THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW A TRUSTEE'S HANDBOOK. TRUSTEE'S HANDBOOK BY AUGUSTUS PEABODY LORING , n A.B., I.I..H., HARV. OF THE SUFFOLK BAB THIRD EDITION BOSTON LITTLE, BROWN, AND COMPANY 1907 Copyright, 1898, 1900, 1907 Br AUGUSTUS P. LOBING All rights reserved 8. J. PAKKBILL & Co., BOSTON, U. 8. A. PREFACE TO THIRD EDITION. THE numerous decisions concerning the matters covered in this Handbook since the last edition have made it necessary to rewrite and enlarge many parts of it, particularly those parts treating the trustee's liabilities to strangers, extra dividends, and interstate law. It has been found necessary to cite 366 additional cases. AUGUSTUS P. LORING. BOSTON, August 12, 1907. 735227 PREFACE TO FIRST EDITION. THIS little book is meant to state, simply and con- cisely, the rules which govern the management of trust estates, and the relationship existing between the trustee and beneficiary. The lack of a Handbook of this kind has led me to complete and publish what were originally notes for personal use merely. As the book is for general as well as professional readers, the citations are illustrative, with an ap- proach to completeness only where the law is doubt- ful or conflicting. But pains has been taken to notice the peculiarities of local State law, especially where dependent on statute. I wish to acknowledge my obligation to the writers of the many admirable text books which bear on my subject, all of which I have used freely, and to which I have referred often for a fuller discussion of prin- ciples and a more complete citation of authorities ; and I have to thank Mr. Edward A. Howes, Jr., for his valuable assistance in digesting cases and passing this volume through the press. AUGUSTUS PEABODY LORING. NOTE. THE citations of the following text books are thus abbreviated : Lewin on Trusts, 9th Eng. ed., is cited as " Lewin." Perry on Trusts, 4th Amer. ed., 2 vols., is cited as " Perry." Underhill on Trusts and Trustees, Amer. ed. Wislizeuus- is cited as " Underhill." Flint, Trusts and Trustees, is cited as " Flint." CONTENTS EMI TABLE OF CASES , w MH* i xxiii PART I. THE TRUSTEE AS AN INDIVIDUAL. Preliminary. The terms of the trust instrument govern the trust 1 It is therefore important to know and follow them . . 1 I. THE OFFICE OF TRUSTEE is NOT ALWAYS DESIRABLE . 2 Because he Cannot come in competition with trust estate . . 2 Cannot delegate the management 2 Cannot render expert services freely 2 Is restricted in his dealings with the beneficiary . 2 His only reward compensation 3 II. DlSCLAIMEB 3-5 Acceptance necessary; may disclaim . 3 But dry trust may vest in representatives of sole trustee ... 3 No special form of disclaimer is necessary 3 It should be affirmative and decided 3 By deed. In Probate Court when instrument is a will 4 Must disclaim whole trust 4 May disclaim executorship or trusteeship 4 Exceptions 4 May disclaim one of two separate trusts 5 Effect of disclaimer 5 Vests title in other trustees 5 Joint power lost by ., 5 X CONTENTS PAOB III. ACCEPTANCE -.- - fl v . . . 6-7 Should be formal . . 5 What is construed as an acceptance ........ 6 Presenting will 6 Doing any act to execute trust 6 Not disclaiming in reasonable time 7 IV. APPOINTMENT 7-13 No trust fails for want of a trustee . 7 Temporary trustee may be appointed 7 Appointment under terms of trust instrument ... 8 How THE TBUSTEE is APPOINTED 8-9 Must be ratified by court when . 8-9 Court will appoint when there is no adequate pro- vision in the instrument . . 9 when donee of power does not act 9 What court will have jurisdiction 9-10 Appointment not complete without title to property 11 May vest by terms of trust instrument 11 May vest in new trustee by statute 11 Decree may order conveyances 12 Appointees of court must give bond 12 Without sureties when 12 Amount required : 13 V. WHO is TBUSTEE 13-15 Any person intermeddling with trust property . . 13 An executor investing and performing duties of trustee 14 Where a second set of trustees appointed under power 15 VI. WHO CAN BE A TBUSTEE 15-17 Any person of legal capacity to hold property and exercise power 15 Such person may be a corporation 15 Who cannot be a trustee 15 Lunatic and infant may be 15 Trustee should be " capable " and " fit " . ... 16-17 Bankrupt, bad character, or beneficiary unfit . . 16 Relationship objectionable 16-17 CONTENTS Xl turn VII. APPOINTMENT OF TRUSTEE 18 Maker may choose whom he will 18 Donee of power must choose honestly and reasonably 18 Courts will only appoint proper persons .... 18-19 Or such person as all agree on 19 Public trustees in Colorado 19 VIII. DEVESTMENT OF OFFICE . . . . 19-24 By extinguishment of trust or completion of duties 19 By death or disability office vests in survivors ... 19 If sole trustee dies or is removed, office vests in successor 20 Cannot abandon trust 20 Resignation 20-22 Must be accepted either by all interested .... 21 Who are interested for this purpose 21 Or by court. What court 21 Where there is more than one trust in same in- strument, must resign both unless devisable . . 22 Removal 22-24 Matter is addressed to discretion of court ... 22 Probate Court has statutory jurisdiction ... 22 Any court of equity in absence of statute ... 22 All interested in trust are parties 22 Removed for Waste and mismanagement 23 Wilful breach of trust 23 Property insecure 23 Unreasonable prejudice 23 Unreasonable disagreement 23 Will not remove For poverty 24 Caprice of beneficiary 24 Unpleasant relations with beneficiary .... 24 For non-exercise of or manner of exercise of discretionary powers, unless prejudiced or unreasonable 24 For technical breach of trust 24 For breach of trust through mistake 24 CONTENTS PART II. THE INDIVIDUAL AS TRUSTEE. I. INCIDENTS OF THE TRUST ESTATE. The legal and equitable estate in every trust 25 OWNEBSHIP OF TRUST PROPERTY ABSOLUTE IN TRUSTEE . 25-26 Incidents of ownership fall to trustee 26 Suing and being sued . 26 No right of action if trustee barred 27 Is stockholder in corporation 27 Is personally bound by contracts 28 Is liable to taxation 29 Liable as owner of property 30 Is liable in tort and criminally 31 OWNERSHIP NOT BENEFICIAL 32-35 Can take nothing but established compensation ... 32 Cannot set off debts in equity 32 Cannot use the property 32 Cannot buy the trust property 32 Cannot borrow trust property . . . 33 Cannot buy up claims at discount 34 May in some States render estate expert services for hire, in others not 34 Must account for any benefit received 35 OWNERSHIP SHOULD NOT BE A BURDEN 35-36 Can charge legitimate expenses. What are .... 35-36 Entitled to reasonable compensation. What is . . 36-44 Commissions allowed in various States . 39-44 TRUSTEE'S ESTATE 44-52 In real estate; only what is needed .......... 44 In personal; absolute 44 In Code States, no title, and is holder of power only . 44 Is entitled to possession at law 45 Possession of beneficiary is that of trustee 45 Estate is joint; cannot be severed 45-46 CONTENTS Xlll PAOB TRANSMISSION OF THE TBUSTEE'S ESTATE. Alienation . . 46-52 Inter vivos 46-51 May convey at will. Effect of conveyance 46 Purchaser for value without notice, who is and is not 46-47 Title will not pass under general assignment ... 47 Cannot be taken for trustee's individual debts . . 48 Subject to execution for trust debts 48 To what extent 49 Set-off 49 Title passes to remainderman even if equitable . . 50 Passes to successor; how 50 Forfeiture 51 On death of trustee 51 Vests in survivor 51 On death of sole trustee vests in 51-52 General devisee when 51 Heir or personal representatives when 52 II. POWERS. IN GENEBAL. What powers treated -. 52 WHAT POWEBS A TRUSTEE HAS . 52-53 As incidental 53 Granted by court or statute 53 Granted by maker of trust 53-54 VESTING OF POWEBS 54 When powers do not vest in trustee 54 Vest in all trustees jointly 54 Pass to successors and survivors when ....... 54 General powers , . ,., ....... 54 Special powers 55 EXECUTION OF POWEBS 55 The essential part of a power . ,. . . 55 Joint execution necessary 55-56 Exception about collecting money 56 DELEGATION .,.....,.. 56-57 Cannot delegate essentials 57 Can delegate non-essentials 57 XIV CONTENTS PARTIAL OB DEFECTIVE EXECUTION ......... 58-59 Defective execution aided for purchaser ...... 58 Substantial execution of essentials confirmed .... 58 Literal execution of prescribed non-essentials neces- sary ..................... 58 Consent, etc .................. 58-59 CONTBOL OF COUBT OVEB EXECUTION .......... 59 Will control obligatory powers ......... 59-60 Will ratify when ................ 60 Extent of control of discretionary powers .... 60-63 Will not inquire reasons ............ 61 May consider reasons if given .......... 61 Practically require reasonable exercise ...... 63 Will set aside for fraud ............. 63 EXTINCTION OF POWEBS ............... 64 By death of person having discretion ....... 64 Expiration or accomplishment of trust ....... 64 Exhausted by what ............... 64 III. PARTICULAR POWERS. POWEB OF SALE 64-73 Not a general power 64 Usual power in trust instruments 65 Usual power under statutes 66 Court of equity may decree sale 68 EXECUTION OF POWEB 68-70 Must be accurate 69 Defective aided when. Under statutes 69 By court 69 Purchaser takes risk of what 70 Purchaser must see to application of purchase money when 71 PLEDGE OB MOBTGAGE 71-72 Not a general power 71 When given by statute 72 Court will not order 72 Power to sell does not include 72 May give power of sale mortgage 72 CONTENTS XV PAOI PARTITION AND EXCHANGE 73 LEASING 73-75 What leases trustee can make 73 What leases are binding 73 Special power to lease 74 Liability on covenants 75 To SUE AND DEFEND 75-76 May incur expense 75 All trustees must join 75 What admissions bind 76 May compromise 76 To CONTEACT 77-78 Express contracts bind estate when 77 Trustee personally bound by contracts 77 Signing as " trustee " 78 How trust estate is reached 78 MAINTENANCE AND SUPPORT 79-82 General power when 79 Special power how exercised 79 Mainly discretional 79-80 General power how exercised 80 Discretion as to amount 81 Discretion as to amount reviewed when .... 81 Discretion as to apportionment when more than one beneficiary 81-82 MISCELLANEOUS 82 Revocation 82 Appoint successor 83 IV. DUTIES. DUTIES TO THE BENEFICIARY OWING TO STATUS 83 To support if unable to care for self 83-84 When others have duty to support 84 Beneficiary is not a stranger in matters outside of trust 85 Contracts with beneficiary 85 Must not take advantage of position 85 Such transaction may be set aside 86 May accept employment from beneficiary 86 XVI CONTENTS PAG* DUTIES IN EXEBCISE OF OFFICE 86 Must exercise utmost good faith in execution of trust 86 Must be loyal to its and the beneficiary's interests . . 87 Must not aid adverse claimants 87 Must not come in competition 87 Must consider interests of trust exclusively in its management 87 Must prosecute suits 88 Must not release securities 88 DUTY TO EXERCISE TRUST PERSONALLY 88 Cannot delegate to co-trustee or agent 88 May employ agent where there is necessity 89 May employ agent to perform ministerial acts ... 90 Distinction between handling income and principal . 89 DUTY TO ACCOUNT 91-95 Must keep separate and accurate accounts 91 Books open to inspection of beneficiary 91 Must settle accounts periodically 91 Entitled to settlement of account 91 Form of account 92-93 Effect of account 94 Account in court 94 Account between parties 95 Expense of accounting 95 WHERE THE TRUSTEE is IN DOUBT AS TO HIS DUTY . . 96-98 May notify beneficiary 96 May get instructions of court where duties are doubt- ful 96 Cannot get instructions to enlighten ignorance ... 96 Proper form of raising questions 97 V. MANAGEMENT OF FUND. What may be trust property 98 MUST TAKE STEPS TO SECURE PROPERTY AT ONCE . . . 98-102 Real estate. Place title in joint names 99 Take possession of 99-100 Personal property. Receipt for to settlor 100 May not come into possession at once 100 Must examine predecessor's account 101 CONTENTS PAOB Transfer of stocks necessary 101 Notice in case of equitable claims 101 Should sue on all claims 102 CASE AND CUSTODY 102-105 Real estate. Should require tenant to attorn or take possession 102 Personal property. Trust chattels 102 Money 103 Non-negotiable securities 104 Negotiable securities 104-105 CONVEBSION 105-109 Usually necessary to some extent 105 What should be converted 106-107 Business, partnership, speculative, unproduc- tive, undivided, or generally property not trust securities 106-107 Liability for delay 106 What need not be converted 107 Maker's reasonable investments 107 Securities at a premium 107 Property to be enjoyed in specie 107 CONVEBSION OF REAL INTO PERSONAL OB THE REVERSE . . 107 May not convert without authority 108 What is a conversion 108 Authorized by statute 108-109 Authorized by court 109 Cy pres 109 Infant's estate 109 Implied authority , . . . . 109 INVESTMENTS 109-124 Must keep funds invested at all times 109 Liable for simple interest 110 Liable for compound interest when 110 Change investments when 110-111 Must invest securely and to get current return ... Ill Trust investments, what are . 112 Determined by statute 113 Determined by court . 113-115 Classes of investment disapproved . . . ... . . .. 115 ft Xviii CONTENTS PAU Must exercise a sound discretion 116 What is sound discretion 116 Determined by condition of affairs at time of in- vesting 116 Margin of security 116 Proportion in one security 116 Investments allowed in various States 117-121 PRINCIPAL AND INCOME 121-142 Need of dividing 121 Receipts. The estate paid in is principal 122 Proceeds of conversion of securities .... 123 Damages recovered . 123-124 Grain and loss 124 Advance or depreciation in value 124-127 Timber and gravel 125 Chattels 125 Farming stock 125 Accumulated income 126 Dividends. Current 126-135 On wasting investment 126 Extra dividend 127-134 Stock dividend 128-129 Delayed dividends 135 Rents 135 Interest, generally income 136 May require apportionment 136 Bonds bought at premium 136 Apportionment at end of life estate 136 PAYMENTS 137-145 Discharge of encumbrances 137 Alterations and repairs 138 When principal and when income 138 On newly acquired property 138 Taxes. Ordinary 139 Betterment and extraordinary 140 Insurance. Premiums 140-141 Proceeds of policy 141 Expenses. Care of property 141 Brokers' charges 142 Legal expenses 142 DISTBIBUTION 142-145 At risk of trustee . 142 CONTENTS x'lX PAOE May have decree of distribution 143 Who bound by decree 143 Should not be by fictitious account . . 144 Payment to an attorney ; . . . 144 Compensation for ...-., 1 . 145 VI. TRUSTEES' LIABILITIES. To STBANGEBS. (See Incidents of Ownership, supra.) 145-147 Criminally for embezzlement 147 To BENEFICIABIES 147-156 Are joint and several 147 Each transaction stands alone 147 For neglect of duty 147 Whether damage is directly or indirectly the result 148 For crimes of strangers where there is neglect . 148 Not for act and default of co-trustee 148 Unless one joined in the breach of trust .... 149 Or contributed by neglect 149-150 Or gave joint bond 149 Contribution from co-trustee 151 For errors of judgment 151-154 In investing 152 Paying to wrong person 152 Must use average discretion 152 Otherwise where discretionary power 153 May be limited by terms of trust 153 Measure of damage 154 Interest simple. Compound when 154 May be required to replace property 154 Liability terminated 155 By death 155 Release 155 Account and apportionment of successor .... 155 Statute of limitations 156 Insolvency 156 Successor's taking over property . ..... : . .. .> . 155 XX CONTENTS PART III. THE BENEFICIARY. PAOI I. WHO MAT BE A BENEFICIARY 157 Who is the beneficiary 158 II. THE ESTATE OF THE BENEFICIARY 158-168 Incidents of the equitable estate 159 Will descend like other property 160 Dower and curtesy 160 May be alienated 160 What estate passes 161 Priority 161-162 Notice 162 Restraint on alienation 163 Tendency of modern jurisprudence 163 Exception as to married women 164 Rules in various States 164-166 Spendthrift trust made by cesser 166 Support of family 167 Condition over on alienation 167-168 III. RIGHTS OF BENEFICIARY AGAINST TRUSTEE . . . 168-179 Where enforced 168-169 How enforced 169 Can compel what 169-170 Damages for breach of trust 170-171 Special rights . . . 171-176 Right to information 171 Right to income 171-172 Right to support 173 Right to conveyance 173-175 Right to possession 175-176 Rights lost 176-179 By release 176 Assent , .. 177 Acquiescence 177-178 Statute limitations 178 IV. RIGHTS AGAINST STRANGERS 179-184 To constitute transferee of property trustee . . 179-182 May follow as long as can identify 180 Money may be followed 180 CONTENTS BAM Must elect whether to hold trustee or follow . . . 182 Rights to pursue stranger aiding breach of trust . . 182 What is notice of trust 182 Rights where disturbed in possession 183 V. LIABILITIES 184 PART IV. INTERSTATE LAW. The construction of the settlement 186 The execution of the trust 187 Where the trust exists 188 When the trustee is appointed by the settlor . . 188 When the trustee is appointed by judicial decree 189 Non-resident trustee 191 Foreign investments 193 Taxation . 193 TABLE OF CASES PAOI A. Abbott, Pct'r 47 v. Foote 50, 185 Abell v. Brady 39, 41 Adair v. Brimmer 177 Adams v. Adams 7, 137 Albert v. Baltimore 182 Aldrich v. Aldrich 62-81 v. Barton 94 Allen v. Gillette 32 Alley v. Lawrence 59 Ailing v. Ailing 84, 85 .Allis' Estate 121, 136 Alston, In re 123 Ames v. Armstrong 149 v. Scudder 103 Amory v. Green 115, 193 v. Lowell 94, 95, 140 Anderson v. Daley 169 v. Mather 108 Angus v. Noble 6, 14 Ansley v. Pace 67, 68 Anthony v. Caswell 29 Arguello, In re 103 Armory Board, In re 11 Arnold v. AJden . 40 v. Brown 32 v. Gilbert 60 Arnould v. Grimstead 111 Atkins, In re 106 v. Albree 134 Att'y Gen. v. Alford 110 v. Briggs 67 v. Gleg 45, 55, 57 v. Landerfield 15 v. Proprietors of Old South Meeting House 180 Aubert's Appeal 186 Avery, In re 119 Aydelott v. Breeding 118 Ayres v. Slebel & Co. 189 B. Babcock v. Hubbard 40 Bacon v. Bacon 61, 62 Badger v. Badger 177 Baer's Appeal Bagshaw v. Spencer Bahin v. Hughes Bailey, Pet'r v. Lloyd PAGE 120 44 151 54 163 v. New England Mut. L. Ins. Co. 183 Bailey's Trustee v. Bailey 174 Bailie v. McWhorter 165 Baker v. Lorillard 67, 68 v. Tibbetts 30 Balch v. Hallett 126 Ball v. Safe Deposit & Trust Co. 67 Barbour v. Cummings 56, 62, 63 Baring v. Willing 145 Barker's Trusts, In re 16 Barker v. Barker 170, 182 v. Mercantile Insurance Co. 27 Barnes v. Dow 165 Barney v. Parsons 121 Barrell v. Joy 36, 41 Barrett v. Hartley 37, 85 Barroll v. Forman 71 Bartlett v. Bartlett 160 Bassett v. Fidelity & Deposit Co. 13, 87 v. Granger 95 Batchelder v. Central Bank 183 Bate v. Hooper 121, 185 Bateman v. Davis 58 Bates v. McKinlay 132, 135 v. Underbill 150 Bayard v. Farmers' & Me- chanics' Bank 182, 183 Beach v. Beach 26, 45 Beatty's Estate 150 Beck Lumber Co. v. Rupp 48 Belchier, Ex parte 90 Belknap v. Belknap 161 Belmont v. O'Brien 54 Beloved Wilkes' Charity, In re 61 Bemmerly v. Woodward 154 Benedict v. Dunning 55 Benjamin v. Gill 87 Bennett v. Bennett 174 v. Colley 178 v. Peirce 94, 95, 160 XXIV TABLE OP CASES Bennett v. Wyndham Bentley v. Dixon Bergengren v. Aldrich Berger v. Duff Bertron v. Polk Bethel v. Abraham PAOB 31 6, 14 74 57 60 60, 61 Biddle's Appeal 37, 38, 134 Billings v. Warren 122 Billington's Appeal 108 Bingham's Appeal 187 Bircher v. St. Louis Sheet Metal Co. 181 v. Walther 181 Bird v. Chicago, I. & N. Rail- road 183 Birmingham v. Wilcox 147, 150 Black v. Ligon 74, 75 Blacklow v. Laws 68 Blair v. Cargill 185 Blake v. Pegram 37, 38, 95, 96, 147, 149, 150 v. Traders' Nat'l Bank 13, 178, 179, 182 Blauvelt v. Ackerman 91 BIythe v. Green 61, 79, 126 Board of Charities v. Ldck- hard 167 Bogle v . Bogle 20 Bohlen's Estate 66 Boon v. Hall 72, 108 Borel v. Rollins 73 Bostick v. Winton 63 Bostock v. Floyer 57, 88, 148 Boston v. Doyle 7, 55 v. Rohbins 76 Boston Safe Deposit & Trust Co. v. Mixter 66 Bostwick, In re 84 Bosworth, In re 96 Bouch v. Sproule 128 Boulton v. Beard 153 Bourquin v. Bourquin 87, 169 Boursot v. Savage 45 Bovey v. Smith 187 Bowditch v. Banuelos 12, 18, 21 Bowen v. Penny 145 Bowers v. Evans 181 Bowes v. Seeger 56 Bowker v. Pierce 37, 85, 107 Boyd v. Oglesby 43 Boyer's Estate 136 Boys v. Boys 107 Bradbury v. Birchmore 36, 49 Bradby v. Whitchurch 96, 170 Bradford v. King 188, 190 Bradlee v. Andrews 80 Bradley v. Chesebrough 180 PAM Bradshaw v. Fane 73 Bradstreet v. Butterfleld 158 Brandenburg v. Thorndike 175 Brander v. Brander 126 Braswell v. Morehead 125 Bresee v. Bradfleld 85 Brice v. Stokes 151, 176 Bridge v. Bridge 139, 141 v. Connecticut Life Ins. Co. 161 Bridges v. Longman 72 Briggs v. Light Boat 15 Brimley v. Grou 128, 134 Briscoe v. State 40 Brittlebank, In re 63 Broadway Nat'l Bank v.Adams 164 Bronson v. Thompson 33 Brooks v. Jackson 39 Brough v. Higgins 141 Broughton v. Broughton 34 Brown v. Berry 80, 84 v. Desmond 168, 189 v. French 116 v. Gallatly 106 v. Lambert's Adm'r 14 v. Macgill 164 v. Mercantile Trust Co. 82 v. Ricketts 33 v. Wright 118 Browne v. Cross 178 Bull v. Bull 61 v. Walker 118 Bullard v. Chandler 97 Bullock, In re 166 Bumgarner v. Cogswell 11 Burgess v. Wheate 159, 160 Burnett v. Lester 125 Burnham v. Earth 181 Burr v. McEwen 102 Burwell v. Mandeville's Ex'or 78 Bushong v. Taylor 77 Busk v. Aldam 15 Byrne v. McGrath 180 0. Caldecott v. Brown 138, 139 Calhoun v. Ferguson 125 Campbell v. Miller 118 Cann v. Cann 109 Canoy v. Troutman 46 Carey v. Brown 26 Carney v. Byron 174 Carpenter v. Cook 58 Carruth v. Carruth 4, 5, 22 Carson v. Carson 14 TABLE OP CASES XXV Gary v. Slead Casey v. Canavan Casparl v. Cutcheon Cassell v. Ross Cathaway v. Bowles Catherwood's Appeal Cauhape v. Barnes Cavin v. Gleason 174 65 118 70 144 62 11 181 Central Trust Co. v. Johnson 41 Chadbourn v. Chadbourn 7(5, 97 Chadwlck v. Heatley 145 Chambersburg Ins. Co. v. Smith 169 Chapin v. First Unlversallst Society 45 Chase v. Chase 62, 84, 169, 190 v. Searls 161 Chatham v. Rowland 77 Chawner's Will, In re 72 Cherry t\ Richardson 50 Chester v. Rolfe 75 Chesterman, In re 172 Chestnut Nat'l Bank v. Fidel- ity Ins. & Trust Co. 82 Cheyney v. Geary 161 Chlsholm v. Hammersley 96, 142 Claflln v. Claflln 173 Clapp v. Ingraham 162 Clark v. Beers 113, 117 v. Blacklngton 92, 155, 190, 192 v. Clark 45, 62, 88, 150 v. Hayes 67 v. Iowa City 136 V. Platt 40 v. Wright 182 Clarke v. Cordla 76 v. Deveaux 158 v. Hogemann 162 Cleaveland v. Draper 143 Cleveland v. Hallett 44 v. State Bank 73 Cllve v. Carew 168 v. Cllve 135 Clough v. Dixon 103 Cobb v. Fant 43, 131, 133 Cochrane v. Snell 165 Codman v. Krell 186 Coffin v. Bramlitt 119 Coffman v. Gates 184 Cogblll v. Boyd 99 Colburn v. Grant 89 Coleman, In re 82, 166 v. San Rafael Turnpike Road Co. 157 Colgate v. Colgate 32 Collier v. Munn 34 PAOB Collins v. Serverson 81 Colllster v. Fassltt 56, 62, 63, 80 Colton v. Colton 62 Cone v. Cone 9 Conger v. Conger Connally v. Lyons 78, 146 Connolly's Estate 132 Conybeare's Settlement, In re 16 Cooley v. Scarlett 168, 189 Coombs v. Jordan 71 Copeland v. Manton 162 Corle v. Monkhouse 123 Corsellls, In re 34 Corya v. Corya 103 Costabadle v. Costabadle 61 Courtier, In re 59 Cousins' Estate 117, 153 Cowley v. Wellesley 125 Cowman v. Colquhoun 67 Cowper v. Stoneham 182 Cowx v. Foster 163 Cox v. Cox 122 Crabb v. Young 60, 153 Craig v. Craig 20, 22 Crane v. Hearn 149 Crawford County Commis- sioners v. Patterson 180 Creveling v. Fritts 33 Crocker v. Dillon 14, 100, 184 Cromle t;. Bull . 62, 63 Cross v. United States Trust Co. 186 Cruger v. Halllday 21 Gulp's Estate 24 Cummins v. Cummins 112 Cunard's Trusts, In re 5 Curtis v. Lakin 178 v. Osborne 130, 136 v. Smith 10, 62, 169, 188, 189, 190, 191 Cushman v. Goodwin 181 D. Daggett v. White Dagley v. Tolferry Dally v. Wright Daland v. Williams Danahy v. Noonan Darcy v. Croft Davidson v. Janes 4 152 38 130 174 140 50 Davis' Appeal (Pennsylvania) 43 Davis, Appellant (Massachu- setts) 63, 112, 116 Pet'r 67 XXVI TABLE OF CASES PAGE Davis v. Charles River Branch Railroad 26 v. Coburn 178 . Harman 121 v. Jackson 130 Davison v. Tarns 145 Davoue v. Fanning 33, 155 Dean v. Lanford 17, 20 Dedham v. Natick 84 Deg v. Deg 180 DeKoven v. Alsop 97, 128, 129, 130, 134, 135 Denegre v. Walker 68 Denike v. Harris 111 Denholm v. McKay 33, 177 DePeyster v. Ferrers 52 Devin v. Hendershot 26 Dexter v. Cotting 12, 158 v. Phillips 136 Diamond v. Wheeler 28, 76, 78, 146 Dickinson's Appeal 114, 116 Dickinson v. New York Bis- cuit Co. 66, 70 Dillingham v. Martin 55 Disbrow v. Disbrow 23 Dixon v. Dixon 182 v. Homer 37, 39, 46 Docker v. Somes 33 Dodd v. Wilkinson 20, 156 v. Winship 50, 92, 94, 98 Dodds v. Tuke 36, 49 Dodkin v. Brunt 7, 22 Dodson v. Ashley 65 Doe d. Raikes v. Anderson 48 D'Ooge v. Leeds 129 Dorr v. Boston 29 v. Wainwright 4, 103, 175 Dover v. Denne 89 Downes v. Bullock 121 Dowse v. Gorton 31, 48, 78 Drake v. Crane 119 v. Price 14 v. Rice 161 Draper v. Stone 154, 181 Dry Goods Co. v. Gideon 33 Dublin Case 15 Dunglison's Estate 162 Dunn v. Dunn 160 Durkin v. Langley 77 Dyer v. Riley 104 E. Eakle v. Ingraham Earl Cowley v. Wellesley 174 125 PAOI Earp's Appeal 124, 131, 132, 133 Edwards v. Edwards 97, 122, 140 Kidman v. Bowman 134 Eisnew's Appeal 134 Eldredge v. Heard 60, 62, 63 Eliott v. Sparrell 110 Ellicott v. Kuhl 181 Ellig v. Naglee 60, 76 Ellis v. Barker 87 v. Boston, Hartford & Erie Railroad 5, 11, 20 v. Ellis 37 Elting, In re 94, 134 Ely v. Pike 72 Emery v. Batchelder 118, 144, 190, 192 English v. Mclntyre 187 Enohin v. Wylie 187 Ervine's Appeal 67, 83, 107 Evangelical Synod v. Schoe- neich 181 Evans' Estate 89, 182 Evans v. John 3 v. Weatherhead 36 Everett v. Drew 26, 77 F. Fairbanks v. Sargent 162 Fairland v. Percy 49 Fanning v. Main 172 Farmers' Loan & Trust Co., In re 147 v. Lake Street Elevated Railroad 22 v. Pendleton 191 Faussett v. Carpenter 48 Fay v. Haven 187, 190 Felch v. Hooper 169 Feltham v. Turner 62 Fenwick v. Greenwell 148 Fernstler v. Seibert 183 Fidelity Co. v. Glover 118 Fidelity Insurance Co. v. Nel- son 190 Fidler v. Higgins 108 Field v. Field 104 v. Middlesex Banking Co. 85, 177 v. Wilbur 79 Finlay v. Merriman 120 First Nat'l Bank v. Mortimer 167 v. Nat'l Broadway Bank 188 First Nat'l Bank of Carlisle v. Lee 125 Fisher v. Wister 168 TABLE OF CASES XXV11 Fitzgerald, In re v. Rhode Is! tal Trust Co. Fleming v. Wilson Fletcher v. Greene Flint v. Clinton Co. Flowers v. Franklin Foil v. Newsome Foote v. Cotting Forbes v. Lothrop Ford v. Brown Forster v. Davies Forward v. Forward Fosdick v. Town stead Foster v. Bailey t;. Cockrell v. Elsley v. Foster v. Smith Fox v. Storrs Franklin v. Osgood Franklin Savings Taylor Frazer v. Western Freedman's Co. v. Earle Freeman v. Cook Frellnghuysen v. Nugent French v. Westgate Frere v. Winslow Frierson v. Branch Fritz v. City Trust Co. Fryberger v. Turner Furness v. Leupp Fyler v. Fyler G. Gamble v. Gibson Garesche v. Levering merit Co. Garesch6 v. Priest Garland v. Garland Garvey v. Garvey Gasquet v. Pollock Geaves, Eat parte George, In re Gerry, In re Gibbons v. Mahon Gilford v. Thompson Gllkey v. Paine Gill, In re v. Carmine Gillesple v. Smith Gil more v. Tuttle Gisborne v. Gisborne PAOK PAOE 39 Gleason v. Boston 84 id Hospi- Glenn r. Allison 28, 146 2o. 139 Glink v. La Fayette 18 41 Gloyd's Estate 41 164 Good v. Lickorish 166 7 Goodrich v. Proctor 65 125 Goodson v. Ellison 173 66 Gordon v. West 42, 141 78 Gott v. Cook 62 161, 168 Graham's Estate 124 47 Graham v. Austin 89, 150 24 v. King 69, 88, 90 1 35 v. Roberts 140, 141 )f Hemp- Granger v. Bassett 129, 135 157 Gray v. Corbit 164 145 Greason v. Keteltas 73 162 Green v. Bissell 130 98, 157 17. Crapo 116 94, 95 Greene v. Greene 123 168 v. Mumford 29, 96, 97 19 v. Smith 80, 85, 134 55 Greenwood v. Coleman 44 Bank v. Griffin v. Prlngle 39 49 Griffith v. Hughes 151, 177 64 Grinnell v. Baker 120 arle 159 Griswold v. Caldwell 72 154 v. Sackett 8 igent 181 Groton v. Ruggles 14 70 Guarantee Trust Fund Co. v. 143 Scott - 9 45 Guernsey v. Lazear 164 [to. 70, 71 Guion v. Pickett 8 177 Gulick v. Gullck 9, 190 161, 167 Gunn v. Brown 174 121, 176 Gunter v. Janes 147, 156 H. 34, 119 Hadden v. Spader 161 g Invest- Hadlock r. Brooks 77 69 Hagan v. Platt 122 119 Hahn r. Hutchinson 166 165 Halnes v. Elliot 24 55, 61, 64 Hall, In re 112 81 v. Cushing 14 95, 99 v. Ditto 180 83 Hallett's Estate 181 124 Hallows t7. Lloyd 2, 99 128, 129 Halsey 17. Tate 178 129, 130 Halstead, In re 104 128 Hamilton v. Faber 22 38 Hamlin r. Hamlin 160 28, 146 Hammond r. Hammond 184 57 Hampton 17. Foster 28, 29, 30, 78 60 Hanna v. Clark 36, 39 e 62 Harlow v. Cowdrey 52 XXV111 TABLE OP CASES PAGE PAGE Harrington v. Brown 33 Houghton v. Davenport 48, 180 Harris v. Elliott 50 Howard v. Fay 181 v. First Nat'l Bank 43 v. Gilbert 22 v. Harris 173 Housman, In re 126, 140, 141 v. Starkey 94, 143 Hovey v. Dary 108 Harrison v. Pepper 140, 141 How v. Waldron 145 Hart v. Kapu 40 Howe v. Lord Dartmouth 106, Harte v. Tribe 82 107, 123 Hartman's Appeal 158 v. Ray 4 Harvard College v. Amory 106, Howland v. Green 98, 142 113, 114, 116 Hoyt, In re 136 v. Weld 66 v. Latham 32, 178 Haskin, In re 38 Hubbard v. Fisher 43 Hassard v. Rowe 108 Hubbell v. Medbury 178 Hauk v. Van Ingen 181 Hughes v. Chicago Co. 24 Hawley v. James 57, 169 Humphrey v. Campbell 162 r. Ross 158 Hun v. Cary 152 Haxall's Adm'rs v. Shippen 141 Hunt, Appellant 114 Haydel v. Hurck 61 v. Gontrum 115, 118 Hayes v. Hall 32, 33, 87, 91 v. Perry 29, 193 Hazard v. Coyle 36 v. Watkins 125 Heard v. Eldredge 123, 142 Huntington v. Jones 166, 168 Heath v. Bishop 165 Hurlburt, In re 184 Heighe v. Littig 124 Hussey v. Arnold 28, 77 Hemenway v. Hemenway 97, 122, Hutchinson v. Maxwell 165 128, 130, 131, 136 Hutchison's Appeal 174 Hemphill's Appeal 120 Henderson's Estate 173 Hepburn v. Hepburn 138 I. Herron v. Marshall 27 Hext v. Porcher 99 Hibbard v. Lamb 55 Hicks, In re 181 Hildenbrandt v. Wolff 139 Hilliard v. Fulford 144 Insurance Co. v. Chase 102 Iowa & California Land Co. v. Hoag 188, 189 Ireland v. Ireland 62 Irvine v. Dunham 23 Hills v. Barnard 98 v. Putnam 80, 84, 96 Hinson v. Williamson 149 v, Irvine 15 Isherwood v. Oldknow Iverson v. Saulsbury 178 Kite's Devisees v. Kite's Ex'ors 122, 128, 132, 133, 134, J. 135, 136, 140, 141 Hobbs v. Smith 165 Jackman v. Nelson 82 Hodges, In re 62, 63 Jackson v. Von Zedlltz 85, 164, v. Bullock 182 167 Hoke v. Hoke 43 Jackson Square Loan & Sav- Holbrook v. Holbrook 133, 134 ings Ass'n v. Bartlett 164 Holland Trust Co. v. Suther- Janes v. Walker 78 land 96 Jencks v. Alexander 17 Holmes, In re 181 Jenkins v. Lester 168, 188, 189, v. Bring 115 190 v. Taber 139 v. Whyte 37, 94 Holt v. Hogan 64 Jennison v. Hapgood 39, 110, 154 Honaker Sons v. Duff 165 Jewett, Ex parte 108, 109 Hopgood v. Parkin 90 v. Schmidt 14 Hopkins v. Burr 180 Johns v. Johns 68, 107, 109 Hopkinson v. Burghley 91 Johnson, In re 31, 78 Ilorton v. Brocklehurst 149 v. Brldgewater Mfg. Co. 135 TABLE OF CASES XXIX PAGE Johnson v. Lawrence 38 Jobnstone v. Jobnstone 67 Jones' Appeal 88, 89 Jones' Estate 178 Jones v. Atchison, Topeka & Santa Fe" Railroad 65 v. Dougherty 170 v. Foote 82 v. Home Savings Bank 145, 178 v. Jones 186, 187, 188, 190, 191 v. Lewis 104, 148 v. McPhllllps 24 Jordan v. Jordan 139, 141, 142 Jourolman v. Massenglll 164 Judson v. Corcoran 161 Kane v. Kane's Adm'r 154 Kaufman v. Crawford 109 Keane v. Robarts 71 Keeler v. Lauer 60, 159 Keeney v. Morse 186, 187, 188 Keith v. Copeland 172 Kemble's Estate 48, 134 Kemp v. Foster 41 Kendall v. DeForest 94, 95, 144 Kennard v. Bernard 55 Key v. Hughes 121 Keyes v. Carleton 82 Kllbee v. Sneyd 6, 89, 103, 151 Klldare v. Eustace 168, 189 Klmball v. Blanchard 62 v. Reding 115 King v. Bellord 16 v. Boys 15 v. Cushman 34 v. Mildmay 51 v. Mullins 91 v. Parker 44 v. Talbot 112, 113, 114, 116 KInmonth v. Brigham 106 111, 122 Knefler v. Shreve 165 Knight v. Boston 112 Knox v. Jenks 69 Krebs' Estate 174 Kyle v. Barnett 33 Ladd v. Ladd 13 Lafferty's Estate 16 Lamberton v. Youmans 177 PAGE Lamport v. Haydel 164 Lamson v. Knowles 143 Landis v. Scott 91 Lang v. Lang's Ex'ors 133, 135 Lang's Ex'ors v. Lang 133 Langton v. Brackenbury 81 Lanius v. Fletcher 187 Law's Estate 120 Lawrence's Estate 187 Lawrence v. Lawrence 82 Laws v. Williams 187 Lawton v. Law ton 112 Learned v. Welton 45 Lebanon Bank's Estate 181 Lee v. Brown 83 v. Hewlett 162 v. Sankey 56 Leeds, Ex'or, v. Wakefield 59 Leggett v. Hunter 67 Leigh v. Harrison 164 Leland v. Hayden 130 v. Smith 188 Lemen v. McComas 175 Lent v. Howard 173 Lenz v. Prescott 144, 163 Leonard v. Owen 125 v. Pierce 92 Lerow v. Wilmarth 141 Lessee of Ward v. Barrows 64 Lever v. Russell 94 Lev! v. Gardner 159 Levy's Trusts, In re 167 Lewis v. Davis 125 v. Nobbs 103, 105 Llbby v. Todd 08 Life Ass'n of Scotland v. Sid- dal 96, 170 Lincoln v. Aldrich 97 v. Morrison 180 v. Perry 186, 187 Lindlngton v. Patton 85 Lindsay v. Harrison 165 v. Kirk 38 Lingke v. Wilkinson 33 Linton v. Shaw 190, 191 Little v. Chadwick 180, 181 v. Little 35, 138. 160 Livingston v. Livingston 17 Lloyd v. Banks 162 Londesborough v. Somerville 135 Long Island Loan & Trust Co., In re 33 Lord v. Brooks 131, 133 Lor ing v. Brodle 72, 17S) v. Loring 84 v. Salisbury Mills 12, 99. 102, 182, 184 XXX TABLE OP CASES PAOK Loring v. Steinemann 94, 143 v. Thompson 172 Lovett v. Farnham 63, 80 Low v. Bouverie 76, 100, 146, 171 Lowe v. Convocation of Prot. Episc. Church 97, 118 v. Jones 181 Lowrle's Appeal 34 Lowry v. Farmers' Loan & Trust Co. 98, 126, 133 Lyman v. Pratt 128, 130 M. Mackey's Adm'r v. Coates 76 Maclaren v. Stainton 123, 137 Magnus v. Queensland Bank 56, 182 Major v. Herndon 125 Mallon's Estate 89, 150 Mandlebaum v. McDonnell 168 Manderson's Appeal 48 Mannix v. Purcell 77 Mannhardt v. Illinois Staats- Zeltung Co. 55, 61 Mansfield v. Wardlow 72 Mant v. Lelth 177 March v. Berrler . 108 v. Roman 22 Marquette Fire Commission- ers v. Wilkinson 181 Marsh v. Read 74 Marshall v. Caldwell 56, 60, 106 v. Kraak 50 v. Marshall 147, 181 Marx v. Cllsby 171 Mason v. Jones 62 v. Pomeroy 31, 48, 77, 78, 79 Massachusetts General Hos- pital v. Amory 8 Massey v. Stout 117 Massle v. Watts 98, 168, 187, 188, 189 Matthews v. Brlce 104, 105 Mattocks v. Moulton 113, 115, 118 May v. May 37, 41, 80, ,81 Mayer v. Galluchat 34 Mayo v. Moritz 31, 48, 77 McCallum's Estate 36 McCaun v. Randall 10, 169, 190 McCartln v. Traphagen 147, 151 McClanahan v. Henderson 87 McCloskey v. Gleason 121 McCoy v. Poor 180 PAOB McDonald v. Irvine 103, 107 v. Kneeland 162 Mclntlre v. Llnehan 13 Mclntlre's Adm'rs v. Zanes- vllle 112 Mclntyre, In re 148 McKeen's Appeal 135 McKlm v. Blake 154 v. Doane 19 v. Hibbard 110, 154, 155 McKnight v. Walsh 81, 84 McLenegan v. Yelser 70 McLeod v. Evans 181 McLouth v. Hunt 133 McNeillle v. Acton 112 McPherson v. Cox 23, 24 McQueen v. Farquhar 73 Meeker v. Crawford 36, 38 Meeks v. Olpherts 27 Me"gret, In re 186 Meldon v. Devlin 47, 123 Meldrlm v. Trustees of Trinity Church 135 Memphis Savings Bank v. Houchens 188, 189 Mendes v. Guedalla 56, 104, 105, 182 Mercantile Trust Co. v. St. Louis, etc. Railroad Co. 181 Mercer v. Buchanan 130, 186 v. Safe Deposit & Trust Co. 55 Mercler v. West Kansas Land Co. 69 Merrlam v. Hassam 180 Merrill v. Preston 186 Merritt v. Cortles 62, 186 Merry v. Pownall 36, 49 Meyers v. Bennett 49 Milbank v. Crane 9, 20 Millen v. Guerrard 128 Miller, Matter of 21 v. Redwlne 72 v. Zufall 183 Mills v. Britton 128 v. Mills 126 Milner v. Proctor 60 Minot v. Paine 128, 129 v. Prescott 58 v. Purrington 94, 143 v. Tappan 126 v. Thompson 106 Mitchell v. Carrolton Bank 69 v. Whitlock 78, 146 v. Winslow 98 Moll v. Gardner 64 Molton v. Henderson 27, 180 TABLE OP CASES XXXI PAGE Monday v. Vance 164 Monell v. Monell 103, 149 Montefiore v. Guedalla 18 Moore's Estate 174 Moore v . Eure 120 v. Sinnott 175 More v. Calkins 38 Morgan v. Kansas Pacific Railroad 26, 169 v. Moore 19, 50, 145 Morrlll v. Merrill 92 Morrison v. Lincoln Sayings Bank 181 Morse v. Hill 32, 94, 155, 159, 171, 177, 178 Mortimer v. Ireland 20, 52 Mortlock v. Buller 70 Morton's Estate 96 Morville v. Fowle 45, 55, 88 Mount v. Tuttle 186 Mudge v. Parker 122 Mulford v. Mulford 112 Muller v. Dows 189 Mulrein v. Smillie 77, 78, 146 Munroe v. Holmes 92 Murphy v. Union Trust Co. 68 Murray v. Feinour 110, 111 Muscogee Co. v. Hyer 40 Myer's Estate 23 N. Nance v. Nance 120 Nash v. Coates 44 National Bank v. Insurance Co. 49, 181 National Exchange Bank v. Sutton 62 National Valley Bank v. Han- cock 84 Neel's Estate 122, 124 Nelson v. Duncombe 75, 83 Nettlefold, In re 61 New v. NIcoll 77 Newcomb v. Keteltas 74 New England Trust Co. v. Eaton 98, 107, 111, 124, 126, 139 Newhall v. Wheeler 183 New York Life Ins. Co. v. Sands 139 New York Life Ins. & Trust Co. v. Baker 136 New York, New Haven & Hartford R. R. Co. v. Schuy- ler 161 Neyland v. Bendy 87. 175 Nichols, Appellant 86, 177 v. Eaton 165, 167 Nice's Appeal 133 Nickels v. Philips 24 Nickerson v. Cockhlll 59 v. Van Horn 164, 165, 166 Nobles v. Hogg 120 Norcum v. D'Oench 56 Norling v. Allee 184 Norris v. Clymer 66, 67 Norris v. Hall 46 North Adams Universallst Society v. Fitch 7 North American Coal Co. v. Dyett 77, 78 Northern Dakota Elevator Co. v. Clark 181 Northington, In re 106 Norton v. Norton 44 v. Phelps 48, 49 Nugent v. Cloon 54 Nyce's Estate 115 O. Ochiltree v. Wright 56 Odd Fellows' Hall Ass'n v. McAllister 30, 78 Oeslager v. Fisher 108 Old South Society v. Crocker 68 Oliver v. Court 70, 149 Olney v. Balch 15 Olson v. Lamb 42 O'Malley v. Gerth 30 Onslow v. Wallis 15 Ord v. Noel 69, 70 Ormiston v. Olcott 115, 116, 193 Osborne v. Gordon 62 Ouseley v. Anstruther 110 Overman's Appeal 164 Ovey v. Ovey 111 Owens v. Walker 81 Owings v. Rhodes 60 P. Pace v. Pace 165 v. Pierce 44, 45 Pacific Nat'l Bank v. Wind- ram 163, 164 Packard v. Klngman 77, 78, 146 v. Marshall 50 v. Old Colony Railroad 44 Paddock v. Palmer 24 Paget v. Stevens 190 XXX11 TABLE OP CASES PAOB Palmer v. Whitney 144, 163 Parcher v. Russell 94 Paris v. Paris 126 Parker v. Ames 38, 39 v. Boston Safe Deposit & Trust Co. 95, 116 v. Converse 19 v. Johnson 124 v. Moore 17 v. Seeley 145 Parmenter v. Barstow 31 Parr, In re 138 Parsons v. Wlnslow 123, 137, 138, 139 Paschal v. Acklln 186, 187 Pass v. Dundas 151 Pearson v. Haydel 180 v. Jamison 57 Peck v. Sherwood 140 Peckham v. Newton 97, 120 Pell v. DeWinton 71 Penn v. Brewer 9, 190 v. Folger 14 Penneld v. Tower 187 Pennell v. Deffell 180 Pennington v. Metropolitan Museum 109 v. Smith 188, 190 People v. Townsend 31, 184 Perkins' Appeal 34 Perkins v. Moore 14 Perrine v. Newell 35, 36 v. Vreeland 153 Perrins v. Bellamy 151, 153 Person v. Warren 16 Peters v. Bain 181 Philbin v. Thurn 6, 14 Philbrick's Settlement, In re 15 Philippi v. Philippe 178 Philips v. Philips 161 Pierce v. Boroughs 134, 140 v. Prescott 143, 152 Piety v. Stace 33 Pink v. De Thuisey 61 Pinkard's Distributees v. Pink- ard's Adm'r 39 Pitney, In re 140 v. Everson 37 Plympton v. Boston Dispen- sary 137, 139, 140 Poindexter v. Blackburn 125 v. Buswell 77 Polk v. Linthicum 23 Pool v. Harrison 157 Pooley, In re 36 Pope v. Devereux 76 v. Farns worth 176 Porter v. Bank of Rutland 17 v. Woodruff 115 Portsmouth v. Shackford 61 Pothonier, In re 105 Potter v. Couch 167 v. Hodgman 72 Powcey v. Bowen 75 Pratt v. Pratt 132 Premier Steel Co. v. Yandes 41 Prendegast v. Prendegast 60, 63 Presley v. Stribling 45 Prevost v. Gratz 178 Price, In re 186 v. Burroughs 133 v. Krasnoff 26 Prinz v. Lucas 30, 31 Pritchett v. Nashville Trust Co. 128, 131, 134 Proctor v. Clark 186, 187 v. Heyer 61 Purdie v. Whitney 66 Pusey v. Clemson 43 Pyle v. Henderson 26 Q. Quackenboss v. Southwick 23 Quin's Estate 160 Quinn v. Safe Deposit & Trust Co. 133 Quirk v. Liebert 33, 177 Raby v. Ridehalgh 151, 177 Raikes, Doe d., v. Anderson 48 Rand v. Hubbell 130 Randolph r. East Birming- ham Land Co. 117 Ray v. Doughty 55 Read v. Patterson 59 Reade v. Continental Trust Co. 63, 80 Rector v. Dalby 174 Reed v. Head 126 v. Whitney 160 Reese v. Meetze 38 Reeves v. Pierce 180 Reid v. Mullins 87 Reybould, In re 30, 31 Rhoads v. Rhoads 174 Rhode Island Hospital Trust Co. v. Waterman 37, 141 Richardson v. Boston 29 v, Richardson 128 TABLE OP CASES XXX111 PAOB Riddle v. Whltehlll 178 Rldgley v. Johnson 56 Robb v. Washington & Jeffer- son College 186, 187 Roberts v. Hale 72, 77, 78 v. Stevens 164 Robertson v. Collier 125 v. De Brulatour 18, 126, 133 v. Johnston 165 Robinson v. Bonaparte 126 v. Robinson 109, 112, 152 v. Wheelwright 164 Rockwood v. School District 181 Rogers v. Chase 47 v. Dill 109 v. Rogers 7 Rome Exchange Bank v. Eames 165 Roosevelt v. Van Allen 38 Rowe, In re 33 Roxburghe v. Cox 162 Royce v. Adams 7 Rua v. Watson 47 Ruggles v. Tyson 58, 64, 68 Russell v. Grlnnell 175 Rutland Trust Co. v. Sheldon 57, 61, 97 Ryan v. Porter 67 Ryder v. Bicker ton 117 S. Saint Paul Trust Co. v. Strong 33, 154 Salmon, In re 99, 116, 156 Samuel v. Samuel 167 Sanders v. Houston Guano Co. 48 Sargent v. Sargent 15 Satterthwalte's Estate 15 Saunders v. Haughton 125 v. Vautler 174 Sawyer v. Cook 178 Schaffer v. Wadsworth 112, 176 Schenck v. Barnes 165 v. Schenck 51 Schley v. Brown 68 Schluter v. Bowery Savings Bank 16 School District v. First Bank 49 Schouler, Petitioner 54 Schwab v. Cleveland 30 Schwartz v. Gerhardt 188, 191 Scott v. Rand 22, 23 . Ray 87 PAOK Scottish-American Mortgage Co. v. Clowney 33 Sculthorp v. Tupper 106 Seamans v. Glbbs 174 Sears v. Choate 174 Seattle v. McDonald 6, 14 Second Universalist Church v. Colgrove 129, 130, 131 Seger v. Farmers' Loan & Trust Co. 162 Seidelbach v. Knaggs 45 Sellew's Appeal 61 Sells v. Delgado 55 Sergison, Ex parte 16 Sewall v. Wilmer 186, 187, 190 Seymour v. McAvoy 167 Shaw v. Cordis 136 v. Humphrey 13 v. Paine 9, 22 v. Spencer 47, 183 Sheets' Estate (52 Pa. St. 257) 14 (215 Pa. St. 164) 4, 6, 14 Sheffield v. Parker 100 Shepard v. Creamer 30 Shepherd v. Hammond 43 Sherman v. Parish 151 v. Skuse 167 v. White 118 Sherrlll v. Shuford 42 Shirley v. Shattuck 41 v. Shirley 17 Shoe & Leather Nat'l Bank v. Dix 28, 77, 78 Sholty v. Sholty 118 Shook v. Shook 46, 51 Shower's Estate 174 Shuey v. Latta 118 Shumway v. Cooper 108 Slmonds v. Simonds 160 Sinclair v. Jackson 45, 73 Singleton v. Lowndes 120 Slse v. Wlllard 175 Skelding v. Dean 178 Skinner v. Taft 122 Slade v. Van Vechten 34 Slaney v. Watney 5 Slater v. Oriental Mills 180 Slauter v. Favorite 115, 118 Slevln v. Brown 44 Sloan's Estate 171 Slocum v. Slocum 64 Smith's Estate 132, 133 Smith, In re 55, 106 v. Ayer 78 v. Barnes 171 v. Burgess 47 v. Calloway 9, 190 XXXIV TABLE OP CASES Smith v. Dana v. Davis v. Hooper v. Keteltas v. Knowles v. Lansing v. Miller v. Nones v. Perry v. Proctor i?. Smith v. Towers Smyth v. Burns PAGE 128, 129, 131 188, 191 125 138 7 38 33 142 50, 185 44 174 164 119 Snowhill v. Snowhill 108, 109 Snyder v. Safe Deposit & Trust Co. 55 v. Snyder 9, 190 Sohier v. Eldredge 97, 138 j Southern Railway Co. v. Glenn's Ex'or 39 Spangler's Estate 141 Sparhawk v. Buell 144 v. Sparhawk 23 Speidel v. Henrici 178 Speight v. Gaunt 59, 90 Spencer v. Spencer 38 Sprague, In re 69 Sproule v. Bouch 128 Staats v. Storm 45, 46 Stanley v. Colt 67 v. Stanley 164 Starkweather v. Jernillo 32 State v. Guilford 89 v. Platt 36 Stearns v. Praleigh 21 v. Palmer 183 Steib v. Whitehead 164 Steinway's Estate 181 Steinway v. Steinway 35 Stenfelds v. Watson 183 Stephenson v. Morris 61, 62, 82, 98 Sterling v. Sterling 87 Stetson v. Bass 94 Stevens, In re 124, 125, 136 v. Austen 52 v. Palmer 163 Stewart v. Conrad's Adm'r 178 v. Phelps 133 Stockdale v. South Sea Co. 182 Stone, Ex parte 19 v. Clay 112 v. Farnham 39 v. Godfrey 87 v. Kahle 66 v. Littlefleld 140 Story v. Gape 146 PAGI Stott v. Lord 55, 56, 76 v. Milne 153 Stowe v. Bowen 149 Strickland v. Symons 48 Sturges, In re 1 Sugden v. Ashley 128 v. Crossland 35 Sullivan v. Babcock 187 Swale v. Swale 55 Swartwout v. Burr 15 T. Tabor v. Brooks 61 Taft v. Smith 115 Talbot v. Leatherbury 51 Tallant v. Stedman 155 Taylor v. Buttrick 82, 85 v. Davis 28, 77, 78, 145, 146 v. Hite 119 Teague v. Corbett 35 Tebbs v. Carpenter 148 Tempest, In re 18 Temple v. Ferguson 50, 145 Ten Broeck v. Fidelity Co. 41 Thayer v. Daniels 101, 162 v. Dewey 115 v. Kinsey 99, 156 Thiebaud v. Dufour 186 Third Nat'l Bank v. Lange 47, 70, 71, 179 Thomas v. Bowman 87 v. Gregg 132, 133 v. Higham 21 Thompson v. Finch 147, 151, 155 v. Murphy 164 v. Remsen 169 Thomson v. Peake 47 Thome v. Foley 178 Tillinghast v. Bradford 165 v. Coggeshall 160 Todd, In re 38, 42 Tolles v. Wood 167 Toronto General Trust Co. v. C. B. & Q. R. R. 188, 190 Townend v. Townend 33 Townley v. Sherburne 149 Townsend v. Allen 186 Treadwell v. Salisbury Mfg. Co. 97 v. Treadwell 177 Trenton Trust Co. v. Donnelly 123, 140 Trull v. Trull 115 Tryon, In re 5 Tucker v. State 118 TABLE OP CASES XXXV PAOB Turnbull v. Pomeroy 34, 37 Turner v. Maule 8 Tuttle v. First Nat'l Bank 72, 179 v. Gilmore 116, 153 v. Robinson 42 v. Woolwortb 97 . U. Cllman v. Cameron 168, 174 United States Nat'l Bank v. Weatherby 181 United States Trust Co. v. Roche 26, 72 Urann v. Coates 37 Utica Insurance Co. v. Lynch 110 V. Vanderbllt, In re 61 Vandever's Appeal 55, 76 Van Doren v. Olden 124, 131, 132, 133 Van Vechten v. Terry 26 Van Vronker v. Eastman 124, 137 Vaughton v. Noble 86 Vetterlein v. Barnes 26 Vlnton's Appeal 132 Vohmann v. Michel 160 Vyse v. Foster 147 W. Wade v. Lobdell 177 Wadsworth, Matter of 55 v. Arnold 77, 78 Wagnon v. Pease 11, 98 Walker v. Beal 173 r. Brooks 49 v. Shore 60, 176 Wallston v. Braswell 162 Walton v. Follansbee 175 v. Ketchum 27 Warburton v. Sandys 19 Ward v. Barrows 64 v. Harvey 180 v. Kitchen 111 Warnecke v. Lembca , 55 Warren v. Ireland 48 Waterman v. Alden 130 v. Baldwin 72 v. Spaulding 69 Watts v. Howard 139, 140, 172 Wayman v. Jones 182 turn Weaver v. Fisher 91 Webb v. Dietrich 23 r. Ledsam 56 Webster v. Vandeventer 20, 54 Webster Bank v. Eldridge 12 Wedderburn, In re 111 Weeks v. Hobson 67, 109 Weir v. Barker 73 Welch v. Adams 190, 192 v. Allen 44 v. Polley 181 Weld v. Weld 67, 68 Wells, Fargo & Co. v. Walsh 7 Wemyss v. White 54 Westcott v. Nickerson 122, 123 Westerfleld, In re 150, 153 Western Railroad Co. v. Nolan 45, 158, 184 Wetherell v. O'Brien 180 Wetmore v. Porter 26, 179 v. Truslow 18 Wheate v. Hall 65 Wheeler v. Perry 14, 97 White v. Albertson 45 v. Cuddon 70 v. Ditson 14, 148 v. Wiley 162 Whiteley, In re 116 Whitney v. Smith 35 Whittier v. Child 77 Wiess v. Goodhue 27 Wiggin v. Swett 140 Wilding v. Bolder 17 Wiles v. Gresham 147, 153 Wilkes v. Rogers 84 Wilkin, In re 5 Wllkins v. Hogg 149, 151, 153 Williams v. Bradley 82 v. First Presbyterian So- ciety 180 v. Scott 32 v. Smith 81 Williamson v. Berry 66, 109 v. Williamson 172 Willis v. Klymer 93 Wilson v. Braden 189 v. Davisson 71 v. Wilson 23, 79, 80, 158 Wiltbank's Appeal 124, 134 Winona Co. v. Saint Paul Co. 15 Winslow v. Young 184 Winthrop v. Attorney General 88 Wise v. Wise 3 Woddrop v. Weed 57 Womack v. Austin 111, 116 Wood v. Burnham 88 v. Mather 109 XXXVI TABLE OP CASES PAOB Wood v. Travis 9 v. Wood 187 Woodard v. Wright 36, 49 Woodhouse v. Crandall Woods v. Sullivan 125 Wootten v. Burch 125 Wormeley v. Wormeley 47, 71 Worrell's Appeal 113 Wright's Trusts, In re 91 Wych v. East India Co. 27 Wylly v. Collins 30, 48, 77, 79 Wyman v. Patterson 148 Y. Yeakel v. Litchfleld 171 Yerkes v. Richards Young v. Snow 174, 175 v. Young (4 Cranch C. C. 499) 19 z. Zabriskie v. Wetmore 174 Zimmerman v. Makepeace 169 PART I. THE TRUSTEE AS AN INDIVIDUAL. PRELIMINARY. THE class of trusts treated in this handbook are those trusts which are expressly created by deed or will. The maker of the trust can make any provision not contrary to public policy as to the management of the trust property or the duties and liabilities of the trustee; and these provisions, clearly expressed in the trust in- strument, will supersede the general provisions of law applicable to trustees and trust estates. It is, therefore, of primary importance for the trustee to make himself thoroughly familiar with the trust instrument, and to follow its directions carefully and accurately. It is only in those cases where the trust instrument does not make special provisions, or where those provisions are contrary to public policy, that he must be guided by the general law. Probably no set- tlement was ever drawn expressly covering all a trustee's duties, powers, and liabilities, hence the necessity of a knowledge of the general laws governing trust estates; BUT THE FIRST AND MOST IMPORTANT D.UTY OF THE TRUS- TEE IS TO STUDY AND BECOME THOROUGHLY FAMILIAR WITH THE PROVISIONS OF THE TRUST INSTRUMENT, AND THERE- AFTER TO FOLLOW THEM OUT IMPLICITLY. 