estate, 116 A. D. 367; aff'd., 188 N. Y. 584; Deo- bold V. Opperman, 111 N. Y. 538; Moore v. American Loan & Trust Company, 115 N. Y. 65; King v. Talbot, 40 N. Y. 76. Continuing Business of Creator of Trust. A trustee may not continue the business of the creator of the trust, unless he is expressly authorized so to do by the trust instru- ment. Wilmerding v. McKesson, 103 N. Y. 329; Matter of Myers, 131 NEW YORK. 195 N. Y. 409; Warren v. Union Bank of Kochester, 157 N. Y. 259, 268; Saperstein v. Ullman, 49 A. D. 446; Matter of McCollum, 80 A. D. 362; Farrelly v. Sehaettler, 121 A. D. 678. Even when the power to continue a business is conferred by the trust instrument it is strictly construed. Willis v. Sharp, 113 N. Y. 586; Miller V. King, 168 N. Y. 635; Thorn v. De Breteuil, 179 N. Y. 78; Matter of Bannin, 142 A. D. 436. Corporate Stocks and Bonds. Except as specifically authorized by the statute, a trustee may not invest trust funds in corporate stocks and bonds. Hogan v. De Peyster, 20 Barb. 100; Mills v. Hoffman, 26 Hun. 594; King v. Talbot, 40 N. Y. 76; Matter of Wotton, 59 A. D. 584; aflE'd., 167 N. Y. 629; Matter of Douglas, 60 A. D. 64; Matter of Hall, 164 N. Y. 196. Continuing Investments Made by Creator of Trust. Although a few of the early New York decisions protected a trustee who continued investments made by the creator of the trust, it seems to be now well settled that a trustee should not continue such investments, if the trust instrument does not authorize it and if the investments are not sanctioned by law. Goodwin v. Howe, 62 How. Pr. 134; Mills y. Hoffman, 26 Hun. 594; Matter of Weston, 91 N. Y. 502; Matter of N. Y. Life Ins. Co., 86 A. D. 247; Matter of Wotton, 59 A. D. 584; aff'd., 167 N. Y. 629; Matter of Avery, 45 Misc. 529, 549; Matter of Burr, 48 Misc. 56, 74; Toronto Trust Co. v. C. B. & Q. Ey. Co., 64 Hun. 1; aff'd., 138 N. Y. 657; Matter of Douglas, 60 A. D, 64; Matter of Myers, 131 N. Y. 409; Matter of Hirsch's Estate, 116 A. D. 367; aff'd., 188 N. Y. 584; Cannon v. Quincy, 65 Misc. 399. There seems to be one comparatively recent contrary decision (Matter of Krisfeldt, 49 Misc. 26), but this case stands alone against the decided weight of authority. Time Allowed for Disposing of Unauthorized Investments. As a general rule, a trustee should convert unauthorized invest- ments into legal securities within a year. King v. Talbot, 40 N. Y. 76; Matter of Douglas, 60 A. D. 64. But a trustee is permitted to use his discretion in the matter, and may not be liable for loss if he retains the investments for a longer period, awaiting a favorable market. Matter of Weston, 91 N. Y. 502; Matter of Mercantile Trust Co., 156 A. D. 224. Second Mortgages. The wording of the statute, namely, that investments shall be made in mortgages upon unencumbered real property, clearly prohibits investments in second mortgages. This is the rule in New York. Mat- ter of Petrie, 7 St. Eep. 718. 196 STATE LAWS AND DECISIONS. Investments Outside of the State. An investment by a trustee in securities whicli are beyond the jurisdiction of the court will not be upheld, unless in presence of a clear and strong necessity or a pressing emergency. Ormiston v. 01- cott, 84 N. Y. 339; Matter of Eeed, 45 A. D. 196. "Where a trustee, in selling land in another state, was compelled to take a first mortgage in order to make the sale, he was not subject to the strict rule. Denton v. Sanford, 103 N. Y. 607. But this rule does not apply to municipal and railroad bonds which are authorized by statute. Eight of Trustee to Erect New Buildings. As to the right of a trustee to make repairs and erect new build- ings, see Smith v. Keteltas, 62 A. D. 174. Katlfication of Unauthorized Investment. The beneficiaries may elect to affirm or disaffirm an unauthorized investment, and having once elected they are bound. Hine v. Hine^ 118 A. D. 585. NORTH CAROLINA. TRUSTEES GENERALLY. Statutes of 1908. (With Amendments to 1914.) Sec. 1792. Funds Invested by Fiduciaries. — Guardians, trustees, and others acting in a fiduciary capacity, having sur- plus funds of their wards and cestui que trustent to loan may invest in United States bonds, or any securities for which the United States are responsible, or in consolidated bonds of the state of North Carolina, and in settlements by guardians, trustees and others acting in a fiduciary capacity, such bonds or other security of the United States, and such bonds of the state of North Carolina shall be deemed cash to the amount actually paid for same, including the premium, if any, paid for such bonds or other securities, and may be paid as such by the transfer thereof to the persons entitled. Personal Security. Under the Code as originally adopted, it seems that trustees had the right to invest in personal securities, provided the sureties on the bond were adequate. Hurdle v. Leath, 63 N. C. 597; Boyett v. Hurst, 54 N. C. 166; Covington v. Leak & Wall, 65 N. C. 594. The old section was strictly construed and a trustee was required to obtain a surety no matter how responsible the borrower might be. Freeman v. Wilson, 74 N. C. 368. This was a departure from the English rule and gave the trustee a wider range for investment. Whitford v. Foy, 65 N. C. 265. A loan to one member of a firm with the bond of a partner as security complies with the statute, for there is a responsible person "in addition to the borrower." Watson v. Holton, 115 N. C. 36. But a note signed by a firm with one of the members as surety does not comply with the statute. Boyett v. Hurst, 54 X. C. 166. Although the case of Watson v. Holton (supra) was decided in 1894, we cannot harmonize it and the present Code, Section 1792, 197 198 STATE LAWS AND DECISIONS. which seems to have been adopted in 1885 and does not provide for investment on personal security. Apparently the old section, 1592, has been repealed and it would not be safe now for a trustee to invest in such security. In a recent case where a trustee in bankruptcy loaned funds to a manufacturing company in which he was interested, the investment was declared wrongful because made without an order of court. Cost- ner v. Cotton Mills Co., 155 N. C. 128. Deposit in Bank. Certificates of deposit do not constitute legal investments. Money may be deposited in bank for convenience in settling estates, but not as a permanent investment. Collins v. Gooch, 97 N. C. 186. See also Moore v. Eure, 101 N. C. 11. Tliird Mortgage. A trustee who owned a second mortgage on property invested trust funds in a third mortgage, the money lent being applied to the first mortgage. This was clearly a breach of trust. McEachern v. Stewart, 114 N. C. 370. May Not Obtain Any Personal Advantages from the Estate. A trustee may not purchase trust property at his own sale or obtain any personal advantages from his management of the estate. Patton V. Thompson, 55 N. C. 285; Bruner v. Threadgill, 88 N. C. 361; Gibson v. Barbour, 100 N. C. 192; McEachern v. Stewart, 114 N. C. 370. Investment in Another State. It seems that the courts of North Carolina do not approve of in- vestments of trust funds in other states. Collins v. Gooch, 97 N. C. 186. Duty to Invest. It is the duty of a trustee to invest in interest-bearing securities. If he permits the funds to lie idle he is chargeable with interest. Mc- Neill v. Hodges, 83 N. C. 504. Whenever balances accumulate beyond the exigencies of the estate, it is the duty of an administrator to invest, unless he is holding the fund intact, ready for distribution. Pickens v. Miller, 83 N. C. 543. When an executor is authorized by will to invest, he must invest as directed. He may not turn the funds over to a guardian. Pea- cock V. Harris, 85 N. C. 146. A guardian is chargeable with interest when he permits funds to remain uninvested. Wilson v. Lineberger, 88 N. C. 416. NORTH CAROLINA. 199 Confederate Notes. As to investments in Confederate notes and the efifect of the war upon the duties of trustees, see Whitford v. Foy, 65 N. C. 265; Sud- dertK V. McCombs, 65 N. C. 186, and Freeman v. Wilson, 74 N. C. 368. Failing Securities. Where a trustee has notice that a security in which funds are invested is bad, he must exercise due diligence in protecting the bene- ficiary. Williamson v. Williams, 59 N. C. 62. NORTH DAKOTA. Eevised Code, 1899. (With Amendments to 1914.) Sec. 4286. Investment of Trust Money. — A trustee must invest money received by him under the trust as fast as he collects a sufficient amount in such manner as to afford reason- able security and interest for the same. Sec. 4287. Liability for Failure. — If the trustee omits to invest the trust moneys according to the last section, he must pay simple interest thereon if such omission is negligent merely and compound interest if it is willful. TRUST COMPANY LAW. Sec. 4688. Investment of Trust Funds. — Any sum of money not less than one hundred dollars, which will be col- lected or received by any such corporation in its trust capacity, and W'hich money shall not be required for the pur- pose of such trust, or is not to be accounted for within one year from the date of such collection, receipt or deposit, shall be invested by such corporation as soon as practicable, and in such securities as are mentioned in Section 4678, and the net interest and profits of such investment, less the reasonable charges and disbursement of said company in the premises, shall be accounted for and paid over as a part of such trust; and the net accumulation of such interest and profits thereon shall likewise be invested and reinvested as a part of such principal; and such investments shall be received and allowed in the settlement of such trust. Section 4678, above referred to, is as follows: Sec. 4678. Capital Stock. — The amount of capital stock of any such corporation hereafter organized shall not be less than one hundred thousand dollars, and the same shall be 200 NORTH DAKOTA. 201 divided into shares of one hundred dollars each. No such corporation hereafter organized shall be authorized to transact any business, or exercise any powers as such, until the afore- said minimum amount of capital stock shall have been sub- scribed for, and not less than fifty thousand dollars thereof shall have been actually paid in, invested and deposited as hereinafter provided. Said fifty thousand dollars shall be invested in bonds of the United States, or of the state of North Dakota, or in the bonds of other states, which shall 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 of North Dakota, which bonds or obligations have not been issued as a bonus for, or purchase 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 unincumbered real estate, situated within the state of North Dakota, worth three times the amount of the obligation so secured, and the deposit of such corporation shall not be permitted, at any time, to be less than fifty thousand dollars in amount, and not less than one-sixth of its capital stock. Sec, 4689 provides that a trust company shall not loan its funds, moneys, capital, trust funds or other property to any director, officer, agent or employee. Mingling Trust Funds. When a trustee mingles trust funds with his own the whole fund is treated as a trust, and when he pays out a portion of the fund, it will be presumed that he made the payments from the portion of the fund which belonged to him. Widman v. Kellogg, 22 N. D. 396. Guardian. The statutes provide that if the estate of the ward is sold for the purpose of investment, "the guardian must make the investment according to his best judgment or in pursuance of any order that may be made by the county court." Eevised Codes, Sec. 6564. The legal authority both for sales and investments by guardians emanates from the County Court. Shepard v. Hanson, 9 N. D. 249. OHIO. TRUST COMPANIES. General Code, 1910. (With Amendments to 1914.) Sec. 9781. All moneys or properties received on deposit or received in trust by such corporation, unless by the terms of the trust some other mode of investment is prescribed, to- gether with its capital and surplus, excepting such as is re- quired to be kept as a reserve, shall be invested in or loaned on only the following: (a) The securities mentioned in paragraphs (b), (c), (d), (e) and (f) of Section ninety-seven hundred and fifty-eight, of this Act relating to commercial banks, subject to the limita- tions and restrictions contained in said paragraphs, except that trust companies shall not loan more than sixty per cent of the amount of their paid-in capital, surplus and deposits on notes secured by mortgage on real estate; (b) Stocks, which have paid dividends for five con- secutive years next prior to the investment, and bonds of cor- porations when the same are authorized by the affirmative vote of the majority of the board of directors or of the ex- ecutive committee of such trust company; but the superin- tendent of banks may order that any such securities which he may deem undesirable shall be sold within six months ; (c) Promissory notes of individuals, firms or corpora- tions, when secured by a sufficient pledge of collateral, ap- proved by the directors, subject to the provisions of Section? ninety-seven hundred and fifty-four and ninety-seven hundred and fifty-five, of this Act. Sec. 9782. All moneys or properties received in trust by such company, unless by the terms of the trust some other 202 OHIO. 208 mode of investment is prescribed, together with the capital and surplus of such corporation, may also be invested in ground rents, when authorized by a vote of the board of directors. Sec. 9783. Not more than twenty per cent of the capital and surplus of any such corporation shall be invested in any one security or loan unless it be in the bonds or other in- terest-bearing obligations enumerated in paragraphs (b), (c) and (d) of Section ninety-seven hundred and fifty-eight, or in providing a building and vaults. Sec. 9784. No investment in notes secured by mortgage on real estate shall be made by such corporation except upon the approval of the board of directors. Sec. 9785. No trust company shall lend any part of its capital and surplus unless such loan be secured by bonds or stocks as collateral in which it is allowed to invest its capital, or by mortgage on real estate, where the amount loaned in- clusive of prior encumbrances thereon does not exceed sixty per cent of the value of the real estate, including improve- ments, which shall be kept adequately insured ; nor shall such corporation lend to any one person, firm, association or corporation more than twenty per cent of its paid-in capital and surplus. Sec. 9786. This section provides that trust funds shall be kept separate from other funds. Sec. 9788. In the management of money and property held by it as trustee, under the powers conferred in the fore- going sections, such trust company may invest the same in a general trust fund of the corporation. But the authority making the appointment, upon the conferring of it, may direct whether such money and property shall be held separately or invested in a general trust fund of the corporation; except that such corporation always shall follow and be governed by all directions contained in any instrument under which it acts. Sec. 9754. A bank doing business as a commercial bank shall not lend, including overdrafts, to any one person, firm or corporation, more than twenty per cent of its paid-in capital and surplus, unless such loan be secured by first mortgage 204 STATE LAWS AND DECISIONS, upon improved farm property in a sum not to exceed sixty per cent of its value. The total liabilities, including overdrafts, of a person, company, corporation, or firm to any bank, either as principal debtor or as security or endorser for others, for money borrowed, at no time shall exceed twenty per cent of its paid-in capital stock and surplus. But the discount of bills of exchange drawn against actual existing values and the discount of commercial or business paper actually owned by the person, company, corporation or firm negotiating it, shall not be considered as money borrowed. Sec. 9755. The deposits of funds in a bank or trust company, not duly designated as a depository by the board of directors as hereinafter provided, shall be held to be a loan within the meaning of the preceding section. Sec. 9758. Subject to the provisions of the preceding sec- tion, commercial banks may invest their capital, surplus and deposits in, or lend them upon: (a) Personal or collateral securities; (b) Bonds or other interest-bearing obligations of the United States, or those for which the faith of the United States is pledged to provide payment of the interest and prin- cipal, including bonds of the District of Columbia ; also bonds or other interest-bearing obligations of any foreign govern- ment; (c) Bonds or interest-bearing obligations of this or any other state of the United States ; (d) The legally issued bonds or interest-bearing obliga- tions of any city, village, county, township, school district, or other district or political subdivision of this or any other state or territory of the United States and of Canada; (e) Mortgage bonds or collateral trust bonds of any regularly incorporated company, which has paid, for at least four years, dividends at the rate of at least four per cent on their capital stock. Such loan shall not exceed eighty per cent of the market or actual value of such bonds, the purchase of which has been first authorized by the directors. All such securities having a fixed maturity shall be charged and entered OHIO. 205 upon the books of the bank at their cost to the bank, or at par, when a premium is paid, and the superintendent of banks shall have the power to require any security to be charged down to such sum as in his judgment represents its value. The superin- tendent of banks may order that any such securities which he deems undesirable be sold within six months. (f) Notes secured by mortgage on real estate, where the amount loaned thereon inclusive of prior encumbrances does not exceed forty per cent of the value of the real estate if unimproved, and if improved sixty per cent of its value, in- cluding improvements, which shall be kept adequately in- sured. Not more than fifty per cent of the amount of the paid- in capital, surplus and deposits of such bank at any time shall be invested in such real estate securities. Guardians. — Under the duties of guardians and trustees, Section 10933, subdivision 7, of the Ohio code, provides that it is the duty of a guardian, within a reasonable time after he receives it, to loan or invest the money of his ward, in notes or bonds, secured by first mortgage on real estate of at least double the value of the money loaned or invested. The buildings thereon, if any, must be well insured against loss by fire and so kept by the mortgagor for the benefit of the mortgagee, until the debt is paid. On failure so to do, the mortgagee shall insure them and the expense to him be re- paid by the mortgagor and be a lien on the property concur- rent with the mortgage. Or he may invest such money in bonds of the United States, or of a state on which default has never been made in the payment of interest, or bonds of a county or city in this state, issued in conformity to law; or with the approval of the probate court, in productive real estate within this state, the title to which must be taken in the name of the guardian as such. He also shall manage such investments, and when deemed proper, change them into other investments of the above classes. No real estate so purchased shall be sold by the guardian, except with the approval of the probate court. If the guardian fails to loan or invest money of his ward within such reasonable time, he must account on 206 STATE LAWS AND DECISIONS. settlement for such money and interest tliereon, calculated with annual rests. Note. — This section refers to guardians only. In Ohio trust companies have no power to act as guardians. TRUSTEES GENERALLY. Page and Adams Code. Vol. 5. . Sec. 11214. When they have funds belonging to the trust which are to be invested, executors, administrators, guar- dians, and trustees, may invest them in certificates of the in- debtedness of this state, of the United States, or in such other securities as the court having control of the administration of the trust approves. When money coming into the hands of an executor, administrator, trustee, agent, assignee, attorney or officer is stopped therein by reason of litigation or other law- ful cause, and if it will probably be so detained for more than six months, he may invest it during such detention in the manner that trust funds are now authorized by law to be in- vested, or as the probate or other court having jurisdiction of the pending litigation, or person aforesaid, directs. Duty to Call in Estate. It is the duty of an executor to convert the assets of an estate into money. He must collect the funds for distribution or invest- ment as the case may be. Weyer v. Watt, 48 O. St. 545. It seems that an executor should have one year within which to collect assets. Gray v. Case School, 62 O. St. 1. Duty to Invest. Failure on the part of a trustee to invest the funds within a reason- able time renders him liable for interest. In re Spencer's Appeal, 2 O. Dec. Eeprint 510. A trustee is required to invest the funds under his control. In re Strickland, 1 O. Dec. 703; Armstrong v. Miller, 6 Ohio 119. Purchase of Real Estate. With the consent of the probate court a trustee may purchase real estate for the benefit of the cestui que trust. Fourth National Bank v. Hopple, 6 0. Dec. 482. OHIO. 207 Duty of Co-trustees. When co-trustees leave the duty of investing the funds to one of their number, and he applies the money to his own use, all are liable for the loss. State v. Guilford, 15 Ohio 593. Mingling Funds. A trustee who deposits trust funds to his personal account is liable for any loss. Shaw v. Bauman, 34 O. St. 25; Lotze v. Hoerner, 11 0. Dec. Eeprint 131. It is important that the trustee keep the investments separate and in the name of the trust. Brown v. Williams, 9 O. C. C. N. S. 307. But if he selects a reputable bank and deposits the funds in his name as trustee, he is not liable. Odd Fellows' Ben. Assn. v. Ferson, 2 O. C. D. 48. Change of Real Estate Into Money. Unless he has express authority by the trust instrument or by order of court, a trustee should not change realty into personalty. In re Spencer's Appeal, 2 O. Dec. Reprint 510. Care Required of Trustee. A trustee is bound to exercise ordinary prudence and good faith in investing the funds. In re Spencer's Appeal, 2 O. Dec. Reprint 510. Where trustees exercise the diligence of ordinary men in making an investment, and have relied upon the advice of an attorney, they are not liable for a mistake in law. Miller v. Proctor, 20 O. St. 442. Continuing Business of Testator. In the absence of specific authority a trustee has no right to continue a business in which the creator of the trust has been en- gaged. When he is authorized to continue a business a trustee may be held liable personally, if he permits debts to be contracted beyond the amount embarked in the business. As a general rule the estate is not liable beyond the amount embarked in the business. Lucht v. Behrens, 28 O. St. 231. Where trustees are expressly authorized by will to continue a busi- ness, they may carry on a partnership and settle its affairs at the appointed time for dissolution. Jones v. Proctor, 14 Ohio Cir. Dec. 80. Mercantile Business. Trustees have no right to loan trust funds to a manufacturing company on mere personal security, or to carry on a mercantile busi- ness. Adams v. Nelson, 1 O. Dec. 216. 208 STATE LAWS AND DECISIONS. Mortgage. A mortgage on adequate real estate is proper. In re Spencer's Appeal, 2 O. Dec. Eeprint 510. The Guardian's Act of 1857 provided that the money of the ward should be lent within a reasonable time, and secured by a mortgage upon real estate, of double the value of the money lent. "Ordinary prudence" would require a trustee to loan no more than two-thirds of the fair appraisal price. In re Spencer's Appeal, 2 O. Dec. Eeprint 510. Second Mortgage. A trustee should not accept a second mortgage. In re Spencer's Appeal, 2 O. Dec. Eeprint 510. Bank Stock. By the statutes, a trustee is limited in his investments. But where the trust instrument expressly provides, the scope of the statute may be extended. Where a will gave a trustee power to sell and ^'reinvest" the proceeds "in such manner as she or they may think best," the statute is extended and a trustee, exercising due care, may invest in bank stock. Willis v. Braucher, 79 O. St. 290. Personal Security. The law does not permit trustees to invest on mere personal se- curity. But where trustees are given full power to manage a trust fund "as they think best for said poor," they may invest in real estate security or notes or bonds without security. Scott v. Trustees of Marion Township, 39 O. St. 153. Must Follow Directions in Trust Instrument. A trustee may not substitute his judgment for that of the creator of a trust. Where he is required to buy in at a foreclosure sale to protect the estate, he must sell as soon as practicable and reinvest as directed by the creator of the trust. Willis v. Holcomb, "BS O. St. 254. Trustee to Wind up a Bank. A trustee appointed to wind up the affairs of a savings bank has no power to loan funds which may come into his hands. He may make a special deposit in bank as trustee. Smith v. Fuller, 86 0. St. 57. Use by Trustee. The use by a trustee of the funds does not constitute embezzle- ment unless there is a fraudulent intent. State v. Meyer, 10 O. Dec. Eeprint 746. OKLAHOMA. TRUST COMPANIES. Statutes of 1903. (With Amendments to 1914.) Sec. 1125. The directors of corporations created under this Article shall have power of investing the moneys placed in their charge in loans secured by real estate or other suf- ficient collateral security, in public bonds of the United States or of this territory, or of any state, or in the bonds or stocks of any county or school district, or any incorporated city, town or village of any state or in this territory or in the Indian Territory. Such corporations shall own only such real estate as may be required for the transaction of their busi- ness, and such as they may acquire in the enforcement and collection of debts or liabilities due to them. TRUSTEES. Statutes of 1909. Sec. 5396. Investment of Funds. — Pending the settlement of any estate on the petition of any .party interested therein, the county court may order any money in the hands of the executor or administrators to be invested for the benefit of the estate, in .securities of the United States. Such order can only be made after publication of notice of the petition in some newspaper to be designated by the judge. Liability for Loss. A trustee is responsible for ordinary care and diligence in taking possession of and managing the trust property. Wyman v. Herard, 9 •Okla. 35. Mingling Trust funds. If a trustee deposits trust funds with his own, the whole is con- -sidered trust property. Fidelity & Deposit Co. v. Rankin, 33 Okla. 7. 209 210 STATE LAWS AND DECISIONS. Guardian. The statutes provide that the County Court may authorize and require a guardian to invest the proceeds of sales and any other of his ward's money in real estate or in any other manner most to the interest of all concerned. When property is sold for investment, the guardian must invest according to his best judgment or in pursuance of any order that may be made by the County Court. Eevised Laws, Sec- tions 6556, 6569. Investment of School Funds. What are considered legal investments in Oklahoma is indicated in Section 7942, Comp. Laws 1909, which provides that until the school funds may be permanently invested as provided by law, the commis- sioners of the land office are empowered to deposit them in banks or trust companies, but shall in every case select as security therefor: Bonds of the State of Oklahoma, bonds of the counties, school dis- tricts, cities and towns of this state, county and municipal bonds of other states, bonds of the United States, first mortgages on real estate and securities issued by municipalities in payment of paving, sewer, waterworks, electric lights or other public indebtedness, for which a special tax may be levied. Columbia Bank & Trust Co. v. U. S. Fidelity & Guaranty Co., 126 Pac. Eep. 556. OREGON. TRUST COMPANIES. General Laws of 1911. (With Amendments to 1914.) Investment of Trust Funds. — By Chapter 354 of the Laws of 1913, trust companies are authorized to invest trust funds "in bonds of the United States of America, or bonds of which the faith of the United States is pledged for the payment of the principal and interest, or in bonds or warrants, issued in pursuance of law, of any state of the United States of Amer- ica, or any county, school district or municipal corporation therein, which has not defaulted in the payment of either prin- cipal or interest thereof, within five years previous to mak- ing such investment, or in notes or bonds secured by unin- cumbered real estate, the actual value of which shall not be less than twice the amount loaned thereon, or in bonds or notes secured by a pledge of collateral or personal property, the actual cash market value of which shall be at least twenty per cent more than the amount loaned thereon, or in such other bonds or securities as the Superintendent of Banks shall approve, and not otherwise." When Chargeable with Interest. A trustee is not chargeable with interest unless he has used the funds for his own benefit, or has invested them to produce interest, or has permitted them to lie idle when they might have been in- vested. Martin v. Martin, 43 Or. 119. Where a guardian makes a separate deposit of funds he should not be charged with interest. Independent Foresters v. Keliher, 36 Or. 501. Mingling Funds. Where a guardian mingled trust funds with her own and put part of the fund out at interest, it seems that she was chargeable with in- 211 212 STATE LAWS AND DECISIONS. terest only upon the portion of trust fund whicli was lent. Inde- pendent Foresters v. Kelilier, 36 Or. 501. Mortgages. A trustee, in determining the value of land upon which he takes a mortgage, is required to exercise the judgment of ordinary men. If Ms action is questioned the burden is upon him to prove the adequacy of the security. If he fails to prove that he exercised due care in selecting the security, he is liable for any loss. Eoach's Estate, 50 Or. 179. Personal Loan. A trustee is liable for the loss of funds lent without security. Eoach's Estate, 50 Or. 179. Corporate Stock. It seems that Oregon follows the New Jersey rule and does not sanction an investment in corporate stock. Eoach's Estate, 50 Or. 179. Guardian. The statutes provide that the court may authorize guardians to invest the proceeds of sales and any other of their wards' money in real estate or in any other manner most to the interest of all con-< cerned. When property is sold for investment, the guardian must in- vest according to his best judgment or in pursuance of any order that may be made by the court. Lord's Oregon Laws, Vol. I, Sees. 1330-1349. Good Faith and Due Diligence. There is no statute regulating investments of trust funds, except the sections relating to guardians. Trustees are bound, therefore, to employ such prudence and diligence as men of discretion employ in the management of their own affairs. Eoach's Estate, 50 Or. 197. The Trust Company Law of 1913 provides for investments by such corporations when they act as trustees. This section, above quoted, is a guide for trustees generally. PENNSYLVANIA. INVESTMENTS BY TRUSTEES. Purdon's Statutes. Sec. 115. No act of the general assembly shall authorize the investment of trust funds by executors, administrators, guardians, or other trustees, in the bonds or stocks of any private corporation; and such acts now existing are avoided, saving investments heretofore made. (Constitution, Art. Ill, Sec. 22.) Sec. 116. "When an executor, administrator, guardian or trustee shall have in his hands any moneys, the principal or capital whereof is to remain for a time in Iris possession, under his control, and the interests, profits or income thereof are to be paid away, or to accumulate, or when the income of a real estate shall be more than sufficient for the purpose of the trust, such executor, administrator, guardian or trustee may present a petition to the Orphans' Court of the proper county, stating the circumstances of the case, and the amount or sum of money which he is desirous of investing; whereupon it shall be lawful for the court, upon due proof, to make an order directing the investment of such moneys in the stock or public debt of the United States, or in the public debt of this commonwealth or in the public debt of the city of Phila- delphia, or on real securities, at such prices, or on such rates of interest and terms of payment respectively, as the court shall think fit; and in case the said moneys shall be invested conformably to such directions, the said executor, adminis- trator, guardian or trustee shall be exempted from all lia- bility for loss on the same, in like manner as if such invest- ments had been made in pursuance of directions in the will or other instrument creating the trust; provided, that nothing herein contained shall authorize the court to make an order 213 214 STATE LAWS AND DECISIONS. contrary to the direction contained in any will or other in- strument, in regard to the investment of such moneys. Sec. 117. Section 14 of the act entitled "An act relating to Orphans' Court," approved the twentieth day of March, Anno Domini, one thousand, eight hundred thirty-two, be and the same is hereby extended so as to include all bonds or certif- icates of debt now or hereafter to be created and issued ac- cording to law by any of the counties, cities, school districts or municipal corporations of this commonwealth ; which said bonds or certificates are hereby declared to be legal invest- ments of moneys, by executors, administrators, guardians or trustees. Sec. 118. It shall and may be lawful for any trustee, com- mittee, guardian or other person acting in a fiduciary capacity, to invest trust moneys in ground rents, or other real estate, by leave of the proper court, under proceedings as provided in the act to which this is a supplement : provided, that it shall be the opinion of tjie court, that such investment will be for the advantage of the estate, and no change be made in the course of succession by such change of investment, as regards the heirs of next-of-kin of the cestui que trust. Trust Companies. — The rules applicable to individual trus- tees apply also to trust companies. Such companies are also required to keep all trust funds and investments separate and apart from the assets of the company, and all investments made by the said companies as fiduciaries shall be so desig- nated as that the trust to which such investment shall belong shall be clearly known. Note. — It follows, therefore, that unless the trust instru- ment provides otherwise, the courts are authorized to direct investments in the following securities only: 1. Stocks or public debt of the United States. 2. Public debt of the Commonwealth of Pennsylvania. 3. Public debt of the City of Philadelphia. 4. Real securities, e. g., mortgages. 5. Real estate, including ground rents, and then only by leave of court. PENNSYLVANIA. 215 6. All bonds or certificates of debt issued by any county, city, school district or municipal corporation of Pennsylvania. It further follows : 1. One acting in a fiduciary capacity who before making an investment in any of the above-authorized securities ob- tains leave of court as provided in the acts is relieved of all responsibility for any subsequent default or depreciation. It is to be noted in this connection, however, that the courts are loath to entertain petitions asking for leave to invest in au- thorized securities. They very properly maintain that in the case of ordinary investments not involving any unusual ex- ercise of judgment a trustee should not strive to escape a responsibility incident to the trust. Only unusual conditions would justify an application to the courts with its necessary delay and expense. 2. One acting in a fiduciary capacity who without leave of court invests in any of the above authorized securities is not thereby relieved of the obligation to exercise due care and reasonable prudence in the selection of the investment. The absence of such care or prudence would create a liability for any subsequent default or depreciation. 3. One acting in a fiduciary capacity who in\ests in any securities other than those above authorized and in the ab- sence of any authority in the instrument creating the trust is by virtue of that fact alone and irrespective of the exer- cise of due care or prudence in other respects liable for any subsequent default or depreciation. Duty to Invest. It is the duty of a trustee to make the funds productive. If he is unable to find legal securities in which to invest he may apply to the court for instructions. Hower 's Appeal, 22 "W. N. C. 536; Pray 's Appeal, 34 Pa. 100. Even if the fund is small, a trustee is liable for interest if he fails to ask the direction of court. McCauseland's Appeal, 3S Pa. 466. But he may retain a moderate sum for the uses of the trust. Lukens' Appeal, 47 Pa. 356. Time Allowed for Investing. A reasonable time should be allowed for making investments. The time depends on circumstances, but where a trustee has used ordinary 216 STATE LAWS AND DECISIONS. care, lie will not be chargeable witli interest for failure to invest within three months. Lukens' Appeal, 47 Pa. 356. In view of the facility with which trust funds may now be de- posited at interest until permanent investments can be made, it is doubtful whether any considerable time should be allowed. Noble's Estate, 178 Pa. 460. An allowance of two months is not undue, Witmer's Appeal, 87 Pa. 120. In the earlier decisions, six months were ordinarily allowed for investment. Worrell's Appeal, 23 Pa. 44. Deposits in Bank. A trustee, while seeking investment, should deposit trust funds in bank in his name as trustee, and if possible at interest. Where such a deposit draws three per cent interest, provided the trustee gives the bank two weeks notice of withdrawal, it is a reasonable provision and not inconsistent with a deposit. Consequently the trustee is not liable for loss if the bank fails. Law's Estate, 144 Pa. 499. But a certificate of deposit in a private bank payable twelve months after date is a personal loan and not a proper deposit or investment. Baer's Appeal, 127 Pa. 360. A certificate of deposit in a savings bank, although it is payable in three months and draws six per cent interest is not a legal invest- ment. Frankenfield's Appeal, 11 W. L. N. 373; quoted, 127 Pa. 369. But a trustee may keep funds on deposit for a reasonable time pending investment. The circumstances of each case determine what constitutes a reasonable time. When it appears that he could have invested in authorized securities, a deposit for eight months is an un- reasonable time, and he is liable for loss due to failure of the bank. Clark's Estate, 56 P. L. J. 193. A trustee who has permitted a fund to remain on deposit in a savings bank for fifteen years, drawing only three per cent interest, is guilty of supine negligence. A surcharge of one per cent per annum will not more than represent the loss to the estate. Whitecar's Estate, 147 Pa. 368. Carrying on Business. When a trustee is specifically authorized to carry on a iusiness, he may sell on credit in the ordinary course of that business. Cline's Appeal, 106 Pa. 617. Personal Security. It is well settled in this state that a trustee who invests trust funds upon mere personal security is liable for any loss. Strong's Estate, 160 Pa. 13; Dietterich v. Heft, 5 Pa. 87; Hemphill's Appeal, 18 Pa. 303. PENNSYLVANIA, 217 A loan on personal security may afford ground for dismissal of the trustee. Johnson's Appeal, 9 Pa. 416. Interest. Ordinarily a trustee is chargeable with the interest which might have been earned under a proper investment. It has not been usual to charge compound interest for ordinary neglect. Graver's Appeal, 60 Pa. 189; Worrell's Appeal, 23 Pa. 44; Eoberts' Estate, 22 Pa. C. C. 4. But in Noble's Estate, 178 Pa. 460, where a guardian mingled his ward's money with his own, interest was compounded on the surplus income. In a case of simple neglect, however, it would seem that simple interest only is chargeable. Pennypacker's Appeal, 41 Pa. 494. Compounding interest by means of rests has not been generally adopted in Pennsylvania. Dietterich v. Heft, 5 Pa. 87. Continuing Investments Made by Testator. A trustee who for more than a year retained investments in stocks which came into his hands was not chargeable with neglect. Where a trustee receives investments which have been made by the creator of the trust, the strict legal rules do not apply and whether or not he will retain the investment is left to his discretion, exercised in good faith. Coggins' Appeal, 3 Walk. 426; Estate of Williamson, 12 Phila. 64; Christian's Estate, 13 Pa. C. C. 283. But recent cases seem to indicate that unless the trust instrument authorizes the continuance of investments made by the creator of the trust, the wisest plan for the trustee is to call in the estate and invest in legal securities. Skeer's Estate, 236 Pa. 404; Bartol's Estate, 182 Pa. 407. It seems that when bonds of doubtful value come into the hands of trustees as a part of the estate, it is their duty to convert them into cash and properly invest the proceeds. They are not permitted to ex- change them for stock. Locher's Estate (No. 2), 219 Pa. 46. Investment Outside of State. Trust funds in Philadelphia may be invested in mortgages upon property in Camden. Gouldey's Estate, 201 Pa. 491. But this is because of the nearness of the two cities. The general rule is that a court will not authorize an investment, the collection of which must be enforced outside of the state. Rush's Estate, 12 Pa. 375; Roberts' Estate, 22 Pa. C. C. 4. This applies also to bonds of a railroad located in another state. Hoyt's Estate, 2 Kulp. 286. A trustee who invests in Western mortgages renders himself per- sonally liable for the principal and interest which might have been secured in a legal investment. Roberts' Estate, 22 Pa. C. C. 4. 218 i STATE LAWS AND DECISIONS. Second Mortgages. A loan on second or third mortgages is illegal. Makin's Estate, 20 Pa. C. C. 587; Gaw's Estate, 12 Phila. 4; Glesenkamp 's Estate, 48 P. L. J. 356. Stocks and Bonds. Article III, Sec. 22, of the Constitution, which prohibits the invest- ment of trust funds in stocks or bonds of private corporations, re- pealed the earlier Acts of 1870 and 1873, which authorized trustees to invest in the bonds of the Pennsylvania Eailroad Company, and the Act of 1872 which authorized investments in the bonds of the Phila- delphia & Eeading Eailroad Company. The only exception to the rule is where a court orders such investment to be made by a Committee of a lunatic or drunkard. Commonwealth v. McConnell, 226 Pa. 244. The rule applies to a bank, railroad, manufacturing or canal com- pany. Morris v. Wallace, 3 Pa. 319; Worrell's Appeal, 23 Pa. 44. Where a will gives a trustee full power to take charge of an estate and sell the real and personal property, at the same time allowing the trustee absolute discretion as to management, an investment in rail- road bonds may be sustained. But it must clearly appear that the will gives authority for such an investment. Barker "s Estate, 159 Pa. 518. An investment in stock of the Bank of the United States has been held illegal. Hemphill's Appeal, 18 Pa. 303. Where a will authorizes a trustee to sell any part of the estate and "invest the proceeds in such other securities as may in their judg- ment be best," it did not give the trustee unlimited authority, and he was liable for loss on bonds of a manufacturing corporation in another state. Hart's Estate, 203 Pa. 480. A provision that a trustee may invest "in any property, real or personal, that he may see fit," does not warrant an investment in stock of a manufacturing corporation. Pray's Appeal, 34 Pa. 100. When a trustee is authorized to invest "in first class mortgage bonds of railroad companies," the trustee is not liable when he ex- ercises ordinary care and prudence in selecting the securities of a rail- road in another state. Bartol's Estate, 182 Pa. 407. Mingling Funds with Individual Property. Where a trustee mingles trust funds with his own or invests in his own name, he is chargeable with interest and is liable for any loss. If he makes a profit the beneficiary may elect to take such profit. Norris' Appeal, 71 Pa. 106; McAllister v. Commonwealth, 30 Pa. 536; Noble's Estate, 178 Pa. 460; Erie School Dist. v. Griflath, 203 Pa. 123. The rule applies to deposits in bank in his own name. Common- wealth v. McAllister, 28 Pa. 480; Hemphill's Appeal, 18 Pa. 303; Columbian Bank's Appeal, 147 Pa. 422. PENNSYLVANIA. 