1 2 TRUSTEESHIP OFTEN A BURDEN I. Office not always desirable. Trusteeship is not mere contract to manage property for another, but it is a relationship, involving many duties and liabilities. It is not always desirable to be a trustee, and before undertaking any trust the individual should make a care- ful examination of the trust instrument to ascertain its particular provisions and what his duties and liabilities will be. 1 He should also examine the property to see that his personal interests will not conflict with his duties as trustee. The duties of a trustee to his beneficiary require not only the highest good faith in their execution, but also the absence of conflicting personal interests, and often the sacrifice of personal convenience and chance of profit. 2 An individual may be willing to trust the whole or some part of the management of his personal affairs to others; but a trustee must manage the trust affairs him- self. 8 The individual might have important employment as broker or counsel for the trust estate, but if he is the trustee such services will be unpaid in some jurisdictions, or at least looked on with suspicion, or he might buy from the estate or sell property to it, but as trustee he is deprived of these privileges. Moreover, he is put in such confidential relationship to his beneficiary that any profitable business dealings which he has with the bene- ficiary are subject to suspicion, even where the trust property is not in question. 4 In addition to the complications that may arise from the relationship to the beneficiary, the trustee assumes all the liabilities involved in the ownership of property, and for neglect or errors in judgment in its management. 6 He may be required to give bonds with sureties for the faithful performance of his duties. 6 To counterbalance these possible disadvantages the 1 Kekewich, J., in Hallows v. Lloyd, 39 Ch. D. 691. Infra, p. 98. 2 Infra, pp. 85, 87. 8 Infra, pp. 85, 88. 4 Infra, p. 85. 5 Infra, pp. 29, 151. Infra, p. 12. DISCLAIMER 3 trustee is entitled in America to compensation, generally to the same extent as an agent or factor who manages the affairs of others. 1 He is absolutely prohibited from tak- ing any other benefit from the trust. 2 He is not ordina- rily protected by statutes of limitations, and with some exceptions remains liable for his mistakes and mis- deeds as long as the trust lasts. II. Disclaimer. No one need be a trustee against his will, since an acceptance of the office is necessary ; 8 and the office may be refused or disclaimed at any time be- fore acceptance, even though the trustee were nominated under his promise of acceptance. 4 It is true that a trust estate may vest in the heir or representatives of a deceased trustee without possibility of disclaimer ; 5 but in such case the heir or represent- ative takes only the title to the property, and a limited trust to transfer the estate to the new trustee, when appointed, and if he is the personal representative to settle the accounts of the deceased trustee. If the office is to be disclaimed, it must be disclaimed at once and unequivocally, as otherwise an acceptance may be implied. 6 No particular form of disclaimer is necessary ; but it should be affirmative and decided. Although a simple verbal refusal to undertake the trust is sufficient, such a disclaimer would be unwise in most cases, and probably difficult of proof after a considerable period had elapsed. In general the disclaimer should be in writing, and re- corded where the settlement is recorded ; and if the set- tlement is not recorded, then addressed and delivered to whomsoever has the custody of the instrument; that per- son being in most cases one of the beneficiaries. l Infra, p. 36. a Infra, p. 32. 8 Ga. Code (1895), 3190. * Evans v. John, 4 Beav. 35. Co. Litt. 9 a. Infra, p. 51. 6 Wise v. Wise, 2 Jon. & La. 403. 4 DISCLAIMER If the trust instrument is a deed, then the disclaimer should be by deed, but not in the form of a reconvey- ance which presupposes an acceptance and vesting of the estate ; though in practice it would not probably be so construed. 1 If the trust instrument is a will, a disclaimer filed in the Probate Court is appropriate, although the failure to qualify or give bond in court is usually construed as a disclaimer by statute ; 2 but such a disclaimer cannot be set up by a person other than one for whose security the bond is given until some action is taken by the court. 8 A trust must be disclaimed wholly, as trusts are not divisible, 4 and if an executor have the management of real estate given him, or the other administration of property in which he acts the part of a trustee as well as executor, he cannot separate his duties and accept part and disclaim the other. 6 If, however, separate trusts are made for the real eptate and personal property, he may disclaim one and accept the other. 6 Where, however, a person is appointed executor and trustee under the same will, he may disclaim either office and accept the other, unless there appears to be an inten- tion on the part of the testator that he should accept both or neither. 7 It is said that when two trusts are created by the same instrument both must be disclaimed or accepted ; 8 but the 1 Lewin, p. 207. * Gen. Stat. Conn. (Revision of 1902), 248; Rev. Stat. Me. (1903), ch. 70, 3 ; Rev. Stat. Mo. (1899), 4586 ; Bev. Laws Vt. (1894), 2608. But the refusal to give bond is treated as a ground for removal, not aa a disclaimer, in some States. Bates' Annotated Revised Statutes Ohio (1906), 5983 ; Code Va. (1904), 3420 ; Code Ala. (1896), 4155. 8 Howe v. Ray, 110 Mass. 298. * In New Jersey trusts are divisible. Underbill, p. 420, n. 6 See Shaw, C. J., in Dorr v. Wainwright, 13 Pick. 328, 331 ; In re Sheets' Estate, 215 Pa. St. 164. 6 Carruth v. Carrnth, 148 Mass. 431. 7 Daggett v. White, 128 Mass. 398. 8 Lewin, p. 214, 12. Perry, 264, end. DISCLAIMER ACCEPTANCE 5 better view seems to be, that where they are wholly sepa- rate trusts, not interdependent, and no intention appears that both or neither shall be accepted, one may be ac- cepted and the other disclaimed. 1 The effect of a disclaimer is to vest the whole estate in the trustees who accept, 2 and relates back to the time of the gift, and the result is the same as though the indi- vidual disclaiming had never been appointed. 8 As to the legal title the exact effect is less clear, but nevertheless it is held to be devested by the disclaimer.* If, however, the trust instrument bestowed a special power on all the trustees nominated, the disclaimer of one will destroy the power, 5 and if a gift or legacy is attached to the office it will be lost by a disclaimer; 9 but a gift which is -not attached to the office or con- ditional on its acceptance will not be affected by a dis- claimer of the office. If the individual were not consulted about the appoint- ment, he may have the expense of consulting counsel and his costs. 7 III. Acceptance. An acceptance should be made formally according to the provisions of the trust instru- ment; 8 but if no manner is therein specified, if the set- tlement be by deed, then by joining in the deed, or if the trust be established by will, then by qualifying in the Probate Court, and by statute a person not so qualifying 1 In re Canard's Trusts, 48 L. J. (N. S.) 192; Can-nth v. Carruth 148 Mass. 431. 2 Generally and by statute in Maryland. Pub. Gen. Laws (1904), Art., 93, 293, 294. 8 Ellis v. Boston, H. & E. Railroad, 107 Mass. 1. * Lewin, p. 208. 6 In re Wilkin, 90 App. Div. (N. Y.) 324, remedied by statute in New York, 1903, p. 732, c. 370, Infra, p. 55. 6 Slaney v. Watney, L. R. 2 Eq. 418. 7 In re Tryon, 7 Beav. 496. 8 Ga. Code (1895), 3190. 6 ACCEPTANCE is held to have disclaimed, and a new trustee may be appointed. 1 If an individual be named both executor and trustee, he will be construed to accept both offices if he presents the will for probate without disclaiming either. 2 In absence of statute the executor or administrator accepts the decedent's trusts, and cannot disclaim them; but by statute the law is usually the reverse. It is not unusual for a will to provide that the execu- tors shall manage certain estates, and hold them in trust for certain purposes. In such cases the executors act as and really are trustees to that extent, and not executors, and should be qualified as trustees as well as execu- tors, although in practice they often qualify as executors only. 8 In some jurisdictions the sureties on the execu- tor's bond will not be liable for his acts as trustee, but in other States they will. 4 An acceptance will be implied if the individual inter- meddles with the trust property, or performs any act to carry out the trust. 5 Hence, if a disclaimer is con- templated, care should be taken to avoid any assumption of authority, or voluntary interference with the trust es- tate, either as volunteer or agent, until the disclaimer has formally been made; since such assumption or interfer- ence will readily be construed as an acceptance. And a trustee who has acted as such cannot disclaim, even though the deed needed his signature and he has not 1 Supra, p. 4. 2 Flint, 157. Supra, p. 4. 8 In re Sheets' Estate, 215 Pa. St. 164, holds that the office is really that of an executor, the distribution being delayed, and so charged the surety on the bond of the administrator d. b. n. c. t. a. This doc- trine is unsupported by authority elsewhere. Infra, p. 14. Bentley v. Dixon, 60 N. J. Eq. 353 ; Angus v. Noble, 73 Conn. 56 ; City of Se- attle v. McDonald, 26 Wash. 98 ; Philbin v. Thurn, 103 Md. 342. Infra, p. 14. 6 Kilbee v. Sneyd, 2 Molloy, 186. ACCEPTANCE APPOINTMENT 7 signed. 1 He may, however, prove that the act from which an acceptance would be implied was done as agent, or was merely to protect the property until a trustee could be .appointed, 2 or that he acted in some other capacity than that of trustee, and in that case disclaim ; but the burden of proving it will be on Mm. The estate vests in a transferee subject to dis- claimer, 8 therefore if an appointment be known of and not disclaimed within a reasonable time, an accept- ance will be implied ; and the burden will fall on the appointee to show that he had no reasonable oppor- tunity to disclaim. IV. Appointment. No trust will be allowed to fail for want of a trustee, 4 and if conveyance is made to one that cannot act, or if those who have been nomi- nated disclaim, or if all .the trustees die, the property will be held by whoever may have the title until a proper trustee can be appointed. 8 In case of need the court will appoint a temporary trustee or a receiver, 6 and may in certain contingencies administer the trust itself, though such a course is very unusual. 7 The power to make an appointment will arise when- ever the circumstances make it necessary, either in the nature of things, as in the case of the death or dis- 1 Flint v. Clinton Co., 12 N, H. 432. 2 Smith v. Knowles, 2 Grant's Cases, 413. 8 Adams v. Adams, 21 WalL 185. 4 North Adams Universalist Soc. v. Fitch, 8 Gray, 421 ; Dodkin v. Brunt, L. R. 6 Eq. 580 ; Civil Code Cal. (1903), 2289 ; Revised Civil Code So. Dak. (1903), 1655 ; Code No. Dak. (1895), 4302. See to the contrary In re Sturges, 59 N. Y. S. 783. 6 So, also, the court will appoint trustees from a similar class, where the class of persons specified no longer exist. Boston v. Doyle, 184 Mass. 373. 6 Brightly's Dig. Pa. (1894), p. 2030, 18. 7 Rogers v. Rogers, 1 11 N. Y. 228 ; Royce v. Adams, 123 N. Y. 402! Wells, Fargo & Co. v. Walsh, 88 Wis. 534. Infra, p. 170. 8 APPOINTMENT claimer of all the trustees, or whenever the provisions of the trust instrument prescribe it. As when the num- ber of trustees sinks below the prescribed number, 1 or a trustee becomes disqualified by going abroad, or as it may be otherwise provided in the instruments, or when the safety of the fund or the proper administration of the trust requires an additional trustee. But the power of appointment under the trust instru- ment will only arise under the exact terms specified therein, and will not arise under similar terms; as, for instance, a provision that a trustee shall be appointed on one of the trustees becoming "incapable," will not give rise to a power to appoint when one becomes bank- rupt and therefore' " unfit" but still " capable; " 2 or in the case where the power to appoint arose on the refusal and neglect of the original trustee to execute the trusts, and he died without executing them, the power did not arise. 8 How the Trustee is appointed. If the trust instru- ment adequately provides a method to be pursued in making the appointment of a trustee, the court has no jurisdiction in the case, and the method prescribed must be carefully followed; but if it becomes impossible to follow the method prescribed, the power is wholly lost, and the appointment must be made by the court. 4 As a matter of precaution, an appointment made under a power in a settlement should be recorded with the settle- ment. In some States the power to appoint the trustee is given by statute to the beneficiary, and in others to the surviv- ing trustee, but usually to the court. If the trust is under a will, the Probate Court has 1 Mass. Gen. IIosp. v. Amory, 12 Pick. 445. 2 Turner v. Maule, 15 Jur. 761. 8 Guion v. Pickett, 42 Miss. 77 ; Underbill, p. 400, n. 2. 4 See statutes. Griswold v. Sackett, 21 R. I. 210. Infra, p. 58. APPOINTMENT 9 jurisdiction of the estate, and the appointment, even if made under the terms of the will, according to the prevailing statutory law, must be confirmed by a de- cree of the court, and a letter issued, although the trustee's powers in such cases come from the settle- ment, and not the court. 1 The same is true if the trust be under the jurisdic- tion of the court for any reason. 8 If for any reason, either to fill a vacancy, or for the security of the fund, or convenience of the benefi- ciaries, the appointment of a trustee is desirable, and the trust instrument does not contain an adequate pro- vision for appointing the trustee, or if the person holding the power to appoint a trustee unreasonably refuses or neglects to act, 8 the court will appoint a trustee upon the application of any person interested in the trust, whether in possession or remainder,* though it would not take any notice of the application of a stranger. 6 All persons in interest must be parties to the suit,. 8 but less parties are required in some jurisdictions by statute. 7 Ordinarily, jurisdiction in these matters is con- ferred on the Probate Court by statute; but in the ab- 1 The appointment of any voluntary trustee may be confirmed by court in Maine. Rev. Stat. (1903), ch. 70, 13. * In Maine a trust may be confirmed by court, and thus come under its jurisdiction. Rev. Stat. Me. (1903), ch. 70, 13-15. 8 Cone v. Cone, 61 S. C. 512. * Statutory provisions in most jurisdictions. 6 Penn v. Brewer, 12 Gill& J. 113; Snyder v. Snyder, 1 Md. Ch. 295 ; Smith v. Calloway, 7 Blackf.86; Gulick v. Gnlick,3 AtL R. (N. J.) 354. Creditors or even transferees of stock may apply to have a trus- tee appointed. Guarantee Trust Fund, etc. Co. v. Scott, 199 Pa. St. 471. * Shaw w. Paine, 12 Allen, 293. In New York the proceeding was considered as being in rem and valid without any parties. Milbank v. Crane, 25 How. Prac. 193 ; Wood v. Travis, 54 N. Y. S. 60. Pub. Gen. Laws Md. (1904), Art. 16, 230. 10 APPOINTMENT sence of statute any court of chancery or equity will have jurisdiction among its ordinary powers. The court will have jurisdiction and can appoint a trustee if the person who holds the title to the property is within its jurisdiction, or if the property itself is within its jurisdiction and there is a statute by which the title will vest in the new trustee appointed. 1 In the absence of such statute there is no way of vesting the title, and the court is powerless. The operation of the statute is to confiscate the title of the person out of the jurisdic- tion, and vest it in the appointee of the court. 2 The trustee is responsible to the court in which he is appointed, and cannot be controlled by another court, nor can his appointment be attacked collaterally. It is held that the court having original jurisdiction of a testamentary trust may make a subsequent ap- pointment, although the property and holder of the title are both out of the jurisdiction, 8 but it is hard to see what effect the decree can have unless the trustee be aided by statute or be reappointed in the jurisdiction where the property lies. Statutes exist in some jurisdictions which authorize trustees appointed in other States to recover trust property in the State where the statute exists.* So too by statute, where the sole beneficiary has moved into a State and wishes the property there also, the court may appoint a trustee; but this case seems open to the same criticism as the foregoing. 8 No attempt will be made to state the rules of pro- cedure in such cases, since the matter is one of prac- * McCann v. Randall, 147 Mass. 81. See infra, p. 166. Annot. Stat. Col. (1891), 2535 ; Gen. Stat. N. J. (1895), p. 394, 112. 2 McCanu v. Randall, 147 Mass. 81. 8 Curtis v. Smith, 6 Blatchf. 537. * Ky. Stat. (1899), 4709, 4711 ; Gen. Stat. N. J. (1895), p. 3685, 9 ; Code Va. (1904), 2630 ; Code W. Va. (1906), 3249. 6 Code Ala. (1896), 4200. TITLE NECESSARY TO COMPLETE APPOINTMENT 11 tice, though simple, requiring care and professional advice, as the consequences of administering a trust under a defective appointment may be serious, since the outgoing trustee is not relieved and is still liable for the trust, and the incoming trustee is acting wrongfully as trustee, and may incur heavy liabilities without any right to indemnity out of the trust estate, and may be estopped to deny the regularity of the appointment. 1 Appointment not Complete without Title to Property. The appointment of a trustee is not complete until the title to the trust property is vested in him. The origi- nal trustees under a will get title to the real estate from that instrument itself, but do not get title to the personal estate until it is turned over by the executors, usually after a considerable interval. The original trustees under a deed will have the property vested in them by the conveyance. The property ordinarily vests in later appointees by express provisions of the trust instrument, which com- monly provides that on the appointment of a new trus- tee he shall become entitled to and vested with the trust property ; 2 but in order that the title shall pass under the terms of the instrument, all the prescribed conditions concerning the appointment must have been accurately fulfilled. 8 In many jurisdictions the property will vest in the new trustee by statutory provision ; * but this vesting 1 Wagnon v. Pease, 104 Ga. 417; Cauhape v. Barnes, 135 Cal. 107. a Ellis v. Boston, H. & Erie Railroad, 107 Mass. 1. 8 Bumgarner v. Cogswell, 49 Mo. 259. * Perry, 284, n. 6; Mass. Rev. Laws (1902), ch. 147, 6; Laws Del. (1893), p. 709, ch. 250, and p. 709, ch. 95 ; Gen. Stat. R. I. (1896), ch. 208, 4 ; Brightly's Dig. Pa. (1894), p. 2030, 26; Rev. Stat. Mo. (1899), 4581 ; Gen. Stat. Conn. (1902), 250 ; Gen. Stat. N. J. (1895), p. 3684, 4. 12 TRUSTEE'S BOND of title is usually confined to appointees of the court ; * and even where the donee of the power is the judge of probate, the appointment being that of the individual and not of the court, the title will not pass under the statute. 2 Where there is no adequate provision in the trust instrument and no statute applicable, conveyance must be made by whoever holds the title ; 8 and where the court appoints, a well-drawn decree will contain an order for the necessary conveyance. 4 Trustees' Bonds. Trustees under wills, and usually trustees appointed by the court, are required to give bond to the court for the faithful performance of their trust, 6 and the court may require an appointee under a power in the instrument to give bond if the circum- stances require it. 6 In testamentary trusts these bonds are required to be with sureties, unless the testator has expressly excused the trustee from furnishing them, or unless all parties in interest join in requesting the exemption. In such cases "all persons beneficially interested" refer only to per- sons in being and who have a present vested interest in the estate, and not to persons unascertained and not in being. 7 It is not unusual for a trustee, especially if he be a man of standing, to decline a trust where he is required 1 Pub. Gen. Laws Md. (1904), Art. 16, 226; Gen. Stat. Kan. (1899), 7528; Rev. Laws Minn. (1905), 3262; Annot. Stat. Wis. (1898), 2094. 2 Webster Bank v. Eldridge, 115 Mass. 424, amended by Stat. 1878. c. 254, 1, so as to vest title in appointees under any written instrument. 8 Loring v. Salisbury Mills, 125 Mass. 138, 141. 4 Rev. Laws Vt. (1894), 2612; Rev. Stat. Me. (1903), ch. 70, 5. For further discussion see pp. 191,192, infra. 6 Statutes in nearly all jurisdictions. 6 Bowditcb v. Banuelos, 1 Gray, 220. 7 Dexter r. Cotting, 149 Mass. 92. TRUSTEE'S BOND 13 to furnish security; and the wiser course seems to be to select the trustees with care, and trust to the carefulness of the selection, rather than to take a less desirable in- dividual with security, since continual watchfulness is required to be sure that the security remains sufficient and that no depreciation is occurring, and bondsmen are difficult to collect from. 1 The amount of the bond required is sufficient to cover with a margin of fifty per cent the personal property in the trustee's hands, and, if there is a power of sale of real estate in the settlement, sufficient to cover the value of the real estate also. A trustee who has not furnished sureties may be required to do so, if at a later time the court, on ap- plication of any one in interest, considers it necessary for the safety of the fund; but the need of security must appear affirmatively. 2 When the court orders a sale of real estate it will ordinarily order the trustee to file a bond sufficient to cover the price received, if such a bond has not already been given. V. Who is Trustee. The question of who is the trustee and who is to administer the trusts not unfre- quently arises. Any person who intermeddles with the trust property is a trustee de son tort, and is accountable as such to the 1 The surety on a trustee's bond occupies a particularly disagreeable position. He is not only liable for all the trustee's defaults while he is regularly in office, but even for his failure to account for funds received prior to the date of the bond, Mclntire v. Linehan, 178 Mass. 263; or for a debt which the trustee owes the estate when he accepts office. Bassett v. Fidelity & Deposit Co., 184 Mass. 210. He may be denied the privilege of appearing in a case which may result in charging him on the bond, since he is adequately represented by the trustee, Shaw v. Humphrey, 96 Me. 397 ; and he is not protected by the statutes of limitation any more than the trustee. Blake v. Traders' Nat'l Bank, 145 Mass. 13. a Ladd v. Ladd, 125 Ala. 135. 14 WHO IS TRUSTEE same extent as though he were duly appointed. 1 As, foi instance, the executor or administrator of a deceased trus- tee, or an executor or administrator who meddles with the real estate of the deceased. 2 An executor who has the duties of a trustee conferred on him by the will, as for instance the payment of an annuity out of part of the estate, even though he quali- fies as executor only, has in regard to that property the powers he would have if he qualified as trustee. 8 That is to say, though the trustee calls himself an executor, if in fact he acts as trustee he is a trustee, and not an ex- ecutor, in the eyes of the law. 4 In Alabama, Massachu- setts, and Maine the sureties on his bond as executor are liable for his acts as trustee, 5 but the rule is otherwise elsewhere. 6 Where the same person is appointed executor and trus- tee under a will, he holds the property as executor until he has settled his account in the Probate Court as executor, crediting himself with any funds which he holds as trustee, or done some other notorious act of transfer. 7 Where a power of appointment is given by the trust instrument and the donee appoints new trustees, the sec- 1 Brown v. Lambert's Adm'r, 74 Va. 256. 2 Perry, vol. 1, 245-247, and cases cited. Penn v. Folger, 182 111. 76. 8 Wheeler v. Perry, 18 N. H. 307 ; Carson v. Carson, 6 Allen, 397 ; Sheets's Estate, 52 Pa. St. 257 ; Jewett y, Schmidt, 83 App. Div. (N.Y.) 276. * Philbin v. Thurn, 103 Md. 342. He should qualify as trustee, Angus v. Noble, 73 Conn. 56 ; City of Seattle v. McDonald, 26 Wash. 98 ; and may be enjoined from performing trustee's duties if he fails to do so. Bentley v. Dixon, 60 N. J. Eq. 353. The case of In re Sheets's Estate, 215 Pa. St. 164, which denies the executor's right in such cases to qualify as trustee, is contrary to the general trend of authority. 5 White v. Ditson, 140 Mass. 351 ; Groton v. Ruggles, 17 Me. 137; Hall v. Cushing, 9 Pick. 395 ; Perkins v. Moore, 16 Ala. 9. 6 Drake v. Price, 5 N. Y. 430. 7 Crocker v. Dillon, 133 Mass. 91, 98. See infra, p. 100. WHO CAN BE TRUSTEE 15 ond set of trustees in point of time will not necessarily administer the trust; 1 but if the property be given to the second set to convert, or their discretion is relied on, they will take the property, 2 and it is immaterial whether the trusts can be carried out or not. 8 Where a general power of appointment is exercised by will, the executors of the will, not the trustees, will carry out the trust, and where the power is special the same rule should prevail unless the appointment is directly to the objects of the bounty and was not meant to pass through the executor's hands. 4 VI. Who can be a Trustee. Any person that has the capacity to hold the title to the property, and the right to exercise the powers, may be a trustee. A corporation having such capacity and rights among its charter powers is such a person, and may be a trustee, 5 even in a jurisdiction where it has not the right to do business, provided it gives bond with domestic sureties and agrees to submit to the jurisdiction of the court. 6 An alien enemy or an alien in a jurisdiction where he cannot hold property could not be a trustee. 7 The sovereign may be trustee, but the beneficiary cannot enforce the trust except by petition, 8 until the property is conveyed to some one amenable to the juris- diction of the court. 9 The trust estate may vest in a lunatic or infant, but they will be removable. 10 An infant may be compelled to 1 Ames, p. 460, n. ; Busk v. Aldam, L. R. 19 Eq. 16. 2 Onslow v. Wallis, 1 Hall & Twells, 513. 8 Phil brick's Settlement, 34 L. J. Ch. 368 ; Olney v. Balch, 154 Mass. 318. 4 Sargent v. Sargent, 168 Mass. 420. 6 Attorney General v. Landerfield, 9 Mod. 286 ; Dublin Case, 38 N. H. 577. 6 Satterthwaite's Estate, 47 AtL Rep. 226, 227 (N. J. Eq. 1900). 7 King 17. Boys, 3 Dyer, 283. 8 Briggs v. Light Boat, 11 Allen, 157. 9 Winona Co. v. St. Paul Co., 26 Minn. 179. 10 Irvine v. Irviiie, 9 Wall. 617 ; Swartwout v. Burr, 1 Barb. 495. 16 WHO CAN BE TRUSTEE convey by statute, 1 and so long as infants or lunatics hold the property' the trust will be administered by the court through them or their guardians. 2 Having no discretion, they cannot act in trust affairs any more than they can in their own affairs, 8 and if one of three trus- tees is an infant or lunatic, action by the other two is barred. 4 At common law a wife could not be a trustee for her husband, but she may be now in most jurisdictions under the statutory rules. 6 A trustee should be "capable," that is to say, a person having the legal and actual capacity to hold the title to the trust property and exercise the powers. Thus the trustee should be a person of full age and sound discretion. He should be " fit," that is to say, a person in whose hands the property will be safe, 6 and who will be im- partial in the administration of his trust. Thus a bankrupt is not a "fit" person, as being unsuccessful in Lis own affairs he is not likely to be successful in those of others, and a drunkard or person of dishonest or of bad character is unfit, since the property would not be safe in his hands. So too a beneficiary is an unfit person, whether he be a life tenant or remainderman, since he will nat- urally be partial to his own interests; 7 and for sim- ilar reasons a near relation is objectionable, 8 although irt this country they are more often appointed than Brightly's Dig. Pa. (1894), p. 2033, 46; Gen. Laws R.l'(1896), ch. 208, 16 ; Gen. Stat. N. J. (1895), p. 3683, 2, 3. ' 2 Ex parte Sergison, 4 Yes. Jr. 147. 8 Person v. Warren, 14 Barb. 488. * King v. Bellord, 1 Hem. & M. 343. Infra, p. 55. 6 Schluter v. Bowery Savings Banks, 117 N. Y. 125. 6 In re Barker's Trusts, 1 Ch. D. 43. 7 Ex parte Conybeare's Settlement, 1 Weekly Rep. 458. 8 The court in Pennsylvania refused to appoint a son co-trustee with his father where three trustees were required, as he would naturally be dominated by his father, and thus there would be but two trustees. Lafferty's Estate, 198 Pa St. 433. But the court was divided. WHO CAN BE TRUSTEE 17 strangers. The fact of near relationship makes the trustee less able to withstand the importunities of the beneficiaries, 1 and moreover such a connection, espe- cially where a parent or older relation is trustee for a child, is too often made an excuse for lax man- agement, and the knowledge that a breach of trust is likely to be condoned not infrequently leads to disre- gard of strictly legal management, which is the only safeguard of trust estates. Deviation from the rules of strict accountability only too often leads to speculation and the loss of the property. A court will not appoint a husband trustee for his wife, 2 and there is no resulting trust between husband and wife; 8 but there is nothing in the relationship of husband and wife absolutely preventing the appoint- ment, 4 and the maker of the trust may make such an ap- pointment. But where a husband is trustee for his wife, her equitable estate is supposed to be reduced to posses- sion, and may be attached for his debts. 6 In this connection it may be said that the trust com- panies, which have of late years become so numerous, to a considerable extent do away with the element of per- sonal risk attaching to an individual trustee; but they lack the advantages of personal management. These companies sometimes fail from improper management as utterly as individuals do, and as a rule the lack of personal management results in securing the minimum return only on the amount invested, and lacks the great advantages often secured by the able personal oversight of individual trustees. 1 Wilding t>. Bolder, 21 Beav. 222 ; Parker v. Moore, 25 N. J. Eq. 228, 240. 8 Dean v. Lanford, 9 Rich. Eq. 423. 8 Jencks v. Alexander, 11 Paige, 619. 4 Porter v. Bank of Rutland, 19 Vt. 410; Livingston v. Livingston 2 Johns. Ch. 537. 6 Shirley v. Shirley, 9 Paige, 363. 18 APPOINTMENT FITNESS VII. Appointment of Trustee. The maker of the trust in making his appointment is bound only by the consideration of the legal capacity of the individual, and may appoint a person actually incapable or unfit, 1 and his appointee will be removed for cause only. 2 The donee of a power to appoint may also use his dis- cretion in determining the fitness and actual capacity of the appointee ; but the power is not an arbitrary one, and if the appointment be of an unfit or incapable person the court may review it. 8 If the holder of the power be himself a trustee, he should consult his beneficiaries and appoint some one agreeable to them; 4 and should the matter of the ap- pointment become a matter of litigation, the power, though discretionary, cannot be exercised without the assent of the court. Where the court is called upon to appoint a trustee, it will appoint only a person who is actually and legally capable and fit, and within its jurisdiction; 6 but it will have due regard to the wishes of the maker of the trust if they can be discovered. 6 In some cases the court will appoint a non-resident where the beneficiaries or part of the property is out of its jurisdiction. 7 In some jurisdictions it is forbidden to do so by statute, 8 but the statutes have been held un- constitutional. 9 1 Robertson v. De Brulatour, 111 App. Div. (N. Y.) 882, 901,902. 2 Wetmore v. Trnslow, 51 N. Y. 338. 8 Shaw, C. J., in Bowditch v. Banuelos, 1 Gray, 220, 231. As a rule he should not appoint himself, but may do so, if he is specially fit. Montefiore v. Guedalla, L. R. (1903), 2 Ch. 723. * Perry, 297. 6 Rev. Stat. Ind. (1901), 3410. 6 In re Tempest, L. R. 1 Ch. 485, 487. See Perry, 39 ; Story, Eq. Jur., llth ed., vol. 2, 1289 b ; Underbill, p. 408. 7 Ames, 250 n. ; Brightly's Dig. Pa. (1894), p. 2039, 84. 8 Rev. Stat. Ind. (1901), 3410. 9 Glink w. La Fayette, 52 Fed. Rep. 857. DEVESTMENT OP OFFICE 19 If all the beneficiaries agree on a person, the court will nearly always appoint him, even though he be a beneficiary or otherwise unfit. 1 The laws of some States provide for a public trustee, who will be appointed whenever the beneficiary shows that his trustee is absent from the country or refuses to act. 2 The regularity of the appointment by the court cannot be questioned in any collateral preceding. 8 VIII. Devestment of Office. A trustee is discharged (1) by extinction of the trust, (2) by completion of his duties, (3) by such means as the instrument contem- plates, (4) by consent of the beneficiaries, (5) by judg- ment of a competent court. 4 The trustee's office may come to an end by the extinc- tion of the trust. This may come to pass either by the completion of the purposes of the trust, as, 8 for instance, on the death of the life tenant and the vesting of the es- tate in the remainderman, 6 or in the case of a trust to enable a widow to support her children, on the remar- riage of the widow, 7 or by the legal title and benefi- cial title merging in one person. 8 If the trust itself continues and the trustee dies, or is under a natural disability, or one created by the trust instrument, if there be more than one trustee, the office will vest in the surviving or remaining trustees, even though there be a provision in the instrument for keep- ing up the number of the trustees. 9 1 Young v. Young, 4 Cranch C. C. 499. * Colorado Laws of 1894, pp. 51-58, 2-1 7. | 8 McKim v. Doane, 137 Mass. 195. 4 Rev. Civ. Code So. Dak. (1903), 1651; Rev. Code N. Dak (1895), 4298; Civ. Code Cal. (1903), 2282. 6 Ex parte Stone, 138 Mass. 476. 6 Morgan v. Moore, 3 Gray, 319. 7 Fox v. Storrs, 75 Ala. 265. 8 Parker v. Converse, 5 Gray, 336. 9 Warburton v. Sandys, 14 Sim. 622. 20 DEVESTMENT OP OFFICE RESIGNATION If he is disabled, the title will remain in him until a new trustee is appointed, and the powers will be sus- pended or vested in the court. If a sole trustee dies, then in absence of statute his executor or administrator accepts his trusts and at com- mon law cannot disclaim them, though in some States he may disclaim by statutory provision. In many States the statute provides that the executor or administrator does not succeed to the decedent's trusts, and in such cases the office vests in the court, 1 or is in abeyance, and will vest in a successor when appointed; the person in whom the title to the property has vested in the mean- while, not having the office of trustee in anything but a limited extent, namely, to preserve the property and act in an emergency to prevent a loss, and finally convey to the new trustee when appointed. 2 It is the duty of the executor or administrator of a deceased trustee to settle the decedent's trust accounts, and his estate is liable for breaches of trust committed in his lifetime. 8 The guardian of an insane person would stand in the same position as the executor of a deceased trustee. The trustee cannot abandon his trust, and even if he conveys away the property he will still remain liable as trustee;* but he may resign. 6 Resignation. The resignation in most jurisdictions may be at pleasure, 6 and in any jurisdiction for good reason. 7 1 Milbank v. Crane, 25 How. Prac. 193. 2 Mortimer v. Ireland, 11 Jurist, 721 ; Ames, 510, n. Infra, p. 54. 8 Dodd v. Wilkinson, 41 N. J. Eq. 566 ; Perry, 344. 4 Webster v. Vandeventer, 6 Gray, 428. Mass. Rev. Laws (1902). ch. 147, 12. Bogle v. Bogle, 3 Allen, 158; Ellis v. Boston, H. & E. Railroad, 107 Mass. 1 ; statutes passim. 7 Craig v. Craig, 3 Barb. Ch. 76 ; Dean v. Lanf ord, 9 Rich. Eq. (S. C.) 423. RESIGNATION OF TRUSTEE 21 To be effective, the resignation must be made either according to an express provision of the trust instru- ment, 1 or with the assent of all the beneficiaries or the court. 2 The assent of the beneficiaries must be unanimous; hence, if some are under age, unascertained, unborn, or incompetent, a valid assent cannot be given by the bene- ficiaries, and resort must be had to the court. The mere resignation and acceptance thereof will not convey the title to the property, but the trustee should then devest himself of the property by suitable convey- ances, and complete his duties, and until he does so he will remain liable as trustee. 8 Even where all persons in interest assent, it has been suggested that the resignation is not complete without the action of the court, 4 but it is, to say the least, doubt- ful ; and especially as all persons who are likely to raise the question are concluded by their assent. The resignation need not be in writing, and where a trustee has conveyed the trust property to a successor appointed by the court, there being no evidence of any direct resignation, one would be presumed. 6 Ordinarily courts of probate have jurisdiction in these matters; but where it is not specially given to them, a court of equity will have the power to accept a resigna- tion among its ordinary powers, and generally has con- current jurisdiction where the Probate Court has the power. 6 The court will not accept a resignation until the retir- ing trustee has settled his account, 7 and returned any Stearns v. Fraleigh, 39 Fla. 603. Cruger y. Halliday, 11 Paige, 314. Ibid. Matter of Miller, 15 Abb. Pr. 277. Thomas v. Higham, 1 Bail. Eq. 222. Bowditch v. Banuelos, 1 Gray, 220. 7 Statutes passim. In re Olmstead, 24 App. Div. (N. Y.) 190. 22 RESIGNATION REMOVAL benefit connected with the office, 1 and in some jurisdic- tions they will require a successor to be provided for. 2 Where there is more than one trust in the same in- strument, the rule for resignation is the same as for acceptance; namely, unless the trusts are divisible, all or neither must be resigned. 3 Removal. The beneficiaries may remove a trustee if the power is expressly given them by the settlement,* but this power is usually only given in railroad mort- gages and the like. The court may remove a trustee for good cause; 5 but the application is addressed to the reasonable discretion of the court, 6 and each case, there- fore, stands on its own merits. 7 The power is among the ordinary powers of a court of equity, 8 but jurisdic- tion in such cases is generally given to the Probate Courts by statute, and action should always be taken in the court having original jurisdiction of the trust. 9 All persons interested in the trust must be made par- ties in a suit for a removal. 10 Cut this is not required where the parties are very numerous, as, for instance, in a railroad mortgage. 11 1 Craig v. Craig, 3 Barb. Ch. 76. 2 Civ. Code Cal. (1903), 2260; Rev. Civ. Code So. Dak. (1903), 1638. 8 Carruth v, Carruth, 118 Mass. 431. 4 March . Roman, 116 Fed. Rep. 355, Circ. Ct. App. 5 Statutes exist in most jurisdictions giving courts of probate juris- diction to act in these matters. 6 Scott v. Rand, 118 Mass. 215. 7 A number of examples in Underbill, p. 393, n. 8 Dodkin v. Brunt, L. R. 6 Eq. 580. As to who are interested, see infra, p. 158. 9 Howard v. Gilbert, 39 Ala. 726. Supra, p. 8 ; infra, p. 189. 