219 When a trustee mingles trust funds with his own and uses both in his business, he is liable for the fund and may be made to account for the share of profits earned by the trust money. Eobinett 's Ap- peal, 36 Pa. 174; Balicr's Appeal, 120 Pa. 33; Seguin's Appeal, 103 Pa. 139; Hertzler's Estate, 192 Pa. 531. Trust Strictly Construed. The creator of the trust may authorize investment in other than legal securities, but where such a provision in the trust instrument is relied on, it is the duty of the trustee to establish it with the utmost clearness. Where a trustee has invested in unauthorized securities and there is a loss, the fact that he exercised good faith and diligence will not protect him. Barker's Estate, 159 Pa. 518. Order of Court. Where a trustee invests in authorized securities, an order of court is not necessary. It seems that a court will not authorize an invest- ment outside of the securities named by the legislature. Hoyt's Estate, 2 Kulp. 286; Noble's Estate, 33 P. L. J. 113. Depreciation of Securities. Where a trustee has made an investment in good faith, and has exercised ordinary care and prudence in selecting a legal investment, he is not liable for loss or depreciation in value of securities. Grid- land's Estate, 132 Pa. 479; Bartol's Estate, 182 Pa. 407; Gouldey'a Estate, 201 Pa. 491. Committee of Lunatic or Drunkard. The statutes provide that a Committee of a lunatic or drunkard, under the direction of the Court of Common Pleas, shall invest the money of the lunatic or drunkard in such stocks or upon such security as shall be approved of by such court. Purdon's Digest, Vol. 2, p. 2396. Although there seems to be an exception here to the rule that a court will not authorize investments in corporate stock (Commonwealth v. McCounell, 226 Pa. 244), it is likely that Article III, Sec. 22, of the Constitution, applies, and that the Court of Common Pleas is thus limited in the investments which it authorizes. Guardian. There seems to be no specific statute governing investments by guardians. The Orphans' Court has jurisdiction over the estates of minors, and if a guardian would protect himself, an order of court should be obtained. PORTO RICO. Statutes of 1911. (With Amendments to 1914.) Tutors. — Section 3349, of the Statutes, gives tutors, who have charge of the person and property of infants and in- competent persons, power to continue the business or industry of the person, to alienate personal property, the value of which does not exceed two hundred dollars, without judicial authorization, to loan and borrow money and to withdraw capital for the purpose of investment. Section 3353 provides that the tutor shall be liable for in- terest at the legal rate if he permits a fund to remain unpro- ductive. Section 3355 prohibits tutors from remunerating them- selves without an order of court, and from purchasing the trust property for their own benefit without a court order. Note. — ^For the general rules governing trustees, see Part I herein. 220 RHODE ISLAND. TRUSTEES GENERALLY. General Laws, 1909, p. 904. (With Amendments to 1914.) Sec. 12. Every trust instrument hereafter made, wherein no provision is made to the contrary, shall be deemed to give to the trustees or trustee thereunder for the time being full power, in their, his or her discretion, or, if a corporation, in the discretion of its officer or committee duly authorized, from time to time to invest, reinvest or change the investment, of all personal property held thereunder for the time being. Order of Court. — Section 11 provides that the Superior Court may decree a sale or exchange of investments and may direct the application of the proceeds as shall be for the best interest of the beneficiary. Guardians— General Laws. — Sec. 33, p. 1174. — Guardians may be authorized to invest any money in their hands, not needed for the payment of debts or for the support or educa- tion of their wards, in notes secured by mortgage upon un- incumbered improved real estate situated in this state, or in the bonds or other indebtedness of the United States or of this state, or in the bonds or notes of any city or town in this state, or to make deposits thereof in any savings bank or trust company in this state approved by the probate court, as they shall deem best for the interest of his ward ; and may also, under direction of the probate court, invest any such money in real estate or bank stocks in this state or in such other safe income-producing securities as the probate court may approve. Eight to Sell and Reinvest Does Not Devolve upon Successor. The right given by the creator of the trust to sell or mortgage and reinvest at his discretion is a special discretionary power and does 221 222 STATE LAWS AND DECISIONS. not devolve upon a new trustee appointed by the court. Bailey v. Burgess, 10 E. I. 422. Stocks and Bonds. There is no statute or rule of court in Ehode Island requiring investment of trust funds in any particular securities. The rule of prudence and good faith is applied. Where corporate stocks and bonds came to the trustee from the testator they were declared to be proper investments for the trustee. Peckham v. Newton, 15 E. I. 321. The court indicated that it would follow the Massachusetts rule and would not condemn an investment in stocks or bonds merely be- cause that kind of security had been selected. Continuing Business. When the creator of the trust expressly provides for it, a trustee may continue the business. Greene v. Greene, 19 E. I. 619. It is probable that the converse of this rule is true, and that a business may not be continued unless there is a specific provision. Power to Change Investments. Section 12 of Chapter 208, General Laws, provides that every trust instrument, when there is no provision to the contrary, shall be deemed to give trustees, in their discretion, full power from time to time to invest, reinvest or change the investment of any personal property held by them as trustees. Moreover, the Superior Court has power to direct trustees in the management of property. Branch v. DeWolf, 28 E. I. 542. SOUTH CAROLINA. Statutes of 1902. (With Amendments to 1914.) Sec, 2602. If any executor, or administrator with the will annexed, having power under the will to dispose of the estate or any part thereof, shall take such security as shall be clearly proved to be insufficient at the time, such executors, or ad- ministrators, and their sureties shall be liable to make good any loss or damages that the legatees or creditors may sustain, to be recovered by action against such executors, or by action on the bond of such administrators, wiierein such damages shall be assessed by the verdict of a jury. Duty to Invest. It is the duty of a guardian or other trustee to keep the funds of the estate securely invested. Nance v. Nance, 1 S. C. 220; Brabham V. Crosland, 25 S. C. 539. But a trustee may be guilty of a breach of trust if he calls in funds which are already well invested. If a trustee fails to invest trust moneys, the burden is upon him to show that it was necessary to retain the funds for the exigencies of the estate. Otherwise, he is chargeable with interest. Burnside v. Eobertson, 28 S. C. 583. Executors are required to invest funds within a reasonable time. Taveau v. Ball, 1 McC. Ch. 456. Discretion. A trustee's discretion is limited to the class of investments favored by the courts. Sanders v. Rogers, 1 S. C. 452; Nance v. Nance, 1 S. C. 221. Guardian. There seems to be no special statutory provision governing guar- dians, but the management of the estate is subject to the control of the Probate Court, and an order of court authorizing any particular investment or change of investment is desirable. 223 224 STATE LAWS AND DECISIONS. Care Required. The rule in this state seems to be that a trustee is bound to manage the property with the care and diligence of a prudent man. Crane, Boyleston & Co, v. Moses, 13 S. C. 561. Deposit in Savings Bank. Where a trustee deposits funds in a reputable savings bank, and the interest is credited from time to time, he cannot be held liable for neglect. Fitzsimmons v. Fitzsimmons, 1 S. C. 413; Twittz v. Houser, 7 S. C. 164. Reasonable Time Allowed to Invest. A trustee is allowed a reasonable time within which to invest. The time allowed depends upon circumstances. Crane, Boyleston & Co. V. Moses, 13 S. C. 561. Continuing Investments of Testator. A trustee, as soon as practicable, should change the investments coming into his hands into legal securities. Nance v. Nance, 1 S. C. 218; Spear v. Spear, 9 Eich, Eq. 184. First Mortgages and Public Securities. The rule in this state seems to be that trustees should invest in public securities or in mortgages on unencumbered real estate of a value sufficient to guaranty the debt against all contingencies liable to occur. Bonds of individuals should not be taken in lieu of real securities, unless authorized investments cannot, in the exercise of reasonable diligence, be secured. Nance v. Nance, 1 S. C. 224. Interest. Simple interest is chargeable against the trustee, unless it appears that he has mingled trust funds with his own and subjected them to the risks of trade for his own profit or has disregarded the pro- visions of the trust. In such a case, compound interest may be charged. Livingston v. Wells, 8 S. C. 363. Railroad Bonds. Bonds of railroad corporations are personal securities, and are not proper investments for trust funds. Allen v. Gaillard, 1 S. C. 279. But in this case the bonds were not secured by a mortgage on the property of the road. Whether they would have been a valid investment if secured by a first mortgage on the property does not appear. SOUTH CAROLINA. 225 Confederate Bonds. Investments of trust funds in Confederate bonds prior to 1864 were usually considered proper, but after the fortunes of war had turned, the courts looked upon such investments with disfavor. Brab- ham V. Crosland, 25 S. C. 525; Dickerson v. Smith, 17 S. C. 289. Purchase of Land and Mortgage for Part of Purchase Price. The purchase of land with trust funds, encumbered with a mort- gage to secure part of the purchase price, is a breach of trust. Elliott V. Mackorell, 19 S. C. 238; Mathews v. Heywood, 2 S. C. 239; Nance v. Nance, 1 S. C. 220; Morton v. Adams, 1 Strob. Eq. 72. Deposits in Private Bank. Where a trustee deposited funds with his own at a private bank, and the bank failed because of the Civil "War, he was not liable for negligence. It was practically impossible to secure ordinary invest- ments. Crane, Boyleston & Co. v. Moses, 13 S. C. 561. But this case was decided after a consideration of the conditions brought on by Civil War, and is probably an exception to the rule that a trustee may not loan the funds on mere personal security. Nobles V. Hogg, 36 S. C. 322. Personal Securities. Although personal securities are considered as uncertain and usually improper investments, a trustee is protected if, after the exercise of reasonable diligence, he can find no better investment. But he must sustain the burden of showing that such an invest- ment was necessary. Singleton v. Lowndes, 9 S. C. 465; Nance v. Nance, 1 S. C. 220. The fact that such securities were regarded as safe by men of prudence and were a favorite investment for capitalists, does not justify investment in them, even if the trustee acted in good faith. Allen v. Gaillard, 1 S. C. 279. Stocks. A trustee may not invest in corporate stock, unless he is so au- thorized by the trust instrument, and where the creator of the trust provides for investment in "stocks of the City of Charleston," this does not authorize an investment in stocks of banks of Charleston. Womack v. Austin, 1 S. C. 421. SOUTH DAKOTA. Code of 1913. Sec. 1639. A trustee must invest money received by him under the trust, as fast as he collects a sufficient amount, in such manner as to afford reasonable security and interest for the same. Sec. 1640. If the trustee omits to invest the trust moneys according to the last section, he must pay simple interest thereon if such omission is negligent merely, and compound interest if it is willful. TRUST COMPANIES. Code of 1913, p. 133. Sec. 19. The directors of any such corporation shall in- vest so much of the capital stock as is herein provided to be deposited in the State Treasury, in bonds secured by mort- gages or notes and mortgages on unincumbered real estate within the State of South Dakota, worth double the amount secured thereby, or in bonds of the United States, or any state of the United States that has not defaulted on its prin^ cipal or interest within ten years, or of any organized county or township, or incorporated city or village, or school district in this state, or in any other such state, duly authorized to be issued. And such board of directors may loan the balance of this capital stock and other moneys received by such corpora- tion in trust, in bonds secured by mortgages, or notes and mortgages on unincumbered real estate within the State of South Dakota, worth double the amount secured thereby, or in bonds of the United States, or any state of the United States, that has not defaulted on its principal or interest within ten years ; or of any organized county or township, or incorporated city or village, or school district in this state, or 226 SOUTH DAKOTA, 227 in any other state duly authorized to be issued, or any such real or personal securities as they may deem proper. Sec. 20. No trust company shall employ its money, di- rectly or indirectly, in trade or commerce, by buying or sell- ing goods, chattels, -wares and merchandise, and shall not in- vest any of its funds in the stock of any other trust com- pany or corporation, nor make any loans or discounts on the security of the shares of its own capital stock, nor be the pur- chaser nor holder of any such shares unless such security or purchase shall be necessary to prevent loss upon a debt pre- viously contracted in good faith; and stock so purchased or acquired shall within six months of the time of its purchase be sold or disposed of at public or private sale; after the ex- piration of six months any such stock shall not be considered as a part of the assets of any trust company ; provided, that it may hold and sell all kinds of property which may come into its possession as collateral security for loans or any ordinary collection of debts, in the manner prescribed by law; pro- vided, fui-ther, that any goods or chattels coming into the possession of any trust company as aforesaid shall be disposed of as soon as possible and shall not be considered as part of the trust company's assets after the expiration of six months from the date of acquiring the same. Trust Funds Must Be Kept Separate.— Section 12, of the Trust Company Law, provides that trust funds must be kept separate from the other funds of the corporation. Trustee Must Not Obtain Any Personal Benefit. It is the duty of a trustee in a trust deed to notify the person for whom he acts when interest and taxes come due, and he may not acquire any right to the property through a tax sale. Bush v. Froelich, 14 S. D. 62. Guardian. The statutes provide that if the estate of a ward is sold for in- vestment, the guardian "must make the investment according to his best judgment, or in pursuance of any order that may be made by the County Court." Compiled Laws, 1913, Vol. 2, p. 527. Note. — For the general principles applicable to investments by trustees, see Part I herein. TENNESSEE. TRUST COMPANIES. Laws of Tennessee, 1903, Ch, 377. (With Amendments to 1914.) Investments, Trust Funds. Sec. 5.— All funds lield by such banks in any of the fiduciary capacities hereinbefore in thia act mentioned, which as such it has under existing laws, power, authority or direction to invest, may, unless otherwise required by the principal, or by the court, or by the person creating the trust, agency or other fiduciary capacity, buy United States bonds or state bonds of the State of Tennessee, or first mortgage bonds of any railroad company or bonds of any county or municipal corporation; provided, that such bonds shall at the time of investment be at par or above par value, in the market where such bonds are usually listed and sold, and have regularly paid a dividend of not less than four per centum per annum for the last five years nest pre- ceding such investment, or in first mortgages on real estate; provided, that no sum shall be loaned on any mortgage for more than fifty per cent of the appraised value of the prop- erty mortgaged, nor for a longer period than ten years, and whenever any funds in the hands of any such bank are in- vested by any such bank as herein provided for, such bank shall in no case be liable for any greater amount as interest or otherwise, than the income, earnings, dividend, interest, rents or profits arising or derived from such investment, and in all settlements and accounts required of or made by such banks when acting in any of the fiduciary capacities men- tioned in this act, where any investment has been made hy it as herein provided, such bank shall not be required to- account for or be liable for any sum in excess of the income, earnings, dividend, interest, rent or profit derived from such 228 TENNESSEE. 229 investment; provided, whenever a bank shall receive any funds in the character and for the purpose herein declared, it shall be the duty of said bank to safely invest the same, and a failure to invest such funds shall not release the liability of the bank for interest upon the same. TRUSTEES GENERALLY. Code of 1896. (With Amendments to 1914.) Sec. 5433. The courts of law and equity in this state are- hereby authorized to have the money and funds in the hands of clerks and receivers, or trustees, in litigation or under the control of said courts, invested in the public stocks or bonds of the United States, under such rules and orders in each case as may be legal and just. Sec. 5434. Guardians, executors, administrators, and trus- tees, shall also be authorized and empowered to invest money and funds in their hands in the public stocks or bonds of the United States, and make report thereof to the county court of the county where such guardian, executor, administrator, or trustee resides, unless another mode of investment is re- quired by will or deed of the testator or other person who has established the fund. Sec. 4280. Where the profits of a ward's estate shall be more than sufficient to educate and maintain him, the guar- dian shall lend the surplus, and all other sums of money of the ward in his hands, upon bonds with good and sufficient sureties, or by mortgage on real estate, the amount loaned not to exceed one-half the real, actual value of the real estate mortgaged, to be approved by the court at its next session, and to be repaid with interest ; or he may invest the same in state bonds. Personal Security. If a trustee fails to follow the specific instructions of the trust instrument, or invests the funds upon mere personal security, he does so at his peril. Wynne v. Warren, 49 Tenn. 118. 230 STATE LAWS AND DECISIONS. Purchase of Real Estate. In the absence of express authority, a trustee has no power to purchase real estate as an investment. Lester v. Vick, 49 Tenn. 476. Deposit by Trustee to His Own Credit. Where a trustee deposited trust funds to his own credit in his business, not intending any wrong, and no loss resulting, although there was a technical breach of trust, he will not be charged with in- terest. Vaccaro v. Ciealla, 89 Tenn. 63. Time Allowed for Investment. It seems that three months is considered a reasonable time within which to invest funds. Vaccaro v. Ciealla, 89 Tenn. 63. Guardians. It seems that by Code Sections 4280, 4281, guardians may invest upon bond with sufficient sureties. The law is not clear upon what constitutes good and Sufficient sureties, but the courts have held guardians to a high degree of care in making such investments. Merriman v. Camoran, 9 Bax. 93. And he must take the security in his name as guardian. Sanders v. Forgasson, 62 Tenn. 249. Mingling Trust Funds. A trustee who mingles trust funds with his own is liable for the whole fund. Mason v. Whitthorne, 2 Cold. 242. Interest. A faithful trustee will not be charged with more interest than he receives. But if he is guilty of unreasonable delay in investing, or has used the money for his own profit, he will be charged with in- terest. Viccaro v. Ciealla, 89 Tenn. 63; Jones v. Ward, 10 Yer. 161. In case of fraud or gross neglect, a trustee may be charged wdth compound interest. Tarbet v. McEeynolds, 4 Hum. 215. Decree of Court. A decree of the court of chancery is an absolute protection to a trustee in making an investment. Williams v. Williams, 84 Tenn. 164. TEXAS. TRUSTEES GENERALIiY. Statutes of 1911. (With Amendments to 1914.) Art. 3350. What Care to Take of Property of Estate.— It shall be the duty of the executor or administrator to take such care of the property of the estate of his testator or intestate as a prudent man would take of his own property, and if there be any buildings belonging to the estate it shall be his duty to keep the same in tenable (tenantable) repair, extraordinary casualties excepted, unless directed not to do so by an order of the court. Art. 3351. Duty in Regard to Plantation, Manufactory or Business. — If there be a plantation, manufactory or business belonging to the estate, and the disposition thereof is not spe- cially directed by Avill, and if the same be not required to be at once sold for the payment of debts, it shall be the duty of the executor or administrator to carry on the plantation, manufactory or business, or cause the same to be done, or to rent the same, as shall appear to him to be most for the interest of the estate. In coming to a determination he shall take into consideration the condition of the estate and the necessity that may exist for future sale of such property for the payment of claims or legacies, and shall not extend the time of renting any of the property beyond what may consist with the speedy settlement of the estate. TRUST COMPANIES. Art. 538. Relating to Banking. — The directors of banks and trust companies created under this act shall have power of investing the moneys placed in their charge in loans se- 231 232 STATE LAWS AND DECISIONS. 