10 Shaw v. Paine, 12 Allen, 293. All the trustees, and all former trustees who have not been discharged, are interested parties. Hamil- ton v. Faber, 33 Misc. Rep. (N. Y.) 144. As to other parties inter- ested, see infra, p. 158. 11 Farmers' Loan & Trust Co. v. Lake Street Elevated Railroad 68 111. App. 666. REMOVAL FROM OFFICE 23 Ordinarily a trustee will be removed who refuses to give bond, 1 or who has been guilty of a wilful breach of trust, or who wastes or mismanages the trust property, or who refuses to account, 2 or who is a minor, lunatic, 8 drunkard, 4 or a person of such bad habits that the prop- erty is in danger in his hands; 6 and the fact that he is the testator's son and has a discretionary power of pay- ing the income will not protect him if he mingles the funds with his own and refuses to account. 6 So too a trustee will be removed who denies the trust or is unfriendly to it, 7 who unreasonably or corruptly disagrees with his co-trustee, 8 or who, having a discre- tionary power, exercises it in an arbitrary and capricious manner, 9 or, having a discretionary power over pay- ments to his beneficiary, has an unreasonable prejudice or dislike to him which is likely to defeat the purposes of the settlement, 10 or favors one beneficiary to the preju- dice of the others, 11 or whose relations with his co-trustee or the beneficiaries are such as to interfere with the proper management of the estate. 12 1 See supra, p. 4, note 2. 2 Stated to be the only causes in Webb v. Dietrich, 7 Watts & Sar. 401. 8 Generally, but in some States expressly by statute. Rev. Stat. N. J. (1895), p. 3684, 4; Gen. Stat. Conn. (1902), 371 ; Rev. Stat. Me. (1903), ch. 70, 4 ; Pub. Stat. N. H. (1901) ch. 198, 8 ; Vt. Stat. (1894), 2610 ; Rev. Laws Mass. (1902), ch. 147, 11. * Generally, but in some States expressly by statute. Bates's Annot. Ohio Stat. (1905), 6334 ; Brightly 's Dig. Pa. (1894), p. 2035, 59-61. 5 The statutes existing in nearly all jurisdictions generally ex- pressly cover one or more of the above cases. They should be referred to in each case. 6 Sparhawk v. Sparhawk, 114 Mass. 356. 7 Irvine v. Dunham, 111 U. S. 327 ; Quackenboss v. Southwick, 41 N. Y. 117; Polk v. Linthicnm, 100 Md. 615. 8 Infra, p. 55. 9 Infra, p. 60. 10 McPherson v. Cox, 96 U. S. 404; Wilson v. Wilson, 145 Mass. 490. Infra, p. 61. U Scott v. Rand, 118 Mass. 215. 12 Disbrow v. Disbrow, 46 App. Div. (N. Y.) Ill; In re Myer's Estate, 205 Pa. St. 413. 24 REMOVAL FROM OFFICE The court will sometimes, though not necessarily, re- move a trustee who becomes a bankrupt, 1 or goes to re- side permanently without its jurisdiction ; 2 but it will not remove a trustee simply because he is poor, 8 or to satisfy the caprice of a beneficiary; 4 or because he is prejudiced against or dislikes a beneficiary where he has no discretionary power over the payments to him. 5 Nor will a trustee be removed for the non-exercise of, or the manner in which he exercises, a discretionary power, provided he is honest and reasonable in the use or non- use of his discretion. Nor will a trustee be removed for a technical breach of trust, or one made unintentionally or through mistake. 6 i Paddock v. Palmer, 6 How. Pr. 215. a Gulp's Estate, 5 Pa. C. C. B. 582 ; Brightly's Dig. Pa. (1894), p. 2037, 70; Hughes v. Chicago Co., 47 N. Y. Sup. Ct. 531. 8 Jones v. McPhillips, 77 Ala. 314. * McPherson v. Cox, 96 U. S. 404. 5 Nickels v. Philips, 18 Fla. 732 ; Forster . Davies, 4 DeG., F. & J. 133. 6 Haines v. Elliot, 77 Conn. 247 ; and see Perry, 275 to 287, and Underbill, p. 393, n., for other instances. PART II. THE INDIVIDUAL AS TRUSTEE. 1. INCIDENTS OF TRUST ESTATE. Ownership. In every trust there are two estates, that of the trustee or the legal estate, and that of the beneficiary or the equitable estate. These two estates are separate although bound to- gether and travelling on parallel lines, and they will be treated separately in this treatise; the trustee's estate here, and the beneficiary's estate later on. 1 The trustee's estate consists in the ownership of the property itself, 2 and the beneficiary's in his right in a court of equity to compel the trustee to carry out the provisions of the trust, but not in any estate in the property itself. The tendency in America is to merge legal and equi- table rights, 8 and for courts of law to act on equitable principles. Statutes that reduce the legal estate to a mere power, as in New York and other Code States, and the refusal of a court of law to allow trust property to be sold on execution, are examples of these tendencies that might be largely multiplied. 4 Nevertheless a trustee in either a court of law or equity is the absolute owner of the trust property as to the whole world, and may eject even the beneficiary from 1 /n/ro, p. 157. 2 By statutory enactments in most Code States. ' Lowell, Transfer of Stock, 37. * Infra, p. 49. 25 26 OWNERSHIP OP PROPERTY the premises, 1 and is accountable to no one in the world but the beneficiaries for his use of the ownership. 2 The popular error that the trustee is merely the agent of the beneficiary expresses an entirely erroneous and mis- chievous conception of the trustee's relationship to the property and his beneficiary. 8 In a case of agency the principal owns the property, and the agent acts in his name and place ; in a trust the trustee owns the property, acts in his own name, and the beneficiary has no prop- erty rights, but a claim against the trustee only. In the case of an agency the person with whom the agent contracts may sue his principals on the contract; he has no such rights against the beneficiaries in a trust. * As Owner of the Property, all the Incidents of Own- ership fall to the Trustee. All actions against strangers either at law or in equity for damage to or loss of the prop- erty, 5 and all actions to protect or recover it must be brought in the name of the trustee. And the trustee may sue and be sued without any joinder of the beneficiaries, 6 where the relations between the trustee and beneficiary are not in question, and his interests are adequately represented by the trustee. 7 It was held in a foreclosure suit that the beneficiary had the right to raise money and should therefore be joined, 8 but the weight of authority is otherwise. 9 In some jurisdictions, as Alabama, New 1 Devin v. Hendershott, 32 Iowa, 192. 2 Wetmore v. Porter, 92 N. Y. 76. 8 Beach v. Beach, 14 Vt. 28. * Everett v. Drew, 129 Mass. 150. 6 Davis v. Charles River Branch Rd., 11 Cosh. 506; Morgan v. K. P. Rd. Co., 21 Blatch. 134. 6 Carey v. Brown, 92 U. S. 171. Generally, but expressly by statute in many jurisdictions. See infra, p. 75. 7 Vetterlein v. Barnes, 124 U. S. 169. 8 U. S. Trust Co. v. Roche, 41 Hun, 549. 9 Van Vechten . Terry, 2 Johns. Ch. 1 97 ; Price v. Krasnoff, 60 S. C. 172; Pyle v. Henderson, 55 W. Va. 122. INCIDENTS OF OWNERSHIP 27 York, and South Carolina, beneficiaries are by statute necessary parties. 1 If the beneficiary is in the possession of trust prop- erty he may sue for an injury to his possession to the same extent as any other bailee of property; 2 but as against all the world olher than the beneficiary, the trustee's right to possession is absolute, and cannot be questioned. If the trustee's right of action is barred by the statute of limitations, 8 or if he lose his right of action in any manner, the right is absolutely lost, 4 and the beneficiary is equally barred and has no other rights which he can enforce against the property or a stranger. 6 The trustee, and not the beneficiary, is entitled to vote as stockholder in corporations, 6 and the trustee, as an owner of stock, is eligible as a director, and the benefi- ciary is not. 7 In the absence of statute to the contrary, the trustee is personally liable as stockholder even beyond the ex- tent of the trust property, 8 but his liability is generally limited by statute to the extent of the trust estate. 9 Whether he himself has a right to be reimbursed by the 1 Ames, 261, n. 2 As to his rights, see infra, pp. 158, 168. 8 Wych v. East India Co., 3 P. Wms. 309 ; Walton v. Ketchum, 147 Mo. 209 ; Wiess v. Goodhne, 98 Tex. 274. * Meeks v. Olpherts, 100 U. S. 564. 6 Molton v. Henderson, 62 Ala. 426. 6 Barker v. Mercantile Tns. Co., 6 Wend. 509 ; Lowell, Transfer of Stock, 27 ; Herron v. Marshall, 42 Am. Dec. 444 and note. 7 By statute in most States. 8 Ames, 279, n. ; Lowell, Transfer of Stock, 28 ; Lewin, p. 252. 9 Pub. Stat. N. H. (1901), ch. 150, 20; Rev. Stat. Me. (1903) Qh. 47, 84 ; Gen. Laws R. I. (1896), ch. 180, 26 ; Rev. Stat. N. Y. (1901), p. 1422, 54 ; Burns's Annot. Ind. Stat. (1901 ), 3431 ; Rev. Stat. HI. (1905) ch. 32, 23 ; Stat. Minn. (1894), 3419 ; Wash. Code (1897), 4268; Mont. Civil Code (1895), 608; Rev. Stat. Wy. (1899), 3050 ; Code S. C. (1902), 1843, cl. 19 ; Gen. Stat. Fla. (1906), 2657, 2700 ; D. C., Cogley's Dig. (1892), p. 162, 13O; Comp. Laws N. M. (1897), 28 INCIDENTS OF OWNERSHIP trust estate, or whether the creditor can pursue the trust assets, is immaterial to the action, as the ultimate liability of the trust estate cannot be settled in a suit at law. 1 The trustee is personally liable on the contracts which he makes in respect to the trust property, and if he is not bound nobody is bound; 2 and this fact empha- sizes the difference between a person acting as trustee who binds only himself, and one acting as agent who binds his principal. Even his co-trustee need not be joined in the action, since the contract is the personal contract of the trustee making it. 8 By using appro- priate expressions the trustee can exempt himself al- together from personal liability or limit his liability to the extent of the trust estate; 4 but it is erroneous to suppose that he does so by describing himself or sign- ing his name with the word " trustee" or " as trustee" added. 6 Unless he is expressly exempted from liability by the contract itself he will be personally liable even on a con- tract made under order of the court. 6 If he has the power to contract for the benefit of the trust, and if he properly describes himself as trustee, the contract will bind the trust effects in his hands and those of his suc- 430; Annot. Stat. Col. (1891), ch. 30, 495; Pub. Gen. Laws Md. (1904), Art. 23, 74 ; unless he voluntarily invested in it, New York. But not personally on contract in mutual insurance companies, Mass. Rev. Laws (1902), ch. 118, 40. 1 Hampton v. Foster, 127 Fed. 468. 2 Taylor v. Davis, 110 U. S. 330; Shoe & Leather Nat'l Bank v. Dix, 123 Mass. 148; Hussey v. Arnold, 185 Mass. 202. Infra, p. 158. 8 Diamond v. Wheeler, 80 App. Div. (N. Y.) 58. * Shoe & Leather Nat'l Bank v. Dix, 123 Mass. 148 ; Hnssey v. Arnold, 185 Mass. 202. 6 Shoe & Leather Nat'l Bank v. Dix, 123 Mass. 148 ; Taylor v. Davis, 110 U. S. 330 ; Perry, 437 b. 8 Gill v. Carmine, 55 Md. 339 ; Glenn v. Allison, 58 Md. 527. Infra, p. 145. LIABILITY AS OWNER 29 cessor, although recourse will be had to him in the first instance. 1 So, too, a trustee will be personally liable on the cov- enants in a deed or lease, whether he signs as trustee or not; and it is important in this connection to bear in mind that there is an implied covenant for quiet enjoy- ment on behalf of the lessor in every lease. 2 Taxation. The trustee is personally liable for tax- ation. In the absence of statute, on the personal prop- erty where he resides, and on land where the land lies ; 8 but statutes are not unusual making the personal tax payable where the beneficiary resides who is entitled to the income. When both the trustee and beneficiary are non-resi- dent, the personal property is not taxable to any one. 4 A statute making the property taxable where the bene- ficiary lives, when neither the trustee nor the property are within the State, is constitutional. 5 In many jurisdictions it is the trustee's duty to bring in a list of the trust property for taxation, and in others he may do so. A trustee who neglects his duty would be personally liable for the penalty of his neglect; and where he neglects his opportunity to file a list, and the property is over assessed, and owing to his neglect the over assessment cannot be recovered, he would probably not be able to charge the over assessment to the trust. Personally liable as Owner of Property. The trustee is personally liable as owner of the trust property in the 1 Hampton v. Foster, 127 Fed. 468. Infra, pp. 77, 78. 2 Infra, p. 75. 8 Richardson v. Boston, 148 Mass. 508 ; Greene et al. v. Mumford at al., 4 R. I. 313. * Dorr v. Boston, 8 Gray, 131 ; Anthony v. Caswell, 15 R, L 159; Ames, 279, n. 4 Hunt v. Perry, 165 Mass. 287. 30 LIABILITY AS OWNER same way and to the same extent as if he owned the property individually. Thus he is personally liable for a nuisance on the trust premises, 1 for a defective coal hole or sidewalk, 2 or for snow falling from the roof of a building belonging to the trust estate. 8 So, too, he is personally liable if through operations on the trust prop- erty his neighbor's building is unlawfully let down or his land flooded. 4 If the trustee employs servants about the trust business he will be personally liable for their torts equally as if he had employed them for his own affairs. 5 His liability as stockholder in a corporation has been already noticed. 6 This liability as owner is entirely irrespective of the trustee's right to be indemnified by the trust estate, which it was consistently held could not be adjudicated in a legal action in a court of law. Hence describing the trustee in the writ " as trustee " was held to be sur- plusage, 7 judgment was entered against him individually and execution issued against his own goods and not those of the trust. 8 The tendency of courts of law to adopt equitable prin- ciples in dealing with trust estates, which has already been referred to, has modified this doctrine, and it is now pretty generally held that where the trustee has a right of indemnity against the trust estate he may be sued as trustee and execution will issue against the trust prop- erty; but if the trust property is insufficient to satisfy the execution the balance can be collected from him per- sonally. 9 In other words, the plaintiff is subrogated to 1 Schwab v. Cleveland, 28 Hun, 458. 2 O'Malley v. Gerth, 67 N. J. Law, 610. 8 Shepard v. Creamer, 160 Mass. 496. * In re Reybould, 1 Ch. (1900), 199. 5 Prinz v. Lucas, 210 Pa. St. 620. 6 Supra, p. 27. 7 Shepard v. Creamer, ul supra; Baker v. Tibbetts, 162 Mass. 468. 8 Hampton v. Foster, 127 Fed. 468; Odd Fellows Hall Ass'n v. McAllister, 152 Mass. 292, p. 297. 9 Wylly v. Collins, 9 Ga. 223. LIABILITY AS OWNER 31 the trustee's right of indemnity, 1 which is convenient for him, as the trust estate is not infrequently larger than the trustee's. The trustee has no right to indemnity from the trust estate where his neglect causes the accident. The law does not allow the trust estate to be diminished by the trustee's neglect or default. 2 Where, however, the trustee has been conducting the trust business reasonably and carefully, he will have a right to be indemnified for judg- ments recovered against him. As, for instance, where the plaintiff is injured by a falling limb, although the trustee is using due care in having the wood cut; 8 or where the plaintiff is injured by the careless driving of a servant of a trustee, who is lawfully carrying on the testator's busi- ness;* or where the plaintiff's buildings are let down by mining operations carefully conducted on the trust prop- erty. 5 In all these cases the trustee was held to have a right of indemnity from the trust estate, and the plaintiff was allowed to recover -against him as trustee. Reasoning from the analogy of the trustee's responsi- bility for debts, even in those jurisdictions that deny his right to hold the trust estate in an action at law, he might go against the trust estate in equity, subrogating himself to the trustee's right to indemnity. This indi- rect remedy would seem to have the disadvantage of mak- ing him subject to all set-offs against the trustee. 6 The trustee as owner of the property is liable crimi- nally for a nuisance on it, 7 and may be indicted under liquor or gambling laws. 1 In re Johnson, 1 5 Ch. Div. 548, p. 552. 2 Parmenter v. Barstow, 22 R. 1. 245. 8 Bennett v. Wyndham, 4 DeG., F. & J. 258. * Prinz v. Lucas, 210 Pa. St. 620. 6 In re Reybold, 1 Ch. (1900) 199. 6 Mason v. Pomeroy, 151 Mass. 164; Dowse v. Gorton, 40 Ch. D. 536 ; Mayo v. Moritz, 151 Mass. 481. Infra, p. 48. 7 People v. Townsend, 3 Hill, 429. 32 THE TRUSTEE'S OWNERSHIP is NOT BENEFICIAL The Trustee's Ownership is not Beneficial. Although the trustee is the absolute owner of the property, he can take no benefit from his ownership, and he may not deal with the estate for his own profit, or for any purpose un- connected with the trust. 1 All the benefits belong to the beneficiaries, and the trustee has no more right to any of them than he has to the property of a stranger. All his skill and labor must be directed to the advancement of the interests of his beneficiaries. 2 He may take no benefit directly or indirectly from the estate or his office, except the regular compensation allowed by law, and if he take a present or be paid a bonus or commission of any kind in a trust transaction by a stranger, he must account to the trust for it. 8 He cannot set off his own debts in equity against one who sues him as trustee. 4 He cannot use the real estate or chattels, or pledge any of the property, as security for his debts. Nor can he purchase them directly or indirectly at public or private sale, 6 except by arrangement with all the beneficiaries. In which case he does not get a merchantable title, as the burden is on him to show affirmatively that the benefi- ciaries were all sui juris, informed of all the facts, and dealt at arm's length; 6 but he may purchase under leave of court, 7 or at a judicial sale which he does not control in any manner. 8 Nor can a husband or wife be- 1 Cal. Civil Code (1903), 2229; Rev. Civ. Code So. Dak. (1903), 1618; Code of Ga. (1895), 3183; Rev. Code N. Dak. (1895), 4265. 2 Arnold v. Brown, 24 Pick. 89, 96. 8 Infra, p. 35. * Infra, p. 49. 6 Hoyt v. Latham, 143 U. S. 553; Morse v. Hill, 136 Mass. 60; Amer. & Eng. Encyc. Law, vol. 27, p. 197 ; Hayes v. Hall, 188 Mass. 511 and cases cited. Infra, p. 70. 6 Williams v. Scott (1900), Eng. App. Cases, 499. 7 Morse v. Hill, 136 Mass. 60, 67 ; Colgate v. Colgate, 8 C. E. Green, 372, p. 383. 8 Allen v. Gillette, 127 U. S. 589 ; Starkweather v. Jernillo, 27 App. D. C. 348. THE TRUSTEE'S OWNERSHIP is NOT BENEFICIAL 33 ing trustee sell to the other, 1 even though the other be a beneficiary. It is immaterial that the price paid is a fair one. The transaction is a breach of trust, and may be set aside by the beneficiary, 2 but no stranger to the estate can question the transaction. 8 If, however, the property be honestly sold to a third person, there being no scheme to repurchase, the trustee is not disabled from buying it subsequently. 4 Similarly he cannot sell any property to the trust. 6 He cannot speculate with the trust funds under the guise of a loan to himself ; 6 if he does, all the profit will belong to the trust, and if the profit does not equal in- terest he must pay interest. 7 If there is a loss he must stand it. 8 He cannot borrow the trust funds on any security, and he should not lend them to his family or associates on any terms. 9 He cannot swell his personal credit by keeping a large balance of the trust funds at his banker's. 1 Scottish Amer. Mortgage Co. v. Clowney, 70 S. C. 229 ; Hayes v. Hall, 188 Mass/510; Davoue v. Fanning, 2 Johns. Ch. (N. Y.) 252. In Lingke v. Wilkinson, 57 N. Y. 445, it was held that a trustee might sell to his son, but two judges dissented, and the principle is very doubtful. 2 Denholm v. McKay, 148 Mass. 434 ; Davoue v. Fanning, 2 Johns. Ch. (N. Y.) 252; Quirk v. Liebert, 12 App. D. C. 394; Smith v. Miller, 98 Va. 535. Infra, p. 155. 8 Harrington v. Brown, 5 Pick. 519 ; Bronson r. Thompson, 77 Conn. 214. 4 Creveling v. Fritts, 34 N. J. Eq. 134 ; Dry Goods Co. v. Gideon, 80 Mo. App. 609. 6 Re Long Island Loan & Trust Co., 92 N. Y. App. Div. 1 ; St. Paul Trust Co. v. Strong, 85 Minn. 1. 6 Brown v. Ricketts, 4 Johns. Ch. 303; Townend v. Townend, 1 Giff. 201. 7 Piety v. Stace, 4 Ves. Jr. 620. 8 Docker v. Somes, 2 Mylne & Keen, 655. 9 Kyle v. Barnett, 17 Ala. 306. This does not go so far as to prohibit his lending to a corporation in good standing, because he is a stock- holder. In re Rowe, 42 Misc. Rep. (N. Y.) 172. 3 34 THE TRUSTEE'S OWNERSHIP is NOT BENEFICIAL He cannot come in competition with the trust estate, nor make a profit by buying up claims against the estate at a discount, directly or indirectly. 1 By statute in some jurisdictions he cannot enforce a claim against the estate acquired, nor make a profit out of the trust estate in any other manner. 2 Where the English rule prevails which refuses compen- sation to a trustee, he should not employ himself or his partner to render expert services to the estate, or if he does he may receive no compensation therefor. 8 But in most other jurisdictions, if he could have given such employment legitimately to another, he may render it himself and receive reasonable compensation for his ser- vices ; as, for example, where he acts as counsel, broker, or agent to collect. 4 But the law is not uniform, and in some States he cannot take any compensation. 5 In practice the matter is a delicate one, and it is a bet- ter rule to avoid the difficulty altogether by employing a stranger; but where such employment is allowed, the charge for expert services, together with the regular commission, should not amount to more than reason- able compensation for all the services rendered. 6 1 Slade v. Van Vechten, 11 Paige, 21 ; King v. Cushman, 41 HI. 31. 2 Rev. Civ. Code So Dak. (1903), 1641 ; Rev. Code N. Dak. (1895), 4288; Civ. Code Cal. (1903), 2263. 8 In re Corsellis, 34 Ch. Div. 675. 4 Turnbull v. Pomeroy, 140 Mass. 117, 118; Lowrie's Appeal, i Grant, 373; Perkins's Appeal, 108 Pa. St. 314. Perry, 432, contra. 5 He can take none in New York, Missouri, or South Carolina. Collier v. Munn, 41 N. Y. 143 ; Gamble v. Gibson, 59 Mo. 585 ; Mayer v. Galluchat, 6 Rich. Eq. 1. The reason assigned in some of the cases is, that a trustee cannot fix his own compensation, because he will have in that case to deal with himself. See Lord Cranworth in Broughton v. Broughton, 5 DeG., M. & G. p. 160. But this reason is not wholly satisfactory, as it is conceded that he can collect other expenses, etc. 6 Turnbull v. Pomeroy, 140 Mass. 117, 118; Lowrie's Appeal, 1 Grant, 373 ; Perkins's Appeal, 108 Pa. St. 314 ; Perry, 432, contra. Infra, p. 36. MAY HAVE EXPENSES FROM TRUST FUND 35 He must pay over to the trust estate any bonus he re- ceives in the performance of his duties, or for resigning the trust, 1 but he need not account for the profit which he receives from other business owing to the fact that he is a trustee. 2 May have Expenses from Trust Fund. On the other hand, the trusteeship should not be a burden, and the trustee may pay from the estate all the expenses which he incurs as owner, such as taxes, repairs, and insurance, and he may charge the estate irrespective of the provi- sions of the settlement with all the legitimate expenses of management, 8 as travelling expenses, 4 the cost of jus- tifiable litigation, 6 and expense of consulting counsel when there is reasonable cause, 6 and if he be not at fault judgments recovered against him as owner of the prop- erty, 7 or, where the employment is reasonable and usual, the expense of brokers or agents, or the expense of look- ing after the beneficiary, as for instance having him de- clared insane and placed under guardianship ; 8 and in some States the premium paid a surety company on his official bond may be charged to the estate. 9 Ordinarily, the expense of accounting, not including court expenses, and clerk hire and office rent, are in- cluded in the ordinary allowance made as compensation, 10 and so are not charged to the trust ; but where it is neces- 1 Sugden v. Crossland, 3 Sim. & Giff. 192. 2 Whitney v. Smith, L. R. 4 Ch. App. 513. Perrine v. Newell, 49 N. J. Eq. 58 ; Perry, 910. 4 Rev. Stats. Me. (1903), ch. 65, 37. 8 For instance, maintaining the validity of the trusts. Steinway v. Steinway, 112 App. Div. (N. Y.) 18. 6 Forward v. Forward, 6 Allen, 494, 497 ; Teague v. Corbitt, 57 Ala. 529; Rev. Stat. Me. (1903), ch. 65, 37. 7 Supra, p. 30. 8 Infra, p. 83. 9 As to apportionment of charges between income and principal, see infra, pp. 137 et seq. w Little v. Little, 161 Mass. 188. 36 COMPENSATION sary to keep a clerk exclusively for a particular trust, it would be the ground for an extra charge. 1 He has a lien on the estate for his expenses, and may reimburse himself out of income or hold possession of the corpus of the estate until he is paid, 2 but not if he has exceeded his powers, has been guilty of a breach of trust, or is in default, 3 or has denied the trust and in- volved the estate in litigation. 4 Before incurring expense he may require security if there is doubt about his being reimbursed, and he has a right to his costs prior to all charges. 6 Compensation. The whole matter of compensation is subject to the provisions of the settlement ; 6 in the ab- sence of these in England and Delaware 7 the trustee cannot charge for services ; but in all the other States he is entitled to reasonable compensation. The amount of the compensation is fixed by statute or rule of court, and is usually by way of commission 8 on the gross in- come collected, 9 and ranges from five to ten per cent. The court usually allows the highest amount paid agents, factors, and the like for performing similar services. 10 The trustee may agree as to amount of commission with the beneficiary, if the beneficiary is competent to act, 1 Meeker v. Crawford, 5 Redf. (N. Y.) 450. 2 Even though the trust itself is invalid. Merry v. Pownall, 67 L. J. Ch. 162; (1898), 1 Ch. 306. 8 Perrine v. Newell, 49 N. J. Eq. 58. * Hanna v. Clark, 204 Pa. St. 145. 8 Woodard v. Wright, 82 Cal. 202; Bradbury v. Birchmore, 117 Mass. 569; Dodds v. Tuke, 25 Ch. Div. 617. 6 Infra, p. 39. In re Pooley, 40 Ch. Div. 1 ; Evans v. Weatherhead, 24 R. I. 394. 7 State v. Platt, 4 Harring. 154. 8 Hazard v. Coyle, 26 R. I. 361. A trustee cannot recover for services on a quantum meruit. 9 Taxes paid by the tenant form part of the gross income on which the trustee is entitled to charge. In re McCallum's Estate, 211 Pa. St. 205. 10 Barrell u. Joy, 16 Mass. 221. COMPENSATION 37 and no undue advantage is taken; and the court should take the agreement into consideration in fixing the amount of compensation. 1 Although the amount to be allowed rests, in the absence of provision by the settle- ment or statute, in the sound discretion of the court, the judgment is not conclusive on persons not properly par- ties to the case. 2 In many cases a commission on income will not amount to reasonable compensation, 8 and in such cases an extra charge will be allowed ; 4 and in cases where valuable ser- vice has been rendered to the principal fund over and above what is covered by the ordinary commission, a charge on principal will be allowed. 5 The ordinary changing of investments is not usually considered to be such a service, 6 but sometimes a commission is allowed, 7 and even where it is a case of extraordinary trouble entitling the trustee to an extra charge, the court will not allow compensation by way of commission, in these cases, as it is against its policy to encourage frequent changes and excessive expenditure; 8 but the sale and conversion of real estate, or the difficult settlement of a large claim, are usually considered extra services. The court disallowed a commission of five per cent for war- ranting a title. 9 In some jurisdictions the trustee will be allowed compensation for professional services, but in other jurisdictions he will not. 10 A cumulative commission is never allowed, as for in- 1 Bowker v. Pierce, 130 Mass. 262. But see Barrett v. Hartley 2 L. B. Eq. 789. 2 Infra, p. 94. Jenkins v. Whyte, 62 Md. 427. 8 Dixon v. Homer, 2 Met. 420. 4 Turnbull v. Pomeroy, 140 Mass. 117. * Ellis v. Ellis, 12 Pick. 178; Pitney v. Everson, 15 Stew. (N. J.) 361, 367 ; Biddle's Appeal, 83 Pa. St. 340. 6 Jenkins v. Whyte, 62 Md. 427. 7 Rhode Island Hosp. Trust Co. v. Waterman, 23 R. I. 342. 8 Blake v. Pegram, 101 Mass. 592; May v. May, 109 Mass. 252. 9 Urann v. Coates, 117 Mass. 41. 10 Supra, p. 34. 38 COMPENSATION stance a commission in two capacities, such as guardian and trustee, for the management of the same fund, 1 un- less there was a complete separation of duties, 2 or for collecting and disbursing the funds ; but the commissions, however and on whatever charged, must not amount in all to more than reasonable compensation for all the ser- vices. 8 The commission should be deducted from cur- rent payments, and not in a lump on the termination of the trust ; * but the claim for a commission is barred by limitation from the end, not the beginning, of a trust. 5 A commission of one to two and one half per cent on the personal property is usually allowed on paying out or distributing the trust estate. 6 No commission is ordi- narily allowed on turning over the estate to a successor 7 or on real estate which vests in the remainderman by the force of the original instrument. 8 When, however, a large amount of the personal has been rightly converted into real estate by payment for improvements on it, a commission may be allowed on that amount. 9 No com- 1 Brightly's Pardon's Dig. Pa. (1894), p. 616, 239 ; Meeker v. Crawford, 5 Redf. (N. Y.) 452. 2 Johnson v. Lawrence, 95 N. Y. 154; Blake v. Pegram, 101 Mass. 592. In Daily v. Wright, 94 Md. 269, a trustee who owned a large amount of stock in a corporation took a large salary as treasurer of the company and also charged a commission on dividends, and it was held not to be a double charge. 8 Blake v. Pegram, 101 Mass. 592. 4 Parker v. Ames, 121 Mass. 220; Spencer v. Spencer, 38 App. Div. (N. Y.) 403 ; In re Haskin, 98 N. Y. S. 926 ; Conger v. Conger, 105 App. Div. (N. Y.) 589, aff'd 185 N. Y. 554. But this rule is not invariable. See Lindsay v. Kirk, 95 Md. 50. 6 Reese v. Meetze, 51 So. Car. 333. More v. Calkins, 95 Cal. 435, 441 ; Ga. Code (1895), 2552, and 3484-3489 ; Crocker's Notes on Rev. Laws Mass. 483 ; Gen. Stat. N. J. (1895), p. 2385, 125; Manual of Wills, Tucker, pp. 120, 121 ; Biddle's Appeal, 83. Pa. St. 340 ; Smith v. Lansing, 53 N. Y. S. 633 ; In re Gill, 47 N. Y. S. 706. 7 In re Todd, 64 App. Div. (N. Y.) 435. 8 Roosevelt v. Van Allen, 31 App. Div. (N. Y.) 1. 9 Spencer v. Spencer, 38 App. Div. (N. Y.) 403. COMPENSATION 39 mission is allowed on assuming the trust. 1 If the trustee has been unfaithful, has denied 2 or mismanaged his trust, compensation may be withheld, 8 or allowed only to the extent that the estate has benefited by his ser- vices. 4 But under a statute allowing specified com- missions, the court disclaimed power to withhold a commission for unfaithfulness. 6 Where the matter of commission is regulated by statute, or the court, the rate prescribed by the trust instrument will govern, 6 as the statutes, expressly in many cases, and impliedly in almost all, provide that the provisions of the instrument shall govern; and this, although no exact sum is specified. As, for instance, if the in- strument provides for " reasonable compensation," the amount will not be confined to the statutory rate. 7 The rule in each jurisdiction, so far as it is determined by a reported decision or statute, is given below. Where no authority exists, in the absence of actual knowledge of a definite practice recognized and followed in the lower courts, it is usually safe to follow the rules laid down for executors and administrators, mutatis mutandis. 8 Alabama. Reasonable compensation. Griffin v. Prin- gle, 56 Ala. 486; 5 per cent allowed in Pinckard's Dis- tributees v. Pinckard's Adm'r, 24 Ala. 250. Alaska. No authority. Executors, see Code of Civil Procedure (1900), 869. Arizona. No authority; as to executors and admin- istrators, Revised Statutes (1901), 1853. 1 Dixon v. Homer, 2 Met. 420. 2 Stone v. Farnham, 22 R. I. 227 ; Hanna v. Clark, 204 Pa. St. 145. 8 Brooks v. Jackson, 125 Mass. 307. 4 Jennison v. Hapgood, 10 Pick. 77. 6 In re Fitzgerald, 57 Wis. 508. 6 Southern Ry. Co. v. Glenn's Ex'or, 98 Va. 309. 7 E. g., Civ. Code So. Dak. (1903), 1646, and statutes passim; Parker v. Ames, 121 Mass. 220. 8 Abell v. Brady, 79 Md. 94. For other authorities on the subject in general, see Perry, 918, n. 40 COMPENSATION Arkansas. Rate provided in settlement, and enough to make reasonable compensation, Briscoe v. State, 23 Ark. 592; as to executors and administrators, Digest of Statutes (1894), 134. California. See Civil Code (1903), 2273, 2274, and Supplement to Code of Civil Procedure, 1618, as amended in 1905. On the amount of estate accounted for, 7 per cent up to $1,000; 5 per cent from $1,000 to $10,000, 4 per cent, $10,000 to $20,000; 3 per cent, $20,000 to $50,000 ; 2 per cent, $50,000 to $100,000. All over $100,000, one half of one per cent, and such further allowance for extra services as court may allow, not ex- ceeding one half amount allowed by statute. Trustee under a will, see Code of Civil Procedure (1903), 1700, such compensation as court deems reason- able. And may establish a yearly allowance. Colorado. No authority. As to executors, Annotated Statutes (1905), 4809. Connecticut. Reasonable compensation. Clark v. Platt, 30 Conn. 282 ; Babcock v. Hubbard, 56 Conn. 284. Delaware. Reasonable compensation in discretion of court Laws of Delaware (1893), p. 712. Florida. Reasonable compensation. Muscogee Co. v. Hyer, 18 Fla. 698. Georgia. Code (1895), 3168. Same commissions as guardian; 3484, 2| per cent on both income and payments; 3487, 10 per cent on proceeds of land worked; 3489, extra in discretion of court; 2552, on paying over, the same as administrator. Hawaii. Reasonable compensation. Hart v. Kapu, 5 Hawaiian, 196, 200. Idaho. No authority. Executors and administra- tors, Statutes (1887), 5586. Illinois. Reasonable compensation. Revised Stats. (1905), ch. 3, 136. And this applies to trusts es- tablished before the act. Arnold v* Alden, 173 111. 229. COMPENSATION 41 Indiana. Reasonable compensation. Premier Steel Co. v. Yandes, 139 Ind. 307. Iowa. Reasonable commissions. In re Gloyd's Est., 93 Iowa, 303. Kansas. No authority. Kentucky. Statutes (1894), 3883, not to exceed 5 per cent on amounts received and distributed, and extra in discretion of court Fleming v. Wilson, 6 Bush, 610, allowed 1| per cent yearly on amount of principal; Ten Broeck v. Fidelity Co., 88 Ky. 242, allowed 5 per cent on income, and \\ per cent on investments. 1 Maine. Revised Statutes (1903), ch. 65, 37; 5 per cent and expenses. Maryland. 5 per cent on income. Abell v. Brady, 79 Md. 94. Massachusetts. Revised Laws (1902), ch. 150, 14. Discretion of court; general rule, 5 per cent on income. Barrell v. Joy, 16 Mass. 221; May v. May, 109 Mass. 252 ; and extras earned. Michigan. Compiled Laws (1897), 695. Trustees appointed by Probate Court, same compensation as ad- ministrators, 9438. Administrator, on all personal estate and proceeds of real estate sold. First $1,000, 5 per cent; $1,000 to $5,000, 2 per cent; all above, 1 per cent. Minnesota. No authority ; but executors, administra- tors, and guardians are allowed, and presumably trustees, such reasonable compensation as court decrees just. Re- vised Laws (1905), 3707. Mississippi. Reasonable compensation. Shirley v. Sbattuck, 28 Miss. 13. Missouri. Reasonable compensation. Kemp v. Fos- ter, 22 Mo. App. 643. Montana. Civil Code (1895), 3301, reasonable compensation. Code Civil Procedure, 2776. For first 1 See also Central Trust Co. v. Johnson, 25 Ky. Law Rep. 55. 42 COMPENSATION $1,000, 7 per cent; all between $1,000 and $10,000, 5 per cent; between $10,000 and $20,000, 4 per cent; all above $20,000,2 per cent; extra not to exceed amount allowed by statute. Nebraska. Reasonable compensation. Olson v. Lamb, 56 Neb. 104, 118. Nevada. No authority. For executors, see Compiled Laws (1900), 2969. Neiv Hampshire. Gordon v. West, 8 N. H. 444, trustee allowed 1 per cent on principal, rate of income being 6 per cent. Practice is 5 per cent on income. Tuttle v. Robinson, 33 N. H. 104, 118. New Jersey. General Statutes (1895), p. 2380, 109, 110. Actual value, p. 2402, 204. Reasonable com- pensation not exceeding 5 per cent on income. New Mexico. No authority. For executors, see Compiled Laws (1897), 1972. New York. Code of Procedure (1902), 2730, 2802, and 3320, as amended by Laws of 1904, p. 1921, ch. 755. Allowed 5 per cent up to $1,000; $1,000 to $10,000, 2| per cent; for all above $11,000, 1 per cent. 1 North Carolina. Reasonable commission not exceed- ing 5 per cent. Sherrill v. Shuford, 6 Ired. Eq. 228. North Dakota. Revised Code (1895), 4293, same as executors. 6492, for first $1,000, 5 per cent; $1 ,000 to $5,000, 4 per cent. All above, 2| per cent. Ohio. Revised Statutes (1890), 6333; reasonable compensation. Oklahoma. No authority. Statutes (1903), 1719, as to executors. Oregon. No authority. Executors, Annotated Laws (1901), 1209. Pennsylvania. Brightly's Purdon's Digest (1894), p. 2031, 29; reasonable compensation; 5 per cent rea- 1 Trustee who has collected bnt not paid out is entitled to half commission. In re Todd, 64 App. Div. (N. Y.) 435. COMPENSATION 43 sonable, Pusey v. Clemson, 9 Serg. & R. 204; Davis's Appeal, 100 Pa. St. 201. Rhode Island. No authority. Executors, General Laws (1896), ch. 219, 8. South Carolina. Code (1902), vol. 1, 2590, same as executors; 2560, executors allowed not exceeding 10 per cent. Court has no discretion. Cobb v. Fant, 36 So. Car. 1. South Dakota. Civil Code (1903), 1646. Same as executors, if trust instrument silent. If rate not speci- fied in trust instrument, reasonable compensation. Ex- ecutors, 5 per cent on collections up to $1,000; 4 per cent between $1,000 and $5,000; 2| per cent on all above $5,000. Judge of probate may make allow- ance for extraordinary services. Probate Code (1903), 271. Tennessee. Code (1896), 3525. Same as clerks and masters, not exceeding 5 per cent, 6388. Clerks and masters' fees defined. Texas. Reasonable compensation. Harris v. First National Bank, 45 S. W. 311 (1898. Texas Civil Ap- peals). Utah. Reasonable compensation. Revised Statutes (1898), 3978. Vermont. Reasonable compensation. Hubbard v. Fisher, 25 Vt. 539. Virginia. Code (1904), 2695. Reasonable commis- sion on receipts or otherwise. Usually 5 per cent. Boyd v. Oglesby, 23 Gratt. 674, 688. Washington. No authority. Executors, Code (1897), 6314. West Virginia. Code (1906), 3309. Reasonable compensation. Usual 5 per cent. Hoke v. Hoke, 12 W. Va. 427. 10 percent allowed for extraordinary services. Shepherd v. Hammond, 3 W. Va. 484. Wisconsin. No authority. Executors, Annotated Statutes (1898), 3992, 3993. 44 THE TRUSTEE'S ESTATE Wyoming. No authority. Executors, Revised Stat- utes (1899), 4712. The Trustee's Estate. The trustee takes an absolute estate in personal property ; l but in real estate he will take a large enough estate to administer the trusts and no larger, entirely irrespective of the use or absence of words of limitation, or the technical phraseology of the trust instrument. 2 Thus where the estate is granted without words of limi- tation, but a power of sale is given to the trustee, he will take an estate in fee instead of a mere life estate, 8 since without a fee he could not exercise his power; but no larger estate is given than is absolutely necessary, as, for instance, a life estate being sufficient to support an annuity, no larger estate will be implied. 4 Although a fee be given to the trustee to support a less estate, as e. g. for the benefit of A until B comes of age, the estate will vest in B when he comes of age irre- spective of the trustee's fee; 6 and there is often statutory provision that the estate of the trustee shall terminate on the completion of the purposes of the trust. 6 In some Code States, namely, New York, Michigan, "Wis- consin, Minnesota, and South Dakota, 7 the trusts not ex- 1 Pace v. Pierce, 49 Mo. 393. See infra, p. 102. 2 Cleveland v. Hallett, 6 Cush. 403 ; Packard v. Old Colony Rail- road Co., 168 Mass. 92, p. 96; Greenwood v. Coleman, 34 Ala. 150; King v. Parker, 9 Cush. 71 ; Smith v. Proctor, 139 N. C. 314. 8 Bagshaw v. Spencer, 1 Ves. Sen. 142 ; Welch v. Allen, 21 Wend. 147. 4 Norton v. Norton, 2 Sand. 296; Code Ga. (1895), 3191 ; Green- wood v. Coleman, 34 Ala. 150. 5 Slevin v. Brown, 32 Mo. 176; Nash v. Coates, 3 B. & Adol. 839; Ga. Code (1895), 3191. 6 N. Y. Rev. Stat. (1901) p. 3030, 89 ; Mich., Wise., Minn., Cal., So. Dak. Rev. Civ. Code. 7 Rev. Stat. N. Y. (1901), p. 3026, 77, 78; Annot. Stat. Mich. (1882), 8843; Rev. Laws Minn. (1905), 3250 ;> Wise. Statute POSSESSION TRUSTEE'S ESTATE is JOINT 45 pressly established by statute are cut down to a mere power and no title vests in the trustee. A passive trustee (that is, a trustee who merely holds a naked title to permit another to do something, as, e. g., collect the rents) takes a modified title, about which we need not concern ourselves, as such trusts are not within the scope of this treatise. Possession. At law the trustee is entitled to the pos- session of the real estate, 1 and may eject the beneficiary, 2 nor can the beneficiary deny the trustee's title if he is his landlord. 8 He is equally entitled to the possession of the personal property ; 4 but the beneficiary may have an equi- table right to possession and will receive it under those circumstances, 6 though even then at law his possession will technically be the possession of the trustee. If he buys in a tax title, he cannot hold it against the trustee. 8 Trustee's Estate is Joint. Trustees, where there are more than one, take a joint estate which is not subject to partition. 7 If one trustee conveys his part without join- ing the others the conveyance is void, and the grantee does not take an undivided estate in the premises; no title passes. 8 (1899), 2084; Rev. Civ. Code, So. Dak. (1903), 310; Seidelbach v. Knaggs, 44 App. Div. (N. Y.) 169 ; Staats v. Storm, 76 App. Div. (N, Y.) 627. i Clark v. Clark, 8 Paige, 153 ; Beach v. Beach, 14 Vt. 28. a Presley v. Stribling, 24 Miss. 527. 8 White v. Albertson, 3 Dev. 241. * Pace v. Pierce, 49 Mo. 393 ; Western Railroad Co. v. Nolan, 48 N. Y. 513. 6 Infra, pp. 100, 175. 6 Frierson v. Branch, 30 Ark. 453. ' Attorney General v. Gleg, 1 Atk. 356 ; Burns's Annot. Ind. Stat. (1901), 3342; Rev. Stat. N. J. (1895), p. 3685, 7. 8 Chapin v. First Univ. Soc., 8 Gray, 580; Learned v. Welton, 40 Cal. 349; Sinclair v. Jackson, 8 Cow. 543; Morville v. Fowle, 144 Mass. 109; but see, contra, Perry, 334, and Boursot v. Savage, L. R. 2 Eq. 134. 46 TRUSTEE'S ESTATE is JOINT ALIENATION All the trustees are equally seised, and on the death of one the whole estate vests in the survivors. 1 A provision in the trust instrument for keeping up the number of the trustees will not prevent survivorship ; 2 and the statutes in many States providing that joint tenancies shall be construed as tenancies in common do not apply to trus- tees' estates. 8 Transmission of the Trustee's Estate. The trustee, being the legal owner, may make conveyance, and his transferee will stand at law entitled in his place. 4 But if the trustee had no power given him to convey, his transferee would take no larger title than the trustee con- veyed, and would be bound by the trusts his grantor was bound by. In the Code States the trustee having no estate, but a power merely, the conveyance would be simply void, and no estate would pass; and there is a similar statutory provision in Indiana. 6 Alienation. If the trustee transfers his estate to a purchaser for value without notice of the trust, the pur- chaser will acquire the title discharged of the trust. 6 This is universal law, but is often enacted by statute. 7 1 Co. Lit. 113; Ames, 346, n. 2 Shook v. Shook, 19 Barb. 653; Dixon v. Homer, 12 Cush. 41 ; Norris v. Hall, 124 Mich. 170. 8 Underbill, 382, n. * Canoy v. Troutman, 7 Ired. 155. 5 Rev. Stat. N. Y. (1901), p. 3028, 85; Burns's Annot. Ind. Stat., (1901), 3395; Comp. Laws, Mich. (1897), 8849; Wise. Stat. (1899): 2091 ; Gen. Stat. Kan'.