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. GUAEDIANS. Eevised Civil Statutes, 1911. (With Amendments to 1914.) Art. 4140. If at any time the guardian of the estate shall have on hand any money belonging to the ward beyond what may be necessary for the education and maintenance of such ward, such guardian shall, under the direction of the court, invest such money in the bonds of the United States or of the State of Texas, or loan the same for the highest rate of interest that can be obtained therefor. Art. 4141. When the guardian loans the money, he shall take the note of the borrower, the same to be secured by mortgage with power of sale on unincumbered real estate situated in this state, worth at least double the amount of such note and interest, or on collateral notes secured by vendors' lien notes, as collateral, or may purchase vendors' lien notes; provided, that at least one-half has been paid on the land for which said notes are given; and he shall not deliver such money until such note and security have been taken and approved by the county judge of the county in which the guardianship is pending, which approval shall be by an order of such judge entered upon the minutes of his court, either in term time or vacation. Art. 4142. Nothing contained in the last preceding Article shall relieve the county judge from responsibility on his bond as now provided by law. Art. 4143. When the guardian may think it best for his ward to have any surplus money on hand invested in real estate, he shall file an application in writing in the court where the guardianship is pending, asking for an order of such court authorizing him to make such investment. Such ap- plication shall state the nature of the investment sought to TEXAS. 233 be made, and the reasons why the guardian is of the opinion that it would be for the benefit of the ward to have the same made. Art. 4150. If the surplus money in the hands of the guar- dian belonging to the ward cannot be invested or loaned at interest as directed in this chapter, after due diligence to do so by the guardian, he shall be liable for the principal only of such money. But if the guardian neglects to invest such money or loan the same at interest when he could do so by the use of reasonable diligence, he shall be liable for the principal and also for the highest legal rate of interest upon such principal for the time he so neglects to invest or loan the same. Neglect to Invest. If, by the exercise of ordinary diligence, a guardian could have loaned his ward's money, he is liable for ten per cent interest -n-hich he could have made by the loan. Freedman v. Yallie, 75 S. W. 322. Purchase of Real Estate. A trustee, in the absence of authority, has no power to purchase real estate with trust funds. Stone v. Kahle, 22 Tex. Civ. 185. Order of Court. Personal Security. Guardians are required to invest funds in mortgages on real estate under the approval of court. Investments in individual notes with sureties are not warranted either in law or equity. Smith v. Dibrell, 31 Tex. 239. The statute must be strictly followed. Snioot v. Eichards, 8 Tex. Civ. 146, and 16 Tex. Civ. 662; Smythe v. Lumpkin, 62 Tex. 242; Hurst V. Marshall, 75 Tex. 452. Time Allowed for Investment. A trustee who has not invested the trust funds within two years is guilty of negligence. Murchison v. Payne, 37 Tex. 305. UTAH. TRUSTEES GENERALLY. Compiled Laws of Utah, 1907. (With Amendments to 1914.) Sec. 3917. Powers of Executors. Continuing Business. — When the interests of creditors are not prejudiced thereby, the court may prescribe that the business in which the de- ceased was engaged at the time of his death may be con- tinued for such length of time as may be necessary to permit the affairs of the estate to be wound up to the best advantage. Sec. 3925. Court Order. — Pending the settlement of any estate, on the petition of any party interested therein, and upon good cause shown therefor, the court may upon notice order any moneys in the hands of the executors or adminis- trators to be invested for the benefit of the estate in securities of the United States or other good securities to be approved by the court or judge. Sec. 3930. Not to Profit. — He shall not make profit by the increase, nor suffer loss by the decrease or destruction, without his fault, of any part of the estate. He must ac- count for the excess when he sells any part of the estate for more than the appraisement, and if any is sold for less than the appraisement he is not responsible for the loss if the sale has been justly made. Sec. 3931. No administrator or executor shall purchase any claim against the estate he represents; and if he pays any claim for less than its nominal value, he is only entitled to charge in his account the amount he actually paid. Sec. 4017. Guardians. — If the estate is sold for the pur- pose of putting out or investing the proceeds, the guardian must make the investment according to his best judgment, or in pursuance of any order that may be made by the court. 234 UTAH. 235 Sec. 4018. The court, on the application of a guardian or any person interested in the estate of any ward, after such notice to persons interested therein as the court shall direct, may authorize and require the guardian to invest the proceeds of sales, and any other of his ward's money in his hands, in real estate, or in any other manner most to the in- terest of all concerned therein ; and the court may make such other orders and give such directions as are needful for the management, investment, and disposition of the estate and effects as circumstances require. TRUST COMPANIES. Sec. 429. Referring to Trust Companies. Investment of Capital. — Any corporation organized or existing under this chapter shall keep its capital stock in money on hand, or on de- posit in solvent banks, or invested in the 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, the amount invested in any mortgage not to exceed fifty per cent of the value of the land so mort- gaged. Note. — Whether or not a trust company may invest trust funds in the securities above mentioned without an order of court is not stated. It is probable that trustees may invest in such securities without an order of court. Personal Benefit. Unless authorized by a court of equity, a trustee may not pur- chase trust property either at private or judicial sale. Neither can he reap any personal benefit from the trust estate. Hamilton v. Dooly, 15 Utah 280; Thum v. Wolstenholme, 21 Utah 479. Purchase of Property. In the absence of authority, either from the trust instrument or by a court order, a trustee may not purchase property with trust funds. Scheib V. Thompson, 23 Utah 564. Interest Cliargeable for Violation of Trusts. A trustee who violates the trust by making improper investments may be charged compound interest. Scheib v. Thompson, 23 Utah 564. VERMONT. TRUSTEES GENERALLY. Statutes of 1906. (With Amendments to 1914.) Sec. 3009. Investment of Trust Estate. — The probate court may, on application of the trustee or a person interested in the trust estate, and after notice to other persons interested, authorize or require the trustee to sell all or any part of the real estate, stock or other personal estate, and invest the proceeds of such sale, with moneys in the hands of the trustee, in real estate, or in such manner as the court judges most beneficial to those interested in such trust estate. Sec. 3189. Guardians. — This section is similar to Section 3009 and applies to guardians. TRUST COMPANIES. Laws of 1910. No. 158. Sec. 73. — A trust company incorporated under the laws of this state may act as executor, administrator, guardian, assignee or trustee "under the same circumstances, in the same manner and subject to the same control by the court having jurisdiction, as a natural person." Sec. 77. Money Held in Fiduciary Capacity to be Kept Separate. — All moneys, property or securities received or held by a trust company in the capacity of executor, administrator, receiver, assignee, trustee or guardian shall be kept separate and distinct from its general business, and shall not be mingled with the investments of its assets, or be liable for the debts or obligations thereof; neither shall the bank's de- posits and its surplus (other than the trust guaranty fund) be liable for any claims growing out of the holding or manage- 236 VERMONT. 237 ment of funds or securities so received or held except as to any balance remaining after the satisfaction of the demands of other creditors. Authorized Investments. — There are no specific provisions in the Statutes regulating investments by trustees. But the Vermont decisions are liberal toward trustees and it is safe to say that if a trustee exercises due care in selecting from investments which are legal for savings banks, he will be protected. The sections governing investments by savings banks are therefore given. Sec. 4648. Mortgages, Limited. — No investment of de- posits and surplus by savings banks, savings institutions and trust companies shall be made upon mortgages of real estate, except upon first mortgages of unencumbered real estate ; and the amount of such investments shall not exceed three-fifths of the cash value of the property mortgaged. 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 cent of the amount of the assets shall be invested in mortgages of real estate; provided, that not exceeding sixty per cent of the amount of such assets may be invested in mortgages of real estate outside of this state. If the investment is on mortgage of unimproved or unproductive real estate, the amount of such investment shall not be more than forty per cent of the value thereof; and no mortgage investment shall be made by such corporation except upon the written approval of at least three trustees or their board of investment. Sec. 4649. Capital. — The capital of savings banks and trust companies shall be subject to the same laws of invest- ment as are applicable to their surplus and deposits. Sec. 4652. Personal Security; Limitation. — No loans or investments on personal security shall be made except upon at least two approved names, not less than two of whom reside in this state or within fifty miles of the institution making such investment, or upon notes or accepted drafts given by individuals, firms or corporations residing without the state for goods manufactured within the state, and pay- 238 STATE LAWS AND DECISIONS. able to individuals, firms or corporations located within the state ; and such personal loans or investments shall not be for a longer time than one year ; and not more than one-third of the assets of a savings bank, savings institution or trust company shall be invested in personal securities. Sec. 4654. Surplus and Deposits of Savings Institutions. — "With the foregoing exceptions, the moneys deposited in sav- ings banks, savings institutions and trust companies and the income therefrom, shall be invested only as follows: in the public funds of the United States, or public funds for the payment of principal and interest of which the faith of the United States is pledged ; in the bonds or notes of the counties, cities, towns, villages and school districts of the New England States, New York, Pennsylvania, Ohio, Michigan, Indiana, Illinois and Iowa; in the stock of any national bank in the New England States, New York and the cities of Detroit, Chicago, St. Paul and Minneapolis ; in the stock of any bank- ing association or trust company incorporated under the au- thority of and located in this state ; in the municipal bonds, not issued in aid of the railroads, of counties, cities and towns of five thousand or more inhabitants in the states of New Jersey, Wisconsin, Minnesota and Missouri, and in coun- ties, cities and towns of ten thousand or more inhabitants in the states of Kansas, Nebraska, North Dakota, South Dakota, Oregon and Washington, but no investment shall be made in any of the counties, cities or towns in tlie states above mentioned, except in cities of fifty thousand or more in- habitants, where the municipal indebtedness of such county, city or town exceeds five per cent of its assessed valuation, and when not issued in aid of railroads ; in the school bonds and independent school district bonds of New Jersey, "Wis- consin, Minnesota and Missouri; and in the school bonds and independent school district bonds of school districts of two thousand or more inhabitants in the states of Kansas, Ne- braska, North Dakota, South Dakota, Oregon and Washing- ton, where the amount of such bonds issued does not exceed five per cent of the assessed valuation of the respective cities, towns and school districts; in the public funds of any of the VERMONT. 239 states named in this section; in notes with a pledge of any of the aforesaid securities, including deposit books or deposit receipts issued by a savings bank, savings institution or trust company, or banking association located in this state as col- lateral, such notes not to exceed the par or market value of such security; but no savings bank, savings institution or trust company shall hold, by way of investment or as security for loans, more than ten per cent of the capital stock of any bank, nor invest more than ten per cent of its deposits, nor more than thirty-five thousand dollars in the capital stock of any one bank ; and no such investments shall be made in the capital stock of any such banks owned or loaned upon, to exceed in the aggregate one-fourth of the deposits of any sav- ings bank, savings institution or trust company. Sec. 4655. Limit of Loans on Personal Security. — No sav- ings bank, savings institution or trust company shall loan to any one person, firm or corporation or the individual member thereof, more than five per cent of its deposits, nor more than thirty thousand dollars; nor shall such loans on personal se- curity exceed ten thousand dollars until its deposits amount to one million dollars, after which the sums so loaned may be increased one per cent of the deposits in excess of the one million dollars; but this section shall not apply to United States bonds or municipal bonds, or notes with such bonds as collateral. Repairs. A trustee -n-ill be allowed sums for reasonable repairs aud the erection of necessary farm buildings. Field v. Wilbur, 49 Vt. 157. Mingling Trust Funds. A trustee who mingles trust funds with his own' is chargeable with any loss to the estate and with compound interest, at the highest legal rate, and is not entitled to commissions. In re Hodge's Estate, 66 Vt. 70. Stocks and Bonds. There is no special rule in this state prohibiting the investment of trust funds in stocks and bonds of private corporations, even if the corporations are located without the state. Scoville v. Brock, 81 Vt. 405. 240 STATE LAWS AND DECISIONS. Care EecLuirecL A trustee who exercises ordinary prudence in selecting an invest- ment is protected. He is not compelled to investigate the records of a corporation before retaining stocks and bonds as an investment. The opinion of well-informed men as to the character of such security and its standing in the market are su£S.cient evidence. Scoville v. Brock, 81 Vt. 405. Personal Seciirity. A guardian lent some of his ward's money, taking only the promis- sory note of the borrower. The money was lost. The court found that the trustee had exercised due diligence and was not liable for the loss. Barney v. Parsons, 54 "Vt. 623. Guardians. It seems that the statutes go no further than to provide that a guardian must manage his ward's estate "frugally and without waste." Public Statutes, 1906, Sec. 3183. VIRGINIA. TRUSTEES GENERALLY. Code of 1904. (With Amendments to 1914.) Sec. 2676. Liability of Fiduciaries, Agents and Attorneys, for Debts Lost by Negligence or Failure to Make Defense. — If any fiduciary mentioned before in this chapter, or any agent or attorney-at-law, shall, by his negligence or improper conduct, lose any debt or other money, he shall be charged with the principal of what is so lost, and interest thereon, in like manner as if he had received such principal. And if any personal representative, guardian, curator or committee shall pay any debt the recovery of which could be prevented by reason of illegality of consideration, lapse of time, or other- wise, knowing the facts by w^hich the same could be so pre- vented, no credit sliall be allowed him therefor. Sec. 2700. Court May Order Money in Hands of Fidu- ciary to be Invested. — AVhen it appears by a report made as aforesaid or a special report of the commissioner, that money is in the hands of any fiduciary, the court, in the clerk's office of which said report is filed, may order the same to be in- vested or loaned out, or make such other order respecting the same as may seem to it proper. Sec. 2700a. To Allow Executors and Other Fiduciaries to Invest in Virginia Three per Centum Bonds Issued by Virtue of an Act Approved February 14, 1882 (Preamble Omitted). — Executors and other fiduciaries may invest in the bonds issued under the act approved February 14, 1882, commonly known as the Riddleburger bonds, and the same shall be considered a lawful investment. Sec. 2606. When Guardian to Pay Compound Interest on Annual Balances. — If any balance, whether of profits received 241 242 STATE tAWS AND DECISIONS. or estimated, or of interest or principal, be due by any guar- dian, or other person acting as guardian, at the end of any year, which ought to be invested or loaned out within a reasonable time for the benefit of the ward, and the same remain in the hands of such guardian or other person, he shall be charged with interest thereon from the end of the year in which said balance arose, and so on toties quoties during the continuance of the trust. Sec. 2608. Time Within Which Guardian Allowed to In- vest Funds. — "Whenever a guardian shall collect any principal or interest belonging to his ward, he shall have thirty days to invest or loan the same, and shall not be charged with in- terest thereon until the expiration of said time, unless he shall have made the investment previous thereto ; in which case he shall be charged with interest from the time the invest- ment or loan is made. Sec. 399. Fiduciary Funds May be Invested in These Bonds. — Executors, administrators, and others acting as fidu- ciaries may participate in the settlement of the debt herein specified in the manner hereinbefore provided, and such action shall be deemed a lawful investment of their trust fund. Ex- ecutors, administrators, and others acting as fiduciaries may invest in the bonds issued under this act, and the same shall be considered a lawful investment. (This statute refers to the public debt of Virginia and the provisions for adjustment with West Virginia.) Time Allowed for Investment. Guardians were formerly allowed six months within which to make investments of the funds coming into their hands. Armstrong v. Walkup, 53 Va. 608; Hooper v. Eoyster, 1 Munf. 119. But the statute now requires that the funds must be invested within thirty days. A guardian who has not made investments is not to be allowed compensation. Jennings v. Jennings, 22 Grat. 313. A guardian who receives the money of his wards, and does not invest it, but retains it in his own hands, is to be charged interest thereon from the date of its receipt, and not from the end of thirty days allowed by the' statute. Snavely v. Harkrader, 29 Grat. 113. VIBGINIA. 243 Trustee May Retain Small Amounts on Deposit. A trustee who keeps small balances on deposit may not be charge- able with interest. Each case depends upon its own circumstances. Wood's Ex'r v. Garnett, 6 Leigh 271. Direction of Court. When a receiver, or trustee appointed by a court, is ordered to collect and invest a sum of money for the benefit of a person in certain designated securities, he is liable for loss if he does not follow strictly the instructions of the court. Carr's Admr. v. Morris, 85 Va. 21; Whitehead v. Whitehead, 85 Va. 870. Deposits in Bank. Even where a trustee deposits trust funds in bank in his own name, he may not be liable for loss if the failure of the bank is due to the general destruction of the whole currency. Parsley's Admr. v. Martin, 77 Va. 376. Good Faith. Trustees acting with reasonable care and prudence and exercising their best judgment in good faith at the time of the transaction will be protected, notwithstanding unforeseen loss to the estate. Cooper v. Cooper, 77 Va. 198; Elliott v. Carter, 9 Grat. 559. Care Eeciuired. In making investments of the trust fund, a trustee is required to exercise the same care and prudence that the average man would exercise in his own affairs. Cogbill v. Boyd, 77 Va. 450; Davis v. Harman, 21 Grat. 200. Advice of CounseL A claim by the trustee that he acted under the advice of counsel is no excuse for a violation of the trust or for mismanagement. Cogbill V. Boyd, 77 Va. 450. Mortgage Security, A trustee who accepts a bond and mortgage upon real estate whose value is less than or only equal to the loan, knowing that the obligor on the bond is of doubtful financial standing, is guUty of negligence. Cogbill v. Boyd, 77 Va. 450. Interest Chargeable Against Trustee. When a trustee is imprudent in his investments and loss results, he will be charged with the loss and interest on the fund at six per cent. Cogbill v. Boyd, 79 Va. 1. 