-(1897), ch. 113, 5 ; N. Dak. Civ. Code (1895), 3400 ; Rev. Civ. Code So. Dak. (1903), 317 ; Rev. Stat. Okla. (1903), 4096; Rev. Stat. Minn. (1905), 3259 ; Staats v. Storm, 76 App. Div. (N. Y.) 627. 6 Perry, 217 et seq. ; Ames, 286, n., has a full discussion of au- thorities. See also infra, p. 1 79. 7 Rev. Stat. N. Y. (1901), p. 3028, 84, 85 ; Comp. Laws Mich, ( 1897), 8838; Wise. Stat. (1899), 2080; Civil Code Calif. (1903), 856; N. Dak. Code (1895), 3387; Rev. Stat. Okla. (1903), 4083; ALIENATION 47 In some jurisdictions an attaching creditor is on the same footing as a purchaser for value ; 1 but if the prop- erty were transferred to secure a pre-existing debt, the transferee is not a purchaser for value. If the purchaser has reason to believe that the prop erty is held in trust, and fails to make proper inquiries, he is not a purchaser without notice; and the word " trus- tee " occurring on the face of the deed or certificate is sufficient to put him to his inquiry as to the trustee's power to transfer the property. 2 If a purchaser has once acquired a good title, he may transfer a good title to any one but the person who de- frauded the trust in the first place ; and even he may hold title if he takes it as trustee in another trust. 8 If the trustee have the power to transfer, his transferee will take a good title unless he knows that the transfer is a breach of trust; but the fact that the consideration is inadequate, or that it goes elsewhere than to the trust estate, will be sufficient notice of fraud to invalidate the title. 4 No title to trust property will pass by a general as- signment, as the trustee will not be supposed to intend to commit a breach of trust, and the deed will not be so construed as to make him do so. 6 Where the trustee was one of the beneficiaries as well as trustee, it was said that the legal title would pass sub- Burns's Annot. Ind. Stat. (1901), 3392; Gen. Stat. Kan. (1897), ch. 113, 2; Rev. Stat. Me. (1903), ch. 75, 15; Ala. Code (1896), 1042; Rev. Laws Minn. (1905), 3248. 1 Mass. Rev. Laws (1902), ch. 147, 3. 2 Smith v. Burgess, 133 Mass. 511; Shaw v. Spencer, 100 Mass. 382 ; Third Nat. Bk. v. Lange, 51 Md. 138 ; Ford v. Brown, 114 Tenn. 467 ; s. c. 1 L. R. A. N. s. 188 and note. See Rua v. Watson, 13 So. Dak. 453, for decision to contrary. Infra, p. 1 50. 8 Meldon v. Devlin, 31 App. Div. (N. Y.) 146. * Wormeley v. Wormeley, 1 Brock. U. S. Cir. Ct. 330. 5 Thomson v. Peake, 17 S. E. 45; Rogers v. Chase, 56 N. W. 537; Abbott, Adm'r, Pet'r, 55 Me. 580. 48 ALIENATION ject to the execution of the trusts, but the better opinion seems to be that it will not. 1 No title will pass to the trustee's assignee in bank- ruptcy or insolvency; 2 nor can the trust property be taken for the trustee's private debt. 3 If the creditor levies with notice of the trust, he will take title subject to the trust; 4 but if he attaches in some States without any notice, he will stand in the position of a bonafide purchaser. 5 The trust property may be taken on execution for debts incurred by the trustee in the execution of his trusts, in all jurisdictions to the extent to which the trustee is en- titled to reimbursement, and in some without regard to his claim. 6 That is to say, in most jurisdictions the creditor takes only by subrogation through the trustee, and so is liable to all the set-offs which the trustee would be ; as, for instance, if the trustee were in default, the creditor would only take the amount due, less the default. 7 If, however, the trustee were given the powers of a general agent by statute or by the trust instrument, as, for instance, where he is authorized to carry on the tes- tator's business, the liability would bind the trust estate 1 Doe d. Raikes v. Anderson, 1 Starkie, 1 55 ; Fausset v. Carpenter, 2 Dow & Clark, 232 ; in re Kembles's Estate, 201 Pa. 523. 2 Ames, 393, n. 8 Supra, pp. 16, 17. 4 Warren v. Ireland, 29 Me. 62 ; Houghton v. Davenport, 74 Me. 590. 6 Supra^ p. 47. In Beck Lumber Co. P. Hupp, 188 111. 562, B took conveyance on a secret oral trust, which he executed by giving a deed ; before this was recorded his creditors attached, but took nothing. 6 15 Amer. Law Rev. 449 ; Wylly v. Collins, 9 Ga. 223 ; Mander- son's Appeal, 113 Pa. 631 ; Sanders v. Houston Guano & Warehouse Co., 107 Ga. 49. 7 Strickland v. Symons, 26 Ch. Div. 245 ; Dowse v. Gorton, 40 Ch. Div. 536 ; Ames, 423, n. ; Mason v. Pomeroy, 151 Mass. 164 ; Mayo v. Moritz, 151 Mass. 164; Norton v. Phelps, 54 Miss. 467; Ga. Code (1895), 3185. Supra, p. 28. ALIENATION SET-OFF 49 to the extent of his authority ; but even then it is held that the creditor must come against the trustee first. 1 The court has held in Mississippi, 2 and it is provided by statute in Alabama, 8 that where the trustee is dead, in- solvent, or out of the court's jurisdiction, the creditor may proceed against the trust property direct. A mechanic's lien will attach to a trust estate only where the trustee has the power to contract for the labor for which recovery is sought, 4 and is not forbidden to encumber the estate by the trust instrument. 6 Set-off. The trustee's private creditor might set off his debt in a suit at law, unless he knew at the time of its creation that the claim was a trust claim, in which case he will be enjoined from doing so in equity; 6 but if he were ignorant of the trust relationship, he may keep his set-off. 7 The trustee's private creditor has no set-off in equity, bankruptcy, or insolvency. A creditor of the beneficiary may set off his debt in equity or in an action at law by the trustee as an equi- table bar in most jurisdictions. 8 The trustee can set off, against third persons, only such debts as his beneficiary could set off, and in equity can set off the debts of the beneficiary. 9 The trustee has a set-off against the beneficiary for debts due him from the trust estate, 10 or for any amounts 1 Fairland v. Percy, L. R. 3 Prob. & Div. 217. 2 Norton v. Phelps, 54 Miss. 467. 8 Stat. Ala. (1896), 4183. * Meyers v. Bennett, 7 Daly (N. Y.), 471. 6 Franklin Savings Bank v. Taylor, 131 111. 376. 6 Nat. Bk. v. Ins. Co., 104 U. S. 54. 7 School Dist. v. First Bank, 102 Mass. 174. 8 Ames, 270, n. ; but see Walker v. Brooks, 125 Mass. 241. 9 Walker v. Brooks, 125 Mass. 241 ; Rev. Stat. Me. (1903), ch. 84, 77; Rev. Laws Mass. (1902), ch. 174, 5, 6 ; Wise. Stat. (1899) 4260. 10 Woodard v. Wright, 82 Cal. 202 ; Bradbury v. Birchmore, 117 Mass. 569 ; Dodds v. Tuke, 25 Ch. Div. 617 ; Merry v. Pownall, 1 Ch. (1898) 306. Infra, p. 184. 4 50 TITLE PASSES TO REMAINDERMAN due him from the beneficiary as beneficiary ; but he can- not retain the trust property to liquidate a debt due from the beneficiary in another capacity, as, for instance, a professional fee 1 or personal loan. 2 In equity the defendant may set off a debt due a third person as trustee for the defendant, and is generally en- titled to such set-off as an equitable plea. 8 Title passes to Remainderman though his Estate be only Equitable. Where the trustee's estate is reduced to a mere power by statute, 4 or where a life estate only was necessary to execute the trusts, the trust estate will pass out of the trustee's hands, and vest in the remain- derman, even though he have an equitable estate only, when the purposes of the trust are accomplished, and the intervention of the trustee will not be necessary to per- fect the title. 6 But in the absence of statute, where the trustee has taken a fee, a conveyance by the trustee is necessary. 6 On the resignation or disability of a trustee the title to the property may vest in the successor by conveyance of the outgoing trustee, or where there is a statute au- thorizing it the court may appoint a person to convey the estates, if he be beyond the jurisdiction. In the absence of such statute there is no way of divesting the outgoing trustee's title save by act of the legislature. Such acts are not unconstitutional, as the estate taken is not bene- ficial to the trustee. 7 1 Harris v. Elliot, 24 App. Div. (N. Y.) 133. 2 Abbott v. Foote, 146 Mass. 333 ; Dodd v. Winship, 133 Mass. 359 ; but the set-off was allowed in Smith v. Perry, 197 Mo. 438. 8 Ames, 270, n. 4 Stats, in New York, Michigan, Wisconsin, &c. Supra, pp. 44, 45. 5 Morgan v. Moore, 3 Gray, 319 ; Cherry v. Richardson, 24 S. Rep. 570 (Ala. 1898) ; Temple v. Ferguson, 110 Tenn. 84. 6 Packard v. Marshall, 138 Mass. 301 ; Davidson v. Janes, 30 Misc. Rep. (N. Y.) 156. Infra, p. 119. 7 Supra, pp. 11, 12. Marshall v. Kraak, 23 App. D. C. 129. TRANSMISSION ON DEATH OF TRUSTEE 51 Transmission. Forfeiture. Forfeiture of the trustee's property formerly carried with it a forfeiture of the trust property, although the Crown took subject to the trust; 1 but now there is no forfeiture in equity, and it is gener- ally provided by statute that there shall be neither for- feiture nor escheat. Transmission on Death of Trustee. When one of sev- eral trustees dies, both the office and the title to the es- tate vest in his co-trustees by survivorship; 2 and when a sole trustee dies, it is generally provided by statute that the property and office shall vest in his successor in the trust, the title in the meanwhile remaining in the court or his heirs and personal representatives, 8 Aside from statute, on the death of a sole trustee tes- tate the property will pass to his general devisee in the absence of intent to confine the disposition of property to that in which he had a 'beneficial interest; but it will not pass to a general devisee where such an intention would be negatived by the circumstances; as, for instance, where the general devisee is a class of persons, or where the general devisee is a minor, or otherwise incapable or unfit. In such case the property will descend to the heir as unde vised estate. If the sole trustee dies intestate, the property will de- scend to his representative ; 4 but a widow has no dower, 5 and a husband no curtesy in a trust estate. 6 Or in some jurisdictions the title to real estate vests in the court 7 or 1 King v. Mildmay, 5 Barn. & Ad. 254. 2 Supra, p. 46 : Shook v. Shook, 19 Barb. 653. 8 As to survival of office, see survival of powers, infra, p. 54. 4 Schenck v. Schenck, 16 N. J. Eq. 174 ; Talbot i;. Leatherbury, 92 Md. 166. * Gen. Stat. N. J. (1895), p. 1280, 25. 6 Flint, 125 ; Perry, 321, 322. 7 New York, Michigan, Wisconsin, Alabama, and Missouri; Perry 341. 52 WHAT POWERS A TRUSTEE HAS eldest son by statute. 1 In some jurisdictions they may disclaim. 2 When the title to an estate vests in the devisee, heir, or personal representative of a trustee, the devisee or per- sonal representative only holds the title until such time as a successor may be appointed ; 8 he does not succeed to the office, but to the title only, 4 and he has power to ex- ecute the trust only so far as is necessary to preserve it, 6 and to make it over to the new trustee, and make up an account. It is entirely inappropriate for him to attempt to carry on the trust, and in many jurisdictions it is expressly provided that he takes no estate. 6 II. POWERS. Of Powers in General. It does not come within the scope of this treatise to consider the powers which a trustee may have collateral to the trust estate, whether they are to be exercised over the trust property or else- where. As, for instance, a power to distribute the trust property among a certain class of persons, and appor- tion the shares among beneficiaries, such as children or charities. We need only concern ourselves with those powers which the trustee must, or ordinarily does have, in con- nection with the management of the trust property. What Powers a Trustee has. At common law a trus- tee, being the absolute legal owner of the property, could 1 Pub. Gen. Laws Md. (1904), Art. 46, 24. 2 Perry, 344 ; Mass. Rev. Laws (1902), ch. 147, 13. 8 Stevens v. Austen, 7 Jur. N. s. 873 ; Harlow v. Cowdrey, 10S Mass. 183. 4 Mortimer v. Ireland, 11 Jurist, 721. Infra, p. 54. But other- wise in some States, where personal representatives succeed to trust West Va. Code (1906), 4001. 6 De Peyster v. Ferrers, 11 Paige, 13. 6 Perry, 344 ; Code Ala. (1896), 1044. WHAT POWERS A TRUSTEE HAS 53 exercise all the ordinary powers which an absolute owner might, but in a court of equity the rights of the bene- ficiary are paramount, and consequently a trustee will be restrained from exercising any power inconsistent with the beneficiary's rights; hence a trustee may be said to have only those powers which he will not be restrained from using. The trustee retains in equity as incidental to his office certain of the powers which are his at law as owner of the property ; he has also those additional powers which are conferred by the legislature or the court, and those powers which are conferred by the trust instrument. The general powers incidental to the office are limited to and comprise all those that are necessary to the per- formance of his duties, such as power to demand, receive, and sue for the trust property or any income accruing on it; to invest the funds and lease the real estate; to take proper measures to keep the real estate repaired and in- sured, and to defend suits against him in respect to the property, or against him as trustee ; to disburse and dis- tribute the property; to protect the beneficiary, or main- tain him if incapable of maintaining himself. The powers to sell the trust property, and to change investments, and to convert real into personal estate and vice versa, are usually bestowed on the trustee by the legislature or court, but are special, and not general and incidental to the office, since the original conception of a trustee was some one to be trusted with the title to the property, and not a sort of business manager, as the office has more and more become. The trust instrument itself may, and usually does, con- fer in express terms the powers which the court or legis- lature gives; and it usually enlarges the general powers incidental to the office. In addition it frequently gives other powers of a discretionary character, such as a power of revocation of the trust, or a power of appointment as to distribution of income. 54 VESTING OP POWERS Implied powers are also often given by the trust in- strument where it places a duty on the trustee, and neg- lects to give expressly the powers to perform it ; and in every such case the trustee will take by implication all the powers necessary to execute his duty. 1 As, for in- stance, where a trustee is to borrow money on mortgage, he may give a mortgage containing a power of sale, 2 or where he is to keep the estate safely invested he will have implied power to sell hazardous investments left by the maker of the trust. Vesting of Powers. There are some cases in which the powers incidental to the office do not vest in the holder of the title. For instance, where the ownership vests in the heir or personal representative of a sole trustee, or in a stranger by a conveyance not properly authorized. In such cases the owner will be a trustee, but will not have the usual incidental powers to manage the estate ; but only such powers as are necessary to preserve the property until it can be conveyed to a properly con- stituted trustee. 8 The powers will vest in a trustee properly appointed, and, if there is more than one trustee, in all the trustees jointly. The general powers will pass to the survivors or survi- vor, and will vest in the successors in the trust; 4 and this notwithstanding a provision for the keeping up of the number of the trustees. 6 Special powers conferred by the trust instrument upon the trustees in that capacity will pass to survivors and successors. 6 The old law was that special powers limited to " my trustees " or " my trustees A & B " did not pass with the 1 Infra, pp. 65, 66. 2 Infra, p. 72. 8 Supra, p. 52. 4 Webster v. Vandeventer, 6 Gray, 428; Belmont v. O'Brien, 12 N. Y. 394; Nugent v. Cloon, 117 Mass. 219. Statutes in many juris- dictions to same effect. 5 Hammond v. Granger, 128 Mass. 272 ; Bailey, Pet'r, 15 R. I. 60. 6 Wemyss v. White, 159 Mass. 484 ; Schouler, Pet'r, 134 Mass. 426. VESTING OF POWERS EXECUTION OP POWERS 55 office, because there was an implied intention to trust to the discretion of two or more trustees, but not to that of one, or to trust to A and B but not to A alone. 1 Such phrases are but little regarded now, and the preference for the individual to the exclusion of the trustee for the time being must be clearly expressed. 2 If, however, there is a personal confidence in the individuals who are named trustees, it will not survive, or pass to their suc- cessors, 8 except where the power is limited to them and their heirs and assigns. In that case the powers will pass to the trustees' successors but not to their personal representatives. 4 Execution of Powers. The essential part of the exe- cution of a power is the exercise of the discretion vested in the trustees. As this discretion vests in them jointly, 5 it can only be executed by the joint action of all the trustees; and an execution by part, even though a majority, is void, unless provided for by the instrument. 6 Hence the insanity or refusal to concur of one trustee can block all action, 7 and where the trustees disagree, the only remedy is to have a trustee removed and a new one appointed, 8 which the court will not do, unless the con- 1 Hibbard v. Lamb, Arab. 309. Supra, p. 5. 2 In re Smith, L. R. (1904), 1 Ch. 139 ; Mercer v. Safe Dep. & Trust Co., 91 Md. 102; Sells v. Delgado, 186 Mass. 25; Franklin v. Osgood, 14 Johus. 527. But it still remains a question of intention. See Snyder v. Safe Dep. & Trust Co., 93 Md. 225 ; Kennard v. Bernard, 98 Md. 513 ; Dillingham v. Martin, 61 N. J. Eq. 276. 8 Benedict v. Dunning, 110 App. Div. (N. Y.) 303. 4 Warnecke v. Lembca, 71 111. 91. 6 Stott v. Lord, 31 L. J. Ch. 391 ; Ray v. Doughty, 4 Blackf. 115. 8 Attorney General v. Gleg, 1 Atk. 356 ; Morville v. Fowle, 144 Mass. 109 ; Vandever's Appeal, 8 Watts & S. 405 ; In the Matter of Wadsworth, 2 Barb. Ch. 381. A charity differs from an ordinary trust, and a ma- jority of a board may act. City of Boston v. Doyle, 184 Mass. 373. 7 Swale v. Swale, 22 Beav. 584. Supra, p. 15. 8 Mannhardt v. 111. Staats Zcitnng Co., 90 111. App. 315. But the rule is weak. The court, instead of removing the trustee, often com- 56 MUST BE JOINT DELEGATION duct of the trustee has been factious and unreasonable or promoted by corrupt or selfish motives. 1 Must be Joint. Trustees are joint tenants at law, hence one of them-may give a debtor a good discharge if he pays his debt into his hand ; 2 hence one trustee may collect dividends, rents, interest, or any other income ac- cruing; and be may receive a simple debt or discharge a mortgage. 3 He cannot, however, assign a mortgage, as all the trustees must act in a sale or assignment of the trust property, 4 nor could he collect a judgment, as all the trustees must join in the suit. 5 Nor can one trustee bind all by a compromise. 6 Conversely, as he may col- lect it alone, so one trustee may pay out income, but in dealing with matters of principal all should join. 7 In equity a joint receipt is required; hence if the debtor knows that the trustee is committing a breach of trust in receiving the money, or if be has been warned to pay to all the trustees only, he will not be protected by his single receipt. 8 The liability of one trustee for allowing his co-trustee to receive or have the custody of the property is a differ- ent question and is treated below. 9 Delegation. The execution of a power in its essential part cannot be delegated either to a stranger or by one of pels action. Infra, pp. 59 et seq. Marshall v. Caldwell, 125 Mass. 425 ; Garvey v. Garvey, 150 Mass. 185 ; Barbour v. Cummings, 26 R. I. 201 ; Collister v. Fassitt, 163 N. Y. 281. 1 Norcum v. D'Oench, 17 Mo. 98. Supra, p. 24. 2 Bowes v. Seeger, 8 Watts & S. 222. 8 Ochiltree v. Wright, 1 Dev. & Bat. Eq. 336. Supra, p. 20; infra, p. 89. 4 Mendes v. Guedalla, 2 Johns. & Hem. 259 ; Ridgley v. Johnson, 11 Barb. 527. 5 Infra, p. 75. 6 Stott v. Lord, 31 L. J. Ch. 391. ^ Infra, p. 87. 8 Lee v. Sankey, L. R. 15 Eq. 204; Magnus v. Queensland N. Bk., 37 Ch. Div. 466 ; Webb v. Ledsam, 1 K. & J. 385. 9 Infra, pp. 104, 105, 148 et seq. DELEGATION 57 the trustees to another. 1 Nor can the trustees divest themselves of their discretion by asking the advice of the court. 2 Thus a trustee cannot appoint an agent to sell the property 8 or to manage the real estate, or hand the funds to a solicitor to invest, 4 because by doing so he delegates the essential part of his power, namely, the ex- ercise of his discretion in determining the selling or let- ting prices, or the need of repair, or the appropriateness of the security selected for investment. 5 This does not prevent the trustee from intrusting the unessentials to an agent, 6 such as the delivery or execu- tion of a deed or lease, or any other matter not requiring the exercise of discretion, unless the trust instrument re- quires his personal execution of these unessential matters. A convenient mode of action in such cases is to author- ize the agent to contract subject to the assent of the trustee. 7 Hence a trustee, having fixed the terms of sale, may give his attorney .a special power to carry out the sale and convey the property; or in the case of a sale of stocks may sign a special power of attorney in blank to transfer the stock, and the transferee will not be put on his inquiry, as there is nothing to suggest that the trustee has delegated his discretion. But an attempt to reach the same results under a general power would be other- wise, as the evident implication is that the trustee has not passed on this particular case, and has delegated his discretion to his general attorney. 8 1 Pearson v. Jamison, 1 McLean (Ky.), 197 ; Attorney General v. Gleg, 1 Atk. 356 ; Berger v. Duff, 4 Johns. Ch. 368. See article in 12 Central L. J. 266-270. 2 Rutland Trust Co. v. Sheldon, 59 Vt. 374. 8 Berger v. Duff, 4 Johns. Ch. 368. * Bostock v. Floyer, L. R. 1 Eq. 26. 6 Woddrop v. Weed, 154 Pa. St. 307. 8 Gillespie v. Smith, 29 111. 473. Infra, pp. 69, 90. 7 Hawley v. James, 5 Paige, 318, 487. 8 Lowell, Transfer of Stock, 76 ; Hawley v. James, ubi supra. 58 PARTIAL OR DEFECTIVE EXECUTION Partial or Defective Execution. A power need not be executed at one time, and if it be only partially exe- cuted, the execution may be completed at a later date. 1 If the execution is defective, the court will compel the trustee to complete the execution in favor of a purchaser for value, or one having a meritorious claim, but it will not aid a volunteer. 2 If the power is substantially executed in essential mat- ters, the execution will be upheld and confirmed by the court, 8 in spite of errors of execution as to non-essen- tials; but if there has been error in execution as to non-essentials prescribed by the trust instrument the execution is absolutely void, and the court will not inter- fere. Thus, if the power is to be executed by deed, an execution by parol or by will is ineffective, 4 or if it is to be executed by deed witnessed by two men, a deed wit- nessed by a man and a woman will not do. 5 Nor could a power to appoint by will be executed, waived, or extin- guished in any other way. 6 If the validity of a special power be dependent on a condition, the condition must be proved and may be trav- ersed, e. g., where a ti'ustee was to sell land to support the beneficiary, where there proved to be plenty of per- sonalty, it was held that no power of sale arose. 7 If the consent of a beneficiary is a condition precedent, the subsequent ratification will not be sufficient, 8 and if any party die whose consent is necessary, the power will 1 Sugden on Powers, 3d Amer. ed., i. 79-85. 2 See p. 69. 8 Sugden on Powers, 3d Amer. ed., i. 391 ; Amer. & Eng. Encyc. Law, vol. 18, p. 927. Thus where the same persons were trustees and executors and had a power to sell as trustees but not as executors, a deed signed by them as executors was held to be a sufficient execution of their power as trustees. Philbin v. Thurn, 103 Md. 342. 4 Carpenter v. Cook, 60 Pa. 475. 6 Sugden on Powers, 3d Amer. ed., i. 299, 300. 6 Ruggles v. Tyson, 81 N. W. Rep. 367 (Wise. 1899). 7 Minot v. Prescott, 14 Mass. 495. 8 Batemau v. Davis, 3 Mad. 98. CONTROL OP COURT OVER POWERS OP TRUSTEE 59 be lost; 1 but in a case where the consent of a class of beneficiaries was required to protect their own interests, and they all died, it was held that, as there were no inter- ests to be protected, the power had become unconditional, and the assent was no longer necessary to its execution. 2 And in some jurisdictions it is provided by statute that where the person has died whose consent was necessary to the execution of the power, the court may act in his place. So too a decree of the court acting by statute authority is invalid which does not conform to the statute authoriz- ing it; since the court can only execute the power given it by statute, and is not itself the party creating the right, as it is where it acts on its own equitable jurisdic- tion. 8 Only those interested can object to the execution of the power. Control of the Court over Powers that it is the Trus- tee's Duty to Exercise. Where a trustee has a duty to perform he is held to perform it with sound discretion, and is liable if he fails to do so. It follows that the court will control the trustee's powers where they are ancillary to his duties, 4 and he must exercise -them ac- cording to the court's standard of a sound discretion. 6 The discretion given the trustee by the trust instru- ment as to time or manner of performing these duties, 1 Alley v. Lawrence, 12 Gray, 373. 2 Leeds, Ex'r v. Wakefield, 10 Gray, 514. 8 Infra, p. 66. * Read v. Patterson, 44 N. J. Eq. 21 1 ; Nickerson v. Cockhill, 3 DeG. J. & S. 622 ; Re Courtier, 34 Ch. Div. 136. Such powers are sometimes called " powers coupled with a trust." * What is a sound discretion is not always easily determined. Lord Blackburn says, " Judges and lawyers who see brought before them the cases in which losses have been incurred, and do not see the infinitely more numerous cases in which expense and trouble and inconvenience are avoided, are apt to think men of business rash." Speight v. Gaunt, 9 App. Cas. 1. 60 CONTROL OP COURT OVER DISCRETIONARY POWERS does not convert the corresponding powers into "discre- tionary powers " properly so called, or oust the court of its control over the trustee's action. 1 Thus, trustees being given a discretion as to time of conversion can be compelled to sell vacant land if they fail to do so within a reasonable time, 2 or they may be restrained from changing an investment where there is no good reason for doing so. 3 As noted hereafter, discretion as to the amount of a payment is usually treated otherwise. If the trustee has not used his discretion in such a way as to meet the court's approval but has acted in good faith, honestly and without selfish motive, he will be treated with indulgence, especially if he has acted under advice of counsel, 4 which shows that he was acting carefully. Yet if the action amounts to a gross breach of trust, such as investing in a second mortgage, the court will not excuse him even under these circumstances. 4 - It is said that the court will ratify anything which it would order done, 6 but this is not quite true, since a court will not ratify an unauthorized conversion, and it is not quite safe to rely on it since a court may not look at the matter just as the trustee does; hence if a trustee has any doubt as to his duty, his best course is to ask the instruction of the court before he acts. 7 Control of Court over Discretionary Powers. Purely discretionary powers are special powers given the trustee 1 Bethel v. Abraham, L. R. 1 7 Eq. 24 ; Keeler r. Lauer, 85 Pac. 541 , Kansas (1906) ; Walker v. Shore, 19 Ves. Jr. 387 and note ; Prendegast v. Prendegast, 3 H. L. Cases, 195, p. 218; Eldredge v. Heard, 106 Mass. 579 ; Marshall v. Caldwell, 125 Mass. 435 ; Arnold v. Gilbert, 5 Barb. (N. Y.) 190, p. 195. 2 Marshall v. Caldwell, 125 Mass. 435 ; Arnold v. Gilbert, 5 Barb. (N. Y.) 190, p. 195. 8 Bertron v. Polk, 101 Md. 686. * Ellig v. Naglee, 7 Cal. 683 ; Crabb v. Young, 92 N. Y. 56 ; Milner v. Proctor, 20 Ohio St. 442. 5 Owings v. Rhodes, 65 Md. 408 ; Gilmore v. Tuttle, 32 N. J. Eq. 641. Perry, 476. 7 Infra, p. 96. CONTROL OP COURT OVER DISCRETIONARY POWERS 61 by the maker of the trust not coupled with a duty, but resting on the trustee's discretion as to whether they shall be executed or not. 1 The court cannot control the trus- tee's action, since it is a matter of choice whether he will or will not act, and he is under no legal obligation to do either. 2 The maker of the trust meant to trust to the conscience and discretion of the trustee, and not to the court. 8 Nor can the court inquire into the trustee's rea- sons for acting or not acting, since he and not the court is the tribunal; 4 but if he gives his reasons, which he cannot be compelled to do, the court may review them, and if it finds them insufficient may reverse his action. 5 It also follows that the trustee cannot divest himself of his discretion by consulting the court. 6 If, however, the execution of the power becomes a matter of litigation or is brought into court for execu- tion the holder can only exercise it with the court's ap- proval; 7 nor will the court permit the trustee to act arbitrarily from mere whim or caprice, 8 or from fraud or prejudice. 9 What amounts to fraud is treated in the next section. Where a trustee is given discretion as to the amount of income or principal to be paid to the beneficiary or ap- 1 Lewin, 690. 2 Sellew's Appeal, 36 Conu. 186; Bacon v. Bacon, 55 Vt. 243; Costabadie v. Costabadie, 6 Hare, 410 ; Mannhardt v. 111. Staats Zeitnng Co., 90 111. App. 315. 8 Pink v. De Thuisey, 2 Madd. 157 ; Portsmouth v. Shackford, 46 N. H. 423 ; Haydel v. Hurck, 72 Mo. 253 ; Blythe v. Green, 38 Atl. 743 (N. J. Ch.). < Re Vanderbilt, 20 Hun (N. Y.), 520. * Re Beloved Wilkes' Charity, 3 McN. & G. 440, 448. 6 Rutland Trust Co. v. Sheldon, 59 Vt. 374 ; Proctor v. Heyer, 122 Mass. 525. 7 Bethell v. Abraham, L. R. 17 Eq. 24; Bull v. Bull, 8 Conn. 47. Perry, 511. By paying into court the trustee renounces his dis- cretion. Re Nettlefold, 59 L. T. 315. 8 Stephenson v. Norris, 107 N. W. 343(Wisc. 1906) ; Tabor v. Brooks, 10 Ch. Div. 273 ; Bacon v. Bacon, 55 Vt. 243. 9 Garvey v. Garvey, 150 Mass. 185. Supra, p. 23. 62 CONTROL OP COURT OVER DISCRETIONARY POWERS plied to his support,, 1 or has discretion as to the appor- tionment of a fund among a class, the general rule is to construe his power as a purely discretionary power, and while the court will insist on his making some payment, 2 it will not interfere with the trustee's determination as to the amount unless there is bad faith. 8 It has been held that where no express discretion has been given the trus- tee he is bound to exercise a sound discretion in paying over the income to a beneficiary who is not a proper per- son to receive money. 4 On the other hand, the court has sometimes held the discretion as to the amount of the payment to be ancil- lary to the duty to make some payment, and has accord- ingly assumed the control of the whole matter. 5 The rules governing the court's control over the trustee's powers, have been stated above as they appear on the whole to be established by weight of authority and principle; but unfortunately the authorities are con- flicting, and the reasoning in the decisions confused and perplexing. Some legislatures and courts assert the right to control the exercise of all powers, whether purely discretionary or not, 6 regardless of the fact that they 1 As to infant's support, see infra. 2 Colton v. Colton, 127 U. S. 300; Osborne v. Gordon, 86 Wise. 92; Aldrich v. Aldrich, 12 R. I. 141 ; Bacon v. Bacon, 55 Vt. 243 ; Collister w. Fassitt, 163 N. Y. 281. 8 Gisborne v. Gisborne, 2 App. Cas. 300; Eldredge v. Heard, 106 Mass. 579; National Exchange Bank v. Button, 147 Mass. 131 ; Cather- wood's Appeal, 52 Pa. St. 154; Kimball v. Blanchard, 64 A. 645; Mer- ritt v. Corlies, 71 Hun, 612 ; Bacon v. Bacon, 55 Vt. 243. * Mason v. Jones, 2 Barb. 229 ; Gott v. Cook, 7 Paige, 338. 5 Feltham v. Turner, 23 L. T. (N. s.) 345; Stephenson v. Norris 107 N. W. 343 (Wise. 1906) ; Chase v. Chase, 2 Allen, 101 ; Ireland 17. Ireland, 84 N. Y. 321 ; Osborne v. Gordon, 86 Wise. 92 ; Collister v. Fassitt, 163 N. Y. 281 ; Barbour v. Cummings, 26 R. I. 201. 6 Clark v. Clark, 21 Misc. Rep. (N. Y.) 272; Stephenson v. Norris, 107 N. W. 343 (Wise. 1906) ; Curtis v. Smith, 6 Blatch. 537, p. 543 ; In re Hodges, 7 Ch. Div. 754, p. 761 ; Cromie v. Bull, 81 Ky. 646 ; Feltham t7. Turner, 23 L. T. (N. s.) 345; Rev. Civ. Code So. Dak. (1903), 1644; Cal. Civ. Code (1903), 2629. FRAUD IN THE EXECUTION OP A POWER 63 thus set aside the provisions of the settlement vest- ing the discretion in the trustee; and thus exercise a power, the constitutionality of which may well be doubted. Practically, if the trustee uses his discretion in any case honestly and reasonably the court will not interfere with him ; 1 but if he acts unreasonably he will probably be overruled by the court for one reason or another, no matter how clearly the testator may have stipulated that he relied on the judgment of the trustee, and not that of the court. 2 "What amounts to Fraud in the Execution of a Power. If the trustee exercises his power in such a manner as to amount to a fraud, the court can on that ground set it aside, having the usual jurisdiction to remedy a fraud, and not because it has jurisdiction to review the exercise of the power. And accordingly the person attacking the exercise of a power on the ground of fraud must prove his case affirmatively. 8 If the trustee exercise an unlimited power for his own gain, or to get an advantage for himself or his family, it will be a fraud, though not injurious to others. 4 If he exercise a power in such a way as to defeat the purposes of the trust, as, for instance, if under a power to use the principal for the support of the beneficiary, he pays the whole amount over at one time for the pur- pose of revoking the trust, it will be a fraud. 5 1 Eldredge v. Hurd, 106 Mass. 579 ; Cromie v. Bull, ubi supra ; In re Hodges, ubi supra. 2 Prendegast v. Prendegast, 3 H. L. Cases, 195; Barbour v. Cum- mings, 26 R. I. 201 ; Collister v. Fassit, 163 N. Y. 281. Davis, Appel- lant, 183 Mass., 499. s Re Brittlebank, 30 W. R. 99. * Bostick v. Winton, 1 Sneed (Tenn.), 524. * Lovett v. Farnham, 169 Mass. 1 ; Reade v. Continental Trust Co. 48 App. Div. (N. Y.) 632. See infra, p. 82. 64 EXTINCTION OF POWERS If he exercise a power for corrupt motives 1 , or out of spite or revenge, the execution will be set aside. 2 Thus where a trustee appointed a double portion to bis son to avoid a lawsuit, the execution was set aside. 8 Extinction of Powers. A power may become extinct by the death or disclaimer of one of those to whom it is given; 4 but it cannot be waived or extinguished as against a donee who is not a party to the waiver. 5 A power cannot be exercised after the trust has ex- pired, 6 or the purposes for which it was given have been fulfilled or become impossible; as, for instance, where a power was given to sell and convert into cash for A, and A had died. 7 A power will not be exhausted by an exercise of part; but where the court gives the power it may be otherwise. As, for instance, a power to sell real estate is not ex- hausted by the sale of the original property ; but extends to real property bought with the proceeds, and if part of a tract of land be sold under power of sale at one time, the balance may be sold at a later date ; or if a power of appointment fail, it may be exercised again. 8 III. PARTICULAR POWERS. Sale. Power of Sale. Although a power to sell is one of the most important powers a trustee may have, it 1 As to " Whim and Caprice," see the preceding section. The real ground for setting aside the execution in such cases is fraud. 2 Garvey v. Garvey, 150 Mass. 185. - 8 Holt v. Hogan, 5 Jones Eq. (N. C.) 82. * Supra, pp. 5, 54, 55. 6 Frazer v. Western, 1 Barb. Ch. 220, 240 ; Moll v. Gardner, 214 111. 248. 6 Ruggles v. Tyson, 81 N. W. 367 (Wise. 1899). 7 Slocum v. Slocum, 4 Edw. Ch. 613 ; Lessee of Ward v. Barrows, 2 Ohio St. 241. See supra, p. 19. 8 Supra, p. 58 ; Sugden on Powers, 3d Amer. ed. 391. SALE POWER OP SALE 65 is not a general power incidental to his office, 1 since the original theory of a trust did not contemplate a trustee's doing anything but holding and taking care of the prop- erty, the object of a trust then being to avoid feudal dues and forfeitures. 2 At the present day the usual object of a trust is to settle property in the hands of persons of good business ability to manage it for the benefit of others not possessed of such ability ; or to settle property so that it may form a family fund to descend in the family as long as it can be tied up, and so that the prop- erty may not be dissipated by the improvidence or bad management of the persons to be benefited ; who usually are, in part at least, persons unfitted for business and the care of large estates. The policy of the modern trust is to give the trustees the fullest power to manage the estate to the best advan- tage, and hence a power of sale is a feature of all well drawn trust instruments. In some jurisdictions there is a statutory provision that every will shall be construed to give the trustees power to change all trust investments. 8 In many cases where the power is not expressly given, it will be implied from the fact that the trustee is given a duty which cannot be performed without a power of sale. 4 As, for instance, 6 where the trust was to pay the settlor's debts, and then the income to B, 6 or where the 1 Wheate v. Hall, 17 Ves. Jr. 80 ; Jones v. Atch., Top. & S. F. Carleton, 141 Mass. 45; Brown v. Mercantile Trust Co., 87 Md. 377. See, contra, Chestnut Nat'l Bank v. Fidelity Ins. & Trust Co., 186 Pa. St. 333 (disapproved in preceding case). 6 Supra, p. 80. DUTIES SUPPORT 83 IV. DUTIES. The trustee's duty is to carry out the provisions of the trust instrument, hence he must make himself thoroughly familiar with its provisions and follow them out accurately. As we have already seen, the trustee is the absolute owner of the property, except in so far as his ownership is modified by his duties to the beneficiaries. These duties are not limited to the disposition of the property for his benefit, but an individual in assuming the charac- ter of a fiduciary or trustee for another immediately enters into a status with respect to that other which modi- fies their relationship as individuals, and places on the trustee a large number of duties to his beneficiary outside of and beyond the questions affecting the trust property. His duties are to all the beneficiaries collectively, and he is bound to treat them all with equal justice. First, we will treat of the duties which a trustee owes his beneficiary aside from the management of the property. Support. If the beneficiary is under a disability, it is the trustee's duty to see that he has proper care and support. If insane, it is his duty to have him declared so; l and if incapable for any reason, to maintain and support him out of the funds which he would otherwise pay over to him, and accumulate any balance not needed. 2 He cannot use funds the person would not be entitled to otherwise, 8 and an act of the legislature authorizing him to use the principal for the support of the life tenant is unconstitutional and void. 4 1 Nelson v. Buncombe, 9 Beav. 211. Supra, p. 75. 8 As to discretion in deciding amount of support, see pp. 61, 62 supra. 8 Lee v. Brown, 5 Ves. Jr. 362, but now in England by statute may advance support to an infant contingently interested (Re George, 5 Oh. D. 837) where an estate becoming vested he would be entitled to the accumulations. * Ervine's Appeal, 16 Pa. St. 256. 84 SUPPORT The support is to be taken wholly from income except in a case where the property is absolutely vested in the beneficiary, in which case the court may make an allow- ance from principal ; l but the trustee should not do so without an order from the court. 2 The matter of support is often complicated by the fact that others may have a duty to support the beneficiary, in which case the trustee is excused. Thus, if the parent be alive and able to furnish sup- port adequate to the minor's condition and fortune, the trustee should not contribute except under order of court ; 8 if the parent cannot furnish sufficient support, the trustee should contribute sufficient to make reasonable support, taking all sources together, and if there are two funds to be drawn from they should be taxed ratably. Where, however, a fund is given to trustees to use in their discre- tion for the support of an insane person, they may take all his support from that fund irrespective of his other means : 4 and if the settlement be on the father as trustee to support his child, the settlement being in a certain sense for the benefit of the father, he may take the whole support from the trust funds irrespective of his own ability ; 5 and if the income is to be paid to a father or mother for the support of a child, they are entitled to it so long as they support the child, but the court will see that they do so. 6 It is the duty of a father, or a mother no^t under cover- ture, 7 to support a minor child who is not taken from his 1 Brown v. Berry, 71 N. H. 241. 2 Supra, pp. 79, 80. In re Bostwick, 4 Johns. Ch. 100. 8 McKnight v. Walsh, 23 N. J. Eq. 136; Perry, 612; Flint, 190; Lewin, 653 ; Underhill, 350. 4 Hills ?>. Putnam, 152 Mass. 123. 6 Nat'l Valley Bank v. Hancock, 100 Va. 101. 6 Chase v. Chase, 2 Allen, 101 ; Loring v. Loring, 100 Mass. 340. 7 Dedham v. Natick, 16 Mass. 135; Gleason v. Boston, 144 Mass., 25 ; Wilkes v. Rogers, 6 Johns. 566 ; Ailing v. Ailing, 52 N. J. Eq. 92 ; Underhill, 350, n. SUPPORT CONTRACTS WITH BENEFICIARY 85 or her care; but a stepfather or a mother under cov- erture has no such duty. * A husband must support his wife. The trustee must handle the funds himself, and not delegate the management of the funds for support to another, as e. g., he must not delegate the duty to the father. 2 Under the existing, statute law married women, except in their relations with their husbands, generally have the same status as other individuals, 8 and the trustee has no peculiar duty to them except in preventing the husband from reducing his wife's property to possession, in which case he should protect her rights. Contracts with Beneficiary. Where the beneficiary is of full legal capacity, the trustee may deal with and make binding contracts with him, even concerning the trust property. He cannot, as in dealing with a stranger, take advantage of his peculiar knowledge or position, either for his own profit or for the profit of the other beneficiaries ; 4 but if he gains any advantage in the trans- action he will be under the burden of showing that the beneficiary was fully informed and thoroughly understood the matter, and that he, the trustee, has taken no advan- tage of his position or influence, or the transaction may be disaffirmed. 5 In other words, any transaction with a beneficiary in which the trustee receives a benefit is pre- 1 Ailing v. Ailing, 52 N. J. Eq. 92. 2 Flint, 191 ; but Perry, 620, says he may exercise sound dis- cretion in paying to parent or guardian, and the same rule applies in payments to the beneficiary himself. See Greener. Smith, 17 R. I. 28. Supra, 80, n. 6. 8 Taylor v. Buttrick, 165 Mass. 547; Jackson v. Von Zedlitz, 136 Mass. 342. 4 Lindington v. Patton, 111 Wise. 208. 6 Bowker v. Pierce, 130 Mass. 262 ; Field v. Middlesex Banking Co, 77 Miss. 180 ; Barrett v. Hartley, 2 L. R. Eq.'.789. But the beneficia. ries' creditors cannot disaffirm. Bresee v. Bradfield, 99 Va. 331. 86 CONTRACTS WITH BENEFICIARY GOOD FAITH sumed to be fraudulent, and the burden of proving it otherwise falls on him. 1 The rule is the same whether the transaction concerns the trust proper or property outside of the trust. If, for instance, a trustee sells to the trust fund a mortgage for more than the property is worth, and after- wards induces his beneficiary, relying on his representa- tions, to allow him to buy in the property on foreclosure to prevent loss, the beneficiary may disaffirm the purchase and require the trustee to take the property and refund the money, if he acts as soon as he discovers the mis- representations. 2 The trustee may accept professional employment from the beneficiary, as that of attorney, broker, or counsel in other than trust matters, but if he takes compensation must show that he has not used his position to obtain the employment. 8 It is said that a trustee may not receive a gift from a beneficiary, 4 but with the limitations specified as to other transactions, there seems to be no reason why a sponta- neous present, especially if of small value, should not be given and accepted. Still such transactions, being subject to suspicion, are better wholly omitted. \ Duties in Exercise of Office Good Faith. A trus- tee is bound to exercise the utmost good faith in all the concerns of the trust, 6 whether it be in dealing with the trust property itself, or with the beneficiary in matters concerning the trust. His fealty is to the trust, and all his acts must be governed by strict loyalty to it and the 1 Cal. Civ. Code (1903), 2235; Kev. Civ. Code, So. Dak. (1903) 1624; Rev. Code N. Dak. (1895) 4271. Supra, 32. 2 Nichols, Appellant, 157 Mass. 20. 8 As to professional employment in trust matters, see supra, p. 34. 4 Vaughton v. Noble, 30 Beav. 34. 5 Cal. Civ. Code (1903), 2228; Kev. Civ. Code, So. Dak. (1903) 1617. GOOD FAITH HIS DUTY IS ALL TO THE TRUST 87 interests of the beneficiaries ; l and any act which is not in the interest of the beneficiaries is a breach of trust. He cannot make any profit out of the use of the trust property, or get any advantage, direct or indirect, by its purchase or sale. 2 Even where the trustee honestly believes that the intention of the maker of the trust was otherwise, he must do nothing to prejudice the interest of his beneficiaries, 8 and in a suit for a conveyance he cannot set up a superior title. 4 He must not divulge a defect in the title, nor admit the adverse claim of another, 5 nor deny the power of the settlor to create the trust, 6 or set up an adverse claim himself, or accept an adverse employ- ment. 7 He must yield all controversy; if he has an adverse interest when he accepts the trust 8 or if he sub- sequently buys one he cannot set it up against the trust. 9 If he accidentally acquire an adverse interest which he intends to assert, he must resign the trust, unless the beneficiaries are informed and consent to his retention of the office. 10 He must not come in competition with the trust estate, 11 and if he has demands both as an individual and trustee 12 against the same person, he must appropriate any sum he collects ratably between the two claims. 18 His Duty is All to the Trust. In the management of the fund, the trustee's duty is wholly to his trust ; and 1 Perry, 434. 2 Hayes v. Hall, 188 Mass. 510. Supra, p. 32. 3 Ellis v. Barker, L. R. 7 Ch. 104 ; Reid v. Mullins, 48 Mo. 344. 4 Neyland v. Bendy, 69 Tex. 711. 5 Thomas v. Bowman, 30 111. 84. 6 Sterling v. Sterling, 77 Minn. 12. 7 Benjamin v. Gill, 45 Ga. 110 ; Civ. Code Cal. (1903), 2230. 8 His bondsman is liable for money he owes the trust when he ac- cepts it. Bassett v. Fidelity & Deposit Co., 180 Mass. 210. 9 M'Clanahan v. Henderson, 2 A. K. Marsh. (Ky.) 388; 12 Am. Dec. 412 ; Bourquin v. Bourquin, 110 Ga. 440. 10 Stone v. Godfrey, 5 DeG., M. & G. 76. u Supra, p. 34. w Rev. Civ. Code, So. Dak. (1903) 1621. w Scott v. Ray, 18 Pick. 360. 08 TRUST CANNOT BE DELEGATED he must do all that can be honestly done for the further- ance of its interests. In the case of a demand he must press it by suit, unless it is evident that nothing can be gained. In defending suits he should take all good ground that he lias, and claim all exceptions. 1 It is not his duty to appeal from an adverse decision, though he may do so in exercise of a sound discretion and under good advice ; but if a decision in his favor is appealed from he must maintain his suit, 2 and he should not compromise nnless it is clearly for the benefit of the trust ; 8 and if he have security, he must not release it, or part of it, without adequate consideration. 4 Trust cannot be Delegated. In theory a trust is a personal confidence, that is to say, the beneficiary has a right to compel the individual who is trustee to perform the trusts himself. The trustee cannot turn over the whole trust to another, as is exemplified in the case of Winthrop v. Attorney General, 6 where the trustees of a fund for the support of a museum at Harvard College were refused leave to turn the fund over to the general fund of the College, the income to be accounted for to them. 6 Nor can the trustee delegate any part of his duties or powers ; his duty is to exercise the powers and discretion himself,' and if he permits another to act in his place he does so at his peril, 8 for the law does not recog- nize a passive trustee. 9 Thus, where two trustees divided the trust and each managed , a half, one was held liable 1 Amer. & Eng. Encyc. Law, vol. 27, pp. 155-157. 2 Wood v. Burnham, 6 Paige, 513. 8 Lewin, p. 666. * Supra, pp. 75, 76, as to conduct of suits. 6 128 Mass. 258. 6 See also Morville i;. Fowle, 144 Mass. 109. 7 Graham v. King, 50 Mo. 22. Supra, pp. 56, 57. 8 Bostock v. Floyer, L. R. 1 Eq. 36 ; Jones's Appeal, 8 Watts & S 143. 9 Clark v. Clark, 8 Paige, 153. TRUST CANNOT BE DELEGATED 89 for the half lost by the other. 1 But where the duties cannot be jointly exercised they may make a reasonable apportionment of them, and neither will be liable for the loss of funds or neglect of the other. 2 In practice, it is usual for one trustee to assume the active management of the property. 8 As noted above (p. 56), trustees are joint tenants; ac- cordingly one of them alone may demand and receive in- terest, rents, dividends, and some other sums of money. In the absence of any knowledge of unfitness, the other trustees may permit one of their number to exercise these powers, and will not be liable if he abuses them. 4 It would be impossible, and it is generally unreasonably inconvenient for all the trustees to join in the active man- agement of the property; hence, provided that all the trustees exercise a general supervision over the trust affairs, 8 and "fulfil the purposes of the trust with ordi- nary care and diligence, " 6 they may permit one of the number to take the general custody and management of the trust estate. 7 They would not be justified in placing the property wholly beyond their control, 8 or in leaving the funds for an unreasonable time in the hands of their co- trustee 9 or neglecting to exercise a reasonable oversight over his actions. 10 A distinction should be drawn between the manage- ment of income and principal, it being customary and 1 Graham v. Austin, 2 Gratt. 273. 3 State v. Guilford, 18 Ohio, 500; Kilbee v. Sneyd, 2 Molloy, 186. 8 Jones's Appeal, 8 Watts & S. 143. Infra, p. 148. 4 State v. Guilford, 18 Ohio, 500; In re Mallon's Estate, 43 Misc., Rep. (N. Y.) 569. Infra, p. 149. 6 Jones's Appeal, 8 Watts & S. 143. 8 Dover v. Denne, 3 Ont. L. R. 664 ; Rev. Civ. Code So. Dak. (1903), 1637 ; Rev. Code N. Dak. (1895), 4284. 7 Colbnrn v. Grant, 181 U. S. 601 ; Perry, 409. 8 Evans Estate, 2 Ashmead, 470. Infra, pp. 104, 105, 148. 9 Infra, p. 103. l Jones's Appeal, 8 Watts & S. 143. Infra, p. 149. 90 TRUST CANNOT BE DELEGATED probably justifiable for one trustee to collect and disburse the former, but not the latter ; and a trustee who allowed his cotrustee to collect a large amount of principal and let it lie unmolested in his hands would be liable for its loss. 1 An agent may be allowed to collect dividends and rents, and keep the books, and in general act for the trustees wherever there is a moral or legal necessity to employ an agent. 2 Such a necessity exists where the ordinarily pru- dent man of business would employ an agent in his own affairs, as, for example, employing a stockbroker to pur- chase stocks, and paying for them through him. 8 In such cases the trustee will not be liable for the default of the agent, but only for his care in selecting him ; 4 as again, for instance, a trustee who has employed a good convey- ancer is not responsible for a flaw in the title which he overlooked. 6 The employment of one of the trustees or an agent in such cases is not a delegation of the trust, but is the law- ful act of the trustees by the hand of another. The difference between a delegation of the trust itself and the performance of a ministerial act by an attorney may be illustrated in the case of a sale of land. The trustees could not delegate the matter of making the sale that is, determining the price, terms, and whether it was better or not to sell or adjourn the sale to one of the trustees, 6 but they might authorize one of the trustees to execute and deliver the deed for them, after they had determined the matter of the sale. Again, the trustees could not give an agent or one of 1 Infra, pp. 103, 149. 2 Ex parte Belchier, Arab. 219. 8 Speight v. Gaunt, 22 Ch. D. 727. 4 Lewin, 268, n. ; Speight v. Gaunt, 22 Cb. D. 727 ; Ex parte Belchier, Arab. 219. Supra, p. 57. 6 Contra, Hopgood v. Parkin, 1 1 Eq. 74. But see criticism on this case, Underbill, p. 300, 8. 6 Graham v. King, 50 Mo. 22. Supra, p. 55. TRUST CANNOT BE DELEGATED ACCOUNTS 91 their number a general power of attorney to sell stocks ; but they might give a special power to transfer a par- ticular stock. In the first instance the trustees are dele- gating their power to sell, which is a delegation of the trust; in the latter case they are employing an agent to make a transfer, which is a purely ministerial act. 1 Accounts. If the trust is a testamentary one, the trustee will be required to file an inventory (by statute in practically all the States) soon after his appointment. A trustee must keep accurate and separate accounts of the trust, which should be always open to the inspection of the beneficiary, even if kept in a book with other accounts. 2 If the account is inaccurate or obscure, the trustee is the loser, since everything will be taken against him. 8 A court of equity may compel any trustee to account, 4 but as a general rule the jurisdiction is given to probate courts by statute. A testamentary trustee is entitled to a periodical settlement of accounts with his beneficiaries, and to a formal discharge or settlement in court, but he is not entitled to a release under seal. 6 In England, under the trustee's relief act, any trustee can account and pay money into court ; 6 but in the ab- sence of statute in America there seems to be no general jurisdiction in the court to compel the beneficiary to come in and settle his account. 7 1 Supra, p. 57. 2 Hopkinson v. Burghley, L. R. 2 Ch. 447. 8 Landis v. Scott, 32 Pa. St. 495 ; Blauvelt v. Ackermann, 23 N. J. Eq. 495. * Weaver v. Fisher, 110 111. 146; Mass. Pub. Stat. (1882), ch. 144, 15 ; Report of Commissioners to revise Public Statutes (1901), p. 1311, n. 1, said passim; Hayes /. Hall, 188 Mass. 510, p. 512. 6 King v. Mullins, 1 Drew. 308. Infra, p. 142. 8 In re Wright's Trusts, 3 K & J. 419, 421. 7 But see Hayes v. Hall, ubi supra. 92 ACCOUNTS FORM OF ACCOUNT All the trustees must join, and if one trustee allows another to render a fraudulent account, he is liable as a party to it. 1 All the beneficiaries are necessary parties. 2 If the trustee holds by appointment of the court, he will be required to settle his account in court at stated intervals. 8 In such cases he need not render any other account, and the beneficiary must come into court to settle. If the trustee does not hold under appointment of court, he should settle his accounts yearly, or as often as the settlement requires. If a trustee dies, the survivors will settle the account ; and if a sole trustee dies, his executor or administrator may do so, although he does not succeed him in the trust. 4 Form of Account. The trustee's account is intended to show the condition of the estate, and does not involve the trustee's personal account with the remainderman or with other trusts. 5 The account must show every transaction in detail, and include a list of property in the hands of the trustee. He must charge himself with each item received, and credit himself with every item lost, expended, or paid out, and ask to be allowed for the saine. In accounting to a court he need not include in his account real estate, or the rents from real estate which lies in another juris- diction, 6 but only the surplus brought into the jurisdiction of the court. 7 The court in which the account is settled will prescribe the form in which the account will be made ; but in every 1 Infra, p. 149. 2 Leonard v. Pierce, 94 App. Div. (N. Y.) 266. Infra, p. 94. 8 Provided for by statute in most States. * Munroe v. Holmes, 13 Allen, 109. 6 Dodd v. Winship, 133 Mass. 359. 6 Morrill v. Morrill, 1 Allen, 132. 7 Clark v. Blackington, 110 Mass. 369. Infra, p. 192. FORM OF ACCOUNT 93 trust account there should be at least six schedules, viz. : income received, income paid, additions to principal, de- ductions from principal, principal on hand, and changes in investments consisting of debtor and creditor sides. The income received should contain all the sums to which the life beneficiary is entitled, and the income paid all the charges against him. The changes in investment should contain on the debtor side all the amounts received as principal for the remain- derman, beginning with any balance of cash on hand; and on the credit side, all the amounts paid out as prin- cipal ; and these two accounts should balance. If there has been any gain to the principal, as by in- come added, or sale of a security above its cost, or the recovery of an amount not shown in the inventory or previous accounts, it should appear in the schedule of additions to principal. The schedule of deductions from principal will be made of similar items of loss and of any charges against the remainderman. The schedule of principal on hand should enumerate each item of the trust property with its cost, either actual or appraised, carried out; and the schedule of the current year will always equal that of the previous year, after adding the schedule of additions and deduct- ing the schedule of deductions. The form of account given above is that used in the courts of many States, but in some States the schedules of changes and additions and deductions are not put in, but all amounts received as principal are charged, and all amounts paid out of principal are credited, and the difference in amount between these two schedules will be the difference between the schedule of the current and preceding year. The account should be accompanied by proper vouchers for all payments. 1 1 Willis v. Klymer, 66 N. J. Eq. 284. 94 EFFECT OF AN ACCOUNT Effect of an Account. The settlement of trustees' accounts in court is generally governed by the statutory law, which varies with the various jurisdictions ; and the statutes of the jurisdiction where the account is settled should be carefully studied. In general an account set- tled in court is final l as to all persons who are parties to the proceedings, 2 but not as to other persons. 8 Minors may be represented by a guardian ad litemf and statutes commonly exist by which persons unborn or unascertained can be similarly represented. 6 Such a settlement can only be set aside to correct a fraud or mistake, 6 and cannot be questioned in a collateral preceding, either at law " or in equity. 8 If an account is corrected, all persons interested will get the benefit of the correction. 9 Probate courts are peculiar, as they have jurisdiction over the property itself as_ well as the parties. Hence judgments of a probate court do not depend on the parties to the suit, but are final as to the disposition of the matter in controversy, 10 provided the notice required by the court is given, and that notice is sufficient to cover the constitutional requirements of ' ' due process of law." In Indiana and Massachusetts, by peculiar statute law, when an account is filed in the probate court all former accounts of the same accountant may be reopened, except 1 Amory v. Lowell, 104 Mass. 265, p. 272 ; Stetson v. Bass, 9 Pick. 26, 29; In re Elting, 93 App. Div. (N. Y.) 516. 2 Foster v. Foster, 134 Mass. 120. 8 Kendall v. DeForest, 101 Fed. R. 167. * Jenkyns v. Whyte, 62 Md. 427. 6 Mass. Rev. Laws (1902), ch. 150, 22. A statute seems to be necessary. Morse v. Hill, 136 Mass. 60, p. 67. Dodd v. Winship, 144 Mass. 461 ; Aldrich v. Barton, 138 Cal. 220. 7 Parcher v. Russell, 11 Cush. 107. 8 Lever v. Russell, 4 Cush. 513. Bennett v. Peirce, 188 Mass. 186. Infra, pp. 159-160. 10 Loring v. Steineman, 1 Met. 204 ; Minot v. Purrington, 1 90 Mass. 336; Harris v. Starkey, 176 Mass. 445. EFFECT OF ACCOUNT EXPENSE OF ACCOUNTING 95 as to matters which have been heard and determined ; l and as to these matters the accounts may be reopened to correct a fraud or mistake, but not to correct the judgment of the court. 2 Notice is construed to mean " actual no- tice," and a settlement is only conclusive in the case of a final account. 8 A successor in a trust is not accountable for the faults of his predecessor, yet as the state of the funds may be affected by his act, the successor's duty may require him to investigate his predecessor's acts, reopen his accounts, and recover from him or his estate. 4 If a beneficiary had an estate in possession and has assented to the account, 6 or has neglected for a long period to enforce his rights, the court will not help him, although there is no statute of limitations to bar him. 6 If the account is not settled in court, the settlement is final in so far as the account is assented to by persons interested and able to act for themselves, and may be reopened even by them to correct mistakes of fraud, 7 but in so far as fairly made is binding on all who take part in it, even though it cover a breach of trust. 8 The Expense of Accounting. It is the trustee's duty to make up an account ; therefore ordinary compensation covers the'making up of the account, but any court charges will be borne by the trust estate, unless the trustee was at 1 Foster v. Foster, 134 Mass. 120. 8 Burns's Annot. Stat. Ind. ( 1901), 2559 ; Mass. Rev. Laws (1902), eh. 150, 17. But see as to Massachusetts, Acts 1907, ch. 438. 8 Parker v. Boston Safe Deposit & Trust Co., 186 Mass. 393, 396. * Blake r. Pegram, 109 Mass. 541 ; Bennett v. Pierce, 188 Mass. 186; Ex parte Geaves, 8 DeG., M. & G. 291; Kendall v. DeForest, 101 Fed. R. 167. 6 Amory v. Lowell, 104 Mass. 265. 6 Infra, p. 177. 7 Bassett v. Granger, 140 Mass. 183. 8 Infra, p. 176; Amory v. Lowell, ubi supra. 96 WHERE TRUSTEE IS IN DOUBT AS TO DUTY fault in not accounting, in which case he may be ordered by the court to pay the costs. 1 "Where the Trustee is in Doubt as to his Duty. When a trustee is in doubt as to his duty, he may notify the beneficiary of his intended action, and if he does not object he will not be heard to do so at a later date ; 2 and where the beneficiaries are of full capacity, although there is no obligation on him to do so, yet it is undoubtedly a prudent plan for the trustee to consult his beneficiaries before taking any important step, 8 but generally this mode of procedure will only protect the trustee against the life beneficiaries, and so is incomplete. If therefore there is a doubt as to what the trustee's duties are, he can and should apply to the court for instructions ; 4 but he cannot consult the court simply because he is ignorant and does not know his duty or what the law is. In such case, the court may tell him to take advice, 6 and if he involves the estate in unnecessary litigation he may have to pay costs. But where a question arises as to the proper construction of the settlement, or a determination between conflicting claims 6 is necessary, he may refer the matter 1 Blake v. Pegram, 109 Mass. 541, 558 ; Chisholm v. Hammersley, 100 N. Y. S. 38. Supra, p. 35 ; infra, p. 142. In England, and where the trustee acts without compensation, the fund would bear the ex- pense of accounting, but the expense of furnishing an unnecessary account must be borne by the person requiring it. Re Bosworth, 58 L. J. Ch. 432. 2 Life Association of Scotland v. Siddal, 3 DeG., F. & J. 58, 74. Bradby v. Whitchurch, W. N. 1868, p. 81. 4 Generally, but by statute sometimes. Rev. Stat. Ohio (1904), 6202; Pub. Stat. N. H. (1891), ch. 198, 10; Holland Trust Co. v. Sutherland, 65 App. Div. (N. Y.) 252. In Pennsylvania the court held that it had no such jurisdiction, but that the result might be reached by a fictitious account. In re Morton's Estate, 201 Pa. 269. In Eng- land the trustee can apply to the court for instructions on nearly any question by an order in chambers. Bissell, The Duties and Liabilities of Trustees, 78. 6 Greene v. Mnmford, 4 R. I. 313 ; Underbill, 436, n. Hills v. Putnam, 152 Mass. 124. WHERE TRUSTEE IS IN DOUBT AS TO DUTY 97 to the court and will be protected by its determination. He may ask its instructions as to a compromise, 1 sale or investment of the trust property, 2 or on such a question as the apportionment of a fund between the life tenant and the remainderman, 8 as, for instance, a stock dividend 4 or the apportionment of the expense of certain repairs. 5 In some jurisdictions he should consult the court before investing. 6 Where, however, he is given a discretionary power in the matter, the court will not interfere since he is the forum and not it 7 Nor could he use this method of de- termining a question at law, as, for instance, what is his liability to a creditor or for a tax ; 8 or what his powers and duties will be under a contemplated reorganization of a corporation ; 9 nor if he contract under order of court will he be protected from personal liability, but will be only assured of indemnity from the trust fund. 10 No application will be considered until the question is a practical one and must be decided. Hence a question as to who will be entitled in remainder cannot be asked during the existence of the life estate, 11 and the distribu- tion of a fund cannot be decided until the cash is in hand. 12 The proper way to raise the question is by a bill for in- structions, and not by a fictitious account. 18 An account 1 Mass. Rev. Laws (1902), ch. 148, 13 ; Chadbourn v. Chadbourn, 9 Allen, 173. a Wheeler . Perry, 18 N. H. 307. 8 Edwards v. Edwards, 183 Mass. 581 ; De Koven v. Alsop, 205 111. 309. * Hemenway v. Hemenway, 181 Mass. 406. 6 Sohier v. Eldredge, 103 Mass. 345. 6 Lowe v. Convocation of Prot. Ep. Church, 83 Md. 409 ; Peckbam v. Newton, 15 R. I. 321. 7 Rutland Trust Co. v. Sheldon, 59 Vt. 374. Supra, p. 77. 8 Greene v. Mumford, 4 R. I. 313. 9 Treadwell v. Salisbury Mfg. Co. 7 Gray, 393. w Infra, p. 145. u Bullard v. Chandler, 149 Mass. 532. " Tuttle v. Woolworth, 62 N. J. Eq. 532. w Lincoln v. Aldrich, 141 Mass. 342. 7 98 WHAT MAY BE TRUST PROPERTY POSSESSION is meant to show the state of the estate, and is not for the trial of disputed claims. 1 All persons interested should be made parties ; 2 but when they are very numer- ous and every possible interest is adequately represented, the court may proceed with less. 3 If the suit is in the probate court it will be conclusive irrespective of the parties joined. 4 The costs of all parties to the proceedings in ordinary cases will be borne by the principal of the estate, 6 but if the application was unnecessary the court may order the trustee to pay costs, and it may, in its discretion, refuse to allow even the expenses of the guardian ad litem, though such a course is unusual. 6 V. MANAGEMENT OF FUND. What may be Trust Property. Any sort of prop- erty, real or personal, in possession or reversion, or any interest, whether vested or contingent, which can be as- signed, may be the subject of a trust, 7 even though it be real estate outside of the jurisdiction of the court, 8 or something not actually in existence, 9 or trade secret or patent right, but trusts only extend to property, and not to such things as the performance of an act, such as the employment of a particular person as attorney or agent. 10 Taking Possession. On accepting a trust, it is the trustee's duty to inquire into the nature of the property 1 Dodd v. Winship, 133 Mass. 359 ; New Eng. Trust Co. v. Eaton 140 Mass. 532. 2 Wagnon v. Pease, 104 Ga. 417. 8 Hills v. Barnard, 152 Mass. 67. * Infra, p. 143. 6 Howland v. Greene, 108 Mass. 277, p. 285; Lowry v. Fanners' Loan & Trust Co., 172 N. Y. 137, p. 145. 6 Stevenson v. Norris, 107 N. W. Rep. 343 (Wise. 1906) ; Libby . Todd, 80 N. E. 584 (Mass. 1907). 7 Perry, 67, 68. Massie v. Watts, 6 Cranch, 148. 160. 9 Mitchell v. Winslow, 2 Story, 630. w Foster v. Elsley, 19 Ch. Div. 518. TAKING POSSESSION 99 and trust documents. 1 If he succeeds a former trustee, he must ascertain that he receives all the property that belongs to the estate, which will involve the examination of his predecessor's accounts so far as they are open. 2 He is not bound to take the securities tendered him if they are improper investments, but may insist on having them converted into cash, or, at any rate, he need only take the securities at their actual value and then should collect the balance from the outgoing trustee. 8 If he takes the securities at their inventory value, he will be responsible for them at that price. The same rule applies where he takes the estate from an executor. He must take immediate steps to secure the trust pr6perty and properly invest it. He will have an equitable action against a transferee of the legal title made before he became trustee. 4 Real Estate. If the appointment is an original one, the will or settlement will vest the title of the real estate in the trustee, and he must see that the instrument is recorded in every jurisdiction where there is any land. 6 If the trustee comes in the place of a former trustee, the estate may vest in him by the terms of the trust in- strument or by statute, in which case he must see that he is duly appointed or his appointment recorded in each jurisdiction where the land lies, 6 or if there is no pro- vision in the instrument, and he is not appointed by a de- cree of court vesting the property in him, then he must take a conveyance and record it in each jurisdiction. Having acquired title he should at once take posses- sion, actual or constructive. If the real estate is let he 1 Hallows v. Lloyd, 39 Ch. Div. 686, 691 ; Underbill, p. 219. 2 Supra, p. 95. Ex parte Geaves, 8 DeG., M. & G. 291. 8 In re Salmon, 42 Ch. Div. 351 ; Thayer v. Kinsey, 162 Mass. 232. 4 Luring v. Salisbury Mills, 125 Mass. 138. 6 Hext v. Porcher, 1 Strobh. Eq. 170. Cogbill v. Boyd, 77 Va. 450. 100 TAKING POSSESSION should take constructive possession by compelling the tenant to attorn, or acknowledge him as his landlord and agree to pay rent to him, or if there is no tenant he should take actual possession of the land. If the beneficiary is in possession under the terms of the trust he need do nothing, as the beneficiary's posses- sion is constructively the possession of the trustee. Personal Property. If the trustee is an original ap- pointee under a deed, the personal property will probably be in the hands of the settlor, and it, or the evidences of it, should be delivered to the trustee when the settlement is made. If the trustee joins in a deed acknowledging the receipt of the property, and does not as a matter of fact receive it, he will be liable for it as though he had received it, to any person acting on the face of his receipt. 1 If the trustee is appointed under a will,' 2 he may not be entitled to the personal property at once, as until the executors have administered the estate they are entitled to hold it ; and where the same persons are trustees and executors, until they terminate the executorship by filing an account crediting themselves as executors with the trust property, and qualify as trustees, or do some other definite act showing a transfer, they will still remain liable as executors and will not hold as trustees. 8 " When a trust fund is to be created by an executor out of the assets of an estate, something more must be done by the the executor in order to impress the trust on particular property than to hold the property with the intention that it shall constitute the trust fund. There must be some act of appropriation which transfers it to the trust fund and gives the beneficiaries the right to have it held for them." 4 1 Low v. Bouverie, 3 Ch. D. (1891) 82. See infra, p. 145. 2 See supra, p. 1 1 . 8 Crocker v. Dillon, 133 Mass. 91. Supra, p. 14. * Knowlton, J., in Sheffield v. Parker, 158 Mass. 330, 333. TAKING POSSESSION 101 In the case of an incoming trustee it is his duty to ex- amine the executor's accounts and ascertain that he obtains all the estate that he is entitled to. 1 Although the provisions of the trust instrument or de- cree of the court may have the force of a written trans- fer, yet in the case of personal property a delivery of the property itself or of the evidence of it is essential, and in every case it is desirable where the property is such as not to pass by delivery simply, to have a written transfer from the former owner. But where the property is vested in the new trustee by force of statute or provision of the trust instrument, he, and not the former owner, is the proper person to transfer. Where there is no decree of the court, or no provision of the trust instrument vest- ing title, an assignment by the holder of the title is indispensable. Registered bonds, notes, and certificates of stock should stand in the names of all the trustees, and should specify the trust under which they are held on their face, so that there can be no question as to its identity. To describe the holders as " trustees " merely is not sufficient, as it is not apparent to what fund the stock belongs, and no well advised purchaser will take a transfer of such a stock without further assurance. The transfer should be made without delay : on a note by indorsement, and on a stock certificate or registered bond by indorsement and transfer on the books of the company. If there is a chose in action or equity, the obligor should be notified at once ; 2 as for instance a bank ac- count, for although notice is not necessary to complete the title in some jurisdictions, 8 a payment of the claim or other novation of the security to the previous holder before notice will discharge the debtor. 4 All claims which are due should be called in, unless 1 Infra, pp. 127, 128. a Ames, 327, n. 8 Thayer v. Daniels, 113 Mass. 129. * Infra, pp. 161-162. 102 TAKING POSSESSION they are such as constitute a proper trust investment; and if necessary the trustee should sue without delay, un- less he can show that more is to be gained by forbear- ance, 1 not only for these, but for any of the trust property which he cannot obtain on demand, and he will have an equitable suit for property, of which the legal title has passed to a third person by a breach of his predecessor in the trust. 2 Care and Custody of the Trust Property. Assuming that the trustees have got title, and the property properly into their hands, their next duty is to take proper care of it Real Estate. The trustee should immediately insure the real estate for a reasonable amount, should fence it if necesssary, and put it in a condition to be let, and there- after he must keep the property insui'ed, 8 fenced, and in repair, and pay the taxes on it. If the property is unimproved he may improve it so as to secure a tenant, but, in the absence of special power from the trust instrument or court to do so, he must be careful not to convert the personal property of the estate from personal to real estate without authority in doing so, as by spending' any cash that may be on hand or the proceeds of the sale of securities. Personal Property. Trust chattels are usually meant to be enjoyed in specie by the beneficiary, and may be 1 Ames, 494, n. 1. 2 Loring v. Salisbury Mills, 125 Mass. 138. 8 Burr v. McEwen, Baldw. C. C. 154, and Eng. and Am. Encyc. of Law, vol. 27, p. 163, which states that the trustee must insure, al- though unsupported by the cases cited. But Davis, J., in Insurance Co. v. Chase, 5 Wall. 509, 514, and the cases in general and the Eng- lish statute, Lewin, p. 314, and Perry, 487, all say that a trustee may insure, but under modern conditions, where every prudent man does insure his own risks, it would seem that a trustee must insure, and he is usually required to do so by well drawn trust instruments. CARE AND CUSTODY OF TRUST PROPERTY 103 turned over to him, and if he uses them up, lets, or de- stroys them, the trustee will not be liable; but the trustee should require him to sign an inventory when they are delivered. 1 Where the use of the chattels is not given to the bene- ficiary, they should be converted into money, 8 unless they were to be held unconverted, in which case the trustee must keep the actual possession, and as several persons cannot conveniently hold them they may be left in the hands of one trustee. Money should be deposited in a good bank in the joint names of all the trustees ; and if it is deposited in the in- dividual names, the trustees will be liable if it is lost, though without their fault, as by a failure of the bank or otherwise. 8 All the trustees are responsible if they leave money for more than temporary purpose in the name of one. 4 And while it is customary and probably justifiable to permit one trustee to draw checks alone against an account which consists wholly of income, they should not permit large amounts of principal to lie in the bank subject to the draft of one of their number. 6 But one trustee may be allowed to draw checks against income, since it is not unreasonable to allow one trustee to collect it.' It was held in a case where there was a dispute, and consequently the funds could not be invested, 7 that the i Dorr v. Wainwright, 13 Pick. 328 ; McDonald r. Irvine, 8 C. D. 101, 112. 4 As to when a conversion is proper, see infra, p. 1 05. 8 In re Arguello 97 Cal. 1 96 ; Ames, 484, n. ; Corya v, Corya, 1 1 9 Ind. 593 ; Civ. Code Cal. (1903), 2236, as amended by Acts of 1905, ch. 615; Rev. Civ. Code So. Dak. (1903), 1625; Rev. Code N. Dak. (1895), 4272. * Monell v. Monell, 5 Johns. Ch. 283 ; 9 Amer. Dec. 298. 6 Lewis v. Nobbs, L. R. 8 Ch. D. 591 ; Clough v. Dixon, 8 Sim. 594. 6 Kilbee v. Sneyd, 2 Moll. 186. Supra, p. 56. 7 Ames v. Scudder, 11 Mo. App. 166. 104 CARE AND CUSTODY OF TRUST PROPERTY trustees were entitled each to hold half and pay interest thereon, and one becoming insolvent the other was not held liable, but it is somewhat doubtful whether this rule can be safely followed ; it would seem more appropriate to deposit the money in a safe place in the joint names. Non-negotiable stocks, registered bonds, notes, deeds, &c., may be left in the custody of one trustee, 1 or in case of necessity or propriety in the hands of an agent ; 2 as for instance deeds could be left with a solicitor, or stocks with a stockbroker who is negotiating a sale ; but if nego- tiable securities be left in the hands of an agent unneces- sarily the trustees would undoubtedly be liable. 8 Negotiable securities, and partially negotiable securities such as registered coupon bonds, should be deposited in a safe deposit vault, or where none is convenient at a bank- er's in a separate box, in the joint names of all the trustees. The question of how far the trustees are justified in allow- ing one of their number to have access to the box alone, cannot be considered as authoritatively determined. The general rule, that the trustee must use reasonable care, only postpones the question, as the question still remains whether allowing one trustee access alone is reasonable care. Mr. Justice Kekewich in a late case 4 expresses his own opinion strongly that negotiable securities should not be got at without the consent of the whole body ; but Vice-Chancellor Wood, in a leading earlier case, 5 said that it was too much to say that ordinary prudence re- quires a box with three keys, and this latter dictum seems to accord more nearly with the general usage in this country. 6 Where a bond could be registered, as most bonds may be, it would appear to be the trustee's duty to have it 1 Dyer v. Riley, 51 N. J. Eq. 124. 2 Jones v. Lewis, 2 Ves. Sen. 240. 8 Matthews v. Brise, 6 Beav. 239. 4 Field v. Field, L R. 1894, 1 Ch. 425. 6 Mendes v. Guedalla, 2 Johns & Hem. 259, 278. In re Halstead, 44 Misc. Rep. (N. Y.) 176. CARE AND CUSTODY OF TRUST PROPERTY 105 registered if he gives his cotrustee separate access to the securities. 1 In that case the coupons only remain negotiable, and as one trustee may collect income alone, he could be reasonably allowed separate control of these. 2 There is no question that a trustee who should neglect for a long time to examine the securities, as for instance for four years, 8 or who should confide them to his c6- trustee in an unusual manner, 4 would be liable. In any event, it would seem a wise precaution to register bonds where possible, but the trustee is not bound to do so where it is not customary with prudent men to do so in caring for their own securities. 5 In general a trustee is bound to take the same care of the trust property which any bailee is bound to take of the property put in his charge, or such care as a prudent man would take of his own. 6 Conversion. The form in which the property usually exists at the formation of the trust, in part at least, is not adapted to trust purposes ; but is generally more adapted to the needs of the individual than to the requisites of successive estates. An individual may be engaged in business, in a part- nership, or in the management of his property for the purposes of gain, and rarely in this country has his property permanently invested without some regard to speculative value. 1 Lewis v. Nobbs, L. R. 8 Ch. D. 591, 594. 2 Supra, p. 56. Mendes v. Guedalla, 2 Johns. & Hem. 259, 277. 4 Matthews v. Brise, 6 Beav. 239. 6 The principal reason for holding bonds unregistered is to avoid transfer taxes, etc. 6 In re Pothonier (1900), 2 Ch. 529. In this case the court in- structed the trustees that the bonds might be deposited with bankers with authority to them to cut coupons, as such was the custom of pru- dent business men. There does not seem to be such a custom in this country. 106 CONVERSION Thus where the maker of a trust transfers a partnership, business risk, speculative or unproductive property, to a trustee, or in fact any property which the trustee would not be authorized to invest in under the terms of the instrument or prevailing law, he must immediately and without delay proceed to convert all such property into investments authorized by the terms of the trust, and will have the implied power to do so. 1 Vacant land, even if it have a large prospective value, should be converted, since trust property should yield the usual income to the life tenant. All undivided estates should be converted, since the trustee has not the absolute control over them ; leaseholds, 2 and all wasting investments, such as stocks in land companies and mines, &c., in which the principal is being consumed in dividends to the life tenant, should be converted into trust investments. If the trustee delay beyond a reasonable time, he will be liable for any loss of the property. 8 Where the time within which the conversion is to be made is expressly left to his discretion, he will be protected in a reasonable use of his discretion, but must sell within a reasonable time.* The only safe rule is to sell promptly. 6 On the other hand, if the settlor has provided for the continuation of his business, or the holding of his securi- ties, or if he has left his property prudently and perma- nently invested, not with a view to speculation, the trustee should not convert it, unless the investments are such as he is forbidden to make by the terms of the settlement or by law, 6 since he is entitled to put confidence where the 1 Kinmonth v. Brigham, 5 Allen, 270 ; Ames, 491, n. ; Howe v. Lord Dartmouth, 2 White & Tudor, L. C. (5th ed.), 296 and note; Brown v. Gallatly, 2 Ch. App. 751. Supra, p. 65. 8 Minot v. Thompson, 106 Mass. 583. 8 Sculthorp v. Tupper, 13 L. B. Eq. 232. * Marshall v. Caldwell, 125 Mass. 435; In re Smith (1896), 1 Ch. 171 ; In re Atkins, 81 Law T. (N. s.) 421, Ch. Div. 5 In re Northington, 13 Ch. Div. 654. . ' Harvard College v. Amory, 9 Pick. 446, 462. CONVERSION 107 settlor did, and the settlor has impliedly authorized these investments, and in some jurisdictions the trustee must go so far as to get an order of court to change the property from the form in which the testator left it. 1 Thus , where the testator has left bonds that will sell for a large premium, 2 which therefore yield a very small return on the money invested, the trustee need not sell and reinvest. Nor will he be held responsible for not selling a stock at par, which afterwards became worth- less, 8 if he used a reasonable discretion in the matter. No conversion can be made of property which the settlor meant to be enjoyed in specie ; as, for instance, a house for the beneficiary to live in, or property to be sold at the end of the life estate, 4 or household goods and chattels meant for family use, 6 but such intention must be shown affirmatively, as the general rule is that all property is to be converted. 6 Where specific real estate is left of which the beneficiary is to have the rents for life, the right to use the property in specie is implied ; 7 but otherwise where the real estate is not specified. So, also, where the beneficiary is to have the dividends on the property, enjoyment in specie is not implied, unless the property yielding the dividends is specified. 8 Conversion of Real into Personal Property and Vice Versa. Unless the power be given by the trust instru- ment, the trustee may not convert the real property into personal, or vice versa, the reason of which seems to 1 Conn. Gen. Stat. (1902), 255 ; but the distinction is doubted. Perry, 465. a N. Eng. Trust Co. v. Eaton, 140 Mass. 532. 8 Bowker v. Pierce, 130 Mass. 262. * Erviue's Appeal, 16 Pa. St. 256; Johns v. Johns, 172 III. 472. 6 See pages 125 and 175, 176. Howe v. Lord Dartmouth, 2 White & Tndor L. C , 5th ed., 296 ; McDonald v. Irvine, 8 Ch. D. 101, 112. f Perry, 451. 8 Boys v. Boys, 28 Beav. 436. 108 CONVERSION OP REAL INTO PERSONAL PROPERTY have originally depended on the different way in which real estate and personal property descend or could be disposed of by will. 1 Thus, the trustee must not sell real estate and invest in bonds, or buy real estate with uninvested funds, unless they are the proceeds of a sale of real estate ; for where real estate is sold by an administrator or guardian under order of court, the proceeds will be treated as real estate and not as personal ; 2 but where the estate is sold and converted into personalty under order of court by a trus- tee, it loses its character as real estate. 8 If the sale is under a power in the trust instrument, the intention of the maker will govern as to whether the proceeds shall be considered as real estate or converted into personalty by his authority. 4 Under the common-law rule the trustee cannot use the personal property of the estate to improve the real estate. Where the testator left an insurance policy on a building which was subsequently burned, rebuilding with the in- surance money was held to be a conversion ; 5 but buying in land to protect a debt from great loss, although a con- version, is an authorized conversion, and one that will be ratified by the court. 6 This rule is relaxed by statute, or by practice in some jurisdictions. 7 By statute in many States, and by equity jurisdiction in others, a court may order a conversion, 8 and where it does so, the proceeds of land will not be treated as real 1 Perry, 605. 2 Mass. Rev. Laws (1902), ch. 143, 9 ; Fidler v. Higgins, 21 N. J. Eq. 138; March v. Berrier, 6 Ired. Eq. 524; Shumway v. Cooper, 16 Barb. 556. 8 Snowhill v. Snowhill, 2 Green's Ch. 20. * Hovey v. Dary, 154 Mass. 7. 