244 STATE LAWS AND DECISIONS. Personal Security. Continuing Investments. A trustee should not invest the funds of the estate upon mere personal security. Neither is he justified in retaining such investments although they were made by the creator of the trust. Miller v. Hol- comb's Ex 'or., 50 Va. 674. But see also Patterson v. Horsley, 70 Va. 263, 271. An administrator took over an estate in which there were railroad bonds of $6,000 and a note of the railroad for $4,000. The bonds were depreciating in value, but at the request of some of the beneficiaries the administrator held the bonds in the hope that they would later appreciate. He made numerous requests of the road for the payment of the notes and payment was promised. Finally the road failed. The court decided that since the funds had come to the administrator in this form from the deceased and since the administrator had exercised good faith, he should not be responsible for the loss. Some doubt was expressed as to the freedom from liability on the note for failure to attempt to collect it. Watkins v. Stewart, 78 Va. 111. The case can- not be said to be direct authority for the proposition that a trustee may continue the investments made by the creator of the trust. The case of Miller v. Holcomb's Ex'or. (supra) is probably better law. Piirchase of Land. A guardian has no power to purchase land with his ward's money unless authorized by a court of chancery. Boisseau v. Boisseau, 79 Va. 73. Neither may he convert personalty into realty or realty into per- sonalty. Id. General Rule. The general rule in Virginia as to investments seems to be that a trustee is not responsible for loss of trust funds if he has exercised good faith and a fair discretion. Apparently the courts have accepted the English rule as a guide. Elliott v. Carter, 50 Va. 541, 559. Duty to Invest. A trustee who retains trust funds for an unreasonable time is chargeable with interest. Lomax v. Pendleton, 5 Va. 465; Beverleys v. Miller, 4 Va. 415; Fultz v. Brightwell, 77 Va. 742; Elliott's Admr. v. Howell, 78 Va. 297. Mingling of Funds. Where a trustee mingles trust funds with his own money and the funds are lost, he is liable. But it seems that if the loss is not due either to the failure of the bank or the carelessness of the trustee, VIRGINIA. 245 but to an external cause, the trustee should not be liable merely be- cause he mingled funds. Davis v. Harmon, 62 Va. 194. Investment Must be Judged as of the Date Made. The act of a trustee in making an investment must be judged in connection with the circumstances at the time. An investment in Confederate bonds sustained. Myers v. Zetelle, 62 Va. 733. Loan on Real Estate Security — Duty to Investigate. It is the duty of a trustee to investigate the adequacy of the se- curity upon which he loans trust funds, and if he accepts mortgages on real estate which is subject to liens and encumbrances, he may be guilty of negligence, even if he has acted on the advice of counsel. Burwell v, Burwell's Guardian, 78 Va. 574. Delay in Recording Instrument. Trustees who invest in mortgages must personally see to it that the security is obtained before the money is turned over, and they must be prompt in recording the mortgages. Otherwise loss falls upon them. Cogbill v. Boyd, 77 Va. 450. Duty of Substituted Trustee. Where a receiver or substituted trustee is appointed to continue a trust, it is his duty to inform himself as to the legality of previous investments and as to the time when securities may be barred by limitations. Failing in this duty he is liable for loss and it is no defense that he relied upon the care and prudence of the previous trustee. He should inform himself as to whether, in case of a judg- ment obtained by the former trustee, an execution was issued and the proper steps taken to keep the judgment alive. Eush's Ex'r. v. Steele, 93 Va. 526. Confederate Bonds and Slaves. There are numerous cases dealing with the question of the liability of trustees who invested in Confederate bonds and slaves. Generally in these cases the liability of the trustee for loss depended upon the circumstances. If he invested in such bonds, after it was generally known that they were depreciating, he was guilty of negligence. Fultz V. Brightwell, 77 Va. 742; LeGrand's Admr. v. Fitch, 79 Va. 635; Douglass V. Stephenson's Ex'r., 75 Va. 747; Crouch v. Davis, Ex'r., 64 Va. 62; Crickard's Ex'r. v. Crickard, 66 Va. 410; Campbell v. Campbell,. 63 Va. 649. WASHINGTON. TRUST COMPANIES. Laws of 1903. (With Amendments to 1914.) Chapter 176, Sec. 6. Loans to Officers, etc., Prohibited. — No trust company now in existence or hereafter organized shall make any loan to any officer, stockholder or employee from its trust funds, and such trust company shall not permit any officer, stockholder or employee to become indebted to it in any way out of its trust funds; any president, vice-presi- dent, director, secretary, treasurer, cashier, teller, clerk or agent of any such corporation who knowingly violates this sec- tion, or who aids or abets any officer, clerk or agent in any such violation, shall be guilty of a felony and punished ac- cordingly. Sec. 9. Loans, etc., on Own Stock. — No trust company shall make any loan on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith ; and stock so purchased or acquired shall within one year from the time of its purchase be sold or disposed of at public or private sale ; provided, that nothing in this section con- tained shall apply to any loan made before the passage of this act. TRUSTEES GENERALLY. Statutes of 1910. (With Amendments to 1914.) Sec. 1545. Administrator Not to Profit or Sufifer Loss. — He shall not make profit by the increase nor suffer loss by the decrease or destruction, without his fault, of any part of the 246 WASHINGTON. 247 estate. He shall account for the excess when he shall have sold any part of the estate for more than the appraisement; and if any has been sold for less than the appraisement, he shall not be responsible for the loss if the sale has been justly made. Sec. 1548. Shall Not Purchase Claim Against Estate. — No administrator or executor shall purchase any claim against the estate he represents; and if he shall have paid any claim for less than its nominal value, he shall only be entitled to charge in his account so much as he shall have actually paid. Sec. 1641. Court May Change Investment.— Tlie Court may, on the application of a guardian or any other person, said guardian having due written notice thereof, order and decree any change to be made in the investment of the estate of any ward that may to such court seem advantageous to such estate. Deposit in Bank. An executor may deposit funds of the estate in a reputable bank, provided he does so in his name as executor. In such a ease he is not liable for loss. In re Kohler's Estate, 15 Wash. 613. Must Exercise Ordinary Care and Good Faith. "Where a trustee has exercised good faith and the care and prudence of the average person, it seems that he will not be liable for loss. Sharp V. Greene, 22 Wash. 677. Guardians. The statutes provide that the guardian shall manage the estate for the best interests of the ward. They also provide that "the court may, upon application of a guardian or any other person, said guar- dian having due written notice thereof, order and decree any change to be made in the investment of the estate of any ward that may to such court seem advantageous to such estate." Statutes, Vol. 1, Sees. 1636, 1641. WEST VIRGINIA. TRUSTEES GENERALLY. Code of 1913. Sec. 3956. If any balance, whether of profits received or estimated, or of interest or principal, be due by any guar- dian, or other person acting as guardian, at the end of any year, which ought to be invested or loaned out within a reasonable time, for the benefit of the ward, and the same remain in the hands of such guardian or other person, he shall be charged with interest thereon from the end of the year in which such balance arose, and so on toties quoties dur- ing the continuance of the trust. Sec. 3958. "Whenever a guardian shall collect any prin- cipal or interest belonging to his ward, he shall have thirty days to invest or loan the same, and shall not be charged with interest thereon until the expiration of said time, unless he shall have made the investment previous thereto, in which case he shall be charged with interest from the time the in- vestment or loan was made. (There is a proviso that the guar- dian may apply each year to the Circuit Court of Chancery, which has jurisdiction over guardians, for instructions regard- ing investments and may thus be relieved from failure to in- vest.) Sec. 3976. The proceeds of sale (of lands held in trust) shall be invested under the direction of the court, for the use and benefit of the persons entitled to the estate, and in case of a trust estate, subject to the uses, limitations, and condi- tions, contained in the writing creating the trust. But into whosesoever hands the said proceeds may be placed, the court shall take ample security, and from time to time require ad- ditional security, if necessary, and make any other proper orders for the faithful application of the fund, and for the 248 WEST VIRGINIA. 2-19 management and preservation of any property, or securities in which the same may be invested, and for the protection of the rights of all persons interested therein, whether such rights be vested or contingent. Sec. 4049. When it appears by a report (of a fiduciary) made as aforesaid, or a special report of the commissioner of accounts, that money is in the hands of any such fiduciary, the court before which the report so comes may order the same to be invested or loaned out, or make such other order respecting the same as may seem to it proper. TRUST COMPANIES. Trust Funds to be Kept Separate.— Section 4, of the Trust Company Law, provides that, "Every such company shall keep all trust funds and investments separate and apart from the assets of the company, and all investments made by the said company as fiduciary shall be so designated that the trust to Avhich such investment shall belong shall be clearly shown; and such funds shall be held for the uses designated and shall not be liable for any other obligations of such company." There seem to be no other provisions regarding investments by trust companies of funds held in trust. Deposit in Bank. A trustee may deposit trust funds in a reputable bank provided he does so in a separate account from his own and in his name as trustee. Wagner v. Coen, 41 W. Ya. 351. Confederate Bonds. As to liability for investment in Confederate Bonds, see Knight v. Watt's Admr., 26 W. Va. 175; McClure Admr. v. Johnson, 14 W. Va. 432. Must Know that Funds are Invested as Directed. A trustee who paid a cashier of his bank trust funds to be in- vested in certain United States bonds and who merely assumed that the bonds were kept by the bank for him, but never saw them, is guilty of negligence. When it appeared later that the cashier had not purchased the bonds, the trustee was held liable for the loss. Key V. Hughes' Ex'rs., 32 W. Va. 184. 250 STATE LAWS AND DECISIONS. English EiUe Applied. It seems that the responsibility of trustees is no less rigid in West Virginia than it is in England. Key v. Hughes' Ex'rs., 32 W. Va. 184. Time Allowed Guardian to Invest. A guardian should invest the money received by him within thirty days. Hescht v. Calvert, 32 W. Va. 215. Duty to Collect and Invest. It seems to be the duty of a trustee to call in the estate and invest in authorized securities. Anderson v. Piercy, 20 W. Va. 282. It is the duty of a guardian to collect the assets of the estate and exercise care and diligence in the management of the property and he will be liable for a good debt which he fails to collect. Eoush v. Griffith, 65 W, Va. 752. WISCONSIN. TRUSTEES GENERALLY. Statutes of 1911. (With Amendments to 1914.) Sec, 4030. Power of Testamentary Trustee to Sell.— The county court on application of any such trustee or any person interested, may, after notice to all parties in in- terest, authorize and require such trustee to sell any prop- erty so held in trust in such manner as the court may direct and to invest the proceeds of such sale in such manner as will be most for the interest of all concerned therein; and such court may from time to time make such orders and decrees as it may deem just and reasonable in relation to the sale, management, investment and disposition of such trust property and to the settlement of the accounts of such trustee, but no such order shall be made in violation of the terms of the trust. To keep the trust property from being removed out of the state or improperly or illegally used or invested, the county court shall have the same power as surrogate courts to issue the writ of ne exeat and injunctions. Sec. 3986. Power of Guardian to Sell. — The county courts, in their respective counties, on the application of a guar- dian or of any person interested in tlie estate of any ward, after such notice to all persons interested therein as the court shall direct, may authorize or require the guardian to sell and transfer any stock in public funds or in any bank or other corporation, or any other personal estate or effects held by him as guardian and to invest the proceeds of such sale and also any otlier moneys in his hands in real estate or in any other manner that shall be most for the interest of all concerned therein; and the said court may make such further orders and give such directions as the case 251 252 STATE LAWS AND DECISIONS. may require for managing, investing and disposing of the estate and effects in the hands of the guardian. Statutes of 1911. Sec. 2100b. Every executor, guardian or trustee, except where it is otherwise expressly directed by the will or instru- ment of trust, if any, may invest trust funds in governmental and real estate securities as provided by law, and also in the bonds of any state of the United States, except the states of Nevada and Wyoming, and except also the present territories of the United States (and such territories shall continue to be excepted after admission to statehood). In the bonds of any city, village or county in the State of Wisconsin, and also in the bonds of any county in any other of the states included herein, having a population of not less than twenty-five thousand, and also in the bonds of any county in any other of the states in- cluded herein having a population of not less than thirty-five thousand, provided that such city, county or village shall not have defaulted in the payment of any of its bonded indebted- ness during ten years immediately preceding such investment, and provided, further, that the existing indebtedness of any such city or county be restricted under the laws of the state wherein it may be situated to a sum in the aggregate not ex- ceeding five per centum on the value of the taxable property therein, to be ascertained by the last assessment for the state and county taxes previous to the incurring of such indebted- ness. In the mortgage bonds or preferred stock of any steam railway or railroad corporation in the United States owning and operating not less than five hundred miles of track, which has paid dividends upon its entire capital stock for ten years immediately preceding such investment. In promissory notes, which are or may be amply secured by pledge of any of the bonds, stock or securities in which investment is hereinbefore authorized. Nothing herein contained shall be construed to affect the power or jurisdiction of any court of the State of Wisconsin in respect to trusts and trustees, nor to affect any powers or WISCONSIN. 253 authority as to investments conferred by will or other instru- ment of trust. TRUST COMPANIES. Statutes of 1911. Sec. 2024-77m. Every Such Corporation Shall Keep its Trust Accounts in Books Separate from its Own General Books of Account.— All funds and property held by it in a trust capacity shall, at all times, be kept separate from the funds and property of the corporation, and all deposits by it of such funds in any banking institution shall be deposited as trust funds to its credit as trustee, and not otherwise. Every se- curity in which trust funds or property are invested, shall, at once, upon the receipt thereof, be transferred to it as trustee, executor, administrator, guardian, receiver, assignee or other trustee, as the case may be, for each particular trust or fund by name and immediately entered in the proper books as be- longing to the particular trust whose funds have been invested therein. Any change in such investment shall be fully specified in and under the account of the particular trust to which it belongs, so that all trust funds and property shall be readily identified at any time by any person. Sec. 2024-77n. It shall not loan its fund, trust or other- wise, to any salaried officer or employee, nor shall any such officer or employee become, in any manner, indebted to it by means of an overdraft, promissory note, account, endorsement, guaranty or any other contract; nor shall such corporation establish more than one office of deposit nor establish nor maintain branches. Transfer of Securities Owned by Trust Company to Trust Estate.— Section 2024-77k provides expressly that a trust com- pany which owns securities which are legal investments for trustees may transfer them to a trust estate the same as if the securities were owned by a third person. Dealing with Trust Property. A trustee is not permitted to purchase the trust property or to deal with it for his own benefit. Such transactions are presumptively 254 , STATE LAWS AND DECISIONS, fraudulent, and the beneficiary is not bound thereby. Ludington v. Patton, 111 W. 208; Cook v. Berlin Woolen Mill Co., 43 W. 433; Gillett V. Gillett, 9 W. 194. Deposit in Bank. A trustee may deposit trust funds in a bank of good standing, but he must do so in his name as trustee, or executor or guardian. Wil- liams V. Williams, 55 W. 300; Booth v. Wilkinson, 78 W. 652; O'Connor V. Decker, 95 W. 202. Must Observe Strictly the Terms of the Trust Instrument. Where the trust instrument provided that the trustee should invest in "United States bonds, or other safe manner," it would seem that the other investments should be as safe as United States bonds. If an investment is made in any other mannei', it should be absolutely safe and protected by ample security. There is a question whether or not a trustee who invests in other securities does not become an insurer of such investment. Andrew v. Schmitt, 64 W. 664. But where the powers conferred by the trust instrument are broad and indicate clearly that the trustee shall not be restricted to legal securities, the trustee is bound only to exercise good faith and pru- dence. In re Allis' Estate, 123 W. 223. Duty to Invest. It is the duty of a trustee to invest a trust fund in accordance with the provisions of the instrument creating the trust, or in legal securities. If he fails to invest he will be charged with interest at the rate which he could have obtained upon real estate security of the proper character, or with the common rate of interest. Andrew v. Schmitt, 64 W. 664. Government and Beal Estate Securities. Formerly a trustee was not protected against loss unless he invested in government or real estate securities, or unless he secured the approval of the court for investment in other securities. Simmons v. Oliver, 74 W. 633. In recognition of the decision in this case, the legislature passed a law (Laws of 1903, Ch. 317) authorizing only such investments. The purpose of the act was to extend the field for investments, provided the trustee first obtained an order of court. No other investment came within the protection of the law. In re Allis' Estate, 123 W. 223. But Section 2100b, of the statutes as amended in 1909, now provides for investments in certain named securities, including pre- ferred stock and railroad bonds, without the necessity of an order WISCONSIN. 255 of court. But investments have now been extended by Section 2100b of the Laws of 1909. Business or Trade. A guardian who invested his ward's money in a trade was guilty of conversion and became personally liable for the fund. Martin v. Davis, 80 W. 376. And where a guardian who is a member of a partnership, invests his ward's money in the business with the consent of the other part- ners, the debt becomes a partnership debt. German American Bank V. Magill, 102 W, 582. Investments by Tnist Company as Trustee. Section 1791h, Statutes of 1898 (no longer in force), which gave trust companies the right to invest in certain named securities, "or in such real or personal securities as they may deem proper," did hot apply to funds held by a trust company as executor, administrator or trustee. Such funds must be invested in government or real estate securities or in other securities which have been approved by court order. In re Allis' Estate, 123 "W. 223. The field of investments has now been extended by Section 2100b, Statutes of 1911 (quoted above), to bonds and stock of railroads which meet certain requirements. Foreign Countries — Other States. • Even where a testator gives his trustees "full authority to invest the trust properties in such manner as they shall deem best, with no responsibility for losses, provided they act honestly and in good faith," they must be held to a reasonable discretion and may not invest the fund beyond the jurisdiction of the court, unless expressly authorized so to do. Pabst v. Goodrich, 133 W. 43. Continuing Business of Deceased. In the absence of specific authority, a trustee has no power to con- tinue the business of a deceased. He has a reasonable time within which to close out the business and may purchase goods for that pur- pose where it is necessary for the preservation of the estate. Beggs, Sons & Co. V. Behrend's Estate, 145 N. W. Kep. 207. WYOMING. TRUST COMPANIES. Statutes of 1910. (With Amendmeiits to 1914.) Sec. 4065. The board of directors of any such loan and trust company are hereby authorized to invest the capital of such association, and such money as they may receive from other persons or associations for investment, and to keep the same invested in good securities; and it shall be lawful for such association to make investments of its capital and the funds accumulated by its business and moneys received from other persons and associations, for investment 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 aU 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. Sec. 5576. Referring to an Executor. — He shall not make profit by the increase, nor suffer loss by the decrease or de- struction, without his fault, of any part of the estate. He must account for the excess when he sells any part of the estate for more than the appraisement, and if any is sold for less than the appraisement, he is not responsible for the loss, if the sale has been justly made. Sec. 5759. Referring to Guardians. — If the estate is sold for the purposes mentioned in this chapter, the guardian must apply the proceeds of the sale to such purchase, as far as necessary, and put out the residue, if any, on interest, or re- invest it in the best manner in his power, until the capital is wanted for the maintenance of the ward and his family, or 256 i WYOMING. 