6 Hassard v. Rowe, 1 1 Barb. 22. 6 Billington's Appeal, 3 Rawle, 48, 55. Perry, 458, says it is not a conversion. Oeslager v. Fisher, 2 Pa. St. 467. 7 Brightly's Dig. (1894), p. 2034, 49 ; Boon B. Hall, 76 App. Div. (N. Y.) 520. 8 Anderson v. Mather, 44 N. Y. 249 ; Ex parte Jewett, 16 Ala. 409. CONVERSION OF REAL INTO PERSONAL PROPERTY 109 estate. 1 But the court will not order a conversion where it is contrary to the wishes of the testator ; 2 nor will it ratify an unauthorized one. Where, however, it has become impossible to carry out the testator's wishes, the court will authorize a conversion on the cy pres doctrine, which amounts to decreeing that the wishes of the testator shall be carried out in the nearest possible way, and seems to rest on his implied authority. 8 Where, however, the trust is for an infant, the court will not usually authorize a conversion, and it has been denied that the court has the power to do so in the ab- sence of statute, but such statutes exist in nearly all jurisdictions. 4 If an unauthorized conversion be made, the infant may elect to take the property or the proceeds at his majority. 6 Where a trustee is given the power to invest and rein- vest, or to sell and manage the property, a power to con- vert will be implied, and under the general language used in most modern settlements the power is generally im- pliedly given, if not expressly so. Investments. It is the trustee's duty to keep all the trust funds at all times fully invested, and if he neglects doing so he will be liable for interest for the period of any unreasonable delay. 8 What is an unreasonable delay is a question of fact depending on all the circumstances. 7 1 Snowhill v. Snowhill, 2 Greene's Ch. 20. 2 Rogeret;. Dill, 6 Hill, 415 ; Johns v. Johns, 172 HI. 472. 8 Weeks v. Hobson, 150 Mass. 377 ; Pennington v. Metropolitan Mnseum of Art, 65 N. J. Eq. 11. See p. 67, supra. * Rogers v. Dill, 6 Hill, 415 ; Williamson v. Berry, 8 How. 495, 531 ; but the better authority seems to be that the court has the power to order a sale. Wood v. Mather, 38 Barb. 473 ; 8. c. 44 N. Y. 249, affirmed on appeal; Ex parte Jewett, 16 Ala. 409. 6 Robinson v. Robinson, 22 Iowa, 427 ; Kaufman v. Crawford, 9 Watts & Ser. 131. 6 Robinson v. Robinson, 11 Beav. 371; Cairn v. Cann, 33 Weekly Rep. 40. 7 Perry, 462, gives numerous examples. 110 INVESTMENTS Simple interest will be ordinarily computed, but in some cases the trustee will be chargeable with compound interest. 1 For instance, if the fund is for accumulation he will be charged with compound interest, since it was his duty to have invested the interest as it accrued. So, too, if the property was invested in trade, since the profits will be presumed to have amounted to that; 2 but in this case the trustee may show that the actual profits were less, since the claim of the beneficiary is for actual profits or simple interest. 8 In some jurisdictions the trustee will be charged com- pound interest as punishment for fraud, misbehavior, or for disobeying the orders of court ; 4 but this doctrine is not general or commendable on principle, or universally followed. The true principle would seem to be " that the trustee is accountable for all interest and profits actually received by him from the trust fund, and for all which he might have obtained by due diligence and reasonable skill." 8 If he was directed to invest in a particular stock or fund, the beneficiary may elect to take simple interest, or the number of shares the money would have purchased with the dividends. 6 If the trustee has no express power under the trust in- strument to change investments, the court can authorize a change, and will do so for good reason ; 7 and where an emergency exists and there is no opportunity to get a decree, will ratify a change made by the trustee without authority. 1 Infra, p. 154. 2 Eliott v. Sparrell, 114 Mass. 404. 8 Attorney General v. Alford, 4 DeG., M. & G. 843, p. 851 ; Utica Ins. Co. v. Lynch, 11 Paige, 520. Infra, p. 154. * McKim v. Hibbard, 142 Mass. 422; Jennison v. Hapgood, 10 Pick. 77. 6 Perry, 472, end ; Cruce v. Cruce, 81 Mo. 676. 6 Onseley v. Anstruther, 1 Beav. 453, 456. 7 Murray v. Feinour, 2 Md. Ch. 418. INVESTMENTS 111 The property being once well inve8ted, the investments should not be changed without a good reason ; l such as, for instance, that an investment has become insecure and the remainderman is likely to suffer loss, or because it has become unproductive and the life tenant is suffering loss. The mere fact that the property has increased in value is not a sufficient reason to sell; for "the doctrine can readily be pressed so far as to sanction a practice of trading and trafficking in trust securities, which would be attended with dangerous results to the trust fund ; " 2 but if it has acquired a speculative value much above its value as an investment, the investment should be changed so that the life tenant may receive the increase of income he is entitled to. The trustee's duty in investing the funds io a double one, namely, to invest them securely, so that they shall be preserved intact for the remainderman, and to invest them productively, so that they shall yield the current rate of interest to the life tenant. He must hold the scales evenly, and must not sacrifice the interest of either bene- ficiary ; and the popular idea that security is the only con- sideration is erroneous, as the trustee is equally bound to get the customary income for the life tenant, and cannot sacrifice his interests to those of the remainderman. 8 The trust instrument may, and ordinarily does, pre- scribe the kind or class of property in which the trustee may invest, and where it does so its provisions will super- sede those of the court or legislature ; 4 but being special powers they must be complied with strictly. 1 N. Eng. Tr. Co. v. Eaton, 140 Mass. 532, 533 ; Murray v. Feinour, 2 Md. Ch. 418 ; Ward v. Kitchen, 30 N. J. Eq. 31. 2 N. Eng. Tr. Co. v. Eaton, 140 Mass. 532, 537. 8 Kinmonth v. Brigham, 5 Allen, 270. * Womack v. Austin, 1 S. C. 421 ; Arnould v. Grimstead, 21 Weekly Reporter, 155 ; Denike v. Harris, 84 N. Y. 89 ; Ovey v. Ovey, (1900), 2 Ch. 524; In re Wedderburn, 9 Ch. D. 112, was not followed. 112 INVESTMENTS A general authority to the trustee to invest ' ' at discre- tion" does not specify any kind of property, 1 and does not enlarge his powers; but authority to invest " in such securities as to him seems best," or " to exercise the same control I now have," with other marks of confidence, gives authority to choose illegal investments in those juris- dictions where the class of investments is limited ; 2 but the trustee is still required to exercise a sound discretion only. He is given the latitude allowed by the Massachu- setts rule, and nothing more, even in Massachusetts. 8 If the trustee is authorized to invest in real securities or mortgages, the class will not be held to cover a bond secured by a mortgage of a railroad ; 4 but a house for the occupation of the beneficiary has been held to be an investment in productive real estate, 5 and a judicious provision of one of the chief requisites of life. 6 Where a testator provides that his trustees shall con- tinue his business, it is their duty to do so; but if the matter is permissive, they should not continue it against their judgment. A partnership cannot be continued after there is a change in the firm, 7 nor should the amount invested in it be increased. 8 Where it is impossible to comply with the investments required by the trust instru- ment, recourse must be had to the court for directions. 9 What classes or kinds of investments are trust invest- ments vary in different jurisdictions, and are determined in some by statute and in others by rule of court. Stat- utes in some jurisdictions are construed to be for the pro- 1 King v. Talbot, 40 N. Y. 76. 2 Lawton v. Lawton, 35 App. Div. (N. Y.) 390. 8 In re Hall, 164 N. Y. 196 ; Davis Appellant, 183 Mass. 499. 4 Kobinson v. Robinson, 1 1 Bear. 37 1 ; King v. Talbot, 50 Barb. 453 ; but see Knight v. Boston, 159 Mass. 551, and dissenting opinion. 6 Schaffer v. Wads worth, 106 Mass. 19 ; Stone v. Clay, 103 Ky. 314. 6 Mulford v. Mulford, 53 Atl. Rep. 79, 83 (N. J. Ch. 1902). ' Cummins v. Cummins, 3 Jo. & Lat. 64. 8 McNeillie v. Acton, 4 DeG , M. & G. 744. 9 Mclntire's Adm'rs v. Zanesville, 17 Ohio St. 352. INVESTMENTS 113 tection of the trustee merely, and not as forbidding other investments than those specified by law ; 1 yet where such a statute exists, a trustee would be imprudent if he in- vested in other than the specified securities, 2 although he might be justified in not converting unspecified securities, if he took them from the testator. 8 Where there is no statute or decision of the highest court fixing the class of securities in which a trustee may invest, he can safely follow the rule prescribed for the investment of the funds of savings banks. In England the only kind of investments formerly al- lowed were in the government funds ; 4 but in America the total absence of such securities in early times, and their relative scarcity in later times, gave rise of necessity to a different rule, called the American rule, which is in general terms that " a trustee must observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested." 8 The courts and legislatures in various jurisdictions have, from this rule, evolved very different results, the court deciding in New York that a prudent man would not invest in the stocks of railroads, banks, manufactur- ing or insurance companies ; 6 saying that " The moment a fund is invested in a bank, or insurance, or railroad stock, it has left the control of the trustees ; its safety, and the hazard or risk of loss is no longer dependent upon their skill, care, or discretion in its custody or manage- 1 Clark v. Beers, 61 Conn. 87. a Worrell's Appeal, 23 Pa. St. 44. 8 Supra, p. 106. 4 Now under the Trustees Relief Acts a large field is opened. Lewin, ch. xiv, 4. 5 Putnam, J., Harvard College v. Amory, 9 Pick. 446. 461 ; Mat tocks v. Moulton, 84 Me. 545 ; King v. Talbot, 40 N. Y. 76. King v. Talbot, 40 N. Y. 76. 8 114 INVESTMENTS ment, and the terms of the investment do not contem- plate that it ever will be returned to the trustees ; " l but that the ideal man would invest in real estate, bonds of individuals secured by first mortgages of real estate, first mortgage bonds of corporations, and municipal securities. On the other hand, the courts of Massachusetts hold that a prudent man may invest, in addition to the class of securities allowed in New York, in the stocks of good business corporations, such as banks, railroads, manu- facturing and insurance companies, 2 and in notes of indi- viduals secured by the stock of such companies, and certificates of deposit of good banks. 8 Chief Justice Field, in Dickinson's Appeal, 152 Mass. 184, at p. 187, lays down and explains the Massachusetts rule in part as follows : " A trustee in this Commonwealth undoubtedly finds it difficult to make satisfactory investments of trust prop- erty. The amount of funds seeking investment is very large ; the demand for securities which are as safe as is possible in the affairs of this world is great; and the amount of such securities is small, when compared with the amount of money to be invested. ... A trustee, whose duty is to keep the trust fund safely invested in pro- ductive property, ought not to hazard the safety of the fund under any temptation to make extraordinary profits. . . . , *' Our cases, however, show that trustees in this Com- monwealth are permitted to invest portions of trust funds in dividend-paying stocks and interest-bearing bonds of private business corporations, when the corporations have acquired, by reason of the amount of their property and the prudent management of their affairs, such a reputa- tion that cautious and intelligent persons commonly invest their own money in such stocks and bonds as permanent investments." 1 Woodruff, J., in King v. Talbot, ubi supra. 2 Harvard College v. Amory, 9 Pick. 446. Hunt, Appellant, 141 Mass. 515. INVESTMENTS 115 In the hands of a good trustee the Massachusetts rule is undoubtedly superior, since it gives him a larger op- portunity to use his skill and ability as a financier for the advantage of his beneficiaries ; but undoubtedly the English rule, or the New York rule, is better adapted to inexperienced or ignorant trustees, as much less is left to their discretion, and unfortunately trustees are too often appointed from considerations of friendship, and not from consideration of their discretion or business ability. The laws of the various States give a preponderance in favor of the Massachusetts rule, and a large majority of carefully drawn trust instruments give the trustees the larger discretion. 1 The rule prevailing in each of various States is briefly stated at the end of this chapter. The following kinds of investments are everywhere disapproved, viz.: loans on personal security merely; 3 investment in unincorporated business ventures, partner- ship, and patent rights ; 8 second mortgages 4 and mort- gages on leasehold security, 6 however large the margin, since the first mortgage may be foreclosed ; unproductive real estate, and all investments of an untried 6 or specula- tive nature. Investments without the jurisdiction of the court, being under dissimilar laws and beyond the court's control, are not usually approved ; but, if they are in con- formity with the purposes of the trust, will be sanctioned. 7 1 Perry, 456, opines to the contrary. See note to Nyce's Estate, 40 Amer. Dec. 498. 2 Holmes v. Dring, 2 Cox Eq. c. 1 ; Hunt v. Gontrum, 80 Md. 64. 8 Trull v. Trull, 13 Allen, 407 ; Ames, 471, n. * Gen. Stat. Conn. (1902), 254 ; Mattocks v. Moulton, 84 Me. 545; Porter, v. Woodruff, 36 N. J. Eq. 174; Ames, 485, n. As vendor, a trustee might be justified in taking a second mortgage in part pay- ment. Taft v. Smith, 186 Mass. 31. 6 Slauter v. Favorite, 107 Ind. 292, 296. 6 Kimball v. Reding, 31 N. H. 352. 7 Ames, 486. n. ; Amory i>. Green, 13 Allen, 414 ; Ormiston . 84 N. Y. 339 ; Thayer v. Dewey, 185 Mass. 68. Infra, p. 19S 116 INVESTMENTS Having ascertained the kind of investments he may make, the trustee must exercise a sound discretion in selecting investments within the authorized class. 1 That is to say, he must exercise the same degree of intelligence and diligence that a man of average ability would exercise in making his own investments ; 2 and a provision of the settlement giving him unlimited discretion does not alter his duty to use care, although it may, but will not neces- sarily, extend the class of investments in which he may invest. 8 The question of whether there was a sound exercise of discretion 4 will be determined according to the state of facts as they existed when the investment was made, and not in the light of later developments ; but as these are sometimes difficult to reproduce, or may be forgotten, any memorandum of the inducements made at the time may be of service in refreshing the recollection. 6 Where the class of investments allowed is large, it has been held imprudent to invest more than a fifth part of the estate in one investment. 6 The margin of security required on a mortgage loan is generally fixed either by decision 7 or by statute at one half, but the amount of margin required also depends on the nature of the estate, a less margin, say one third, being required where the values are more stable. In England farming lands were considered the most stable, but in America business property in a city would probably be so considered. 1 Womack v. Austin, 1 S. C. 421 ; Re WLiteley, 33 Ch. Div. 347, 350 ; Ormiston v. Olcott, 84 N. Y. 339. 2 In re Salmon, 42 Ch. Div. 351 ; Harvard College v. Amory, 9 Pick. 446. 8 Tuttle v. Gilmore, 36 N. J. Eq. 617 ; lung v. Talbot, 40 N. Y. 76. * Brown v. French, 125 Mass. 410. 6 Green v. Crapo, 181 Mass. 55; Parker v. Boston Safe Dep. & Trust Co., 186 Mass. 393; Davis, Appellant, 183 Mass. 499. 6 Dickinson's Appeal, 152 Mass. 184. ' In re Salmon, 42 Ch. Div. 351. INVESTMENTS 117 Where, however, the settlement provided that the trus- tee should not be liable for loss on account of taking insufficient security, he was not excused for making an unauthorized loan to a person unsecured, 1 since the loss was on account of going outside of the class and not because the investment was poor of its kind. Investments allowed in Various States. Alabama. By statute may invest in securities of State or United States. Code (1896), 4174. Constitution forbids any law authorizing trustees to invest in bonds or stocks of private corporation. See Randolph v. E. Birmingham Land Co., 104 Ala. 355. English rule laid down, but statute not alluded to. Alaska. No authorities. Arizona. No authorities. Arkansas. No authorities. California. American rule. Civil Code (1903), 2261; In re Cousins's Estate, 111 Cal. 441. Colorado. English rule. Laws of 1903, ch. 181, 71. Executors, administrators, guardians, and con- servators, in bonds of the United States or Colorado, or mortgages approved by the court. No express pro- vision concerning investments by trustees. Investments in stock or bonds of private corporations forbidden. Con- stitution, 359. See Alabama. Connecticut. Rev. Stat (1902), 254, 255. First mortgages to fifty per cent of value; United States, State, town, or city bonds, and savings bank securities. Statute not mandatory, but there is a rigid responsibility for other investments. Clark v. Beers, 61 Conn. 87. Delaware. Massachusetts rule. Massey v. Stout, 4 Del. Ch. 274, 288. Florida. Gen. Stat. (1906), 2717. Bank stocks. Gen. Stat (1906), 2433 and 2612. Mortgages and United States or State securities, which are free of taxa- 1 Ryder v. Bickerton, 3 Swanst. 80, n. 118 INVESTMENTS ALLOWED IN VARIOUS STATES tion, or others ordered by court. These statutes refer to executors and guardians, and not expressly to trustees, but trustees would be safe in following the same rules. Georgia. Code (1895), 3180. In stocks, bonds, or other securities issued by State. Any other investment must be made under order of court. Brown v. Wright, 99 Ga. 96 ; Bull v. Walker, 71 Ga. 196 ; Campbell v. Miller, 38 Ga. 304. Hawaii. No authority. Idaho. No authority. Illinois. Masachusetts rule. Sholty v. Sholty, 140 111. 82; Sherman v. White, 62 111. App. 271. Indiana. Mortgage securities allowed on sale. Burns's Annot. Stat (1901), 3415, 3416. Massa- chusetts rule approved in Slauter v. Favorite, 107 Ind. 292, 296; Shuey v. Latta, 90 Ind. 136; but in Tucker v. State, 73 Ind. 242, New York rule approved. Iowa. Code (1897), 364. Stocks and bonds of United States and State, and mortgages at fifty per cent of value. Kansas. No authorities. Kentucky. Stat. (1903), 4706. Real estate, mort- gages, stocks and bonds, or loans secured by same. But not in railroads unless operated ten years without default- ing, or municipal securities that have not defaulted within ten years. Aydelott v. Breeding, 111 Ky. 847. Statute not mandatory. Substantially Massachusetts rule. Fidel- ity Co. v. Glover, 90 Ky. 355. Louisiana. No authorities. Maine. Massachusetts rule. Mattocks v. Moulton, 84 Me. 545 ; Emery v. Batchelder, 78 Me. "233. Maryland. Hunt r. Gontrum, 80 Md. 64 (semble). English rule. Trustee appointed by court should get its di- rections. Lowe v. Convention of Prot. Ep. Ch., 83 Md.409. Massachusetts. Massachusetts rule, ubi supra. Michigan. Semble Massachusetts rule. See Caspari v. Cutcheon, 110 Mich. 86. INVESTMENTS ALLOWED IN VARIOUS STATES 119 Minnesota. Under direction of court. Rev. Laws (1905), 3249. Mississippi. Massachusetts rule. Smyth v. Burns, 25 Miss. 422 ; Coffin v. Bramlitt, 42 Miss. 194. Missouri. Massachusetts rule. Gamble v. Gibson, 59 Mo. 585 ; Taylor v. Kite, 61 Mo. 142, 144 ; Drake v. Crane, 127 Mo. 85, 106; Garesch^ v. Priest, 9 Mo. App. 270. Montana. Civil Code (1895), 3013. Reasonable security and interest. Nebraska. No authority. Nevada. No authority. New Hampshire. Pub. Stat (1901), ch. 198, 11,. ch. 178, 9. In notes secured by mortgage of real estate worth at least double, in savings banks, or bonds and loans of State, city, town, or county of New Hampshire, or of the United States, and in no other way. Also in stock of leased steam railroads located wholly or in part in New England, whose rental is guaranteed by the Boston & Maine, the New York, New Haven, & Hartford, or the New York Central & Hudson River Railroads. Laws of 1901, ch. 3. New Jersey. Laws of 1899, ch. 103. In bonds of the United States, New Jersey, and of certain municipal- ities. Also in first mortgages on real estate to an amount not exceeding fifty per cent of its value, and bearing in- terest at not less than three nor over six per cent. Laws of 1903, ch. 146, adds loans or securities in which savings banks may invest New Mexico. No authority. New York. New York rule, ubi supra. Laws of 1897, ch. 417, 9, amended by Laws of 1902, ch. 295. Same as savings banks ; also in first mortgages on land worth at least fifty per cent more than the amount loaned thereon. In re Avery, 45 Misc. Rep. 529. North Carolina. Code (1905), 1792 and 5054. In United States bonds or any bonds guaranteed ty 120 INVESTMENTS ALLOWED IN VARIOUS STATES United States, and in State bonds. Statute not man- datory. Massachusetts rule approved. Moore v. Eure, 101 N. C. 11. North Dakota. "Rev. Code N. Dak. (1895), 4286. Reasonable security and interest. American rule. No authorities. Ohio. Bates's Annot Stat (1906), 6413. Certifi- cates of indebtedness of State or United States, or as approved by court. Oregon. No authorities. Pennsylvania. Const., Art. 3, 69. No bonds or stocks of business corporation. Stat. Brightly's Purdon's Dig. (1894), p. 594, 121, 122. 123. Court may authorize investments in debt of United States, State, or Philadelphia, and real securities ; bonds or certificates of debt of school districts, municipal corporations of State, or by leave of court in ground rents or other real estate. Statute man- datory. Hemphill's Appeal, 18 Pa. St. 303 ; Baer's Appeal, 127 Pa. St. (1889), 360. Cf. Law's Estate, 144 Pa. St. 499, 507. Rhode Island. Gen. Laws (1896), ch. 208, 12, gives trustees full power and discretion. Massachusetts rule followed, but should invest under order of court. Peckham v. Newton, 15 R. I. 321 ; Grinnell v. Baker, 17 R. I. 41. South Carolina. Semble, Massachusetts rule. Should loan on mortgage, if possible; if not, should loan on good security. Nance v. Nance, 1 S. C. 209 ; Single- ton v. Lowndes, 9 S. C. 465 ; Nobles v. Hogg, 36 S. C. 322. South Dakota. Reasonable security and interest. Civil Code (1904), 1639. Tennessee. Code (1896), 5434. In public stocks and bonds of United States, and report to county court. Texas. Massachusetts rule. Finlay v. Merriman, 39 Tex. 56. Utah. No authority. INVESTMENTS ALLOWED IN VARIOUS STATES 121 Vermont. Revised Laws (1894), 2617. In real estate, or such other manner as court directs. Semble, Massachusetts rule. Barney v. Parsons, 54 Vt. 623 (1882); McCloskey v. Gleason, 56 Vt. 264. Virginia. Semble^ Massachusetts rule. Davis v. Harman, 21 Gratt. 194, p. 201. Washington. Massachusetts rule in practice, no authority. West Virginia. Semble, English rule. Key v. Hughes, 32 W. Va. 184, 189. Wisconsin, Governmental and real estate securities ; bonds of Wisconsin, and of certain other States and municipalities; bonds and stock of steam railroads owning and operating not less than five hundred miles of track, and which have paid dividends on their entire capital for the last ten years ; also notes secured by pledge of such securities. Wisconsin Stat., Supplement of 1906, 2100 B. Allis's Estate, 123 Wis. 223. Wyoming. No authority. Principal and Income. Receipts. As different per- sons are entitled to the principal and income of the trust fund, the determination of whether a receipt or charge shall belong to principal or income is of great importance, and the erroneous determination of the question may make the trustee liable for a large amount; as, for in- stance, where he has paid the life tenant sums of money which belonged to principal, and should have been in- vested, and these he has no right to recover back in most cases, 1 and which even if he have the right he may not be able to recover back owing to the beneficiary's want of financial responsibility. In fact, the question will usually arise after the death of the life tenant, when the remain- derman comes into possession, and when it is too late to recoup from the income. 1 Bate v. Hooper, 5 DeG., M. & G. 338 ; Downes v. Bullock, 25 Beav. 54, 59, 62. See L. Langdale, Fyler v. Fyler, 3 Beav. 550, 563, for striking example, and infra, p. 184. 122 PRINCIPAL AND INCOME In general, at the time the estate comes into the trus- tee's hands it is all principal, in whatever condition it may happen to be, and all yearly increase thereafter is income. 1 This would always be the case where the property comes into the trustee's hands without delay and invested in proper trust securities ; but if there is a deferred receipt on the conversion of the estate, the rule is different. Where for any reason property does not come into the hands of the trustee for some time after the beginning of the trust, and in the meanwhile the life tenant has no benefit from it, the fund when realized must be so appor- tioned that the life tenant will get the usual rate of inter- est from the beginning of the trust, and the remainder will be the principal fund. 2 This may be the case where the amount of a legacy or other fund is not immediately received or not received in full, 8 or where the property being an unsuitable invest- ment is sold for conversion at an interval after the trust went into effect. It is immaterial that the trustee be given discretion as to the time when he shall make the conversion, if there must be a conversion at some time ; * but if the trustee has a discretion to hold the property as a permanent investment, no apportionment will be made if he converts it. 6 The rule is the same whether the property be converted because it is unproductive, as, for instance, vacant land, 8 1 Where the estate was stocks pledged as collateral the creditors retained the dividends on account of the notes, and it was held that they were not income. They never came as such into executor's hands. Skinner v. Taft, 140 Mich. 282. 2 Kinmonth v. Brigham, 5 Allen, 270; Hagan v. Platt,48 N. J. Eq. 206 ; Westcott v. Nickerson, 120 Mass. 410 ; Edwards v. Edwards, 183 Mass. 581. 8 Cox v. Cox, L. R. 8 Eq. 343. * Edwards v. Edwards, 183 Mass. 581 ; Mndge v. Parker, 139 Mass. 153. It was decided otherwise in Kite's Devisees v. Rite's Ex'rs, 93 Ky. 257, p. 264, but on the ground of testator's intent. 6 Hemenway v. Hemenway, 134 Mass. 446. 6 In re Neel's Estate, 207 Pa. St. 446 ; Billings v. Warren, 216 111. 281. PRINCIPAL AND INCOME 123 a bottomry bond or similar security where the principal and income are included in one sum, or a defaulted note or obligation on which the whole amount is not recovered, or where an obligation is in default and the security has been realized on ; l or whether it be converted because the earnings are greatly in excess of interest, as in the case of a business or partnership, or on a wasting investment such as a land stock where the dividends will ultimately exhaust the security. In either case the rule is the same, namely, that sum is to be found which at the current rate of interest for the period from the beginning of the trust to the time of conversion will yield the amount real- ized. The sum so ascertained is the principal, and the in- terest is the income payable to the immediate beneficiary. For instance, in a case where a trustee who had wasted the estate was removed and only part of the estate was recovered by his successor, the amount of the original es- tate was $30,000, and the whole amount recovered after one year and two months was $26,000. The tenant for life got $1,742.50, which is the interest at six per cent on $24,257.50, the new capital for one year and two months; 2 but where the return is excessive, if a definite intention on the part of the maker of the trust can be shown that the life beneficiary shall have all the proceeds, i. e. shall enjoy the income in specie, his intention will pre- vail, and the whole profits will be paid to the life tenant as income. 8 The amount recovered as damages for an injury or a taking * need not be apportioned, as the fund invested will 1 In re Alston (1901), 2 Ch. 584 ; Trenton Trust Co. v. Donnelly, 65 N. J. Eq. 119. 2 Parsons v. Winslow, 16 Mass. 361 ; Maclaren v. Stainton, L. R. 11 Eq. 382; Meldon v. Devlin, 31 App. Div. N. Y. 146; Greene v. Greene, 19 R. I. 619. 8 Howe v. Lord Dartmouth, 2 White & Tudor, L. C. Eq., 6th Am. ed. t 296; Corle v. Monkhouse, 47 N. J. Eq. 73 ; Westcott v. Nickerson, 120 Mass. 410. * Heard v. Eldredge, 109 Mass. 258. 124 PRINCIPAL AND INCOME GAIN AND LOSS yield an income, 1 and the amount recovered will bear in- terest from the time of the taking. The converse proposition, i. e. the payment of a better- ment or removal of an involuntary incumbrance, falls under the same rule. Gain and Loss. The general rule is that any gain other than the usual yearly income, and any loss other than the usual yearly charges, fall to the principal of the fund. Thus real estate 2 or securities may advance largely in value without any corresponding increase in income, and the whole gain will belong to the principal of the fund, 8 and the life tenant will get no benefit from the increase, unless he be in a position to insist on a sale and reinvest- ment of the property, so as to yield an adequate return. 4 Gain or loss in continuing a business temporarily until it is converted is to be apportioned, 5 but where the busi- ness is conducted under direction of the trust instrument, ordinarily all the income will go to the life beneficiary, 6 and the loss of one year will be made up out of the profit of the next ; but it is wholly a question of intention to be determined by the construction of the trust instrument. If the gain results not from yearly profits of the business, 1 Van Vronker v. Eastman, 7 Met. 1 57. 2 The rule as to vacant land is stated on pp. 122-123. 8 N. Eng. Trust Co. v. Eaton, 140 Mass. 532 ; In re Gerry, 103 N. Y. 445, 450 ; In re Stevens, 46 Misc. Rep. (N. Y.) 623, aff'd 111 App. Div. (N. Y.) 773. Gain on foreclosure : Parker v. Johnson, 37 N. J. Eq. 366 ; Graham's Estate, 198 Pa. St. 216. 4 The learned editor of the fourth edition of Pern- on Trusts, 545, n. 1, suggested that some doubt had been thrown on this question by the reasoning in decisions on collateral points in some jurisdictions. See Wiltbank's Appeal, 64 Pa. St. 256 ; Earp's Appeal, 28 Pa. St. 368; Van Doren v. Olden, 19 N. J. Eq. 176. But the matter seems to be now settled in these States in conformity with the law elsewhere. Graham's Estate, 198 Pa. St. 216; In re Neel's Estate, 207 Pa. St. 446. 6 Underbill, 250. Supra, p. 123. Heighe v. Littig, 63 Md. 301. GAIN AND LOSS 125 but from increase of value of the plant or property, the gain will belong to principal. 1 If the trust estate consists of country real estate, tim- ber cut for thinning will be income, other timber princi- pal, and it has been held that gravel sold will be income, but probably not to such an extent as to be waste. 2 If the trust property consists in part of chattels, which are intended to be used and not converted into cash and invested, the life tenant may wear them out in ordinary use, and need not replace them. 8 If the property consists of farming stock it should be converted, 4 unless intended to be used in specie. The life tenant cannot sell it, even though it be replaced by other kind of stock; as, for instance, 5 where cows are unprofitable, they cannot be replaced by horses, but the beneficiary for life may use them up, and need not re- place them when they die ; 6 and the natural increase will belong to him. 7 Where, however, the stock is left with a farm, and there is an intention expressed or implied that the farm shall be kept up, so much of the increase as is necessary to keep up the herd will belong to principal, and only the excess to income. 8 Implements, furniture, and cattle, in fact all property 1 First Natl. Bank of Carlisle v. Lee, 66 S. W. Rep. 413 (Ky. 1902) ; In re Stevens, 111 App. Div. (N. Y.) 773; Smith v. Hooper, 95 Md. 16. 2 Earl Cowley v. Wellesley, L. R. 1 Eq. 657. 8 Wootten v. Burch, 2 Md. Ch. 190. See infra, p. 147; supra, p. 107 ; Woods v. Sullivan, 1 Swan (Tenn.), 507. * Burnett v. Lester, 53 111. 325. 6 Leonard v. Owen, 93 Ga. 678. 6 Poindexter o. Blackburn, 1 Ired. Eq. 286 ; Braswell v, Morehead, 57 Am. Dec. 586, n. ; Saunders v. Haughton, 57 Am. Dec. 581. 7 Saunders v. Haughton, 8 Ired. Eq. 217; Lewis v. Davis, 3 Mo. 133; Major v. Herndon, 78 Ky. 124; Hunt v. Watkius, 1 Humph. (Tenn.) 498. 8 Calhoun v. Furgeson, 3 Rich. Eq. 160; Robertson v. Collier, 1 Hill Eq. 370 (S. C.). But see Flowers v. Franklin, 5 Watts (Pa.), 265 ; life tenant was to keep up farm ; increase held to go to remain- derman. 126 GAIN AND LOS8 DIVIDENDS that will wear out in use, must be bought out of income. And where it is necessary to replace chattels which are wearing out in use, the trustee may withhold some of the yearly income to make a sinking fund for that purpose. 1 Any income which is rightfully accumulated and added to the principal, will lose its character as income and be- come a gain to principal ; 2 but if the income be kept in a separate fund, even though invested, it retains its char- acter as income, and may be used as such during the duration of the trust. If not so used it will become principal. 8 Dividends. The current dividends on stocks belong wholly to income, even when the stock has been bought at a premium, since the premium is only a part of the price paid for an investment, or a definite share in a property or business, which is presumably worth the price paid, and any gain or loss in price is the gain or loss of the principal. 4 If, however, the investment is a wasting one, such as a mining or land stock, unless the tenant for life is expressly given the full dividend by the settlement, in which case he will of course take it, 5 he will be entitled to receive only the current rate of interest on the inven- tory or cost value of the investment, and the balance will be applied to reduce the valuation, and the amount which he is entitled to receive will be calculated each year on the new principal made by the credits of the preceding dividends. 6 1 Be Housman, 4 Dem. Sur. 404. 2 Minot v. Tappan, 127 Mass. 333 ; Blythe v. Green, 38 Atl. 743 (N. J. Ch.). 8 Robinson v. Bonaparte, 102 Md. 63. * N. Eng. Trust Co. v. Eaton, 140 Mass. 532. See note, p. 124. 6 Eeed v. Head, 6 Allen, 174; Balch v. Hallett, 10 Gray, 402 ; Rob- ertson v. De Brulatour, 111 App. Div. (N. Y.) 882 ; Lowry v. Farmers' Loan & Trnst Co., 172 N. Y. 137. 6 Paris v. Paris, 10 Ves. 185; Mills v. Mills, 7 Sim. 909; Brander v. Brander, 4 Ves. 800. Such investments should ordinarily be con- verted. Supra, p. 106. DIVIDENDS EXTRA DIVIDENDS 127 When the excess of the dividends has thus entirely wiped out the cost of the investment, all the dividends will go to principal, and the life tenant, though an ap- parent loser, is not, because he will receive the dividends on the new investments to the same amount which was originally invested, which is all he is entitled to. The rule has already been explained as to the receipts from an investment, which is not a proper trust invest- ment, and therefore to be converted. 1 Extra Dividends. The successful corporation of mod- ern times earns much more than it distributes in regular yearly dividends to its stockholders. To insure continued success the company must continually put more money into its plant and business. This money is drawn from either or both of two sources, viz. : first, the accumulation of surplus profits, that is, the profits which are left after paying the usual annual dividends ; and secondly, by sub- scriptions of new capital, which subscription is usually for a less sum than the market value of the stock given for it Hence the right to subscribe is a valuable right, either to use or to sell. Besides the accumulations necessary to renew and extend the plant, and make the necessary additions to working capital to keep up or enlarge the business, well managed corporations usually set aside additional earnings in prosperous times, as reserves to meet future exigencies. From time to time, as these accumulations become con- siderable, the company distributes stock to represent the capital added to its business ; and when it finds that it has more funds than are required as reserves, it pays them out as extra cash dividends. The settlement of the respective rights of the life bene- ficiary and remainderman to receive the benefits of these distributions of stock, cash, or valuable rights to subscribe to stock is perplexing, and has given rise to much litigation and conflicting decisions. i /Supra, p. 123. 128 EXTRA DIVIDENDS A corporation is an artificial person, which owns its property in the same way that a natural person owns his. The stockholders as a whole are the corporation, but separately and individually own none of its property, and are not entitled to any share of it until it has been severed from the general fund and has been made payable to the individual stockholder as a dividend. As between the stockholder and the corporation, the decision of the directors is absolute. 1 They can make dividends or not as they see fit, and may turn earnings into permanent capital or distribute accumulations held in capital as profits. 2 It is when the dividend has come into the hands of the stockholder who is a trustee that the difficulty arises in determining who is entitled to enjoy it. An arbitrary rule has been adopted in the Supreme Court of the United States, and in the States of Massachusetts, Illinois, Maine, Georgia, and Connecticut, 8 and lately it would seem, in England. 4 This rule is concisely and clearly stated by Chief Justice Knowlton as follows : 6 "In Minot v. Paine, 99 Mass. 101, p. 108, it is said that in such cases ' a simple rule is to re- gard cash dividends however large as income, and stock dividends however made as capital.' This general rule 1 Hite's Devisees v. Hite's Ex'ors, 93 Ky. 257, p. 265 ; Pritchett v. Nashville Trust Co., 96 Tenn. 472. 2 Sugden v. Ashley, 45 Ch. D. 237 ; Minot v. Paine, 99 Mass. 101 ; Hernenway v. Hemenway, 181 Mass. 406; Smith v. Dana, 77 Conn. 543, p. 554. It is probable that the unsatisfactory condition of the law under the early English cases referred to in Minot v. Paine resulted in some degree from the fact that the questions arose in respect to joint stock companies, which are not corporations, but partnerships ; and ordinary partners are entitled to the profits as such. 8 Gibbons v. Mahon, 136 U. S. 549; Minot v. Paine, 99 Mass. 101 ; De Koven . Alsop, 205 HI. 309; Millen v. Guerrard, 67 Ga. 284; Ga. Code, 2256 ; Gilkey v. Paine, 80 Me. 319 ; Richardson v. Richard- son, 75 Me. 570; Smith v. Dana, 77 Conn. 543; Mills v. Britton, 64 Conn. 4 ; Brinley v. Grou, 50 Conn. 66. 4 Bouch v. Sproule, 12 App. Cas. 385 ; Sproule v. Bouch, 29 Ch. D. 635 ; Sugden v. Ashley, 45 Ch. D. 237. 6 Lyman v. Pratt, 183 Mass. 58, p. 60. EXTRA DIVIDENDS 129 has been followed by this court ever since." (Cases cited.) " In determining what is a cash dividend and what is a stock dividend, substance and not form is regarded, and often it is difficult to decide to which class a particular dividend belongs. The real question is whether the distribution made by the corporation is of money to be taken and used as income, or of capital to be retained in some form as an investment in the corporation." This rule rests not only on the assumption that the corporation has the right to determine how much of its earnings should be capitalized or properly set aside to cover depreciation or extensions, but even more on the practical impossibility of the determination of those ques- tions by the court. 1 Hence the decision of the directors is final as to whether they are distributing profits as such, or are distributing stock as the evidence of profits which have been made capital, and their decision of these questions is to be gathered mainly from the language of the vote by which the dividend is made. 2 In the application of this rule it has been decided that a dividend cannot be divided, and is either all principal or all income ; 8 that a distribution of stock representing ac- cumulated earnings is principal. 4 So, too, a distribution of bonds which were indefinite as to time of payment, and were in effect a sort of pre- ferred stock, were held to be principal ; 6 but where the 1 Smith v. Dana, 77 Conn. 543. The life tenant is not injured, since he profits by the increased efficiency. Granger v. Bassett, 98 Mass. 462. 2 D'Ooge v. Leeds, 176 Mass. 558, p. 560. 8 Minot v. Paine, 99 Mass. 101 ; De Keren v. AIsop, 205 HI. 309 ; Second Uuiversalist Church v. Colgrove, 74 Conn. 79 ; Gifford v. Thompson, 115 Mass. 478. 4 Minot r. Paine. 99 Mass. 101 ; Gibbons v. Mahon, 136 U. S. 549 ; De Koven v. Alsop, 205 111. 309. 6 D'Ooge i'. Leeds, 176 Mass. 558. 9 130 EXTRA DIVIDENDS distribution was of stock purchased out of earnings, it was held to be a distribution of earnings, and not a " stock dividend " in any proper sense of the words, and so belonged to income. 1 On the other hand, a cash dividend, though paid from earnings accumulated before the beginning of the trust, was held to be income. 2 So, too, a cash dividend which was paid simultaneously with and to the same amount as the cost of subscription to new stock was held to be in- come where the dividend and the subscription were sever- able and the stockholder might take his dividend but refuse to subscribe to the stock, 8 although the whole transaction was obviously a way of making a free distribution of stock to the stockholders, and making it full paid stock to meet the legal requirements in that respect. Where, however, the right to subscribe to the new stock and the dividend could not be severed, and the stockholder had no option but was obliged to take the stock and use his dividend in payment for it, the dividend was held to be a stock divi- dend, and therefore principal. 4 The rule that the determination of the corporation de- cides the character of the distribution applies to dividends in liquidation. If there is no apportionment made by the corporation, the whole amount distributed will be con- sidered capital ; 6 but if the directors distribute part of the funds as accumulated earnings not permanently added to capital, they will be income to the life beneficiary. 6 In this case the company was not actually liquidated, but was absorbed by another company through a banker who 1 Leland v. Hayden, 102 Mass. 542 ; Green v. Bissell, 65 Atl. R. 1056. 2 De Koven v. Alsop, 205 111. 309. 8 Davis v. Jackson, 152 Mass. 58; Lyman v. Pratt, 183 Mass. 58; Waterman v. Alden, 42 111. App. 294. 4 Rand v. Hubbell, 115 Mass. 461 ; Daland v. Williams, 101 Mass. 571 ; Curtis v. Oborne, 65 Atl. R. 968. 6 Gifford v. Thompson, 115 Mass. 478 ; Second Universalist Church v. Colgrove, 74 Conn. 79; Mercer v. Buchanan, 132 Fed. 501. 6 Hemenway v. Hemenway, 181 Mass. 406. EXTRA DIVIDENDS 131 bought all the stock at a certain price, but left certain quick assets in the hands of the directors, which they de- cided did not form part of the capital and so distributed as profits. Some stress was laid by the court on the fact that the company was sold as " a going concern ; " but it does not seem as though this could really make any differ- ence, for the company was liquidated so far as the stock- holders' interest was concerned. On precisely the same facts, both the amount paid for the stock and the dividend were held to be principal by the Connecticut court, though applying the same rule. 1 As is said in a later case in that State, the rule must yield where the result of its applica- tion is inequitable ; 2 and in Hemenway v. Hemenway 8 the court says that equity will look at the substance of the transaction. The evident injustice often worked by the Massachusetts rule has overweighed the convenience of having a definite working rule for the trustee to go by, and has led to some curious and inconsistent law. The desirability of making a fair division of extra dividends between life tenant and remainderman has led many courts to deny the right of the corporation to de- termine, so far as this class of stockholders is concerned, how much of the surplus earnings are profits and how much proper reserves for renewals and additions to capital.