257 the education of his children, or for the education of the ward when a minor, in which case the capital may be used for that purpose, as far as may be necessary, in like manner as if it had been personal estate of the ward. Sec. 5760. Investment of Proceeds. — If the estate is sold for the purpose of putting out or investing the proceeds, the guardian must make the investment according to law. Sec. 5772. Court May Order Investment of Funds. — The court or judge, on the application of a guardian or any person interested in the estate of any ward, after such notice to per- sons interested therein as the court or judge shall direct, may authorize and require the guardian to invest the proceeds of sales, and any other of his ward's money in his hands, in real estate or in any other manner most to the interest of all concerned therein; and the court or judge may make such other orders and give such directions as are needful for the management, investment and disposition of the estate and effects as circumstances require. Note. — There are no decisions by the higher courts relating directly to the investment of trust funds. For the general rules applicable, see Part I, herein. PART III. Typical List of State, Municipal and Railroad Bonds Which Are Legal in Three of the Principal States and Which May Serve as a Guide to Trustees in Those States Which Permit Trustees to Invest in Such Bonds. The following list of state, municipal and railroad bonds, which are legal investments in three of the leading states, is given in order that trustees in other states which permit in- vestment in securities of this character may have a guide. The lists for Massachusetts and Connecticut have been se- cured from the banking commissioners of those states and are the most recent published information on the subject. The list for New York has been compiled from the tables of Messrs. White & Kemble and by the kind assistance of Mr. H. D. Bobbins, of N. W. Halsey & Co., and Mr. W. S. Scott, of Wm. A. Read & Co. We believe that it is entirely reliable. The lists may change from time to time, but the securities given are not subject to great fluctuation in value, and are likely to remain legal investments for trustees and savings banks. A list of legal investments adopted by the Supreme Bench of Baltimore has been given at page 110, and it is safe to assume that these securities are legal generally throughout the state of Maryland. May we suggest, in conclusion, that each state could render a real service to trustees by following the practice of Massa- chusetts and Connecticut in having the state banking de- partment prepare and publish a list of investments which are legal for savings banks and trustees. A convenient source of reliable information would thus be provided and a trustee would not be compelled to rely upon the advice of individuals 258 LIST OF INVESTMENTS. 259 or corporations, or the lists prepared by them. Such a ser- vice by the state would cost little in comparison with its great value to the many savings banks and trustees who are com- pelled to select legal investments. Recognizing this fact, the new banking law for the State of New York provides that hereafter the banking department shall prepare such a list of securities. CONNECTICUT. First. Bonds of the United States and District of Columbia. United States Bonds, 2s, 1930; United States Bonds, 3s, 1918 ; United States Bonds, 4s, 1925 ; U. S. Panama Canal 2s, 1936 ; U. S. Panama Canal 3s, 1961 ; District of Co- lumbia, 3.65s, 1924. Second. State Bonds. California Colorado Connecticut Delaware Florida Idaho Indiana Kansas Kentucky Maine jMaryland Massachusetts Minnesota Missouri Montana Nevada New Hampshire New York North Dakota Pennsylvania Rhode Island South Dakota Tennessee Texas Vermont "Washington "Wisconsin Wyoming Third. Legally issued bonds and obligations of any county, town, city, borough, school district, fire district, or sewer district in the State of Connecticut. Fourth. Akron, Ohio Alameda, Cal. Albany, N. Y. Allentown, Pa Cities outside of Connecticut. Altoona, Pa. Amsterdam, N. Y. Anderson, Ind. Atlantic City, N. J. 260 CONNECTICUT. 261 Auburn, N. Y. Aurora, 111. Baltimore, Md. Bangor, Me. Battle Creek, Mich. Bay City, Mich. Beaumont, Tex. Bellingham, Wash. Berkeley, Cal. Binghamton, N, Y. Bloomington, 111. Boston, ]\Iass. Brockton, Mass. Buti'alo, N. Y. Burlington, Vt. Burlington, Iowa Butte, Mont. Cambridge, Mass. Camden, N. J. Canton, Ohio Cedar Rapids, Iowa Chelsea, Mass. Chester, Pa. Chicago, 111. Cincinnati, Ohio Cleveland, Ohio Cohoes, N. Y. Colorado Springs, Colo. Columbus, Ohio Concord, N. H. Council Bluffs, Iowa Covington, Ky. Cranston, R. I. Cumberland, Md. Dallas, Tex. Danville, 111. Davenport, Iowa Dayton, Ohio Decatur, 111. Denver, Colo. Des Moines, Iowa Detroit, Mich. Dubuque, Iowa Duluth, Minn. Easton, Pa. East Liverpool, Ohio East St. Louis, 111. Elgin, 111. Elizabeth, N. J. Elmira, N. Y. El Paso, Tex. Erie, Pa. Evansville, Ind. Fall River, ]\Iass. Fitchburg, Mass. Flint, ]\Iich. Fort Wayne, Ind. Fresno, Cal. Galesburg, 111. Gloucester, Mass. Gloversville, N. Y. Grand Rapids, Mich. Green Bay, Wis. Hamilton, Ohio Hammond, Ind. Harrisburg, Pa. Haverhill, Mass. Hoboken, N. J. Holyoke, INIass. Indianapolis, Ind. Jackson, Mich. Jacksonville, Fla. Jamestown, N. Y. Jersey City, N. J. Joliet, 111. Joplin, ]\[o. 262 LIST OF INVESTMENTS. Kalamazoo, Mich. Kansas City, Kan. Kansas City, Mo. Kenosha, Wis. Kingston, N. Y. Knoxville, Tenn. LaCrosse, Wis. Lafayette, Ind. Lancaster, Penn. Lansing, Mich. Lawrence, Mass. Lewiston, Me. Lexington, Ky. Lima, Ohio. Lincoln, Nebraska. Los Angeles, Cal. Louisville, Ky. Lowell, Mass. Lynn, Mass. Madison, AYis. Maiden, Mass. Manchester, N. H. " Mansfield, Ohio jMilwaukee, Wis. Moline, 111. Muncie, Ind. Muskegon, Mich. Nashua, N. H. Newark, N. J. Newark, Ohio New Albany, Ind. New Bedford, Mass. New Brunswick, N. J. Newburgh, N. Y. New Castle, Pa. Newport, Ky. Newport, R. I. Newton, Mass. Oakland, Cal. Omaha, Neb. Oshkosh, Wis. Oswego, N. Y. Ottumwa, Iowa Pa due ah, Ky. Pasadena, Cal. Passaic, N. J. Pater son, N. J. Pawtueket, R. I. Peoria, 111. Perth Amboy, N. J. Philadelphia, Pa. Pittsburgh, Pa. Plainfield, N. J. Portland, Me. Portland, Ore. Portsmouth, Ohio Providence, R. I. Quincy, 111. , Quincy, Mass. Racine, Wis. Reading, Pa. Richmond, Ind. Rochester, N. Y. Rockford, 111. Rock Island, 111. Rome, N. Y. Sacramento, Cal. Saginaw, ]\Iich. St. Joseph, Mo. St. Louis, Mo. St. Paul, Minn. Salem, Mass. San Antonio, Tex. San Francisco, Cal. Schenectady, N. Y. Scranton, Pa. CONNECTICUT. 263 Sheboygan, Wis. Shenandoah, Pa. Sioux City, Iowa. Somerville, ]\Iass. South Bend, Ind. South Omaha, Neb. Springfield, 111. Springfield, Mass. Springfield, Mo. Springfield, Ohio Stockton, Cal. Steubenville, Ohio Syracuse, N. Y. Tacoma, Wash. Taunton, Mass. Terre Haute, Ind. Toledo, Ohio Topeka, Kan. Trenton, N. J. Troy, X. Y. Utica, N. Y. Waco, Tex. Waltham, Mass. Waterloo, Iowa AVatertown, N. Y. Wichita, Kan. Wilkes-Barre, Pa. Williamsport, Pa. Worcester, Mass. York, Pa. Youngstown, Ohio Zanesville, Ohio. ( < 1 1 ( < Boston & Lowell R < ( K ( < ( ( ( ( < ( ( ( Fifth. Railroad Bonds BONDS OF NEW ENGLAND COMPANIES. Boston & Albany R. R Debentures 3i/^s, 1951 31/2S, 1952 4s, 1933 4s, 1934 " 4s, 1935 " 41/2S, 1937 " 5s, 1938 " 5s, 1963 R Debentures 4s, 1915 " 4s, 1916 4s, 1917 4s, 1918 4s, 1926 4s, 1927 4s, 1929 4s, 1932 31/os, 1919 31/os, 1921 264 LIST OF INVESTMENTS. < ( (< Boston & Lowell E. R Debentures 31/28, 1923 31/2S, 1925 41/2S, 1933 Concord & Montreal R. R Consolidated 4s, 1920 ** *' Debentures 4s, 1920 " " 31/2S, 1920 Connecticut River R. R Debentures 3i/^s, 1921 *' " *' " 31/2S, 1923 " «' " " 4s, 1943 Conn. & Passumpsic River R. R 4s, 1943 Fitchburg R. R Debentures 4s, 1915 4s, 1916 4s, 1920 31/2S, 1920 31/2S, 1921 4s, 1925 4s, 1927 4s, 1928 4s, 1937 41/2S, 1928 41/2S, 1932 41/2S, 1933 5s, 1934 First 7s, 1924 .Plain 31/2S, 1923 ( ( ( ( < ( < ( Troy & Boston R. R. . Vermont & Mass. R. R. MAINE CENTRAL SYSTEM. Belfast & Moosehead Lake R. R. .First 4s, 1920 Collateral Trust 5s, 1923 Consolidated Refunding 5s, 1961 Dexter & Newport R. R First 4s, 1917 Dexter & Piscataquis R. R " 4s, 1929 European & No. American Ry. . . . " 4s, 1933 Knox & Lincoln Ry 5s, 1921 Maine Shore Line R. R First 6s, 1923 Notes 5s, 1919 Portland & Ogdensburg Ry First 4y2S, 1928 CONNECTICUT. 265 Portland Terminal Co. (Guar.) . .First 4s, 1961 Portland & Rumford Falls Ry . . Consolidated 4s, 1926 Penobscot Shore Line R. R First 4s, 1920 Somerset Railway " 5s, 1917 Consolidated 4s, 1950 First and Ref 'ding.4s, 1955 Sinking Fund Improvement 4i/^s, 1916 41/28,1917 Upper Coos R. R First 4s, 1930 " Extension 41/2S, 1930 New London Northern R. R First 4s, 1940 NEW YORK, NEW HAVEN & HARTFOED SYSTEM. ( < < < N. Y., N. H. & H. R. R Convertible 31/2S, 1956 " 6s, 1948 Debentures ^i^s, 1947 " 31/2S, 1954 4s, 1947 4s, 1955 4s, 1956 Eur'p'n Loan Deb's. 4s, 1922 Boston & New York Air Line. . . . First 4s, 1955 Boston & Providence Debentures 4s, 1918 Branford Electric Company First 5s, 1937 Consolidated Railway Debentures 4s, 1954 " 4s, 1955 " 4s, 1956 " 3s, 31/2S and 4s, 1930 Cent. New England Ry. (Guar) . .Refunding 4s, 1961 Danbury & Norwalk R. R Consolidated 5s and 6s, 1920 " General 5s, 1925 " Refunding 4s, 1955 Greenwich Tramway Company. . .First 5s, 1931 Harlem River & Port Chester 4s, 1954 Hartford Street Railway First 4s, 1930 " Debentures 4s, 1930 266 LIST OF INVESTMENTS. Hartf 'd, Man. & RockviUe Ty. Co, Holyoke & Westfield R. R Housatonic Railroad Meriden Horse R. R Meriden, South. & Com. Ty. Co . . Middletown Horse Ry Montville Street Ry. Naugatuck R. R New England R. R. New Haven & Centerville St. Ry. New Haven & Northampton R. R. New Haven & Derby R. R New Haven Street Railway New London Street Railway. . . . N. Y. Connecting Ry. (Guar.) . . , New York & Stamf 'd Ry. (Guar.) N. Y., W. & Boston Ry. (Guar.) N, Y,, Providence & Boston R. R. Norwich Street Railway Old Colony R. R (( Norwich & "Worcester R. R Pawtuxet Valley R. R Providence & Springfield R. R. . Providence & "Worcester R. R. , Providence Terminal Co Portland Street Railway Stafford Springs St. Ry Torrington & Winchester St. Ry , "Worcester & Conn. Eastern. . . , Sullivan County R. R Yermont Valley R. R First 5s " 41/4S Consolidated 5s 5s, First 5s " 5s " 5s " 4s Debentures 3i/^s Consolidated 4s 5s First 5s Refunding 4s Consolidated 5s Consolidated 5s First 5s " 41/2S " 4s " 41/2S General 4s First 5s Debentures 4s 4s 4s 31/2S 4s First 4s 5s 4s 4s 5s 5s 5s 41/2S First 4s First 4%s 1924 1951 1937 1924 1928 1914 1920 1954 1930 1945 1945 1933 1956 1918 1914 1923 1953 1958 1946 1942 1923 1938 1924 1925 1932 1927 1925 1922 1947 1956 1916 1956 1917 1943 1924 1940 CONNECTICUT. 267 ATCHISON, TOPEKA & SANTA FE SYSTEM. General Mortgage 4s, 1995 Chicago & St. Louis Ry First 6s, 1915 Chic, Santa Fe & California Ry . . " 5s, 1937 Eastern Oklahoma Division " 4s, 1928 Hutchinson & Southern Ry " 5s, 1928 San Fran. & San Joaquin Val. Ry. " 5s, 1940 Transcontinental Short Line " 4s, 1958 ATLANTIC COAST LINE SYSTEM. First Consolidated 4s, 1952 Alabama Midland Ry First 5s, 1928 Ashley River R. R " 8s, 1915 Atlantic Coast Line of So. Caro. . " 4s, 1948 Brunswick & Western R. R " 4s, 1938 Charleston & Savannah Ry " 7s, 1936 Florida Southern R. R " 4s, 1945 Northeastern R. R Consolidated 6s, 1933 Norfolk & Carolina R. R .First 5s, 1939 " Second 5s, 1946 Petersburg R. R Consolidated A 5s, 1926 " " B 6s, 1926 Richmond & Petersburg R. R First 6s and 7s, 1915 " Consolidated 41/2S, 1940 Sanford & St. Petersburg R. R. . . First 4s, 1924 Savannah, Fla. & Western Ry. . . " 5s and 6s, 1934 Silver Springs, Ocala & Gulf R. R. " 4s, 1918 Wilmington & Weldon R. R General 4s and 5s, 1935 Wilmington & New Berne R. R. .First 4s, 1947 BALTIMORE & OHIO SYSTEM. Baltimore & Ohio R. R Extended 4s, 1935 " First 4s, 1948 " Prior Lien Si/os, 1925 Southwestern Division 3i/os, 1925 Bait. & New York R. R. (Guar.) . . First 5s, 1939 Cleveland T. & V. R. R. (Guar.) . . " 4s, 1995 268 LIST OF INVESTMENTS. Huntington & Big Sandy R. R First 6s, 1922 Monongahela River R. R Ohio River R. R Ravensw'd, Spen. & Glenville Ry. Schuylkill R. E. S. R. R. (Guar.) . West Va. & Pittsburg R. R . . Washington Term Co. (Guar.) . . . 5s, 1919 5s, 1936 6s, 1920 4s, 1925 4s, 1990 3%s and 4s, 1945 CENTRAL RAILWAY OF NEW JERSEY. General Mortgage , 5s, 1987 Amer. Dock & Imp. Co. (Guar.) . .First 5s, 1921 CHICAGO, MILWAUKEE & ST. PAUL SYSTEM. General Mortgage Si^s, 4s, and 4i/2S, 1989 Gen. and Ref. (Not in report but probably legal) 4i4s, 2014 Chicago, Mil. & Puget Sound First 4s, 1949 Chicago & Lake Superior Div. ... " 5s, 1921 Chicago & Mo. River Div " 5s, 1926 Chicago & Pac. Western Div " 5s, 1921 Dakota & Gt. Southern Ry '* 5s, 1916 Dubuque Division " 6s, 1920 Fargo & Southern Ry " 6s, 1924 Milwaukee & Northern Extended 41/28, 1934 La Crosse & Davenport Div First 5s, 1919 Wisconsin & Minn. Div '' ....5s, 1921 Wisconsin Valley Div " 6s, 1920 CHICAGO, BURLINGTON & QUINCY SYSTEM. General Mortgage 4s, 1958 Burlington & IMissouri River Consolidated 6s, 1918 Denver Extension 4s, 1922 Illinois Division 3I/2S and 4s, 1949 Iowa Division 4s and 5s, 1919 Nebraska Extension 4s, 1927 Nodaway Valley R. R First 7s, 1920 Republican Valley R. R " 6s, 1919 Tarkio Valley R. R " 7s, 1920 CONNECTICUT. 269 CHICAGO & NORTHWESTERN SYSTEM. General JNIortgage Si/^s and 4s, 1987 Boyer Valley R. R First Si/gS, 1923 Cedar Rapids & Missouri R. R . . . . " 7s, 1916 Collateral Trust 4s, 1926 Consolidated Sinking Fund 7s, 1915 Des Plaines Valley Ry First 41/2S, 1947 Fremont, Elkhorn & Mo. Val. R.R.Consolidated 6s, 1933 Iowa, Minn. & Northwestern Ry. .First Si/os, 1935 Mani., Green Bay & Northw'n Ry. " 31/2S, 1941 Mankato & New Ulm Ry " 31/08,1929 Minn. & So. Dakota Ry " 31/2S, 1935 Milwaukee & State Line Ry " 31/2S, 1941 Mil., Sparta & Northwestern Ry. . " 4s, 1947 Mil., Lake Shore & Western Ry. . " 6s, 1921 Ashland Division " 6s, 1925 Extension and Imp 5s, 1929 j\Iarshfield Extension First 5s, 1922 Michigan Division " 6s, 1924 Minnesota & Iowa Ry " 31/2S, 1924 Northwestern Union Ry " 7s, 1917 Princeton & Northwestern Ry " 31/28, 1926 Peoria & Northwestern Ry " 31/28, 1926 Sioux City & Pacific R. R " 31/2S, 1936 St. Louis, Peoria & Northwest 'n. " 5s, 1948 Southern Iowa Ry " 31^8,1925 St. Paul East'n G. T. Ry. (Guar.). " 41/2S, 1947 Winona & St. Peter R. R Extended 7s, 1916 Wisconsin Northern First 48, 1931 CHICAGO, ST. PAUL, MINNEAPOLIS & OMAHA SYSTEM. Consolidated 6s and 31/2S, 1930 Chicago, St. Paul & Minn. Ry First 6s, 1918 North AVisconsin Ry " 6s, 1930 St. Paul & Sioux City R. R " 6s, 1919 Sault Ste. Marie & SouthAv 'n Ry . . " os, 1915 Superior Short Line Ry " 5s, 1930 270 LIST OP INVESTMENTS. CHICAGO, ROCK ISLAND & PACIFIC SYSTEM. Chicago, Rock Island & Pac R. R. First Mortgage ... .6s, 1917 Chicago, Rock Island & Pac. Ry . . General 4s, 1988 DELAWARE & HUDSON SYSTEM. Adirondack Ry First 41/2S, 1942 Albany & Susq. R. R. (Guar.).. . Convertible 31/2S, 1946 Delaware & Hudson Canal Co. — Pennsylvania Division First 7s, 1917 Delaware & Hudson Co First and Ref g. . . .4s, 1943 Schenectady & Duanesburg R. R. First 6s, 1924 DELAWARE, LACKAWANNA & WESTERN SYSTEM. Bangor & Portland Ry First 6s, 1930 Morris & Essex R. R. (Guar.) .... Refunding 31/28, 2000 Warren R. R. (Guar.) " 31/2S, 2000 GREAT NORTHERN SYSTEM. First and Refunding 414s, 1961 Eastern R. R. of Minn., No. Div. . First 4s, 1948 Minneapolis Union Ry " 5s and 6s, 1922 Montana Central Ry " 5s and 6s, 1937 Spokane Falls & North 'n Ry.... " 6s, 1939 St. Paul, Minn. & Manitoba Ry. . Cons'd 4s, 41/2S, and 6s, 1933 Montana Extension 4s, 1937 Pacific Extension 4s, 1940 Wilmar & Sioux Falls Ry First 5s, 1938 ILLINOIS CENTRAL SYSTEM. Collateral Trust 31/28, 1950 Cairo Bridge 48, 1950 Chic, St. Louis & New Orl's R. R. Consolidated . .31/2S, 1951 Memphis Division 4s, 1951 First Mortgage, Gold 31/2S and 4s, 1951 First Mortgage, Gold Extension Si/os, 1951 First Mortgage, Sterling Exten 3s and 4s, 1951 CONNECTICUT. 271 First Mortgage, Sterling Exten Si/os, 1950 Kankakee & Southwestern R. R 5s, 1921 Litchfield Division 3s, 1951 Louisville Division Si'os, 1953 Purchased Lines 31/28, 1952 Refunding Mortgage 4s, 1955 St. Louis Division 3s and 31/2S, 1951 Springfield Division 31/28, 1951 Omaha Division 3.s, 1951 AYestern Lines 4s, 1951 LAKE SHORE & MICHIGAN SOUTHERN RAILWAY. General Mortgage 3I/2S, 1997 Kalamazoo & White Pigeon R. R.First 5s, 1940 LEHIGH VALLEY SYSTEM. Annuity Perpetual Consolidated -H^s and 6s, Consolidated W2S and 6s, 1923 First Mortgage -Is, 1948 Easton & Amboy (Guar.) First 5s, 1920 LOUISVILLE & NASHVILLE SYSTEM. First Mortgage First 5s, 1937 General :Mortgage 6s, 1930 Unified Mortgage -is, 1940 Evansville, Hen. & Nashv. Div. . . First 6s, 1919 Mobile & Montgomery Ry " 41/08, 1945 Nashv., Flor. & Sheff. Ry. (Guar.) . " 5s, 1937 New Orleans & Mobile Div " 6s, 1930 Pensaeola Division " 6s, 1920 Pensaeola & Atlantic (Guar.) " 6s, 1921 Paducah & Memphis Division. ... " 4s, 1946 Southeast & St. Louis Div " 6s, 1921 Trust " 5s, 1931 Louisville, Cin. & Lexington General 41/08, 1931 Louis. & Nash. T'l Co. (Guar.) . .First 4s, 1952 So. & No. Alabama R. R. (Guar.). Consolidated 5s, 1936 272 LIST OF INVESTMENTS. MICHIGAN CENTRAL SYSTEM. Detroit & Bay City First 5s, 1931 First Mortgage " 31/28, 1952 Joliet & No. Indiana " 4s, 1957 Jackson, Lansing & Saginaw " 3i^s, 1951 Kalamazoo & South Haven " 5s, 1939 Michigan Air Line " 4s, 1940 MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE SYSTEM Pirst Consolidated 4s, 1938 Minn. & Pacific Ry First 4s, 1936 Minn., Sault Ste. Marie & At. Ry. " 4s, 1926 MOBILE & OHIO SYSTEM. First Mortgage 6s, 1927 NASHVILLE, CHATTANOOGA & ST. LOUIS SYSTEM. Consolidated Mortgage 5s, 1928 Centreville Branch First 6s, 1923 Fayette & McMinnville Branch. . Jasper Branch Extension Lebanon Branch Memphis Union Sta. Co. (Guar.). Tracy City Branch ,6s, 1917 ,6s, 1923 ,6s, 1917 ,5s, 1959 ,6s, 1917 NEW YORK CENTRAL SYSTEM. First Mortgage 31/2S, 1997 Refunding and Improvement 4i/2S, 2013 Beech Creek R. R. (Guar.) First 4s, 1936 Beech Creek Exten. R. R. (Guar.). " 31/2S, 1951 .Consolidated 4s, 1955 Carthage, Water. & Sack. H. R. R.First 5s, 1931 Carthage & Adirondack Ry " 4s, 1981 Gouverneur & Oswegatchie R. R. " 5s, 1942 Little Falls & Dolgeville " 3s, 1932 Mohawk & Malone Ry " 4s, 1991 CONNECTICUT. 273 Mohawk & Malone Ry Consolidated .... 31/2S, 2002 New York & Putnam R. R " 4s, 1993 New York & Northern Ry First 5s, 1927 New Jersey June. R. R. (Guar.) . " 4s, 1986 NorAvood & Montreal R. R " 5s, 1916 Oswego R. R. Bridge " 6s, 1915 Oswego & Rome R. R " 7s, 1915 Pine Creek Ry. (Guar.) " 6s, 1932 Rome, Water. & Ogdens. R. R. . . . Cons'd 31/2S, 4s, and 5s, 1922 " " " " Terminal 5s, 1918 Syracuse, Phoenix & Oswego. . . . First 6s, 1915 Spuyten D 'vil & Pt. Morris R. R . " 31/2S, 1959 West Shore R. R. (Guar.) " 4s, 2361 Utiea & Black River R. R " 4s, 1922 NORFOLK & WESTERN SYSTEM. Consolidated Mortgage 4s, 1996 General Mortgage 6s, 1931 €olumbus Con. & Terminal Co. .First 5s, 1922 New River Division " 6s, 1932 Improvement and Exten. Mort 6s, 1934 Scioto Valley & New Eng. R. R . . First 4s, 1989 NORTHERN PACIFIC SYSTEM. General Lien 3s, 2047 Prior Lien 4s, 1997 St. Paul & Northern Pacific Ry . . First 6s, 1923 St. Paul & Duluth R. R Consolidated 4s, 1968 " First 5s, 1931 " Second 5s, 1917 Duluth Short Line First '5s, 1916 Wash. & Columbia River Ry " 4s, 1935 PENNSYLVANIA SYSTEM. Consolidated Mortgage 5s, 1919 4s, 1943 '* " 4s, 1948 274 LIST OF INVESTMENTS. Consolidated Mortgage Allegheny Valley Ry Belvidere Delaware R. R. (Guar.) Cambria & Clearfield Ry Clearfield & Jefferson Ry Cleveland & Pittsburgh (Guar.) Connecting Ry. (Guar.) Dela. River & Bridge Co. (Guar.) Junction R. R New York Bay R. R. (Guar.) . . . , Pennsylvania & Northw 'n R. R. . Philadelphia & Erie Ry Pittsburgh, Va. & Charleston Ry, Phila., Bait. & Washington R. R. , Phila., Wil. & Baltimore R. R. . . . 31/2S General 4s .Consolidated 4s 4s ....31/2S General 4s First 6s General 3I/2S Si/ss " 31/28 and 41/2S 4s < i Pitts., Cin., Chic. & St. Louis, I c i i i i i I I i ( ( < i .First 4s General 3i^s First 4s General 5s " 4s, 5s, and 6s First 4s '' 4s 4s 4s 4s 4s 1 1 ( i 1 1 1 1 ( ( (( < ( (( (( (( Consolidated Chartier Ry Chic, St. Louis & Pittsburgh. . Sunbury & Lewiston Ry Sunbury, Haz. & Wilkes-Barre Ry Southwest Pennsylvania Ry United New Jer. R. R. & Canal Co ...41/2S ...41/2S . . .41/2S 4s 4s 4s 4s ...31/2S ...31/2S i < < ( < ( i i I i First Consolidated 5s First 4s " 5s " 7s General 4s 4s 4s 1945 1942 1925 1927 1943 1955 1927 1948 1950 1942 1951 1936 1930 1948 1930 1920 1943 1943 1917 1922 1926 1932 1940 1963 1942 1945 1953 1957 1960 1949 1931 1932 1936 1928 1917 1948 1944 1929 CONNECTICUT. 