* Having ascertained these facts independently of the corporate action, the court will then apportion the divi- dend according to the equitable rights of the tenant for life and remainderman to the profits in exactly the same manner as though the corporation was a trustee for its stockholders. 1 Second Universalist Church v. Colgrove, 74 Conn. 79. 2 Smith v. Dana, 77 Conn. 543, pp. 551, 556. * 181 Mass. 486, p. 408. * Earp's Appeal, 28 Pa. St. 368; Van Doren v. Olden, 19 N. J. Eq. 176, 97 Amer. Dec. 650; Lord v. Brooks, 52 N. H. 72 ; Cobb v. Fant, 36 S. C. 1 ; Pritchett v. Nashville Trust Co., 96 Tenn. 472. 132 EXTRA DIVIDENDS The courts have never pushed the principle beyond ap- portioning the dividend between the parties who have a beneficial interest in the stock at the time the dividend is declared. No part of a dividend will be given to the estate of a deceased beneficiary. 1 Nor will the court give any part of the increased market price of the stock on account of accumulated earnings to the life tenant, 2 nor can it force the company to divide its earnings, 8 but recognizes that as between the corporation and the stock- holders the directors' decisions are final. 4 With these equitable considerations as a foundation, but disregarding the anomalies and practical difficulties, the Pennsylvania rule is that all the company's earnings belong to the person who was entitled to the income during the period when the money was earned, whether declared in dividends or not. 5 It follows that the form in which a dividend is declared, whether in stock or cash, is im- material. 6 If stock is issued to represent accumulated earnings, it can be sold to produce the same amount as though the accumulations had been divided in cash. 7 The period during which earnings were accumulated is to be gathered from the company's accounts as shown in their published statements, 8 and by the variation of the value of the stock, which is assumed to vary exactly with the amount of accumulated surplus ; 9 and a master may be appointed to ascertain the facts. 10 In New Jersey 1 Bates v. McKinlay, 31 Beav. 280. 2 Connolly's Estate, 198 Pa. St. 137. 3 Pratt v. Pratt, 33 Conn. 446. * Kite's Devisees v. Kite's Ex'rs, 93 Ky. 257-265. 5 Earp's Appeal, 28 Pa. St. 368. 6 Vinton's Appeal, 99 Pa. St. 434. 7 Smith's Estate, 140 Pa. St. 344. 8 Earp's Appeal, 28 Pa. St. 368 ; Thomas v. Gregg, 78 Md. 545. 9 Earp's Appeal, 28 Pa. St. 344 ; Smith's Estate, 140 Pa. St. 344, p. 357. Howes, Income and Principal, p. 29. Common experience indicates that this assumption is contrary to fact. The " value," that is, market price, depends on many other considerations besides ac- cumulated surplus. 10 Van Doren v. Olden, 19 N. J. Eq. 176. EXTRA DIVIDENDS 133 the proportion of time is taken since the last dividend was declared. 1 The Pennsylvania rule is followed in New Jersey, New Hampshire, and South Carolina. 2 In Maryland this rule was followed in Thomas v. Gregg, 8 but in Quinn v. Safe Deposit and Trust Co. 4 the action of the directors in de- termining how much of the accumulated fund was income and how much was principal was approved and followed, although substantially the whole fund was accumulated be- fore the commencement of the trust. Applying this rule, the courts have decided that dividends, whether stock or cash, may be divided and apportioned, 5 and that earnings accumulated during the testator's lifetime or before the beginning of the trust are principal. 6 In New York a modification of the Pennsylvania rule was established by the case of McLouth u. Hunt 7 and confirmed in Lowry v. Farmers' Loan & Trust Co. 8 This rule is that the dividend, either stock or cash, will not be apportioned as to the time when it is earned, but if it is based on accumulated earnings or profits it is income, not capital. That the testator's intent must be discovered, and that the action of the corporation, while having great weight, is not conclusive on the court. 9 Each case stands on its own merits. 10 In a well-considered case in Kentucky, 11 the court recog- nizes that the directors' action must be final as between 1 Lang v. Lang's Ex'rs, 57 N. J. Eq. 325. 2 Van Doren v. Olden, 19 N. J. Eq. 176, 97 Amer. Dec. 650; Lang's Ex'rs v. Lang, 56 N. J. Eq. 603 ; Lord v. Brooks, 52 N. H. 72 ; Price v. Burroughs, 58 N. H. 302; Holbrook v. Holbrook, 66 Atl. K. 124; Cobb v. Faiit, 36 S. C. 1. 8 78 Md. 545. * 93 Md. 285. 6 Earp's Appeal, 28 Pa. St. 278, p. 375. 6 Thomas v. Gregg, 78 Md. 545; Nice's Appeal, 54 Pa. 200; Smith's Estate, 140 Pa. St. 344, p. 352. 7 154 N. Y. 179. 8 172 N. Y. 137. 9 Lowry v. Farmers' Loan & Trust Co., 172 N. Y. 137 ; Stewart v. Phelps, 173 N. Y. 621. 10 McLouth v Hunt, 154 N. Y. 179, p. 189; Rdbertson v. De Brula- tour, 188 N. Y. 301. " Kite's Devisees v. Hite's Ex'rs, 93 Ky. 257. 134 EXTRA DIVIDENDS the stockholder and the corporation, and does not attempt to apportion the dividend, but declines to permit the cor- poration to decide to whom a dividend shall belong as between the life tenant and remainderman, and finally de- cides the case on its merits without attempting to lay down any settled rule. In other jurisdictions the question has been similarly treated ; l and in general, where no rule has been adopted, the trustee should take the direction of the court as to the disposition of the dividend. The right to subscribe for new stock, whether availed of or sold for cash, is generally held in all jurisdictions, irrespective of rules governing extra dividends, to be principal. 2 The granting of such a right is really not a ' ' dividend, " properly speaking, at all, though often called so in discussing these questions. Many settlements to-day expressly provide that the trustee shall in his uncontrolled discretion pay the divi- dend to the life tenant or remainderman, or apportion it between them, as equity may require. The New York court affirmed the trustee's action in such a case, where he seemed to have acted faithfully and discreetly. 3 The Massachusetts rule is too arbitrary and the Penn- s} T lvania rule too impracticable to make them good working rules, while it is too expensive and involves too much de- lay to apply to the court for instructions in each case; and therefore provision by the settlement or by statute would seem desirable, leaving the matter to the trustee's discretion. 1 Pritchett v. Nashville Trust Co., 96 Term. 472 ; Greene v. Smith, 17 R. I. 28; Brown, Pet'r, 14 R. I. 371. 2 Atkins v. Albree, 12 Allen, 359 ; Eidman v. Bowman, 58 111. 444 ; De Koven t>. Alsop, 205 111. 309 ; Greene v. Smith, 17 R. I. 28 ; Brinley v. Grou, 50 Conn. 66 ; Hite's Devisees v. Kite's Ex'rs, 93 Ky. 257, p. 267 ; Pierce v. Boroughs, 58 N. H. 302. The word "generally" was used advisedly, as in Pennsylvania there are decisions both ways. Biddle'a Appeal, 99 Pa. St. 278 ; In re Kemble's Estate, 201 Pa. St. 523 ; Wilt- bank's Appeal, 64 Pa. St. 256 ; Eisnew's Appeal, 175 Pa. St. 143. See also Holbrook v. Holbrook, 66 Atl. R. 124. 8 In re Biting, 33 Misc. (N. Y.) 675. ORDINARY DIVIDENDS NOT APPORTIONED 135 Ordinary Dividends not Apportioned. No part of a company's property belongs to a stockholder until it is separated and declared as a dividend ; hence a dividend is an independent debt payable to the stockholders of a cer- tain day, and remains principal until separated from the other funds and declared payable to the stockholders, 1 and therefore is never apportionable, and is always pay- able, no matter when paid, to the stockholder entitled at the time specified in the vote ; 2 but if the trustee sold a stock just before the dividend day to defraud the life tenant or buy land according to the terms of the trust instrument, 8 the life beneficiary would be entitled to so much of the proceeds as would equal the dividend lost by the sale. Delayed Dividends. Where the dividends on stock are cumulative, and not paid when due but paid in full at a later date, it has been held that they should be apportioned among the persons to whom they would have been paid had they been paid when due, even including the estate of a deceased beneficiary ; 4 but this decision is so contrary to the principles already discussed that it is doubtful whether it would be followed. It is more ingenious than convincing to argue that a dividend is severed from the corporate funds by being made cumu- lative in the charter. 6 Interest sometimes Apportioned. All rents and generally the whole amount received as interest is in- 1 Lowell, Transfer of Stock, 52, n. 3, authorities ; Perry, 545 ; Granger v. Bassett, 98 Mass. 462 ; Bates v. McKinley, 31 Beav. 280 ; De Koven v. Alsop, 205 111. 309. 2 McKeen's Appeal, 42 Pa. St. 479 ; Johnson v. Bridgewater Mfg. Co., 14 Gray, 274 ; Kite's Devisees v. Kite's Ex'rs, 93 Ky. 257 ; but see Clive v. Clive, Kay, 600, contra, and Lang v. Lang' s Ex'rs, 57 N. J. Eq. 325, where dividends are apportioned like interest. 8 Londesborough v. Somerville, 19 Beav. 295. * Meldrim v. Trnstees of Trinity Church, 100 Ga. 479. 6 See pages 128 et seq., supra. Howes, Income and Principal, p. 18. 136 INTEREST SOMETIMES APPORTIONED come, and in England the rule is not subject to any exception. 1 In some States, if a bond is purchased at a premium, sufficient of the interest must be set aside yearly to wipe out the premium at the maturity of the obligation, since a bond purchased at a premium is a wasting security, which would otherwise, out of justice to the remainder- man, be converted ; 2 but it follows that no part of the interest on a bond which is part of the property originally settled need be credited to principal, since there is no obligation to convert the bond, even though it be worth more than par. 8 The practice of buying bonds which sell at a discount, to balance those bought at a premium, is not sound, as the difference of price is not simply a question of interest, but is more often one of security, nor can the loss on one investment be set off against the gain on another. 4 Interest accrues from day to day, and will therefore be apportioned upon a sale of the security on which it accrues, or upon the termination of the life estate. 6 The interest accruing up to the date of sale or death being income, and the balance belonging to, and being part of, the security turned over. And this is the rule even where the debt is secured by a bond or mortgage. 6 But where the interest is payable by a coupon, which might be detached and sold separately, 7 and would then be a separate bond, 1 Hemenway v. Hemenway, 134 Mass. 446, 450. 2 Ibid. ; In re Allis's Estate, 123 Wis. 223 ; Curtis v. Osborn, 65 Atl R. 968 ; In re Hoyt, 27 App. Div. (N. Y.) 285 ; N. Y. Life Ins. & Trust Co. v. Baker, 38 App. Div. (N. Y.) 417. But the rule in New York seems to depend largely on the consideration of each case. N. Y. Life Ins. & Trust Co. v. Baker, 165 N. Y. 484 ; In re Stevens, 111 App. Div. (N. Y.) 773. No sinking fund in Kentucky and Pennsylvania. Kite's Devisees v. Kite's Ex'rs, ubi supra ; Beyer's Estate, 44 W. N. C. 528, Orphans' Ct., Phila., 1899. 8 Shaw v. Cordis, 143 Mass. 443. * Infra, p. 154. 5 Dexter v. Phillips, 121 Mass. 178. 6 Dexter v. Phillips, 121 Mass. 178. Clark v. Iowa City, 20 Wall. 583, 589. INTEREST SOMETIMES APPORTIONED 137 the rule, in the absence of statute,, is otherwise, and there is no apportionment ; but where the statute exists, even coupons are apportioned. 1 In some jurisdictions there are statutes apportioning rents and coupons and annuities on the termination of a life estate settled by will. 2 This statute does not apply to settlements made by deed, which are governed by the common law. Payments. Any loss to the fund by depreciation of the market value of the property belongs to principal, and a loss occasioned by a breach of trust stands on the same footing. 8 Discharge of Encumbrance. If there is an encum- brance on the estate, as, for instance, a mortgage, if at once discharged it is paid from the remainder, but if carried 4 the interest is chargeable to income, and the principal to the corpus of the fund, and this is true even when the estate is not charged until a long period say ten years after the settlement. 5 Similarly, where the trustees are compelled to discharge an involuntary encumbrance, such as a betterment assess- ment 6 or judgment, the cost is apportioned between in- come and principal. The whole amount is charged to principal and deducted from the estate of the remainder- man, and the income is charged interest thereon yearly, or the interest may be funded and charged in a lump ; or if the life tenant and remainderman are beneficiaries of the same funds, the principal is paid out of the corpus, and the life tenant loses interest and the remainderman the principal. 1 Adams v. Adams, 139 Mass. 449. 2 Mass. Rev. Laws (1902), ch. 141, 25. * Parsons v. Winslow, 16 Mass. 361. See p. 124, supra. 4 Van Vronker r. Eastman, 7 Met. 157. 6 Maclaren v. Stainton, L. R. 11 Eq. 382. 6 A betterment assessment is a tax, but not an ordinary one, and as between life tenant and remainderman is treated as an encumbrance. Plympton v. Boston Dispensary, 106 Mass. 544. 138 ALTERATIONS AND REPAIRS Alterations and Repairs. Alterations and additions to real estate whereby the usefulness or rental value is increased are chargeable to principal, 1 but the repairs or expenditures which are necessary to maintain the property in its previous condition are chargeable to income. 2 It is often a difficult question of fact to decide whether a specified expenditure is an addition to the property or a current repair ; but the rule may be stated that, where re- pairs improve the property to the extent of their cost, they are chargeable to principal, and are a judicious investment of the trust funds. 8 For instance, replacing ruinous buildings which have been condemned, 4 or putting in new foundations and add- ing fire escapes when required by the city, 5 and the addition of an elevator to a building which previously had none will be charged to principal, while putting in a new ele- vator in the place of an old one will be a repair chargeable to income. 6 So also an expenditure may be in the nature of both an addition and a repair, and is then chargeable to principal only to the extent to which it benefits the property ; and in some States 7 there are statutes allowing an apportion- 1 Sohier v. Eldredge, 103 Mass. 345 ; Caldecott v. Brown, 2 Hare, 144. 2 Underbill, pp. 250,^251, states that in the absence of express pro- vision in the settlement the equitable life tenant is not bound to repair, and so all repairs should be made under order of court and appor- tioned by it. The English cases have arisen almost exclusively where the property was in the possession of the equitable life tenant, and not being managed as an investment by the trustees, as is general in America. Lewin, pp. 642, 644. In America the rule is as stated in the text, and a trustee should charge necessary current repairs to income. Parsons v. Winslow, 16 Mass. 361 ; Hepburn v. Hepburn, 2 Bradf. (N. Y.) 74; Little v. Little, 161 Mass. 188. 8 Sohier v. Eldredge, 103 Mass. 345 ; In re Parr, 92 N. Y. S. 990. * Smith P. Keteltas, 32 Misc. Rep. (X. Y.) 111. 6 In re Parr, 45 Misc. Rep. (N. Y.) 564 ; affd, 100 N. Y. Supp. 1133. Little v. Little, 161 Mass. 188. 7 Pennsylvania. ALTERATIONS AND REPAIRS 139 ment in such cases. The decision of the trustee in ap- portioning the expense, if made with reasonable discretion, will be upheld by the court ; 1 but in doubtful cases it is well to get the instructions of the court before under- taking an extensive job, which, if charged wholly to the income, might be very burdensome. 2 All expenditures on newly acquired property which are necessary to put it in condition to let or to hold, whether they are in the nature of repairs or additions, are charge- able to principal. For instance, fencing in land or repair- ing a house to obtain a tenant. These expenses, although chargeable to income at other times, on the acquisition of a new estate will be considered as so much additional purchase money, and chargeable to principal. 8 All ordinary current expenses are charged to income. Shaw, C. J., says income means net income after deduct- ing taxes, repairs, and ordinary current expenses ; 4 current expenses are now 5 considered to include insurance, and in some jurisdictions the premiums paid for securities. 6 Taxes. All annual taxes, except those assessed on vacant land, are charged to income. 7 The whole tax for the year is chargeable to the tenant enjoying the property at the time when the tax is assessed. 8 Legacy taxes on the life interest are to be deducted from income, although the executor may have turned over the estate in one lump. 9 As vacant land gives no return to the life tenant, but his whole income might be used in preserving the property of 1 Jordan v. Jordan, 192 Mass. 337, p. 343. a Caldecott v. Brown, 2 Hare, 144. 3 Parsons v. Winslow, 16 Mass. 361 ; N. Eng. Trust Co. v. Eaton, 140 Mass. 532. * Watts v. Howard, 7 Met. 478; Bridge v. Bridge, 146 Mass. 373. 6 Jordan v. Jordan, 192 Mass. 337, p. 344. 6 New York Life Ins. Co. v. Sands, 53 N. Y. S. 320. Supra, p. 136. 7 Plympton v. Dispensary, 106 Mass. 544; Hildenbrandt v. Wolff, 79 Mo. App. 333. 8 Holmes v. Taber, 9 Allen, 246. Fitzgerald v. R. I. Hosp. Trust Co., 24 R. I. 59. 140 TAXES the remainderman, 1 all charges against it, including taxes, are chargeable to principal. 2 The taxes on a dwelling- house given for life are payable by the occupier, and not from the general income, in the absence of the manifesta- tion of a contrary intention. 8 Special assessments, such as betterment assessments, sewer taxes, etc., are chargeable to principal or are ap- portioned as specified. 4 Insurance. Insurance premiums are expressly charge- able to income by the terms of most carefully drawn trust instruments, and where no express provision is made in the instrument the general practice is to charge them to income. 6 1 Stone v. Littlefield, 151 Mass. 485; Underbill, p. 246, n. 2 -Pierce v. Burroughs, 58 N. H. 302; Stone v. Littlefield, 151 Mass. 485 ; Hite's Devisees v. Kite's Ex'rs, 93 Ky. 257 ; Trenton Trust Co. v. Donelly, 65 N. J. Eq. 119; In re Pitney, 113 App. Div. (N. Y.) 845; Edwards v. Edwards, 183 Mass., 581. 8 Wiggin v. Swett, 6 Met. 194 ; Amory v. Lowell, 104 Mass. 265. 4 Plympton v. Dispensary, 106 Mass. 544. 5 There is singularly little authority on the question. Probably be- cause in early times and in England insurance was not considered a necessary precaution of an ordinarily cautious man, and because fail- ure to insure by a life tenant is not permissive waste (Harrison v. Pepper, 166 Mass. 288), and unfortunately what authority there is is conflicting. In Graham v. Roberts, 8 Ired. Eq. 99, the court expresses the opinion, and in the New York case, Re Housman, 4 Dem. Sur. 404, the court decides, on the authority of Peck v. Sherwood, 56 N. Y. 615 (in which no reason is stated), that the premiums are appor- tionable according to the respective interests of the life tenant and remaindermen, and Perry, 487, says that, there being no obligation to insure, the premium should not be charged to the life tenant without his consent. See also Wiggin v. Swett, 6 Met. 194. On the other hand, in Darcy v. Croft, 9 Ir. Ch. 19, in a carefully considered opinion, the cost of insuring the life of the annuitant was held charge- able to income, and this case seems to state the true reason, which is that the income is chargeable with all the ordinary annual expenses of maintaining the property (see Shaw, C. J., Watts v. Howard, 7 Met. 478, 482), of which insurance is now like repairs and taxes, one of the ordinary and necessary incidents of maintaining real estate. (Se INSURANCE 141 In case of a partial loss, the funds recovered would be used in repairing. 1 In case of a total loss, the fund should be invested, 2 and could be used in rebuilding if such an investment is authorized, and will retain its character as real estate, although it may be otherwise where the insur- ance existed at the time of the will, as in such case the policy was a personal asset at the outset. 8 If the life tenant insures the property, the remainderman has no claim on the fund recovered, the contract of insur- ance being merely to indemnify the individual for his loss. The fund recovered does not represent or stand in the place of the building destroyed. 4 But where a trustee insures the building, he will insure all his interest which is subject to the claim of both life tenant and remainderman, and in such case the fund recovered would stand in the place of the property destroyed as the property of the remainder- man of which the life tenant has the use. 6 Expenses. 8 The charges of the trustees for managing the property, which are by the way of a commission on income, are charged to income. Extra charges for ser- vices which are beneficial to the fund are charged to principal, or may be apportioned equitably. 7 Jordan v. Jordan, 192 Mass. 337, p. 344, and Bridge v. Bridge, 146 Mass. 373.) The ordinary practice of charging the premiums to in- come is entirely consonant with the theories of law, and with the law as now enacted by statute in England. Trustees Act, 1893, 18. 1 Brough v. Higgins, 2 Gratt. 408. 3 Lerow r.'.Wilmarth, 9 Allen, 382. 8 Haxall's Ex'rs v. Shippen, 10 Leigh, 536. In that case, the life tenant gave bond to invest money and pay over on death of life tenant, hence had no right to convert. * Harrison v. Pepper, 166 Mass. 288. 5 Graham v. Roberts, 8 Ired. Eq. 99 ; Haxall's Ex're v. Shippen, 10 Leigh, 536 ; Re Housman, 4 Dem. Sur. 404. 6 As to what expenses are allowed, see supra, p. 35. 7 Kite's Devisees v. Kite's Ex'rs, 93 Ky. 257, p. 269 ; R. L Hoep. Trust Co. v. Watermann, 23 R. I. 342 ; Gordon v. West, 8 N. H. 444. But see Spangler's Estate, 21 Pa. St. 335, where such charges were 142 EXPENSES Brokers' commissions on change of investment, where it was expressly provided that all expenses were to be charged to income, were properly classed as expenses and charged to income, 1 but in a purchase or sale of real estate the brokers' commission is in practice con- sidered as part of the price of the property, and so is generally charged to principal, and would probably be allowed so generally ; 2 and in the absence of expressed intention, the same reasoning would seem to apply to the purchase of stocks and bonds. Legal expenses of settling the interpretation of the trust instrument, the cost of obtaining the instructions of the court, or appointment of new trustees are borne by the principal, 8 and so also the expenses of recovering the fund or paying it out, and of the final accounting. 4 So also the legal expenses of protecting the property; but the legal expenses of collecting the income, or of deter- mining the matter of payments chargeable to income, fall naturally to income. The Distribution of the Trust Fund. The trustee must distribute the trust fund properly at his peril, and if he distributes the wrong amount, or pays it to the wrong person, must bear the loss. The fact that he has been diligent or has taken advice will not save him, and his only protection is to obtain a decree of distribution from the court. But he will be protected if, in paying one beneficiary whose share held to be the ordinary charges of protecting the property, and so charged to income. Underbill, p. 246, n. Supra, pp. 98, 99. 1 Heard v. Eldredge, 109 Mass. 258. 2 Smith v. Nones, 28 Ky. Law Reg. 248. On the authority of Heard v. Eldredge and the supposed custom of trustees the Massachusetts court has decided that brokers' commissions must be charged to income. Jordan v. Jordan, 192 Mass. 337, p. 346. By statute the law is now in accordance with the text. Acts of 1907, ch. 371. 8 Howland v. Green, 108 Mass. 283. Supra, pp. 98, 99. * Chisholm v. Hammersley, 114 App. Div. (N. Y.) 565. THE DISTRIBUTION OP THE TRUST FUND 143 becomes due before the others, he pays him on a fair valuation of the estate, although the securities depreciate so that the others get less. 1 In some States the fund itself may be paid into court for distribution ; 2 and statutes generally exist giving courts of probate authority to decree distribution in the case of testamentary trusts. As these courts have the custody of the fund itself, and the decree is against the property, and not merely against the parties to the suit, all persons interested need not be parties in order to give the court jurisdiction, 8 and pro- vided the proper notices have been given, the validity of the decree cannot be questioned by any form of pleading or proof. 4 The notice to be given is generally prescribed by statute, or in the absence of statute by the court. Where an error has been made in the decree as to the persons entitled to distribution, as for instance where the estate has been divided among four persons instead of five, the court may correct its decree so that the excess may be recovered from the persons who have been over- paid, but the original decree will stand in so far as it protects the trustee, and he will not be liable in any event. 6 Where the proper statutory authority does not exist, or in trusts which are not created by the decree of a probate court, resort may be had to a court of equity for a decree of distribution. In such suits care must be taken to make all parties interested parties to the suit, or they will not 1 Frere v. Winslow, 45 Ch. Div. 249. 2 Annot. Code, Iowa (1897), 370, as amended 1902; Mont. Code Civ. Proc. (1895), 970; Bates's Annot. Ohio Stat. (1906), 5592; Rev. Stat. Okla. (1903), 4446; Rev. Stat. Wy. (1899), 4059. 8 Minot v. Purrington, 190 Mass 336, p. 340. 4 Loring Adm. v. Steineman et al., 1 Met. 204 ; Lamson v. Knowles, 170 Mass. 295; Pierce v. Prescott, 128 Mass. 140. See statutes passim. 6 Harris v. Starkey, 176 Mass. 445 ; Minot v. Purrington, 190 Mass. 336 ; Cleaveland v. Draper, 80 N. E. 227 (Mass. 1907). 144 THE DISTRIBUTION OP THE TRUST FUND be concluded, 1 and if there be any doubt as to whether all the proper parties have been joined the trustee may require the payees to give security to reimburse against any claims that may arise. The common practice of getting a final account show- ing a distribution allowed by the court is objectionable, as although the allowance of the account operates as a decree against all parties to the suit, 2 it is not conclusive on all the world, 8 and a share improperly paid over cannot be recovered back. 4 The trustee must pay the distributive shares at his peril to the proper distributees. The fact that he pays on a forged order, or an invalid assignment, 6 or on a power of attorney which he supposes to be good, but which has in fact been revoked, will not protect him. Now, by statute in England, a trustee paying in good faith under a revoked order is protected, 6 but the law is not so in America. He must not pay a minor's share to himself or his parent or guardian without an order of court, 7 or he may be required to pay him again when he comes of age. He may perpetuate the evidence of his payments by an account filed in court, and allowed after notice to all inter- ested, or under statutory law, by filing the vouchers in court. 8 The former course is preferable, as all parties to 1 Cathaway v. Bowles, 136 Mass. 54 ; Kendall v. DeForest, 101 Fed. R. 167. 2 Emery . Batchelder, 132 Mass. 452. 8 Palmer v. Whitney, 166 Mass. 306. There are statutes in some States making such an account conclusive. Mass. Rev. Laws, ch. 150, 21. 4 Hilliard v. Fulford, 4 Ch. Div. 389. 6 Palmer v. Whitney, 166 Mass. 306. The court in a decree of dis- tribution will not pass on the validity of assignments. Lenz v. Prea- cott, 144 Mass. 505. 6 Underbill, p. 365. 7 Perry, 624. But see Sparhawk v. Buell, 9 Vt. 41. 8 Mass. Rev. Laws (1902), ch. 150, 20. THE DISTRIBUTION OF THE TRUST FUND 145 the suit are forever barred by the suit, and he cannot de- mand a receipt or discharge where he simply follows out the distribution according to the terms of the trust, and cannot refuse to pay until he gets a receipt. 1 As a distribution of the fund without a decree of the court or a decree of a court itself is an overt act, the statute of limitations will begin to run from that time. 2 If the trust was "to convey" or "divide" the real estate, a conveyance is necessary, and a power of sale is implied if a sale is necessary to divide the property, 8 but a conveyance to the remaindermen as tenants in common may be all that is necessary to " equally divide " the estate ; * otherwise, real estate will usually vest in the distributees by the provisions of the instrument. 6 As these duties are so onerous, compensation is gener- ally allowed, and is usually two and a half or one per cent on the amount turned over. 6 In some jurisdictions the amount is regulated by statute. The trustee may retain the funds in his hands until the account is settled and he has been paid his charges. 7 VI. LIABILITIES. To Strangers. A trustee is personally liable on his contracts, even where he describes himself as a trustee or adds the word "trustee" to his signature. 8 He may, however, expressly limit his liability to the extent of the 1 Chadwick v. Heatley, 2 Coll. 137. Supra, p. 91. 2 Jones v. Home Savings Bank, 118 Mich. 155. 8 Parker v. Seeley, 56 N. J. Eq. 110; Davison v. Tarns, 30 Misc. Rep. (N. Y.) 156. * How v. Waldron, 98 Mass. 281. 8 Temple v. Ferguson, 110 Tenn. 84 ; Morgan v. Moore, 3 Gray, 319. 8 Supra, p. 36. 7 Foster v. Bailey, 157 Mass. 160 ; Baring v. Willing. 4 Wash. C. C. 248. 8 Bowen v. Penny, 76 Ga. 743; Taylor v. Davis, 110 U. S. 330. Supra, pp. 28, 78. 10 146 LIABILITY TO STRANGERS trust estate, 1 but the terms of the contract must show clearly that the contractor relied wholly on the credit of the trust estate and not on the personal credit of the trustee. 2 Without such a provision the trustee will be personally liable even under a contract ordered by the court ; since the order of court only insures his right to indemnity from the trust property, and does not affect a stranger. 8 He is also liable on the covenants in a deed or lease, and on the recitals in a deed, if he should have special knowledge of their accuracy.* He is not bound to give information to strangers with whom the beneficiary is negotiating a loan, and if he in- nocently makes an erroneous representation, is not liable therefor. 5 He will be personally liable where he assumes to be a trustee, when as a matter of fact, owing to defective appointment he is not a trustee, and in such cases will have no right to indemnity from the trust property. If he exceeds his powers, as for instance in selling or leasing to a stranger, and the stranger gets no title, he will be liable personally and individually for the price, and also for damages, if any. 6 He is liable personally as stockholder in a corporation, 7 and for taxes, 8 and in tort as owner of the property to the same extent as though the ownership was individual.* In all these cases he has a right of indemnity from the trust fund only so far as he has neglected no duty and has acted strictly within his powers. He is liable criminally for embezzlement if he mis- appropriates the trust funds, even though under the pre- 1 Taylor v. Davis, ut supra ; Packard v. Kingman, 109 Mich. 497. 8 Mitchell v. Whitlock, 121 N. C. 166 ; Connally v. Lyons, 82 Texas, 664; Mulrein v. Smillie, 25 App. Div. 135 (N. Y.). 8 Gill v. Carmine, 55 Md. 339 ;. Glenn v. Allison, 58 Md. 537. * Lewin, p. 211, n. ; Story v. Gape, 2 Jur. (N. s.) 706. Supra, p. 100. 6 Low v. Bouverie, 3 Ch. (1891) 82. 6 Diamond v. Wheeler, 80 App. Div. (N. Y.) 58. Supra, p. 29. 1 Supra, p. 27. 8 Supra, p. 29. 9 Supra, p. 30. LIABILITY TO STRANGERS 147 tence of a loan to himself; 1 for he cannot change himself from a trustee of the funds into a debtor without the con- sent of the beneficiary ; 2 and the fact of consent must be established by positive proof. 8 If a defaulting trustee is a lawyer, his breach of trust is a cause for disbarment. 4 Liability to Beneficiaries. The liabilities of trustees to their beneficiaries are joint and several, and^a decree may be enforced against either, even if not the one actually at fault, and irrespective of liability among themselves ; 5 but this joint liability ends with the trustee's death, and his estate is liable only for the acts during the trustee's lifetime. Each transaction stands by itself, hence the gain on one cannot set off the loss on another. All the gains belong to the trust estate, and not to the trustee, hence they do not belong to him to set against his liabilities ; 6 but in administering a fund as a whole, one transaction cannot be picked apart to show gains and losses, as. for instance, in developing real estate, the loss on a building built to make the rest more readily salable is part of the whole transaction, and not a separate loss. 7 The trustee is liable to his beneficiary for any loss of the trust property arising from his neglect of duty. As, for instance, where the trust is created, and he neglects 1 Mass. Kev. Laws (1902), ch. 208, 48 ; Rev. Code N. Dak. (1895), 7464, as amended by Laws 1901, ch. 82; Bates's Ann. Stat. Ohio (1906), 6842-, Annot. Code Oregon (1902), 1836; Code Tenn. (1896), 6592. 2 Marshall v. Marshall, 53 Pac. Rep. 617 (Col. 1898); Gunter . Janes, 9 Cal. 643, p. 659. 8 In re Farmers' Loan & Trust Co., 47 App. Div. (N. Y.) 448. * Thompson v. Finch, 8 DeG., M. & G. 560. & McCartin v. Traphagen, 43 N. J. Eq. 323 ; Bermingham v. Wil cox, 120 Cal. 467. 6 Wiles v. Gresham, 2 Drew. 258 ; Blake v. Pegram, 109 Mass. 54L 7 Vyse v. Foster, L. R. 7 H. L. 318. 148 LIABILITY TO BENEFICIARIES to collect or secure the property, 1 or inexcusably allows rents to fall in arrears. 2 Thus, if he neglects to insure where it is his duty to do so, he will be liable for the loss, 8 or if he neglects to invest, he will be liable for interest. 4 He is liable not only for a loss directly due to his neglect, but also where it is only indirectly due to his neglect ; as, for instance, if he leaves the property im- properly in the hands of his co-trustee or an agent, and it is misappropriated, destroyed, or stolen. 5 Though he will not be liable for the acts and crimes of strangers through which the property is lost, if he has done his duty in taking care of the property, as, for instance, where the property is properly deposited aiid then stolen, 6 yet if he has been remiss in his duty he will be liable for any loss that may occur in any manner ; 7 as, for instance, if he has mingled the trust money with his own funds in the bank, he will be liable for the loss by the failure of the bank ; while if the property were deposited in the names of the trustees, they would not be liable unless they were careless in selecting the depositary. The usual ex- emption clause providing that the trustee shall not be liable for the acts or defaults of his agent will not excuse him if he neglects his duty and intrusts matters to an agent improperly. The exemption clause applies only where the agent is acting properly as such. 8 Liability for Co-trustee. As a general rule he is liable for his own acts and neglects only, and is not liable for 1 Fen wick v. Green well, 10 Beav. 412. Supra, p. 100. 2 Tebbs v. Carpenter, 1 Mad. 291 ; In re Mclntyre, 24 App. Div- (N. Y.) 167. 8 As to his duty, see supra, p. 102, u. 3. 4 See supra, p. 110. White v. Ditson, 140 Mass. 351. 5 Bostock v. Floyer, L. R. 1 Eq. 26. Supra, p. 103. 6 Jones v. Lewis, 2 Ves. Sen. 240. 7 Civ. Code Cal. (1903), 2236, as amended by Acts of 1905, ch, 615; Rev. Civ. Code So. Dak. (1903), 1625. 8 Wyman . Patterson (1900), App. Cas. (Eng.) 271. LIABILITY FOR CO-TRUSTEE 149 the act or default of his predecessor in the trust, 1 or of his co-trustee, 2 unless he joins in the breach of trust, or negligently permits it ; 8 but he can easily make himself so by giving a joint bond, which he need never do, each trustee having a right to give his separate bond, 4 or join- ing in a fraudulent account. 6 He will be liable where he has handed the funds to his co-trustee, allowed him to re- ceive them, or looked on at a breach of trust ; 6 as, for in- stance, by joining in a receipt for the money on a sale of securities and afterwards leaving the property with his co-trustee, 7 though in that case, if he can show affirma- tively that there was a necessity to join in the receipt and leave the funds in the hands of the co-trustee afterwards, he will escape liability ; 8 or by neglecting his duty and allowing his co-trustee to act improperly as his agent, 9 and to do alone what ought to have been done jointly ; or by standing by and allowing his co-trustee to commit a breach of trust. 10 A late case well illustrates these rules. The trustees under a will were to be held liable for their own default only. The active management of the estate was intrusted to F., who had been the testator's man of affairs. He collected and embezzled thirty thousand dol- 1 Blake v. Pegram, 109 Mass. 541. See supra, pp. 95, 101. 2 Stowe v. Bowen, 99 Mass. 194 ; Hinson v. Williamson, 74 Ala. 180, 195 ; Townley v. Sherburne, 3 White & Tudor, L. C. Eq., 6th Am. ed., Notes, 964. 8 Rev. Civ. Code So. Dak. (1903), 1628j Civ. Code Cal. (1903), 2239 ct seq. * Ames v. Armstrong, 106 Mass. 15. 6 Horton v. Brocklehurst, 29 Beav. 504. 6 Wilkins v. Hogg, 3 Gift. 116. 7 It is to be noticed that the ordinary form of a deed, which all the trustees must sign, contains a receipt for the consideration. * Monell r. Monell, 5 Johns. Ch. 283. 9 Rev. Civ. Code So. Dak. (1903), 1628; Cal. Civ. Code (1903), 2239 ; Oliver v. Court, 8 Price, 127, 166. Supra, pp. 89, 90, as to collection of income. 10 Crane v. Hearn, 25 N. J. Eq. 378. See supra, pp. 89, 90, for distinc- tion between leaving income and principal in the hands of one trustee. 150 LIABILITY FOB CO-TRUSTEE lars, which H. , the inactive trustee, discovered but allowed F. to continue to manage the estate. F. then embezzled thirteen hundred dollars. The inactive trustee was not held liable for the first embezzlement, but he was held liable for the second. 1 So also the trustee will be liable if he puts or unjustifi- ably leaves the trust property in the exclusive control of his co- trustee and it is lost. 2 He may not rely on the representations of his co-trustee as to the status of the property, but must ascertain it himself. 8 Thus, where property was left in trust to the widow and brother of the testator, for the benefit of the widow for life and then for others, and the widow managed the trust and the brother never did anything about it, and the widow wasted the property and died insolvent, the brother was held liable for the whole loss. 4 So, too, where the securities were deposited with a banker without inspection for four years, and one trustee was allowed to draw them out. 6 So, too, where the trustees improperly divide the management of the trust, each will be liable for the other, as, for instance, where each of two trustees took half the property and invested it in his respective business and paid interest on it, and then one failed, the other was held to make up the loss. 6 So, too, if he joins in a fraudulent or unfair account, 7 or in a receipt for money which is afterwards misapplied. A provision in the trust instrument that one trustee 1 In re Mallon's Estate, 43 Misc. Rep. (N. Y.) 569. 2 Supra, pp. 1 04, 1 05. But see In re Westerfield, 32 App. Div. ( N. Y.) 324, where trustee who was excluded from management was not held liable. 8 Bates v. Underbill, 3 Redf. (N. Y.) 365 ; In re Beatt/s Estate, 214 Pa. St. 449. 4 Clark v. Clark, 8 Paige, 153. 6 Supra, p. 104. 6 Graham v. Austin, 2 Gratt. 273. It is not necessary to exhaust the remedy against the defaulting trustee first. Bermingbam v. Wilcox, 120 Cal. 467. 7 Blake v. Pegram, 109 Mass. 541. LIABILITY FOR CO-TRUSTEE 151 shall not be liable for the acts or defaults of the other does not relieve him of liability in such cases, as he is made liable, not because the other is at fault, but because he neglects his own duties, and so gives the co-trustee the opportunity to waste the estate; but the clause may be drawn so as to exempt him, 1 and he will not be liable if the loss occurred by following out the directions of the trust instrument, as for instance in leaving money in the hands of A, where the instrument says he may do so. 2 A trustee who has made good a loss occasioned by a breach of trust not amounting to a fraud, is entitled to contribution from his co-trustees ; but where there has been a joint fraud the court will not help him against his partner in wrong. 8 A trustee who has been guilty of no fraud himself, but who has been deceived by his co-trustees 4 as to the state of the funds, or who has made good a loss caused by his co-trustee's fraud, has a right not only to contribution but to full indemnity from his co-trustee, who has had the benefit of the misappropriation. 6 Or he may recover indemnity of the beneficiary who has received the benefit of a breach of trust induced by him. 6 Liability for Errors. The trustee is liable for any loss caused by his exceeding his powers; as, for instance, if he sells without having the power to do so, 7 or makes an 1 Wilkins v. Hogg, 3 Gift. 116; White & Tudor, L. C. Eq., 6th Am. ed., notetoBrice v. Stokes, 1029, 1030. 2 Kilbee v. Sneyd, 2 Moll. 186, 200; Pass v. Dondas, 29 W. R. 332. Underbill, p. 479. * Thompson v. Finch, 8 DeG., M. & G. 560. 6 Bahin v. Hughes, 31 Ch. Div. 390; McCartin v. Traphagen, 43 N. J. Eq. 323 ; Sherman v. Parish, 53 N. Y. 483. 6 Raby v. Ridehalgh, 7 DeG., M. & G. 104 ; Griffith v. Hughes, 3 Ch. (1892), 105; and under statutes even from a married woman without power of anticipation. 7 Perrins v. Bellamy (1899), 1 Ch. 797. 152 LIABILITY FOR ERRORS unauthorized conversion, he may be compelled to replace it in kind or make good its increase in value. 1 Or where he invests in securities in which he has no power to invest, even though honestly, he will be liable ; as, for instance, where the trustee was authorized to in- vest in real security, and held railroad bonds believing them to be authorized, he was held liable. 2 So, too, he is liable if he pays the wrong person, 8 as e. g. where he paid a sum due an infant to his father, without order of court, the infant could demand the sum on coming of age. 4 Or where a beneficiary has encum- bered his estate, and there is notice among the papers. Or where, under a misapprehension, he has paid sums which should be principal to the life tenant, or vice versa. The trustee is liable for his errors in judgment (unless expressly exempted) in the performance of his duties, but not in the exercise of his discretionary powers. 8 The trustee is held to perform his duties with reasonable discretion, 6 that is to say, with the same intelligence that a reasonable man would use in the transaction of his own affairs ; the fact that he is incompetent is no excuse. He must be at the pains to learn his duties. 7 For instance, it being the duty of the trustee to invest the trust funds, if he invests too large a proportion in certain securities, or if he uses poor judgment in investing, he will be liable for the loss, irrespective of his honesty. But he is not 1 Infra, pp. 170, 171. 2 Robinson v. Robinson, 11 Beav. 371. 8 See Underbill, p. 290; see as to distribution, supra, pp. 142-145. 4 Dagley v. Tolferry, 1 P. Wms. 285; Simpson on Infants, p. 180, 2d Eug. ed. 5 Supra, pp. 59-63 ; Civ. Code Cal. (1903), 2238; Rev. Civ. Code So. Dak. (1903), 1627 ; Rev. Code N. Dak. (1895), 4274. 6 " Ordinary care and diligence." Rev. Civ. Code So. Dak. (1903), 1637; Code Ga. (1895), 3170; Cal. Civ. Code (1903), 2258, 2259. 