275 United New Jer. R. R. & Canal Co. General 4s, 1923 tc a ii '« " " 31/28, 1951 West Chester R. R First 5s, 1919 Western Pennsylvania R. R Consolidated 4s, 1928 PITTSBUKGH & LAKE ERIE SYSTEM. Pittsburgh & Lake Erie R. R First 6s, 1928 Pitts., McK. & Y. Ry. (Guar.) .... " 6s, 1932 READING SYSTEM. Philadelphia & Reading R. R 5s, 1933 SOUTHERN PACIFIC SYSTEM. Northern Ry First 5s, 1938 Northern California Ry " ^s, 1929 Southern Pacific Branch Ry " 6s, 1937 Southern Pacific R. R Consolidated 5s, 1937 " " " Refunding 4s, 1955 UNION PACIFIC RAILROAD. First Mortgage '*^' ^^'^^ Refunding Mortgage "^s, 2008 VANDALIA RAILROAD. Consolidated A 4s, 1955 Consolidated B 4s, 1957 Terre Haute & Indianapolis R. R. Consolidated 5s, 1925 Railroad bonds which are at present not legal under the gen- eral provisions of the law, but which are legal investments under Section 36. ATCHISON, TOPEKA & SANTA FE SYSTEM. California-Arizona Lines First and Ref 'g. .41/28, 1962 Ashland Coal & Iron Ry First 4s, 1925 Boston, Revere, B. & Lynn R. R. . " 41/28, 1927 Bridgeton & Saco River R. R " 4s, 1928 276 LIST OF INVESTMENTS. BUFFALO, ROCHESTER & PITTSBURGH SYSTEM. Allegheny & Western Ry First 4s, 1998 Buffalo, Roch. & Pittsburgh Ry . . General 5s, 1937 " ..Consolidated 41/2S, 1957 Clearfield & Mahoning Ry First 5s, 1943 Lincoln Park & Charlotte R. R.. " 5s, 1939 Rochester & Pittsburgh R. R. . . . " 6s, 1921 " Consolidated . . . . . .6s, 1922 Cornwall & Lebanon R. R First 4s, 1921 Coudersport & Pt. Allegheny R. R.First 5s, 1916 CENTRAL RAILWAY OF NEW JERSEY SYSTEM. New York & Long Branch R. R. . General 4s and 5s, 1941 Wilkes-Barre & Scranton Ry First 41/2S, 1938 CHICAGO & NORTHWESTERN SYSTEM. Collateral Trust 5s and 6s, 1929 CONNECTICUT RAILWAY & LIGHTING COMPANY First Refunding 4y2S, 1951 Bridgeport Traction Co First 5s, 1923 Conn. Lighting & Power Co " os, 1939 Chicago & West. Indiana R. R First 6s, 1932 Cumberland & Pennsylvania R. R.First 5s, 1921 DELAWARE & HUDSON SYSTEM. Rensselaer & Saratoga R. R First 7s, 1921 Ticonderoga R. R " 6s, 1921 DELAWARE, LACKAWANNA & WESTERN SYSTEM. Morris & Essex R. R Consolidated 7s, 1915 N. Y., Lacka. & Western Ry First 6s, 1921 Detroit & Toledo Shore Line R. R.First 4s, 1953 Elgin, Joliet & Eastern Ry First 5s, 1941 CONNECTICUT. ' 277 ERIE RAILROAD SYSTEM. Cleveland & Mahoning Val. Ry . . First 5s, 1938 ..6s, 1928 ..5s, 1926 , ..6s, 1917 ...6s, 1917 ,41/28, 1919 Goshen & Deckertown R. R Montgomery & Erie Ry New Castle & Shenango Val. R. R. Northern Ry. of New Jersey. . . . Sharon Ry Genesee & Wyoming R. R First 5s, 1929' HOOKING VAIiIiEY RAILWAY COMPAlTy. First Consolidated 41/2S, 1999 Columbus & Hocking Val. R. R. . First Ext 4s, 1948 Columbus & Toledo R. R " " 4s, 1955 ILLINOIS CENTRAL SYSTEM. Chic, St. Louis & New Orleans. .Consolidated 5s, 1951 LOUISVILLE & NASHVILLE. Atlanta, Knoxville & Cin, Div. . . First 4s, 1955 LAKE SHORE & MICHIGAN SOUTHERN SYSTEM. Kalamazoo, Allegan & G. R. R. R.First 5s, 1938 Mahoning Coal R. R " 5s, 1934 McKeesport & Belle Vernon R. R . " 6s, 1918 MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE SYSTEM. Central Terminal Ry First 4s, 1941 Mobile & Ohio R. R First Extension 6s, 1927 Narragansett Pier R. R First 4s, 1916 NEW YORK CENTRAL SYSTEM. New York & Harlem R. R Refunding 31/2S, 2000 NORTHERN PACIFIC SYSTEM. St. Paul & Duluth Division 4s, 1996 278 LIST OF INVESTMENTS. PENNSYIiVAlHA SYSTEM. Belvidere Delaware R. R Consolidated 4s, 1933 Camden & Burlington Co. R. R. . First 4s, 1927 Delaware R. R General 41/2S, 1932 Elmira & Williamsport R. R First 4s, 1950 Erie & Pittsburgh R. R General 31/2S, 1940 Little Miami R. R " 4s, 1962 Massillon & Cleveland R. R First 5s, 1920 N. Y., Phila. & Norfolk R. R. .. . " 4s, 1939 Ohio Connecting Ry " 4s, 1943 Pitts., Youngstown & Ashta. R. R. Consolidated 5s, 1927 " General 4s, 1948 Pitts., Wheeling & Kentucky R. R. Consolidated 6s, 1934 Sham. Valley & Pottsville R. R. . . First 31/28, 1931 West Jersey & Sea Shore R. R. Series A, B, C, D, E, and F 31/2S and 4s, 1936 Raritan River R. R First : 5s, 1939 READING SYSTEM. Delaware & Bound Brook R. R. .Consolidated 31/28, 1955 East Pennsylvania R. R First 4s, 1958 North Pennsylvania R. R " 4s, 1936 Phila., Harrisburg & Pitts. R. R. . " 58,1925 Phila. & Reading R. R Improvement 4s, 1947 " " " Terminal 5s, 1941 Reading Belt R. R First 4s, 1950 Sham., Sunbury & Lewiston R. R. " 5s, 1912 ST. LOUIS, IRON MOUNTAIN & SOUTHERN SYSTEM. River & Gulf Div First 4s, 1933 SOUTHERN PACIFIC SYSTEM. San Francisco Terminal 4s, 1950 TERMINAL RAILWAY ASSOCIATION OF ST. LOUIS. Consolidated Mortgage 5s, 1944 First Mortgage ^V2^, 1939 CONNECTICUT. 279 General Refunding Mortgage -is, 1953 St. Louis Mer. Bridge Term. Ry. .First 5s, 1930 St. Louis Merchants' Bridge Co . . " 6s, 1929 WESTERN MARYLAND SYSTEM. Bait. & Cumberland Valley Exten.First Gs, 1931 Baltimore & Harrisburg Ry " 5s, 1936 Sixth. Equipment Trust Obligations as follows : Savings Banks may invest not exceeding two per centum of their deposits and surplus therein. BALTIMORE & OHIO RAILROAD. Equipment Trust of 1912 4y2S, .serially to 1922 Equipment Trust of 1913 41/98, serially to 1923 CENTRAL RAILROAD OF NEW JERSEY. Series D 4s, serially to 1915 Series E 4s, serially to 1916 Series F 4s, serially to 1917 ILLINOIS CENTRAL RAILROAD. Series A 4i^s, semi-annually to 1923 Series B 5s, semi-annually to 1923 LEHIGH VALLEY RAILROAD. Series J 41/2S, serially to 1917 LOUISVILLE & NASHVILLE RAILROAD. Series A 5s, semi-annually to 1923 MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE. Series A 5s, serially to 1917 Series B 4i/oS, serially to 1920 Series C 4i/oS, serially to 1921 Series D 4i/oS, serially to 1922 280 LIST OF INVESTMENTS. NEW YORK CENTRAL LINES. Joint Equipment Trust 5s, serially, 1907 to 1922 " 41/2S, serially, 1910 to 1925 " 41/28, serially, 1912 to 1927 " 41/2S, serially, 1913 to 1928 B. & A. Equipment Trust 41/2S, serially, 1913 to 1927 NEW YORK, NEW HAVEN & HARTFORD RAILROAD. Equipment Trust of 1914 serially to 1929 Seventh. Bonds of Street Railways in Connecticut. Savings Banks may invest not exceeding two per centum of their deposits and surplus therein. Bristol & Plainville Tramway Co . First 4l^s, 1945 Eig-hth. Bonds of Water Companies in Connecticut. Savings Banks may invest not exceeding two per centum of their deposits and surplus therein. Bridgeport Hydraulic Co First 4s, 1925 " Notes 5s, 1916 New Haven "Water Co Debentures 4s, 1915 " " 41/2S, 1962 Ninth. Bonds of Telephone Companies in Connecticut. Savings Banks may invest not exceeding two per centum of their deposits and surplus therein. So. New England Telep. Co First 5s, 1948 Tenth. Bonds of Telephone Companies Outside of Connecticut. Savings Banks may invest not exceeding two per centum of their deposits and surplus therein. American Telep. & Teleg. Co Collateral Trust 4s, 1929 MASSACHUSETTS. PUBLIC FUNDS. Public funds of the United States and of the following States : California Connecticut Delaware District of Columbia Illinois Indiana Iowa Maine Massachusetts Michigan Minnesota Missouri Nebraska New Hampshire New Jersey New York Ohio Oregon Pennsylvania Rhode Island Vermont "Washington Wisconsin Bonds or notes of the following counties, cities, towns and districts in New England: MAINE. Counties. Androscoggin Aroostook Kennebec Cities. Augusta Bangor Belfast Biddeford Brewer Eastport Ellsworth Gardiner Hallowell Lewiston Portland Saco Westbrook Towns. Boothbay Harbor Brunswick Caribou Dexter 281 282 LIST OP INVESTMENTS. Fairfield Nashua Houlton Portsmouth Kennebunk Rochester Lisbon Somersworth Lubec Towns. Old Orchard Pittsfield Ashland Rumford Claremont Sanford Derry Yarmouth Gorham Haverhill Water Districts. Jaft'rey Augusta Lancaster Brunswick and Milford Topsham Gardiner Newmarket Northumberland Kennebec Peterborough Kittery * Plaistow Portland Raymond Va7i Bur en * Salem Sunapee NEW HAMPSHIRE. Walpole Wilton Counties. Belknap Water District. Hillsborough North Conway * Merrimack Rockingham VERMONT. Cities. Cities. Berlin Barre Concord Burlington Dover :\Iontpelier Franklin Rutland Keene St. Albans Manchester Vergennes *Less than 5,000 inhabitants within the district, therefore only bonds issued prior to June 8, 1908, are legal. MASSACHUSETTS. 283 Towns. Bennington Brattleborough Ludlow MASSACHUSETTS. Bonds or notes of any county, city, town or incor- porated district! of the Common- wealth of I\Iassa- chusetts. RHODE ISLAND. Cities. Central Falls Cranston Newport Providence Woonsocket % Towns. Barrington Burrillville Bristol Coventry Cumberland East Greenwich East Providence $ Jamestown Lincoln $ North Smithfield South Kingstown Tiverton "SVarren AVarwick Westerly CONNECTICUT. County. Fairfield Cities. Ansonia Bridgeport Bristol D anbury Derby Hartford ]\Iiddletown New Britain New Haven New London Putnam Rockville Stamford AVaterbury AYillimantic Towns. Branford Brooklyn Canton J oh nston § t The banking department has been unable to learn of any incor- porated district in Massachusetts the net indebtedness of which is in excess of the limit prescribed by law. t Net indebtedness, as defined by new law, in excess of legal limit, therefore only bonds issued prior to June 8, 1908, are legal. $ Only those which have been assumed by the city of Providence. 284 LIST OF INVESTMENTS. East Hartford East Lyme Ellington Enfield Essex Fairfield Glastonbury Greenwich Hamden Litchfield Madison Manchester Meriden Newtown Norfolk Norwich Plainfield Ridgefield Southington South "Windsor Stafford Stamford Thomaston Torrington "Wallingford Watertown West Hartford "Windham Windsor Windsor Locks Legally authorized bonds for municipal purposes, etc., of the following cities outside of New England: Akron, 0. Albany, N. Y. AUentown, Pa. Altoona, Pa. Amsterdam, N. Y. Auburn, N. Y. Baltimore, Md. Bay City, Mich. Binghamton, N. Y. Buffalo, N. Y. Canton, 0. Cedar Rapids, la. Chicago, 111. Cleveland, 0. Columbus, 0. Davenport, la. Dayton, 0. Decatur, 111. Des Moines, la. Detroit, Mich. Dubuque, la. Duluth, Minn. Elmira, N. Y. Erie, Pa. Evansville, Ind. Flint, Mich. Ft, Wayne, Ind. Gr 'd Rapids, Mich. Harrisburg, Pa. Indianapolis, Ind. Jackson, Mich. Jamestown, N. Y. Jersey City, N. J. Johnstown, Pa. Joplin, Mo. Kalamazoo, Mich. Kansas City, Mo. La Crosse, Wis. Lancaster, Pa. Lansing, Mich. MASSACHUSETTS. . 28j Lima, 0. Los Angeles, Cal. Louisville, Ky. Milwaukee, Wis. Minneapolis, Minn. Newark, N. J. New Castle, Pa. Niagara Falls, N. Y. Oakland, Cal. Omaha, Neb. Oshkosh, Wis. Paterson, N. J. Philadelphia, Pa. Pittsburgh, Pa. Portland, Ore. Quincy, 111. Keading, Pa. Rochester, N. Y. Rockford, 111. Saginaw, Mich. St. Joseph, Mo. St. Louis, Mo. St. Paul, Minn. San Francisco, Cal. Scranton, Pa. Seattle, Wash. Sioux City, la. South Bend, Ind. Spokane, Wash. Springfield, Mo. Springfield, 0. Superior, Wis. Syracuse, N. Y. Terre Haute, Ind. Toledo, O. Troy, N. Y. Utica, N. Y. Wilkes-Barre, Pa. Williamsport, Pa. York, Pa. Youngstown, 0, Zanesville, 0. • RAILROAD BONDS. Bangor & Aroostook System, f, H Bangor & Aroostook R. B.-\,^--- First 5s, 19-i3 Bangor & Aroostook B. B., Pis- cataquis Division f, U " ^^' ^^^^ Bangor & Aroostook B. B., Van Buren Extension f, ^ Bangor & Aroostook B. B., Med- ford Extension f, H Aroostook Northern B. B. f, H *' 5s, 1943 *' 5s, 1937 " ..., 5s, 1947 Northern Maine Seaport B. B. f, H-R. R- and term, first 5s, 1935 t Dividends paid for insufficient number of years, but legal under clause fourth. _ , 11 Amount paid in dividends less than one-third of amount paid in interest, but legal under clause fourth. 286 LIST OF INVESTMENTS. Boston & Maine System. Boston & Maine R. R Plain . . . .31/28, .31/28, .31/2S, ...4s, .41/2S, ...4s, ...4s, .41/2S, ...3s, Ports., Gt. Falls & Conway R. R. First 41/08, Boston & Lowell R. R Plain 4s, 4s. 4s, 4s, 31/2S, 31,1,8, 31/2S, 31/2S, 4s, 4s, '■ 4s, 4s, 41/2S, Conn. & Passnmpsic Rivers R. R. . First 4s, Concord & JMontreal R. R Consolidated mort. . .4s. Connecticut River R. R Plain "Worcester, Nashua & Rocli. R. R. it I ( < ( C ( First Fitchburg R. R Plain ( ( ( < C< CI ( e a ( < ( ( << (t ( ( .3I/2S, .31/28. , ..4s. ,..4s, ...4s, ...48, .41/08, ...4s, ...4s, .31/08, ...4s, 1921 1923 1925 1926 1929 1937 1942 1944 1950 1937 1915 1916 1917 1918 1919 1921 1923 1925 1926 1927 1929 1932 1933 1943 1920 1921 1923 1943 1930 1934 1935 1914 1915 1916 1920 1920 MASSACHUSETTS. 287 Fitehburg R. E Plain Troy & Boston R. R First Vermont & Massachusetts R. R.. Plain Sullivan County R. R First Vermont Valley R. R " 3V1;S, 1921 ..4s. 1925 ..4s, 1927 ..4s. 192S 41/os. 192S ^y2s. 1932 41/2S. 1933 ..4s. 1937 . .7s. 1924 31/oS, 1923 ..4s. 1924 41/2S, 1940 First Maine Central System. Maine Central R. R Collateral trust Penobscot Shore Line R. R Maine Shore Line R. R Belfast & Moosehead Lake R. R . . Dexter & Newport R. R Dexter & Piscataquis R. R European & North American Ry . Upper Coos R. R . .OS, ..4s. " 6s, " 4s, " 4s, " 4s, " is, ^lortgage 4s. Extension mort. , .414s, First 31/08, Consolidated 4s, Washington Countv Rv Portland & Rumford Falls Ry. Portland & Ogdensburg R. R First 41/98, Somerset Ry " 5s, " " First refunding .... 4s. 1923 1920 1923 1920 1917 1929 1933 1930 1930 1954 1926 1928 1917 1955 i ( New York, New Haven & Hartford System. N. Y., N. H. & Hartford R. R Debenture < < Convertible deb. ..48, 1914 ..4s. 1947 31/2S, 1947 31/2S, 1954 ..4s, 1955 31/2S, 1956 288 LIST OF INVESTMENTS. N. Y., N. H. & Hartford R. R., Harlem River & Port Chester. First 4s, 1954 Housatonie R. R Consolidated 5s, 1937 New York, Prov. & Boston R. R. . General 4s, 1942 Boston & New York Air Line R. R. First 4s, 1955 Danbury & Norwalk R. R Consolidated j^^i 1920 '' General 5s, 1925 " Refunding 4s, 1955 Naugatuck R. R First 4s, 1954 Debenture Si/gS, 1930 New Haven & Derby R. R Consolidated 5s, 1918 Providence & Springfield R. R. . . First 5s, 1922 Providence Terminal Co " 4s, 1956 Boston & Providence R. R Plain 4s, 1918 Holyoke & Westfield R. R First 4i^s, 1951 New England R. R Consolidated j'^H 1945 New York & New England R. B., Boston Terminal \\\\ First 4s, 1939 Norwich & AVorcester R. R Debenture 4s, 1927 Old Colony R. R Plain 4s, 1924 '' " 4s, 1925 " " 4s, 1938 " " 31/2S, 1932 Providence & Worcester R. R First 4s, 1947 Atchison, Topeka & Santa Fe Railway System. Atchison, Topeka & Santa Fe Ry. General mortgage ..4s, 1995 Atchison, Topeka & Santa Fe Ry. Trans. Short Line First 4s, 1958 Atchison, Topeka & Santa Fe Ry. East Oklahoma Chicago & St. Louis Ry Chicago, Santa Fe & Cal. Ry Hutchinson & Southern Ry San. Fran. & San Joaquin Val. Ry. .4s, 1928 .6s, 1915 .5s, 1937 .5s, 1928 .5s, 1940 II II Legalized by special act of General Court. MASSACHUSETTS. 289 Baltimore & Ohio System. Baltimore & Ohio R. R Extension 4s, 1935 " " " Prior lien 31/28, 1925 << ** " First mortgage 4s, 1948 «' <* '' Southwest. Div. .. 31/28, 1925 Ohio River R. R First 5s, 1936 West Virginia & Pittsburgh R. R . " K J 1990 Central of New Jersey System. Central R. R. of New Jersey General 5s, 1987 Chicago & Northwestern System. Chic. & Northwestern Ry General \^J^ S 1987 '' S'k'g. fd. Consolidated 7s, 1915 " '* " Extension 4s, 1926 '' S'k'g. fd. mort....|g^^l 1929 Cedar Rapids & Mo. River R. R. .Mortgage 7s, 1916 Northwestern Union Ry First 7s, 1917 Mil., Lake Shore & Western Ry. Consolidated 6s, 1921 Mil., Lake Shore & Western Ry., Marshfield Extension First 5s, 1922 Mil, Lake Shore & Western Ry., Michigan Division " 6s, 1924 Mil., Lake Shore & Western Ry., Ashland Division " 6s, 1925 Mil., Lake Shore & Western Ry., Ext. and imp :\Iortgage 5s, 1929 Wisconsin Northern Ry First 4s, 1931 Winona & St. Peter R. R '' 7s, 1916 Boy er Valley By * " 3i/os, 1923 Minnesota & Iowa Ry '' 31/2S, 1924 Southern Iowa Ry* " 31/2S, 1925 * Secured on less than 100 miles of railroad, but legal. 290 , LIST OF INVESTMENTS. Princeton & Northwestern Ey First 3y2S, 1926 Peoria & Northhwestern By* .... " 31/28, 1926 Mankato & New Vim By* '' 31/28, 1929 Fremont, Elkhorn & Mo. Val. R. R. Consolidated 6s, 1933 Minnesota & S. Dakota By* First 31/2S, 1935 Iowa, Minn. & Northwestern Ry. . " 31/2S, 1935 Sioux City & Pacific R. R " 31^8,1936 Man., Green Bay & N. "W. Ry . . . . " 31/2S, 1941 Chicago, Burlington & Quincy System. Chic, B. & Q. R. R General 4s, 1958 " " " Illinois Div... Mortgage j^^^^s/ ^949 ^' " " " Iowa " .. " \r^ 1919 I ) Denver Ext 4s, 1922 Nebraska " . . Mortgage 4s, 1927 Bur. & M. River R. R. in Nebraska. Consolidated 6s, 1918 Republican Valley R. R Mortgage 6s, 1919 Tarkio Valley R. R First 78, 1920 Nodaway Valley R. R '' 7s, 1920 Chicago, Milwaukee & St. Paul System. Chic, Milwaukee & St. Paul Ry., General [31/28 4s 41/28 U989 Chic, Milwaukee & St. Paul Ry., La Crosse & Davenport Div. . First Ss, 1919 Chic, Milwaukee & St. Paul Ry., Dubuque Division " 6s, 1920 Chic, Milwaukee & St. Paul Ry., Wisconsin Valley Division. . . " 6s, 1920 Chic, Milwaukee & St. Paul Ry., Chicago & Pac Western Div . . " 5s, 1921 * Secured on less than 100 miles of railroad, but legal. MASSACHUSETTS. 291 Chic, Milwaukee & St. Paul Ry., Wisconsin & Minnesota Div. .First 5s, 1921 Chic., Milwaukee & St. Paul Ry., Chicago & Lake Superior Div. " 5s, 1921 Chic, Milwaukee & St. Paul Ry., Chic & Missouri River Div. . " 5s. 1926 Chic, Milwaukee & St. Paul Ry., Gen. & Ref. (not in report but probably legal) : ^i/ss, 2014 Dakota & Great Southern Ry " 5s, 1916 Fargo & Southern Ry " 6s, 1921 Milwaukee & Northern R. R Extension li/os, 193-4 Chicago, Rock Island & Pacific System. Chic, Rock Island & Pac. R. R. . :\[ortgage 6s, 1917 " Ry General 4s, 198S Chicago, St. Paul, Minneapolis & Omaha System. Chic, St. P., Minn. & Omaha Ry. . Consolidated . . . ](3g [ 1930 Chic, St. Paul & Minneapolis Ry . . First 6s, 1918 North Wisconsin Ry " 6s, 1930 St. Paul & Sioux City R. R " 6s, 1919 Delaware & Hudson System. Delaware & Hudson Co First refunding 4s, 1943 Canal Co. ... First 7s, 1917 Adirondack Ry " ly^s, 1942 Schenectady & Duanesburg R. R. . " 6s, 1924 Albany & Susquehanna R. R Convertible 31/28, 19-16 Delaware, Lackawanna & Western System. New York, Lack. & W. 7?!/.§ .... First 6s, 1921 § Not guaranteed by endorsement, but legal. 292 LIST OP INVESTMENTS. Great Northern System. Great Northern Ry First refunding . .4i/4s, 1961 Minneapolis Union Ry First }?U922 St. Paul, Minn. & Manitoba Ry. Consolidated • (6s ■4s " 41/28 6s 1 193a St. Paul, Minn. & Llanitoba Ry., Montana extension 4s, 1937 St. Paul, Minn. & Manitoba Ry., Pacific extension 4s, 1940 Eastern Ry. of Minnesota, North- ern Division 4s, 1948 H^^^^ Wilmar & Sioux Falls Ry ** 5s, 1938 Spokane Falls & Northern Ry " 6s, 1939 Montana Central Ry First < ( ( < Illinois Central System. 111. Cent. R. R Refunding mortgage.4s, 1955 Sterling Extended 4s, 1951 Gold Extended 31/2S, 1950 Sterling 3s, 1951 Gold 4s, 1951 " 31/2S, 1951 Gold Extended 3y2S, 1951 Springfield Div . . . First 31/2S, 1951 1 1 Kan. & S. W. R. R. Cairo Bridge . . . • St. Louis Division. Purchased Lines . . Collateral Trust . . Western Lines | . . (I ....5s, 1921 ....4s, 1950 IsLl '''' . .31/2S, 1952 . .31/2S, 1950 ....4s, 1951 t Bonds do not cover 75 per cent, of the railroad owned in fee at the date of the mortgage by the railroad corporation on the railroad: of which the mortgage is a lien, but are legal. MASSACHUSETTS. 293 111. Cent. R. R. Louisville Div.t . .First 31/2S, 1953 " " " Omaha Div.t .... " 3s, 1951 " " " Litchfield Div.* .. . " 3s, 1951 " " '* Collateral Trust || 4s, 1952 Lake Shore & Michigan Southern System. Lake Shore & ]\Iieh. Southern Ry. First general 31/28, 1997 Kal, Allegan. & Gr. Rapids R. E.*First 5s, 1938 Mahoning Coal R. R.* " 5s, 1934 Pitts., McKeesport & Y. R. R.*.. " 6s, 1932 Louisville & Nashville System. Louisville & Nashville R. R Unified 4s, 1940 " General 6s, 1930 " ** " First 5s, 1937 *' " " Trust 5s, 1931 Evans., Henderson & Nash. Div. . Sinking fund 6s, 1919 Louis., Cin. & Lexington Ry General 4i/2S, 1931 Southeast & St. Louis Division 6s, 1921 Mobile & Montgomery 41/2S, 1945 New Orl. & Mobile Div., $5,000,000. First 6s. 1930 Nash., Florence & Sheffield Ry . . . . " 5s, 1937 Pensacola & Atlantic R. R " 6s, 1921 Michig-an Central System. Michigan Central R. R First 31/2S, 1952 Mich. Cent.-Mich. Air Line R. R. . " 4s, 1940 Mich. Cent.-Det. & Bay City R. R. ' ' 5s, 1931 Mich.-Cent.-Jackson, Lansing & Saginaw R. R " 31/28, 1951 t Bonds do not cover 75 per cent, of the railroad owned in fee at the date of the mortgage by the railroad corporation on the railroad of which the mortgage is a lien, but are legal. * Secured on less than 100 miles of railroad, but legal. II Railroad covered by one of the issues pledged as collateral is not operated by Illinois Central E. E. 294 LIST OF INVESTMENTS. Mich. Cent.-Joliet & Northern In- diana Pi. i?.* First 4s, 1957 Midi. -Cent. -Kalamazoo & South Haven R. R.^ " 5s, 1939 Nashville, Chattanooga & St. Louis System. Nashville, Chat. & St. Louis Ry. First consolidated ..5s, 1928 Nashville, Chat. & St. Louis Ry., Tracy City Branch First 6s, 1917 Nashville, Chat. & St. Louis Ry., Fayette & McMinnville Branch. " 6s, 1917 Nashville, Chat. & St. Louis Ry., Lebanon Branch " 6s, 1917 Nashville, Chat. & St. Louis Ry., Jasper Branch Extension. ... " 6s, 1923 Nashville, Chat. & St. Louis Ry., Centreville Branch " 6s, 1923 New York Central System. N. Y. Cent. & Hudson River R. R.Mortgage 3y2S, 1997 Beech Creek R. R First 4s, 1936 Mohawk & Malone Ry " 4s, 1991 New York & Harlem R. E.§. . . .Mortgage 31/28, 2000 Rome, Watertown & Ogdenshurg R, J?.§ Consolidated rss 4s 1 1922 31/2S Rome, Watertoivn (& Ogdenshurg Terminal R. R.^ First 5s, 1918 Norwood & Montreal R. R.^ " 5s, 1916 Oswego R. R. Bridge, § " 6s, 1915 Syracuse, Phoenix cC' Oswego R. R.^ " 6s, 1915 Carthage, Watertown & Sachet's Harlor R. R.^ Consolidated 5s, 1931 Utica & Black River R. R.^ First 4s, 1922 * Secured on less than 100 miles of railroad, but legal. $ Not guaranteed by endorsement, but legal. MASSACHUSETTS. 295 Boston & Albany R. R. Plain 31/2S, 1952 " 31/2S, 1951 " 4s, 1933 " 4s, 1934 , " 4s, 1935 , " 4I2S, 1937 . " 5s, 1938 , " 5s, 1963 Northern Pacific System. Northern Pacific Ry Prior lien 4s, 1997 St. Paul & Northern Pac. Ry 6s, 1923 St. Paul & Duluth R. R First 5s, 1931 Washington & Columbia River Ry. " 4s, 1935 Pennsylvania System. Pennsylvania R. R Consolidated (< ... .OS, ^s, ...3V2S, is, Suiibury & Lewiston Eij* First 4s, Suiibury, Eazleton & Wilhesharre %.* " 5s, West Chester B. B* '' 5s, Western Pennsylvania R. R Consolidated 4s, Pitts., Va. & Charleston By* First 4s, South West Pennsylvania R. R. . . " 7s, Junction B. B* General 31/28, res Philadelphia & Erie R. R " j 5s [4s United N. J. R. R. & Canal Co. General 4s, is, is, is, ( ( i ( ( I (< (( << < i ( i (< < I 1 1 <( (( (< ( i i ( 1919 1943 1945 1948 1936 1928 1919 1928 1943 1917 1930 1920 1023 1929 1944 1948 * Secured on less than 100 miles of railroad, but legal. 296 LIST OF INVESTMENTS. United N. J. R. E. & Canal Co.. .General • -Si/oS, 1951 Delaware Riv. B. R. & Bridge Co.*First 4s, 1936 Erie & Pittsburgh B. R* General 31/2S, 1940 Cleveland & Pittsburgh R. R. . . . " itYfl 1942 (31/2SJ "...." 31/2S, 1948 "...." 31/28, 1950 Allegheny Valley Ry General 4s, 1942 Cambria & Clearfield R. R First 5s, 1941 Miscellaneous. Boston Terminal Co.\\\\ First 31/28, 1947 Boston, Rev. Beach & Lynn R. RA " 41/08, 1927 Bridgton & Saco River R. R Consolidated 48, 1928 New London Northern R. R First 48, 1940 Narragansett Pier R. RA " 4s, 1916 Portland Terminal Co First 4s, 1961 STREET RAILWAY BONDS. Bay State Street Railway Company. Boston, Milton & Brockton Street Ry. Co First mortgage ... .5s, 1919 Boston & Northern Street Ry. Co. Refund 'g first mort. 4s, 1954 Braintree Street Ry. Co First mortgage ... .6s, 1914 Braintree & AVeymouth St. Ry. Co. " " ... .5s, 1917 Bridgewater, "Whitman & Rockland Street Ry. Co " " ....5s, 1917 Brockton, Bridgewater & Taunton Street Ry. Co " '' ....5s, 1917 Brockton Street Ry. Co " " ... .5s, 1924 Brockton & East Bridgewater Street Ry. Co '* ** ....5s, 1918 * Secured on less than 100 miles of railroad, but legal. tDividends paid for insufficient number of years, but legal. Legalized by special act of General Court. MASSACHUSETTS, 297 Dighton, Somerset & Swansea Street Ry. Co First mortgage 5s, 1915 Georgetown, Rowley & Ipswich Street Ry. Co " " ... .Ss^ 1920 Gloucester, Essex & Beverly Street ^y- Co - - ....5s, 1916 Haverhill, Georgetown & Danvers Street Ry. Co " " 5^ 2919 Lowell, Lawrence & Haverhill Street Ry. Co " " ... ,5s 1923 Lynn & Boston Railroad Co " " 5s! 1924 Mystic Valley Street Ry. Co *' " 5s! 1919 NcAv Bedford, I\Iiddleboro & Brock- ton Street Ry. Co " " 5>;5. 1920 Norfolk Central Street Ry. Co '' " 5s. 1918 Norfolk Suburban Street Ry. Co. . " " 5s 1914 Old Colony Street Ry. Co Refund 'g first mort. 4s. 1954 People's Street Ry. Co First mortgage 5s, 1928 Providence & Taunton St. Ry. Co. " " 5s. 1918 Rockland & Abington St. Ry. Co. . " " 6s, 1915 South Shore & Boston St. R.y. Co. " " 5s, 1919 Taunton Street Ry. Co Debenture 5s, 1914 Taunton & Brockton St. Ry. Co. . First mortgage 5s, 1917 Wakefield & Stoneham St. Ry. Co. " " 5s, 1915 West Roxbury & Roslindale St. ^y- Co - " ....5s. 1916 Boston & Revere Electric Street Railway Company. Boston & Revere Electric Street %• Co Refund 'g first mort. 5s, 1928 East Middlesex Street Railway Company. East .Middlesex Street Ry. Co Plain 5s 1918 " ''".... - 4s,' 1922 298 LIST OP INVESTMENTS. Fitchburg & Leominster Street Railway Company. Fitchburg & Leominster St. Ry, Co. First mortgage 5s, 1917 " '' " Consol. mort 4y2S, 1921 Leominster, Shirley & Ayer Street Ry, Co First mortgage 5s, 1921 Holyoke Street Railway Gompany. Holyoke Street Ry. Co , (( <( Debenture 5s, 1915 5s, 1920 5s, 1923 Nahant & Lynn Street Railway Company. Nahant & Lynn Street Ry. Co First mortgage . . . ,5s, 1925 ,5s, 1929 Springfield Street Railway Company. Springfield Street Ry. Co First mortgage . Springfield & Eastern St. Ry. Co. *' Western Masssacbusetts St. Ry. Co. Woronoeo Street Ry. Co (( <( (( .4s, 1923 .5s, 1922 .5s, 1926 .5s, 1920 West End Street Railway Company. West End Street Ry. Co Debenture 41/28, 1914 4s, 1915 4s, 1916 4s, 1917 41/2S, 1923 41/2S, 1930 4s, 1932 5s, 1932 MASSACHUSETTS. / 299 Worcester Consolidated Street Railway Company. Marlborough & Westborough St. Ky. Co Gold mortgage 5s, 1921 Uxbridge & Blackstone St. Ry. Co. First mortgage 5s, 1923 " " "Debenture 5s, 1927 Worcester Consolidated St. Ry. Co. " 41/2S, 1920 " " " " " " 5s, 1927 ** " " <' '' Ref'd'gfirstmort. 41/28, 1930 Worcester & Blackstone Valley Street Ry. Co First mortgage . .41/98, 1926 Worcester & Clinton Street Ry. Co. " " 5s, 1919 Worcester & Holden ** ** 5s, 1923 Worcester & Marlboroughh Street Ry. Co " " ....5s, 1917 Worcester & Southbridge Street Ry. Co " " ..41/2S, 1922 Worcester & Southbridge Street Ry. Co " " ..4y2S, 1925 TELEPHONE COMPANY BONDS. American Telephone & Telegraph Co Collateral trust 4s, 1929 NEW YORK. GOVERNMENT BONDS. United States 2% Bonds Panama 2% Bonds United States S% Bonds Panama 3% Bonds United States 4% Bonds Dis. of Columbia.3.65% Bonds STATE BONDS. Arizona California Connecticut Delaware Florida Idaho Indiana Kansas Kentucky Louisiana Maine Maryland Massachusetts Minnesota Missouri Montana Nevada New Hampshire New Mexico New York North Dakota Oklahoma Pennsylvania Ehode Island South Dakota Tennessee Texas Utah Vermont Washington AVisconsin Wyoming. NEW YORK MUNICIPAL BONDS. All bonds legally issued by any City, County, Town, Village, School District, Poor District or Union Free School District, in New York State. CITY BONDS. Akron, Ohio Allegheny, Pa. Allentown, Pa. Altoona, Pa. 300 NEW YORK. 301 xVtlantic City, N. J. Baltimore, Md. Bay City, :\Iieli. Bayonne, N. J. Boston, ]Mass. Bridgeport, Comi. Brockton, Mass. Cambridge, ^lass. Camden, N. J. Canton, Ohio Chicago, 111. Cincinnati, Ohio Cleveland, Ohio Columbus, Ohio Dallas, Texas Dayton, Ohio Detroit, Mich. Erie, Pa. Fall River, Mass. Fort "Wayne, Ind. Grand Rapids, Mich. Harrisburg, Pa. Hartford, Conn. Hoboken, N. J. Holyoke, Mass. Indianapolis, Ind. Jacksonville, Fla. Jersey City, N. J. Kansas City, Kan. Kansas City, Mo. Lancaster, Pa. Lawrence, ^lass. Los Angeles, Cal. Louisville, Ky. Lowell, Mass. Lj'nn, ]\Iass. Manchester, N. H. ^Milwaukee, Wis. Minneapolis, ^linn. Newark, N. J. NeAV Bedford, Mass. New Haven, Conu. Oakland, Cal. Passaic, X. J. Paterson, N. J. Pawtucket, R. I. Peoria, 111. Philadelphia, Pa. Pittsburgh, Pa. Portland, Me. Providence, R. I. Reading, Pa. Rockford, 111. Saginaw, Mich. San Antonio, Texas San Francisco, Cal. Scranton, Pa. Somerville, Mass. South Bend, Ind. Springfield, 111. Springfield, Mass. Springfield, Ohio St. Louis, Mo. St. Paul, :\Iinn. Tacoma, AVash. Terre Haute, Ind. Toledo, Ohio Trenton, N. J. AVaterbury, Conu. AVilkes-Barre, Pa. AVilmington, Del. Worcester, ]Mass. "Wichita, Kans. Youngstown, Ohio 302 LIST OF INVESTMENTS. RAILROAD BONDS. Adirondack Ry., 1st 41/28, 1942 Albany & Susque., 1st Mtge. Conv 31/28, 1946 Allegheny Vy. R. R. Gen 4s, 1942 Atch., Top. & Santa Fe Gen 4s, 1995 Baltimore & Ohio R. R. Co. Extend 4s, 1935 Bay City & Battle Creek R. R. 1st 3s, 1989 Belvidere Delaware Cons. Mtge 4s, 1925 Belvidere Delaware Cons. Mtge 4s, 1927 Belvidere Delaware Cons. Mtge .' 31/2S, 1943 Boyer Valley R. R. 1st 31/2S, 1923 Buffalo Creek R. R. Co. Cons. Mtge 5s, 1941 Buffalo, Roch. & Pitts. Ry. Gen. Mtge 5s, 1937 Buffalo, Roch. & Pitts. Ry. Cons. Mtge 41/2S, 1957 Burlington & Mo. River Cons. Mtge 6s, 1918 Cairo R. R. Co. 1st Mtge 6s, 1925 Carth., Water., & Sack Harb. Cons 5s, 1931 Cedar Rapids & Mo. R. 1st Mtge 7s, 1916 Central Pacific Ry. 1st Ref 4s, 1949 Central R. R. of New Jersey 5s, 1987 Chartiers Ry. 1st Mtge 31/2S, 1931 Chic. &. Lake Sup. 1st Mtge 58, 1921 Chic. & Mo. River 1st Mtge 5s. 1926 Chic. & N. W. Cons. Mtge 7s. 1915 Chic. & N. W. Genl. Mtge 31/28. 1987 Chic. & N. W. Genl. Mtge 4s, 1987 Chic. & Pac. Western 1st 5s, 1921 Chic, Burlington & Quincy, Genl. Mtge 4s, 1958 Chic, Burlington & Quincy, Den. Ext 4s, 1922 Chic; Burlington & Quincy, 111. Div 31/2S, 1949 Chic, Burlington & Quincy, 111. Div 4s, 1949 Chic, Burlington & Quincy, Iowa Div 4s, 1919 Chic, Burlington & Quincy, Iowa Div 5s, 1919 Chic, Burlington & Quincy, Neb. Ext 4s, 1927 Chic, Mil. & St. P. Genl. (due May) 3i/o8, 1989 Chic, ]\ril. & St. P. Genl. (due May) 4s, 1989 Chic, Mil. & St. P. Genl. (due May) 41/2S, 1989 NEW YORK. 303 Chic, Mil. & St. P. Gen. & Ref 41/28, 2014 Chic, Mil. & St. P. Deb 4s, 1934 Chic, Mil. & St. P. Conv 41/28, 1932 Chic, Mil. & St. P. European Loan 48, 1925 Chic, Mil. & St. P., Dubuque Div. l8t 6s, 1920 Chic, Rock Island & Pac 1st Mtge 6s, 1917 Chic, Rock Island & Pac. Genl. Mtge 4s, 1988 Chic, Rock Island & Pac 1st & Ref. 4s, 1934 Chic, St. P., Minn & O. Ry. Cons. Mtge 31/08, 1930 Chic, St. P., Minn & 0. Ry. Cons. Mtge 6s, 1930 Chic, St. Paul & Minn. 1st 6s, 1918 Chic & St. Louis 1st 6s, 1915 Chic, St. Louis & Pitts. Cons 5s, 1932 Chic, Santa Fe & Cal. 1st Mtge 5s, 1937 Cleveland & Pitts. Genl. Mtge 41/98, 1942 Cleveland & Pitts. Genl. Mtge 31/08. 1942 Cleve. & Pitts. Genl. Mtge 31/2S, 1948 Cleve. & Pitts. Genl. Mtge 3i/os, 1950 Col., Conn. & Term. 1st Mtge 5s, 1922 Dak. & Gt. So. 1st Mtge 5s. 1916 Danbury & Norwalk Cons. Mtge 5s. 1920 Danbury & Norwalk Cons. Mtge 6s. 1920 Del. & Hud. Canal Co., Penn. Div. 1st 7s, 1917 DeL & Hud. 1st & Ref. Mtge 4s, 1943 Del. R. R. & Bridge Co. 1st Mtge 4s, 1936 Dexter & Newport R. R. 1st Mtge 4s, 1917 Dexter & Piscataquis 1st Mtge 4s. 1929 East R. R. of :\Iinn. No. Div. 1st Mtge 4s. 1948 Erie & Pittsburgh Genl. :\Itge 3i/oS, 1940 European & North Amer. Ry. 1st 4s. 1933 Evans, Henderson & Nashville 6s, 1919 Fargo & Southern 1st Mtge 6s. 1924 Fayette & Mc:\Iinville Br. 1st 6s, 1917 Fonda, Johnstown & Gloversville Cons 6s, 1921 Fonda. Johnstown & Glovers^'ille Cons. Ref 4148, 1947 Fonda. Johnstown & Gloversville Genl. Ref 4s, 1950 Fonda. Johnstown & Gloversville Genl. Ref 4i'oS, 1952 Fremont. Elk & Mo. Yal. Cons 6s, 1933 304 LIST OF INVESTMENTS. Genesee & Wy. Val. E. R. Co. 1st Mtge 5s, 1929 Gt. Xor. Ry. Co. 1st Mtge. & Ref 414s, 1961 Greenwich & Johnsonville 1st j\ltge 4s, 1924 Harrisburg. Ports. & Mt. J. & Lan. 1st 4s, 1913 Housatonic R. R. Cons. Mtge 5s, 1937 Illinois Central R. R. Co., Cairo Bridge 4s, 1950 Illinois Central R. R. Co., 1st Gold 31/28, 1951 Illinois Central R. R. Co., 1st Gold 4s, 1951 Illinois Central R. R. Co., 1st Sterling Ext 4s, 1951 Illinois Central R. R. Co., 1st Sterling Ext .314s, 1950 Illinois Central R. R. Co., 1st Sterling 3s, 1951 Illinois Central R. R. Co., 1st Ext. Gold 31/2S, 1951 •Illinois Central R. R. Co., Litchfield Div 3s, 1951 Illinois Central R. R., Purchased Line 1st 3I/2S, 1952 Illinois Central R. R., Refunding Mtge 4s, 1955 Illinois Central R. R., Springfield Div. 1st 31/2S, 1951 Illinois Central R. R., St. L. Div. & T. 1st 3s, 1951 Illinois Central R. R., St. L. Div. & T. 1st Si/oS, 1951 Illinois Central R. R. Co., Sterling CoU. Tr 31/28, 1950 Iowa, Minn. & No. W. 1st Mtge 31/2S, 1935 June. R. R. Genl. Mtge 31/2S, 1930 Kalamazoo & "White Pigeon 1st Mtge 5s, 1940 Kankakee & So. W 5s, 1921 La Crosse & Davenport 1st Mtge 5s, 1919 Lake Shore & Mich. So. Ry. 1st Genl 31/2S, 1997 Lehigh Valley R. R. 1st Mtge 4s, 1948 Lincoln Park & Charlotte Ist Mtge 5s, 1939 Louisville & Nashville R. R. Co. 1st Mtge 5s, 1937 Louisville & Nashville R. R. Genl 6s, 1930 Louisville & Nash\ulle R. R. Co. Unif 4s, 1940 Louisville, Cin. & Lex. Genl. Mtge 41/2S, 1931 Mahoning Coal R. R. 1st Mtge 5s, 1934 Maine Shore Line 1st Mtge 68, 1923 Man. Ry. Co. Cons. Mtge 4s, 1990 Man. Ry. Co. Deb 5s, 1916 Mankato & New Ulm 1st Mtge 31/2S, 1929 Mich. Central R. R. Co. 1st Mtge 31/2S, 1952 Mil. & No. 1st Mtge. Ext 41/2S, 1913 NEW YORK. 305 Mil. & No. Cons. Mtge 6s, 1913 Milwaukee, Lake Shore & West. Ext. & Imp 5s, 1929 Milwaukee, Lake Shore & West. 1st :\Itge 6s, 1921 Milwaukee, Lake Shore & W., Ash. Div. 1st Mtge 6s, 1925 Milwaukee, L. S. & W., Marshfield Ext. 1st :\Itge 5s, 1922 Milwaukee, L. S. & West., Mich. Div. 1st :\Itge 6s, 1924= Minn. & Iowa 1st Mtge 31/2S, 1924 Minn. & So. Dak. 1st Mtge 31/2S, 1935 Minn., St. Paul & Sault Ste. Marie Ry. Co. 1st Cons. .4s. 1938 Minn., Sault Ste. Marie & Atl. Ry. Co. 1st Mtge 4s. 1026 Minneapolis & Pacific Ry. Co. 1st Mtge 4s. 1936 ^Minneapolis Union 1st ^Itge 5s, 1922 Minneapolis Union 1st Mtge 6s. 1922 Mobile & Ohio R. R. Co. 1st Mtge 6s. r.i27 Mohawk & :\Ialone 1st Mtge 4s, 1991 Mohawk & Malone Cons. Mtge 3i/oS, 2002 Montana Central Ry. 1st Mtge 5s, 1937 Montana Central Ry. 1st .Mtge 6s, 1937 Montgomery & Erie R. R. 1st Mtge 5s, 1926 Morris & Essex Cons. Mtge 7s, 1915 Morris & Essex 1st & Ref 31/2S, 2000 Nash., Chatt. & St. L. Ry. 1st Mtge 7s, 1913 Nash., Chatt. & St. L. Ry. Co. 1st Cons 5s, 1928 Nash., Chatt. & St. L. Ry. Cen. Br. 1st 6s, 1923 Nash., C. & St. L. Ry., Jas. Br. Ext. 1st 6s, 1923 Nash., C. & St. L. Ry., Lebanon Br. 1st 6s, 1917 Nash., C. & St. Ry., Tracy City Br. 1st 6s, 1917 Naugatuck R. R. 1st Mtge 4s, 1954 New England R. R. Cons. Mtge 4s, 1945 New England R. R. Cons. Mtge 5s, 1945 New Haven & Derby Cons. :\Itge 5s, 1918 New Haven & Northampton Ref. Cons 4s, 1956 New River R. R 6s, 1932 New York & Harlem Ref 31/08, 2000 New York, C. & H. R. R. Co. 1st Ref 31/28, 1997 New York Cent. & H. River R. R. Co. Ref. & Imp.. . .41/08, 2013 New York, Chic. & St. L. R. R. 1st 4s, 1937 New York, Lack. & West. 1st Mtge 6s, 1921 306 LIST OF INVESTMENTS. New York, Prov. & Boston Genl. Mtge 4s Nodaway Valley 1st Mtge 7s Norfolk & West. Ky. Co. Cons 4s Norfolk & West. Ry. Co. Genl. I\Itge 6s Norfolk & West. Ry. Co. Imp. & Ex 6s Northern California lR,j. 1st 5s Northern Pac. Ry. Prior Lien 4s, Northern Ry . 1st 5s North West, Union 1st Mtge. (due June) 7s North Wis. 1st Mtge 6s Norwood & Montreal 1st Mtge 5s Oswego R. R. Bridge 1st 6s Pawtucket Valley 1st Mtge 4s Penn. R. R. Cons. Mtge 5s Penn. R. R. Cons. Mtge 4s Penn. R. R. Cons. Mtge Si/gS Penn. R. R. Cons. Mtge 4s Penn. R. R. Real Estate 1st Mtge 4s Penobscot Shore Line 1st 4s Peoria & No. West. 1st Mtge 31/28 Phila. & Reading 4th (now 1st) 5s Phila. & Erie Gen. Mtge 6s Phila. & Erie Genl. Mtge. (due July) 5s Phila. & Erie Genl. Mtge. (due July) 4S; Phila., Balto. & Wash. 1st Mtge 4s Phila., Wilmington & Baltimore Deb .4s Phila., Wilmington & Baltimore Deb 4s Phila., Wilmington & Baltimore Deb 4s Phila., Wilmington & Baltimore Deb 4s Pitts. & Lake Erie R. R. 1st 6s Pitts., Chartiers & Young. Gen. Mtge 4s Pitts., C, C. & St. L. Ry. Cons. Ser. A 41/08 Pitts., C, C. & St. L. Ry. Cons. Ser. B 41/28^ Pitts., C, C. & St. L. Ry. Cons. Ser. C 41/2S Pitts.. C, C. & St. L. Ry. Cons. Ser. D 48^ Pitts., C, C. & St. L. Ry. Cons. Ser. E 31/2S Pitts., C, C. & St. L. Ry. Cons. Ser. F 4s Pitts., C, C. & St. L. Ry. Cons. Ser. G 48 1942 1920 1996 1931 1934 1929 1997 1938 1917 1930 1916 1915 1925 1919 1943 1945 1948 1923 1920 1926 1933 1920 1920 1920 1943 1917 1922 1926 1932 1928 1932 1940 1942 1942 1945 1949 1953 1957 NEW YORK. 307 Pitts., C, C. & St. L. Ry. Cons. Ser. H 4s, 1960 Pitts., Va. & Charlestown 1st Mtge 4s, 1943 Portsmouth, Great Falls & Conway 41/28, 1937 Princeton & No. W. 1st Mtge 31/28, 1926 Prov. & Springfield 1st Mtge 5s, 1922 Rensselaer & Saratoga Cons. Mtge 7s, 1921 Republican Valley 1st Mtge 6s, 1919 Rochester & Pitts. 1st Mtge 6s, 1921 Roch. & Pitts. Cons. Mtge 6s, 1922 Rome, W. & 0. Cons, (due July) 31/2S, 1922 Rome, W. & 0. Cons, (due July) 4s, 1922 Rome, W. & 0. Cons, (due July) 5s, 1922 Rome, Watertown & Ogdensburg Term. 1st 5s, 1918 St. Paul & No. Pac. Ry. Genl. Mtge 6s, 1923 St. Paul & Sioux City 1st :\Itge 6s, 1919 St. Paul, Minn. & Man. Ry. Cons 4s, 1933 St. Paul, Minn. & Man. Ry. Cons 41/2S, 1933 St. Paul, IMinn. & :\ran. Ry. Cons 6s, 1933 St. Paul, Minn. & IMan., Montana Ext 4s, 1937 St. Paul, Minn. & Man. Pac. Ext 4s, 1940 Sault Ste Marie & S. W. 1st Mtge 5s, 1915 Schenectady & Duaneburg 1st Mtge 6s, 1924 Scioto Valley & New England 1st Mtge 4s, 1989 Sioux City & Pacific 1st Mtge 31/08, 1936 Southern Iowa 1st Mtge 31/28, 1925 Southern Pacific Br. Ry. 1st Mtge 6s, 1937 Southern Pacific R. R. of Cal. 1st Cons 5s, 1937 Southern Pacific R. R. 1st and Ref 4s, 1955 Southwest Penn. 1st Mtge 7s, 1917 Spokane Falls & No. Ry. 1st Mtge 6s, 1939 Steubenville & Ind. 1st Mtge 5s, 1914 Sturgis, Goshen & St. L. 1st Mtge 3s, 1989 Sunbury & Lewi8ton 1st Mtge 4s, 1936 Sunbury, Hazelton & Wilkes-Barre 1st 5s, 1928 Syracuse, Phoenix & Osw. 1st Mtge 6s, 1915 Tarkio VaUey 1st Mtge 7s, 1920 Terre Haute & Indianapolis Cons. Mtge 5s, 1925 Ticonderoga R. R. 1st Mtge 6s, 1921 308 LIST OF INVESTMENTS. Union Pacific R. R. Co. 1st Mtge 4s, 1947 Union Pac. R. R. Co. 1st & R. (due June) 4s, 2008 United N. J. R. R. & Canal Co. Genl 4s, 1948 United N. J. R. R. & Canal Co. Genl 4s, 1923 United N. J. R. R. & Canal Co. Genl 4s, 1929 United N. J. R. R. & Canal Co. Genl 4s. 1944 United N. J. R. R. & Canal Co. Genl SVos, 1951 Upper Coos R. R. Ext 41/2S, 1930 Upper Coos R. R. 1st Mtge 4s, 1930 Utica & Black River 1st Mtge 4s, 1922 Utica, Clinton & Bing. 1st Mtge 5s, 1939 Vandalia Ry. Co. Cons. Mtge., Ser. A 4s, 1955 Vandalia Ry. Co. Cons. Mtge., Ser. B 4s, 1957 Warren R. R. 1st Ref. Mtge Si^s, 2000 West Chester R. R. 1st Mtge 5s, 1919 Western Penna. Cons. Mtge 4s, 1928 Wilmar & Sioux Falls Ry. 1st IMtge 5s, 1938 Winona & St. Peter Ext. 1st 7s, 1916 Wisconsin & Minn. 1st Mtge 5s, 1921 Wisconsin Northern 1st Mtge 4s, 1931 Wisconsin Valley 1st 6s. 1920 INDEX. Acquiescence by Beneficiary in Unauthorized Investments, 5 Alabama Continuing business of testator, 17 Guardians, 16, 17 Investments in other states, 16 Public securities, 16 Purchase of trust property by trustee, 17 Trustee may not profit from estate, 17 Alaska, 18 Arizona, 19 Arkansas Executors and administrators, 20 Guardians, 20 Dealing' Tvith trust property, 21 Beneficiaries, Consent of to Unauthorized Investment, 5 Bonds of Corporations, 10 Business, Continuing, 14 California Advice of attorney, 35 Authorized securities, must invest in, 36 Bonds legal in New York and Massachusetts, 30 Business, continuing, 36 Certificates issued by corporations, 30 Continuing business of testator, 36 Corporation certificates, 30 Corporate bonds, 26 Corporate stocks and bonds, limitations thereon, 33 Deposit of funds in bank, 37 Diligence required, 22, 35 Directions in trust instrument, 22 Giving away worthless securities, 36 Good faith required, 22, 35 Guardians, 36 Individual name, taking loans in, 37 Interest, 22 Liability of trustee for unauthorized loan, 35 Limitations on corporate bonds and stock, 33 Limitations on bonds legal in New York and Massachusetts. 33 309 310 INDEX. California — Continued Limitations on public utility bonds, 32 Loans on unsecured notes, 32 Massachusetts, may invest in bonds legal for savings banks in, 30 Mingling trust funds, 23, 34, 35 Mining stock, 34 Mortgages on real estate, 29, 33 New York, may invest in bonds legal for savings banks in, 30 Omission to invest, 22 Public securities, 24 Public utility corporation bonds, 32 Purchase of property, 24 Purchase of trust property by trustee, 35 Eailroad bonds, 26 Eeal estate mortgages, 29, 33 Savings banks, 23 Street railway bonds, 27 Trust companies, 23, 35 Trust funds to be kept separate, 34 Trustee not to profit, 22, 35 Unsecured notes, loans on, 32 Certificates of Deposit, 13 * Colorado Authorization by court, 40 Bonds of corporations, 39 Mingling trust funds, 40 Purchase of trust property, 39 Stock of corporations, 39 Trust companies, 38 Trustees generally, 39 Combining Funds of Several Estates in One Mortgage, 7 Connecticut Bank stock, 56 Bonds purchased at a premium, 59 Bonds of railroad corporations, 43 Bridge company bonds, 45, 47 Business, continuing, 58 Changing investments to authorized securities, 59 Chattel mortgages, 59 Consolidation of corporations, effect on investments, 52 Continuing business, 58 Continuing investments, 41 Converting investments into authorized securities, 59 Corporate stock, 58 Corporate bonds, 43 Damages for improper investments, 60 INDEX. 311 Connecticut — Continued Default by corporation on bonds, effect of, 51 Depot company bonds, 45, 47 Diligence defined, 59 Effect of default by corporation on bonds, 51 Equipment trust notes of corporations, 53 Individual name, investment in, 58 Legality of bonds when property is transferred to another cor- poration, 52 List of legal investments, 260 Limitations on bonds of railroad corporations, 48, 52 Mortgage bonds defined, 49 Mortgages in other states, 60 Mortgages on real estate, 41, 56 Municipal bonds, 43 Name of trustee, investment in, 58 Other states, mortgages in, 60 Personal benefit, trustee not to obtain, 59 Personal securities, 59 Property of railroad corporation transferred to another corporation, effect on bonds, 52 Public securities, 42 Railroad bonds, 43, 45, 47 Eeal estate mortgages, 56 Retaining investments, 60 Stock of corporations, 58 Savings banks, 41 Street railway corporation bonds, 45, 47, 54 Telephone company bonds, 55 Terminal company bonds, 45, 47 Trust company stock, 56 Trust notes of corporations, 53 Trustees generally, 41 Water company bonds, 55 Consent of Beneficiaries to Unauthorized Investments, 5 Continuing Business of Testator, 14 Continuing Investments Made by Creator of Trust, 1 Corporate Bonds, 10 Corporate Stock, 11 Creator of Trust, Continuing Investments Made by, 1 Delaware Co-administrators, liability of, 64 Collateral trust bonds, 62 Continuing investments, 62 Corporate bonds, 62 Deposit in bank, 64 312 INDEX. Delaware — Continued Guardians, 63 Municipal bonds, 61 Orphan's court, power of, 63 Public securities, 61 Public service corporation bonds, 62 Purchase of trust property by trustee, 64 Purchase at mortgage foreclosure, 64 Eailroad bonds, 62 Transportation company bonds, 62 Trust certificates, 62 Trustee not to profit from estate, 63 Deposit in Bank, 4, 13 Directions in Trust Instrument, 3 District of Columbia Duty to apply to probate court, 65, 66 Duty to invest, 66 Good faith required, 66 Mingling trust funds, 66 Power to sell, 66 Probate court, power of, 65, 66 Purchase of trust property, 64, 66 Sale of non-productive securities, 66 Duty to Invest, 3 Florida Bank stock, 67 Continuing business, 68 Deposit in bank, 67 Failure to obtain approval of court, 69 Guardians, 67 Mortgages on real estate, 69 Personal securities, 69 Purchase by trustee, 69 Keal estate mortgages, 69 Stock of bank, 67 Trust companies, 69 Trustee not to profit, 70 Georgia Administrator, 72 Changing investments, 73 Confederate bonds, 74 Continuing business, 73 Failure to report to court, 71 Good faith, 74 Land, investment in, 73 Municipal bonds, 72 INDEX. 313 Georgia — Continued Order of court, 71 Personal benefit by trustee, 73 Personal securities, 74 Public securities, 72 Purchase by trustee, 74 Eatification of unauthorized investments by beneficiary, 74 Trust company stock, 74 Hawaii, 75 Idaho, 77 Illinois Acquiescence by beneficiary, 82 Bonds of corporations, 79 Business or trade, 81 Business, continuing, 81 Corporate bonds, 79 Corporate stock, 81 Guardians, 80 Interest, 81 Investment in name of trustee, 80 Mortgages on real estate, 79 Municipal bonds, 79 Name of trustee, investment in, 80 Other states, mortgages in, 79, 80 Partnership, investment in, 81 Personal securities, guardians, 80 Power to lease, 81 Power to mortgage, 81 Public securities, 79 Stock of corporations, 81 Trade or business, 81 Trust companies, 79 Indiana Bank stock, 84 Continuing partnership, 85 Corporate stock, 84 Deposit in bank, 84 Diligence in examining title, 86 Duty to invest, 85 Guardians, 85 Loan and deposit companies, 83 Loan to relatives, 84 Mingling trust funds, 85 Mortgages on real estate, 83 Name of trustee, deposit in, 84 Partnership, continuing, 85 314 INDEX. Indiana — Continued Personal security, individual credit, 85 Profit from estate, trustee not to make, 84 Eeal estate mortgages, 83 Second mortgages, 85 Stock of corporations, 84 Trustee not to profit from estate, 84 Title, diligence in examining, 86 Investments Legal in All States Public securities, 9 Eeal estate mortgages, 9 Investments Not Legal in All States Certificates of deposit, 13 Corporate bonds, 10 Corporate stock, 11 Personal securities, 12 Second mortgages, 12 Municipal bonds, 10 Iowa Changing investments, order of court, 87 Deposit in bank, 88 Guardians, 88 Interest, 88 Mingling trust funds, 89 Mortgages on real estate, 87 Order of court, necessity for, 87, 88 Public securities, 87 Time allowed for investment, 88 Trust companies, 88 Kansas, 90 Kentucky Bank stock, 94 Business, carrying on, 94 Continuing investments made by creator of trust, 94 Corporate bonds, 92 Failure to invest, interest chargeable, 94 Guardians, 95 Interest chargeable for failure to invest, 94 Mingling trust funds, 94 Mortgages in other states, 95 Mortgages on real estate, 92 Municipal bonds, 92 Order of court, 92 Other states, mortgages in, 95 Personal profit from estate, 94 Provisions of trust instrument to be followed, 93 INDEX. 315 Kentucky— C7o?i M 1 si i HSiiiii i>.;,;tj;T::ii. 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