7 Han v. Cary, 82 N. Y. 65. In Pierce v. Prescott, 128 Mass. 140, a guardian was held liable for not knowing the law of distributions. C. J. Gray cites many other cases in the opinion. LIABILITY FOR ERRORS 153 supposed to be infallible, and where he has acted with that amount of discretion which an ordinarily prudent man uses in his own affairs, 1 and honestly, he will be pro- tected ; and even where he has acted in good faith only the court will treat him leniently, and give him the benefit of the doubt, 2 especially if he is acting under advice of counsel, 3 since this fact shows that he used due diligence, though it is not in itself an excuse. 4 This liability may be restricted by the terms of the trust instrument ; and a clause making a trustee liable for his wilful and intentional breaches of trust only is a com- mon provision iu trust instruments, and will be given effect by the courts. 6 But this clause does not excuse a trustee who knowingly or carelessly hazards the trust funds, and fails in his duty where reasonable inquiry would have made him safe. 6 He cannot set off the gain on another investment against the loss on any injudicious investment, since all gains belong to the trust fund, and the loss on an improper investment is a personal liability, and the fact that the trust fund has largely profited by the good man- agement of the trustee does not affect his liability to make good any error of judgment. 7 But if he have a discretionary power to do any act, the court will not inquire whether he has used good judgment or not, provided he has been honest in its exercise ; as, for instance, if he have a power of sale, the court will not inquire into the price unless it be so grossly inadequate as to suggest a fraud, or where he has a power to support, i In reCousins's Estate, 111 Cal. 441. Supra, p. 116. 3 Crabb v. Young, 92 N. Y. 56. 8 Perrine v. Vreeland, 33 N. J. Eq. 102. * Stott v. Milne, 25 Ch. D. 710; Boulton v. Beard, 3 DeG., M. & G. 608 ; In re Westerfield, 32 App. Div. (N. Y.) 324 ; Perrins v. Bellamy (1899), iCh. 797. 6 Wilkins v. Hogg, 8 Jur. (N. S.) 25. 6 Tattle v. Gilmore, 36 N. J. Eq. 617. 7 Supra, p. 147 ; Wiles v. Gresham, 2 Drew. 258. 154 LIABILITY FOR ERRORS MEASURE OF DAMAGES the discretion of the trustee, honestly exercised, as to the amount of support will be final. 1 Measure of Damages. A trustee who has caused loss to his trust must make the fund good, and will be charged with interest if any would have been earned. Interest is simple in most cases, 2 but compound interest is allowed if the trust was for accumulation, or if the funds have been used in trade, as that amount will be supposed to be realized, or as a punishment for disobeying the order of the court, or wilful misconduct in the management of the trust. 8 If the trustee fails to perform a specified duty, as, for instance, to invest in specified stock, the beneficiary may elect to have the money and interest, or an equivalent amount of stock and the dividends declared in the meanwhile. 4 Similarly, if he exceeds his powers in selling real estate or stocks, he may be required to replace them by like real estate or stocks ; 5 and if he sell trust stock and have shares in the same company in his own estate, they can be held by the beneficiary as against his assignee in insolvency. 6 Where a trustee had sold the trust property and appro- priated the proceeds to his own use, but rendered accounts as though he still held the securities, he was charged with the market value of the securities at the date of the event, and the amount of dividends payable up to that time, but with an allowance for taxes and commissions, since the 1 Supra, p. 81. 2 McKim v. Blake, 139 Mass. 593. 3 Ames, 498, n. ; McKim v. Hibbard, 142 Mass. 422 ; Jennison v. Hapgood, 10 Pick. 77 ; Bemmerly v. Woodward, 124 Cal. 568; Kane v. Kane's Adm., 146 Mo. 605 ; St. Paul Trust Co. v. Strong, 85 Minn. 1. Supra, p. 110. * Perry, 844 ; Freeman v. Cook, 6 Ired. Eq. 373 ; Lewin, p. 370. Infra, pp. 170, 171. 6 Supra, pp. 151, 152. e Draper v. Stone, 71 Me. 175. MEASURE OP DAMAGES LIABILITY TERMINATED 155 settlement was on the theory that the account was made up as though the trust had been properly administered. 1 Had the stock fallen in value, the beneficiary might have claimed the price at which it actually sold and interest. 2 Io the absence of evidence of the actual price received, the trustee is chargeable with at least the inventory value. 8 If a trustee buys the trust property at a sale, he must make good any loss in price incurred at reselling. 4 Or if he sell to a bona fide purchaser before the sale is dis- affirmed, he must account for any profit. 5 And if the property has depreciated in value, he must make up the difference of the value at the time of purchase, with interest If he purchased the property himself, at an inadequate price, the court may confirm the sale, requiring him to pay the difference to make the full market value. 6 If, however, the trustee, supposing that he has acquired a good title, has laid out money in good faith, and im- proved the estate, he will be allowed for it. 7 Liability Terminated. The liability of the trustee may be ended by his passing through bankruptcy, 8 or getting a release, 9 settling his accounts, or by the statute of limitations. 10 If his successor in the trust takes over, the property without objection at its inventory valuation, and retains it for a considerable time unconverted, he cannot subse- 1 McKim v. Hibbard, 142 Mass. 422. 2 Ibid. 427. * Ibid. 425. * Davoue v. Fanning, 2 Johns. Ch. (N. Y.) 252. 6 Clark i'. Blackington, 110 Mass. 369. 8 Morse v. Hill, 136 Mass. 60. 7 Morse v. Hill, 136 Mass. 60; also Daroue v. Fanning, 2 Johns. Ch. (N. Y.) 252. Supra, p. 147. 8 Thompson v. Finch, 8 DeG., M. & G. 560. This is true of the United States Bankruptcy Act, but not of the Massachusetts Insol- vency Act. Tallant v. Stedman, 176 Mass. 460, p. 466. Infra, p. 176. 10 -Supra, pp. 144, 145; infra, p. 178. 156 LIABILITY TERMINATED quently charge his predecessor with any loss. 1 If, how- ever, the successor seasonably converts the property, he may claim the loss, or he can object to taking the property at more than its real value. 2 He is not liable for the doings in the trust subsequent to his death, but an action against him for a breach of trust survives in equity. 8 The ordinary statute limiting the time for the collection of a debt to two years after the death of the debtor does not apply to the collection of trust funds from the estate of a trustee, even though the trustee so mingled the trust funds with his own that they cannot be traced, for he cannot convert himself from a trustee into a debtor with- out the beneficiaries' consent, 4 and the statute is against debtors only. 5 1 Thayer v. Kinsey, 162 Mass. 232. 2 In re Salmon, 42 Ch. Div. 351 ; Thayer v. Kinsey, 162 Mass. 232. Dodd v. Wilkinson, 41 N. J. Eq. 566. * Supra, pp. 146, 147. 6 Gunter v. Janes, 9 Cal. 643, p. 659 et seq. PART III. THE BENEFICIARY. I. Who may be a Beneficiary. Almost any person may be a beneficiary, but a person who could not legally hold property within the jurisdiction cannot be entitled as a beneficiary. As, for instance, a slave, 1 an alien enemy or a corporation 2 that could not hold property in its own name in the jurisdiction, could not hold it through the instrumentality of a trustee. 8 Parrots, horses, and dogs, and in former times slaves, might be the objects of trusts, but they could not be true beneficiaries, as they are not u persons," and therefore cannot appear in court to enforce the trust. Bequests to unspecified charities stand on another footing, since the Attorney General will appear to enforce them. 4 Trusts for " things," such as pets, etc., if properly drawn, will not be interfered with by the court, but the carrying of them out must depend on the honor of the trustee. That is to say, the gift may be to a trustee to expend so much as he thinks fit in maintaining certain horses and dogs, the residue to go to the trustee. A further clause might be added, that, if the trustee failed to support the animals properly, the property should go to the next of kin. So, too, the direction to employ a particular person as an at- 1 Pool v. Harrison, 18 Ala. 514. 2 Coleman v. San Rafael Turnpike Road Co., 49 Cal. 517. 8 For statutes against aliens holding land in sundry States, see Underbill, p. 95, n. * But see Fosdick v. Town of Hempstead, 125 N. Y. 581, where the poor of a town was considered too indefinite. 158 WHO IS THE BENEFICIARY? torney or agent by a testator does not create a trust or make the person designated a beneficiary. 1 "Who is the Beneficiary ? Any person who has a claim against the trustee for any of the benefit of the trust prop- erty is a beneficiary. The claim need not be vested, a contingent interest being such a claim. 2 Persons to whom income is payable at the discretion of the trustee are not beneficiaries under the above defini- tion, since they have no claim they can enforce or assign, although they are interested in the trust and may intervene to have a proper trustee. 8 In the absence of statute ordering the appointment of a guardian ad litem, persons not ascertained or not in being are not parties interested. 4 Persons having a mere possibility, or a person to whom a beneficiary has given an order on the trustee, are not beneficiaries, although they have property that may be assigned. 6 Nor is the holder of a general power of ap- pointment a beneficiary, although, in some jurisdictions, 8 if he exercise the power his creditors will take the estate. The claim of the beneficiary is not to any part of the property itself, either at law or in equity ; hence he can- not sue to recover, and protect the fund or recover damages for an injury to it. 7 All the property rights are in the trustee, and the claim is against the trustee only. 8 II. Estate of the Beneficiary. The estate of the bene- ficiary may be described as his right to force the trustee 1 Foster v. Elsley, 19 Ch. Div. 518. 8 Clarke v. Deveaux, 1 S. C. 172. 8 Wilson v. Wilson, 145 Mass. 490. Supra, pp. 22 and 81 ; infra, p. 162. 4 Bradstreet v. Bntterfield, 129 Mass. "339; Hartman's Appeal, 90 Pa. St. 203 ; Dexter v. Cotting, 149 Mass. 92. 6 Hawley v. Ross, 7 Paige, 103. G Infra, p. 162. 7 Western Railroad Co. v. Nolan, 48 N. Y. 513. Statutes in Code States and several others. 8 Supra, p. 26. ESTATE OP THE BENEFICIARY 159 to carry out the terms of the trust. 1 As courts of equity recognize the beneficiary's absolute right in this respect, they regard him as the true owner of the property, and have invested his equitable estate with many of the same incidents and qualities pertaining to legal ownership in a court of law. 2 As has been hereinbefore pointed out, 8 the beneficiary is not clothed with the privileges and burdens incidental to the ownership of the property, which are attributes of the legal estate and consequently belong to the trustee ; but his equitable estate is property, and he may treat it in general much as the legal owner of property may treat his, although it is not such an ownership of things as would, for instance, qualify a voter where a property qualification is required. 4 Incidents of the Equitable Estate. The estate of the beneficiaries is not joint, even though there be several beneficiaries entitled to equal and similar interests in the trust. 6 Each beneficiary may act independently of the others, and the admissions of one will not estop the others. 6 A majority has no greater right than a minor- ity, or than even an individual. Where, however, there has been a breach of trust in the sale of trust property, and the beneficiaries do not agree in desiring a reconveyance, if their interests cannot be separated the court will proceed in the best interests of all the beneficiaries and order an avoidance for all, or damages for all, as it thinks best. 7 Or where an account is corrected at the instance of 1 If a valid trust is established the court will enforce it even though the testator provides that the trustee shall not be interfered with by the court. Keeler v. Lauer, 85 Pac. R. 541 (Kansas, 1906). Supra, p. 62. 3 Freedman's Co. v. Earle, 110 U. S. 710. 8 Supra, p. 26 ; and see Lewiu, p. 640. 4 Lewin, p. 247; Burgess K. Wheate, 1 Eden, 177, 251. Underbill, p. 34. Levi v. Gardner, 53 S. C. 24. 7 Morse v. Hill, 136 Mass. 60. 160 INCIDENTS OP THE EQUITABLE ESTATE one, all will be entitled to participate in the benefit of the correction. 1 The equitable estate may descend or be devised, and is now usually liable to the incidents of curtesy and dower. 2 That curtesy may attach, the estate must be in possession, when it will attach although limited to the wife's heirs. 8 In early times dower was not an incident of a trust estate, 4 but now, by statute, it usually is, 5 although there are some jurisdictions where there is no dower, as Massa- chusetts and Maine, but the wife is compensated in other ways. 6 Beneficial estates in lands have been held not liable to forfeiture or escheat, 7 but under the statutes in the United States on failure of heirs the trust property, whether real or personal, would pass to the State. 8 The beneficial estate is subject to disseisin where a trustee repudiates the trust, and claims the property so that the statute of limitations begins to run. 9 Alienation. In the absence of restraint by the terms of the settlement or statute, the beneficial estate may be alienated as freely as any other property. 10 The beneficiary may convey it away and it will pass to 1 Little v. Little, 161 Mass. 189. Even where they have assented to the account, Bennett v. Pierce, 188 Mass. 186, unless the breach of trust has been knowingly released. Vohmann v. Michel, 185 N. Y. 420. Supra, p. 94. 2 Code Miss. (1906), 1652; Laws of Del. (1893), ch. 85, 1 ; Rev. Stat. N. Y. (1901), p. 3078, 280; Bartlett v. Bartlett, 137 Mass. 156; Perry, 323. 8 Tillinghast v. Coggeshall, 7 R. I. 383. * Reed v. Whitney, 7 Gray, 533. 6 See Stimpson, 3202. 6 Hamlin v. Hamlin, 19 Me. 141 ; Reed v. Whitney, 7 Gray, 533 ; Simonds v. Simonds, 112 Mass. 164. 7 Burgess v. Wheate, 1 W. Bl. 123. 8 Perry, 327, 436. Infra, p. 178. 10 In Ga. Code (1895), 3188, may sell to any person except hus- band and trustee. In Pennsylvania and South Carolina, a married woman can convey only in the manner provided in the settlement, Quin's Estate, 144 Pa. 444; Dunn v. Dunn, 1 S. C. 350; Gray, Restraints on Alienation, 2d ed., 275 b. ALIENATION WHAT ESTATE PASSES 161 his assignee under a general assignment. 1 He may dis- pose of it by will, and it may be taken by his creditors for his debts, the manner in which it is reached varying according to local law ; 2 but there is some way of reach- ing it everywhere. Alienation, What Estate passes. The beneficiary, un- like the owner, has no property to alien. All he has are his rights, or, as they are called, his equity. 8 This equity or claim against the trustee is subject to all the counter claims of the trustees. Thus, if the beneficiary was indebted to the trustee, his equity will pass to his transferee subject to the trustee's counter claim, but not if it be in autre droit. 4 Or if the beneficiary, being also a defaulting trustee, assigns, his assignee will take subject to making good the default. 5 It follows from the nature of the estate, being a claim instead of property, that the assignor can only transfer what rights he has, and the assignees accordingly take in the order of their assignments, and a purchaser for value gets no better title than a volunteer. 6 A trustee could give his own claim priority over an assignee, 7 and if a later assignee acting in good faith fortifies his equity by a legal right, such as payment of the claim, 8 a judgment, 9 or a new obligation from the trustee to him direct, he may hold the property both in law and equity. 10 1 Forbes v. Lothrop, 137 Mass. 523. 2 Gray, Restraints on Alienation, 2d ed., 170-174. On execu- tion, Hadden v. Spader, 20 Johns. 554. By creditor's bill for equitable execution, Drake v. Rice, 130 Mass. 410; Chase . Searls, 45 N. H. 51 1. 8 Thus he cannot have his assignment of his interest noted against a trust mortgage in the registry of deeds, as it might cloud the legal title of the trustee. Cheyney v. Geary, 194 Pa. St. 427. * Supra, p. 49. Infra, p. 184. 6 Belknap v. Belknap, 5 Allen, 468. 8 Philips v. Philips, 4 DeG., F. & J. 208. 7 Furniss v. Leupp, 67 N. J. Eq. 159. 8 N. Y., N. H. & H. R. R. Co. v. Schuyler, 34 N. Y. 30; Bridge tx Conn. Life Ins. Co., 152 Mass. 343. 9 Judaon v. Corcoran, 17 How. 612. 10 Ames, 328. 11 162 ALIENATION, WHAT ESTATE PASSES In all jurisdictions the assignment of an equity in real estate is complete when assignor and assignee have assented ; l and the same rule is true of personal property in Massachusetts, New York, Minnesota, Indiana, and West Virginia, 2 but in other jurisdictions notice to the trustee is necessary to complete the assignment of an equity in personal property. 8 Notice to be good must be given to the trustee after his appointment, 4 and notice to one of several trustees or other joint obligors is notice to all. 8 Knowledge is notice, if obtained in such a manner as would affect a reasonable man ; 6 but if the assignor is the trustee his knowledge is not notice, but if he be assignee knowledge is notice. 7 Accordingly, in those jurisdictions where notice is neces- sary to complete the transaction, the person giving notice first will have priority ; but if the person giving the notice was aware of the previous assignment, his notice will not help him. A person who has a general power of appointment and exercises it, in Massachusetts, 8 makes the property assets of his estate for creditors, since he should have appointed to them instead of to volunteers, but in some other States the property is held to pass directly to the appointee under a general power in the same way as if the power were special. 9 If the power of appointment be special, the l Lee v. Howlett, 2 K. & J. 531. a Thayer v. Daniels, 113 Mass. 129; White v. Wiley, 14 Ind. 496 ; McDonald v. Kneeland, 5 Minn. 352 ; Clarke v. Hogeman, 13 W. Va. 718; Fairbanks v. Sargent, 104 N. Y. 108. 8 Foster v. Cockrell, 3 Cl. & Fin. 456 ; Wallston v. Braswell, 1 Jones Eq. 137 ; Copeland v. Manton, 22 Ohio St. 398. * Roxburghe v. Cox, 17 Ch. D. 520, 527. 6 Perry, 438, end. 6 Seger v. Farmers' Loan & Trust Co., 73 App. Div. (N. Y.) 293. 7 Ames, 328, n. ; Lloyd v. Banks, 3 Ch. 488. 8 Clapp v. Ingraham, 126 Mass. 200. 9 Humphrey v. Cambell, 59 S. C. 39 ; In re Dunglison's Estate, 201 Pa. St. 592. ALIENATION, WHAT ESTATE PASSES 163 creditors could not take unless the settlor and the donee of the power were the same, 1 in which case quaere?* But a person to whom income is payable at the pleasure of the trustee has no estate that can be assigned or taken for his debts, as his assignees or creditors must take through him and he has no rights that he can enforce.* In some States the creditors have lien by statute even where the power is not exercised. 4 Restraint on Alienation. One of the ordinary motives for giving property in trust, instead of giving it outright, is the desire of donors to secure to the beneficiaries the enjoyment of its benefits irrespective of their improvidence or extravagance. In such cases it is usual to insert a limitation in the trust instrument that the beneficiary shall not take his income by way of anticipation, and that it and the principal shall not be assigned, or be liable to be taken for his debts. 6 As a general rule in America, such a restraint on the alienation of the income is valid, but is invalid as regards the principal fund, 6 while in England and in other States (there being several where the question is not determined) such a restriction is inoperative except in the case of a 1 Bailey v. Lloyd, 5 Russ. 330 ; Cowx v. Foster, 1 Johns. & Hem. 30. 2 The policy of the law is well set forth by Morton, C. J., in Pa- cific Bank v. Windram, 133 Mass. 175-177. There is a lack of direct decisions. 8 Infra, p. 166. 4 The assignee's standing in the Probate Court is a matter of some doubt, but the allowance of an account showing a payment to an as- signee necessarily involves the determination of the validity of the assignment. Palmer v. Whitney, 166 Mass. 306, p. 310. And heirs who have assigned all their interest have no right to call the trustee to account. Stevens v. Palmer, 15 Gray, 505. When a decree of distri- bution has been ordered, the assignees may compel payment to themselves in equity. Lenz v. Prescott, 144 Mass. 505. 5 See supra, p. 80. The decisions on this subject, and the policy in- volved, are thoroughly discussed in Restraints on the Alienation of Property, by John Chipman Gray, LL.D., 2d ed., 1895. 6 Gray, Restraints on Alienation, 2d ed., 167 j. 164 BESTRAINT ON ALIENATION beneficiary who is a married woman, 1 who is excepted everywhere except in Massachusetts, Pennsylvania, and Maryland, where she cannot settle property on herself without power of alienation during coverture. 2 This restraint in the case of a married woman cannot be removed by any one, not even by the court, 8 and can- not be set aside to relieve against her fraud or breach of trust, 4 nor will acquiescence by the married woman excuse a trustee for disregarding it. 5 In most States the restraint on alienation can be made only by the terms of the trust instrument. There are some States, 6 notably those having codes, where such restraint is provided for by statute. In Pennsylvania, 7 Massachusetts, 8 Illinois, 9 Maine, 10 Maryland, 11 Mississippi, 12 Missouri, 13 Texas, 14 West Vir- ginia, 15 and probably Tennessee, 16 Delaware, 17 Indiana, 18 1 Gray, Restraints on Alienation, 2d ed., 134-213, 268, 2686. 2 Ibid., 269-277 a. See note to Underbill, p. 377 ; Pacific Bank v. Windram, 133 Mass. 175 ; Jackson v. Von Zedlitz, 136 Mass. 342; Brown v. Macgill, 87 Md. 161. 3 Robinson v. Wheelwright, 21 Beav. 214. * Stanley v. Stanley, 7 Ch. D. 589. 6 Gray, Restraints on Alienation, 2d ed., 271 ; Fletcher v. Greene, 33 Beav. 426. 6 Civ. Code Cal. (1903), 867 ; N. Dak. Civ. Code (1895), 3398. 7 Overman's Appeal, 88 Pa. 276. 8 Broadway Bank v. Adams, 133 Mass. 170; Nickerson v. Van Horn, 181 Mass. 562. Steib v. Whitehead, 111 111. 247. 10 Roberts v. Stevens, 84 Me. 325. u Smith v. Towers, 69 Md. 77 ; Brown v. Macgill, 87 Md. 161 ; Jack- son Sq. Loan & Savings Ass'n v. Bartlett, 95 Md. 661. 12 Leigh v. Harrison, 69 Miss. 923. 13 Lampert v. Haydel, 20 Mo. App. 616. 14 Monday v. Vance, 92 Tex. 428. , 15 Guernsey v. Lazear, 51 W. Va. 328. w Tenn. Code (1896), 6091-6093; Jourolman v. Massengill, 86 Tenn. 81. 17 Gray v. Corbit, 4 Del. Ch. 135. 18 Thompson v. Murphy, 10 Ind. App. 464. RESTRAINT ON ALIENATION 165 and in the Federal courts 1 and Vermont, 2 the settlor may settle the life estate without power of alienation on any one but himself as beneficiary, and it cannot be taken for his debts. 8 The provision need not specify that the income may be accumulated, it is only necessary to have a clear intention expressed by the settlor that the income cannot be controlled by the beneficiary until it comes into his actual possession. 4 Such restraints are adjudged bad 5 in Rhode Island, 8 New York (aside from statute 7 ), North Carolina, 8 South Carolina, 9 Georgia, 10 Alabama, 11 Ohio, 12 Kentucky, 13 Virginia, 14 and probably in Arkansas ; 16 in Connecticut the dicta are conflicting, and there are no decisions. 16 Under the statutory provisions of New York, 17 New Jersey, Indiana, Michigan, Wisconsin, Minnesota, Kansas, California, and North and South Dakota, the beneficiary may be restrained from alienating the rents and profits, but not the gross sum. 18 1 Nichols v. Eaton, 91 U. S. 716. 2 Barnes v. Dow, 59 Vt. 530. 8 Gray, Restraints on Alienation, 2d ed., 177 a, 240 A to 249 b; also p. 281. * Nickersou v. Van Horn, 181 Mass. 562. 5 Gray, Restraints on Alienation, 2d ed., 178. 8 Tillinghast v. Bradford, 5 R. I. 205. 7 Rome Exch. Bk. v. Eames, 4 Abb. Ct. App. 83, but changed by statute. See note 1 8, infra. In voluntary settlement on self income can be reached by creditor in spite of statute. Schenck v. Barnes, 156 N. Y. 316. 8 Pace v. Pace, 73 N. C. 119. 9 Heath v. Bishop, 4 Rich. Eq. 46. 10 Bailie v. McWhorter, 56 Ga. 183; Ga. Civ. Code (1895), 3149. 11 Robertson v. Johnston, 36 Ala. 197. 12 Hobbs v. Smith, 15 Ohio St. 419. w Kuefler v. Shreve, 78 Ky. 297. w Restraint was allowed in Garland v. Garland, 87 Va. 758, but disallowed in Hutchinson v. Maxwell, 100 Va. 169; Honaker Sons v. Duff, 101 Va. 675. 15 Lindsay v. Harrison, 8 Ark. 302. 16 Gray, Restraints on Alienation, 2d ed., 195. 17 Cochrane v. Schell, 140 N. Y. 516. See note 7, supra. . 18 Rev. Stat. N. Y. (1901), p. 3027, 83, aa amended by Laws of 166 RESTRAINT ON ALIENATION In Arizona 1 he may settle on his children without power of alienation, and in North Carolina 2 it may be so settled on a relative, if at the creation of the trust his debts do not exceed five hundred dollars. Although there are jurisdictions, as appears above, where a restraint on alienation cannot be successfully attached to a settlement where the gift to the beneficiary is unlimited, yet the same result is practically reached by what is commonly known as a spendthrift trust ; that is to say, by leaving it to the pleasure of the trustees whether they will use the trust fund for the beneficiary, 8 or as more commonly provided, pay the income to the benefi- ciary, use a part of it for his support, or accumulate so much as the}- think fit. Where it is so provided by the settlement, the creditors of the beneficiary cannot take the income, because the beneficiary has no right to any specific income which he can enforce, 4 and therefore nothing that he can alien, or that can be taken for his debts ; but in such cases, if the beneficiary is also trustee, the estate vests in him absolute!}', and no spendthrift trust is estab- lished. 5 In England, and in those States following the English rule, the trustee must account to the creditor for any income which he pays to or expends for the beneficiary after notice of his assignment, 6 although if he pays or expends it for members of the family or other persons 1903, ch. 88 ; N. J. Gen. Stat. (1895), vol. 1, p. 390, 91 ; Comp. Laws Mich. (1897), 8847 ; Rev. Laws Minn. (1 905), 3257 ; Rv. Code N. D. (1895), 3398; Gen. Stat. Kan. (1897), ch. 113, 4; Civ. Code Cal. (1903), 857, 859, 867 ; Rev. Civ. Code So. Dak. (1903), 305,307, 315; Wis. Stat. (1898), 2089; Burns's Annot. Ind. Stat. (1901), 3394 ; Gray, 296. 1 Rev. Stat. Ariz. (1901), 4232. 2 N. C. Rev. Code (1905), 1588. 8 Huntington v. Jones, 72 Conn. 45. 4 In re Bullock ; Good v. Lickorish, 60 L. J. Ch. 341 ; Nickerson r.Van Horn, 181 Mass. 562. 5 Hahn v. Hutchinson, 159 Pa. St. 13a 6 Gray, Restraints on Alienation, 2d ed., 167$r; Re Coleman, 39 Ch. D. 443. RESTRAINT ON ALIENATION 167 specified by the settlement the creditor lias no claim. In jurisdictions not allowing restraints on alienation, if the provision be to pay all the income to him or apply it all to his support, he has an absolute right which he can alien or which can be taken, in spite of a provision to the contrary. If the provision be to pay him or support his familj 7 , in most jurisdictions none of the income can be taken, 1 but in others, notably where the matter is regulated by statute, so much as is left after reasonable support may be taken or alienated, 2 and this amount is sometimes fixed by the statute ; but the statutes only protect the creditor, and give no power of voluntary alienation to the benefi- ciary. 8 A provision for the support of a beneficiary does not cover the support of his wife and family living apart, and for whom he fails to provide. They are like other creditors. 4 The settlor may attach a condition to the gift of income, that if it be alienated, or if the beneficiary become bank- rupt, the income shall pass to others, 5 and this condition will be valid in any case, even though the person to whom the income passes is the wife of the original beneficiary, 8 except only where the income is settled on the settlor him- self; 7 but this exception does not apply to a married 1 Seymour v. McAvoy, 121 Cal. 438. A court of equity cannot de- termine how much income is required for support of beneficiary and family, therefore there is no surplus for a creditor. First National Bank v. Mortimer, 28 Misc. (N. Y.) 686. 2 For the statutes, see Stimpson, Statute Law, p. 237 ; Gray, Re- straints on Alienation, 2d ed., 296. Supra, -p. 165, note 18. 3 Gray, Restraints on Alienation, 2d ed., 292; Ames, 401, n. ; Tollesw. Wood, 99 N. Y. 616; Sherman v. Skuse, 166 N. Y. 345; Furniss v. Lcupp, 67 N. J. Eq. 159 ; but in Illinois the statute curiously cuts out the creditor, and allows the beneficiary to alienate ; Potter v. Couch, 141 U. S. 296. * Board of Charities v. Lockhard, 198 Pa. St. 572. * Re Levy's Trust, 30 Ch. D. 119 ; Nichols v. Eaton, 91 U. S. 716. * Samuel v. Samuel, 12 Ch. D. 152; Gray, Restraints on Aliena- tion, 2d ed., 46. 7 Jackson v. Von Zedlitz, 136 Mass. 342. 168 RESTRAINT ON ALIENATION woman under coverture, 1 except in Pennsylvania, Mary- land, and Massachusetts, where married women have the same status as other individuals. 2 A similar condition attached to a gift of the principal of the fund is valid so long as the estate remains contingent, but if the estate vests, then the gift over becomes void. 8 A trustee having discretion to spend part of the principal for the beneficiary need not pay his debts, 4 but where the life tenant might call for the principal if he needed it in his business, his creditors could take it. It was his duty to call for it. 6 A provision attached to a gift that so much as shall not be used or alienated shall go to another is void. 8 A limitation of the income to the sole and separate use of a married woman is not a restraint on alienation. 7 III. Rights against Trustee. As the whole estate of the beneficiary consists of his right to compel the trustee to carry out the trust, he is considered to be peculiarly under the care of the court. Where enforced. The beneficiary may have a sub- poena against the trustee wherever he can find him, 8 irre- spective of the situation of the trust property, 9 unless the trust be created by the decree of a court of another State, in which case the trustee can only be sued there, unless ancillary trusteeship be also taken out in the jurisdiction where suit is brought. 10 And where the trust is established by the decree of a court of one State, the courts of that 1 Clive v. Carew, 1 Johns. & Hem. 199. 2 See supra, pp. 163, 164. 8 Mandlebaam v. McDonell, 29 Mich. 78. * Huntington v. Jones, 72 Conn. 45. 6 Ullman v. Cameron, 105 App. Div. (N. Y.) 159. 6 Foster v. Smith, 156 Mass. 379; Fisher v. Wister, 154 Pa. St. 65; Gray, Restraints on Alienation, 2d ed., 57-74. 7 Forbes v. Lothrop, 137 Mass. 523. 8 Brown v. Desmond, 100 Mass. 267 ; Kildare v. Eustace, 1 Vernon, 405 ; Cooley v. Scarlett, 38 111. 316. 9 Massie v. Watts, 6 Crane h, 148, 160, Marshall, C. J. 10 Jenkins v. Lester, 131 Mass. 355. 7n/ro,.p. 189. RIGHTS AGAINST TRUSTEES WHERE ENFORCED 169 State have jurisdiction to regulate the trust, although both the trustee and beneficiary are out of the jurisdiction, since they can remove the trustee and appoint one to act in his place. 1 So also, if the trustee is not within the jurisdic- tion, but the trust property is within the jurisdiction of the court, and there is a statute vesting the property in a trustee appointed by the court, 2 then the court can appoint a trustee to execute the trusts. If, however, there is no statute to transfer the title to the property, the court is powerless, unless it have jurisdiction over the trustee in whom the title is vested. 8 If the trust is illegal in the jurisdiction where it is sought to be enforced, the trustees will hold the property on a resulting trust for the heirs. 4 The beneficiary is entitled to have proper persons and a proper number of trustees, and any person interested in the trust, even though the interest is contingent on the mere possibility of receiving a payment at the discretion of the trustee, may apply to the court in the matter of removing or appointing a trustee. 6 Can Compel What. The beneficiary can compel the trustee to perform his duties, and if the trustee refuses to sue or defend, the beneficiary may sue or defend in the trustee's name by getting leave of court to do so ; 6 but the trustee must be shown to be in default, 7 and indemni- fied for costs. 8 1 Chase v. Chase, 2 Allen, 101 ; Curtis v. Smith, 6 Blatchf. 537. 2 Felch v. Hooper, 119 Mass. 52. 8 McCann v. Randall, 147 Mass. 81. Seesupra, p. 9 and infra, p. 191. * Hawley v. James, 7 Paige, 213. 5 Supra, pp. 7 and 9. 6 In some recent cases the beneficiary has been allowed to sue in his own name, where he had a right to use the trustee's name. Ander- son v. Daley, 38 App. Div. (N. Y.) 505 ; Zimmerman v. Makepeace, 152 Ind. 199. In Bourquin v. Bourquin, 110 Ga. 440, the beneficiary was allowed to bring ejectment against his trustee, who claimed the trust estate under the purchase of a tax title. 7 Morgan v. Kansas Pacific Railroad, 21 Blatchf. 134; Thompson u Remsen, 27 Misc. (N. Y.) 279. Chamberaburg Ins. Co. v. Smith, 11 Pa. St. 120. 170 CAN COMPEL WHAT The beneficiary has no right to advise or direct his trustee unless the right be expressly conferred by the trust instrument, and if his advice be asked and followed, he may lose his remedy against the trustee should the ac- tion be injudicious ; therefore, on the whole, it is better to leave the full responsibility on the trustee, where it belongs. 1 If an express power be given by the trust instrument, it is governed by the general rules applicable to such powers. He can have the trustee enjoined from committing a contemplated breach of trust, or voting against his wishes if it would cause him irreparable injury. 2 He may have a receiver appointed to hold the property if it is imperilled by remaining in the hands of the trus- tee, and pending his removal and the appointment of a new trustee. 8 In England and some of the States he may have the estate administered by the court, 4 but such receivership suits are not in vogue in this country in trust estates. 6 If the trustee commits a breach of trust, the benefi- ciary may either sue in equity for his damage or loss, or in testamentary trusts may sue on the bond given to the court. If the trustee has been guilty of a breach of trust in in- vesting or using the funds of the trust, the beneficiary may elect whether he will take the property into which the funds have been converted, or the amount taken with interest. 6 But he must choose, and cannot pursue both remedies ; 7 and if he disaffirms a sale, he must return the 1 Bradby v. Whitchurch, W. N. 1868, p. 81 ; Life Ass'n of Scotland v. Siddal, 3*DeG., F. & J. 58, 74. 2 Ames 276, n. 2. 8 Jones v. Dougherty, 10 Ga. 273. 4 Supra, p. 7. 6 Underbill, pp. 366 and 440. 6 Supra, p. 1 54. 7 Barker v. Barker, 14 Wis. 131 ; Perry, 470 (3). See trustee's liabilities to beneficiary, supra, p. 154 ; Rev. Civ. Code So. Dak. (1903), 1626; Code Ga. (1895), 3183,3184; Rev. Code N. Dak. (1895), 4273; Civ. Code Cal. (1903), 2237. CAN COMPEL WHAT RIGHT TO INCOME 171 consideration in absence of fraud. 1 If he follows the property and it is insufficient, he may prove his claim for the balance ; but if the beneficiaries are not agreed, the court will order whichever remedy it thinks best under the circumstances. 2 In general, the damage recoverable is the amount of the loss for the remainderman, with simple interest for the life tenant; but compound interest is allowed when the income was to be added to the principal periodically, or where there is a presumption that more was earned, or the breach was wilful. 8 Right to Information. The beneficiary has a right to full information about the concerns of the trust at all rea- sonable times, although only contingently interested. 4 He can examine the deeds or opinions of counsel con- sulted by the trustee in respect to the trust affairs, 6 but, as a condition precedent, he must show his interest, and may not examine them to establish an interest. He can ex- amine the books of accounts and securities at all reason- able times, and is entitled to an accounting at reasonable intervals, usually once a year. 6 But he has no right to demand that the trustee shall assist him in encumbering his interest by answering the inquiries as to how his interest is already encumbered, nor can a stranger acting under his authority require the trustee to answer. 7 Right to Income. 8 In a simple trust, as, for instance, where A holds property in trust to permit B to enjoy the income, the income as it accrues belongs to B imme- 1 Yeackel v. Litchfield, 13 Allen, 417 ; Marx . Clisby, 130 Ala. 502 2 Morse v. Hill, 136 Mass. 60. 8 Supra, p. 154. Sloan's Estate, 7 Pa. Dist. Rep. 363 (1898). 6 Smith v. Barnes, L. R. 1 Eq. 65 ; Ames, 470, n. As to accounts, see supra, p. 91. ' Low v. Bouverie, 3 Ch. D. 1891, p. 82. 8 As to what is income, see supra, pp. 121 et seq. 172 RIGHT TO INCOME diately, and he may require the trustee to give him a power of attorney to collect it for himself; but in the case of an ordinary trust, income means net income after deducting the taxes and repairs and ordinary current expenses attending the estate. 1 So the trusteee is entitled to collect it, and make the necessary deductions before pa3*ing it over. In such cases the net income can only be ascertained yearly, and therefore would seem to be payable only on the settlement of the yearly account ; but as the income belongs to the beneficiary, the court would probably not allow a large amount to lie in the hands of the trustee for such a long period if the beneficiary needed it. 2 Most trust instruments have an express provision that the net income shall be paid quarterly or semiannually, which provision would govern in all cases. There has been much discussion in England as to the beneficiary's share of the first year's income, and the de- cisions have been classified by Mr. Lewin. 8 In Massachusetts, by statute the life beneficiary is en- titled to the income, at the .rate of interest it would have produced if properly invested, 4 on the fund given for his use from the date of the testator's death ; and where the whole or a part of the fund does not produce income, on the conversion of the property the proceeds are divided into income and principal so as to give the life benefi- ciary the usual rate of income, as explained supra, page 123. In other jurisdictions, in the absence of statute the beneficia^- only gets the actual income that accrues on the fund, 6 but the intention of the settlement, express or implied, will govern, if it can be discovered. 6 1 Watts, Adm. i>. Howard, Adm., 7 Met. 478. Supra, pp. 137 et seq. 2 In re Chesterman, 75 App. Div. (N. Y.) 573. 8 Lewin, pp. 321 et seq. 4 Loring v. Thompson, 184 Mass. 103. 6 Williamson v. Williamson, 6 Paige, 298 ; Fanning v. Main, 77 Conn. 94. 6 Keith v. Copeland, 138 Mass. 303. RIGHT TO INCOME RIGHT TO A CONVEYANCE 173 The trustee may withhold income to reimburse himself for money erroneous!}* paid to the beneficiary, but cannot reimburse himself in this manner for an individual loan made before he became trustee. 1 As to what constitutes income, see pages 123 et seq. Right to Support. The question of the beneficiary's right to support has been treated already. 2 In Georgia there is an unusual statutory provision, that where the trustee fails to support the beneficiary, the latter may contract debts binding the trust property. 8 Right to a Conveyance. If the trust is merely a dry trust, that is to say, if A is given property simply to hold in trust for B, or if the purposes of the trust have been accomplished, and there is no reason why it should be continued, and all the beneficiaries, being sui juris, desire it, the trust may be terminated or modified in any way. 4 Though by statute in New York the court ma}' in its dis- cretion refuse to order a conveyance. 5 If, in such case, one of the beneficiaries objects, the court may sever the trust, and order the shares of the others to be conveyed ; 6 but as a general rule, the trus- tee may say that he will convey all or none. 7 If the prop- erty is to be held in trust for children until all agree to a sale, part cannot call for a conveyance. 8 The English rule, which also prevails in some of the States, is that, the beneficial estate having vested abso- lutely and entirely in the beneficiary, he may call for a 1 Supra, p. 134; infra, p. 184. . 2 Supra, pp. 75 and 83. 8 Code of Ga. (1895), 3187. * Goodson v. Ellisson, 3 Russell, 583; Claflin v. Claflin, 149 Mass. 19. 6 Lent v. Howard, 89 N. Y. 169. Walker v. Beal, 106 Mass. 109; Henderson's Estate, 15 Phila. 59S 7 Goodson v. Ellisson, ubi supra. 8 Harris v. Harris, 205 Pa. St. 460. 174 RIGHT TO A CONVEYANCE conveyance if he be sui juris ; l but the American rule prevailing in most States is that, although the beneficiary be sui juris, and have the whole estate, he cannot call for a conveyance if it would defeat the intention of the settlor, as in such a case the purpose of the trust has not been accomplished. 2 On the other hand, where the pur- pose of the trust was to protect a married woman against her husband when she got a divorce, the purpose of the trust being accomplished a conveyance was ordered. 8 Thus, where property is left in trust for A until he reaches the age of thirty 3*ears, under the English rule A may call for a conveyance on becoming of age, while under the American rule the trust continues until he becomes thirt}' years old ; 4 though it is not definitely decided that the estate might not be taken by a creditor, 5 still it would seem that he would have no greater right than his debtor through whom he claims. 6 But where the estate is abso- lute and unqualified in the beneficiary, and can be alienated or taken for his debts, and he desires it, he may have a conveyance. 7 If, however, all the beneficiaries and the trustee agree to terminate the trusts in such a case, as no one else is 1 Saunders v. Vantier, 4 Beav. 115; Lewin, p. 774; Rector v. Dalby, 98 Mo. App. 1 89. The trust being for a woman and her issue, the fact that she is sixty years old and unmarried does not entitle her to a conveyance. Bailey's Trustee v. Bailey, 97 S. W. Rep. (Ky. App. 1906) 810. 4 Seamans v. Gibbs, 132 Mass. 239; Danahyv. Noonan, 176 Mass. 467 ; Zabriskie v. Wetmore, 26 N. ,T. Eq. 18; Hutchison's Appeal, 82 Pa. 509 ; Ames, 452, n. ; Rhoads v. Rhoads, 43 111. 239 ; Gunn v. Brown, 63 Md. 96; Smith v. Smith, 70 Mo. App. 448; Carney v. Byron, 19 R.I. 283; Krebs's Estate, 184 Pa. St. 222; In re Moore's Estate, 198 Pa. St. 611 ; Shower's Estate, 211 Pa. St. 297; Eakle v. Ingraham, 142 Cal. 15 ; Bennett v. Bennett, 217 111. 434. 8 Gary v. Slead, 220 111. 508. Claflin v. Claflin, 149 Mass. 19. 5 Ibid. ; Ullman v. Cameron, 92 App. Div. (N. Y.) 91. 6 Young v. Snow, 167, Mass. 287. 7 Sears v, Choate, 146 Mass. 395. BIGHT TO A CONVEYANCE BIGHT TO POSSESSION 175 interested, and there is no one who can object even under the American rule, the trust can be determined without a decree, 1 but if the aid of the court is sought it will not be given. 2 Nothing less than the whole of an absolute estate will entitle the beneficiary to a conveyance, even under the English rule. Therefore, if there are contingent or unas- certained interests there can be no agreement. 8 And a beneficiary who has a life estate, with power of disposition by will, has not such an absolute estate as entitles him to a conveyance ; 4 nor could he call for one if the trustee has discretion as to the application of the income. 6 If, how- ever, the interest of the beneficiary is vested subject merely to some simple duty, such as the payment of an annuity, the beneficiary may have a conveyance by secur- ing the annuity properly. But obviously the maker of the trust can prevent the beneficiary's calling for a conveyance even under the English rule, by making a small provision for some person unascertained, or for the trustee himself. The trustee cannot set up superior title in a suit for a conveyance. 6 Nor can the beneficiary deny the trustee's title if he is his landlord, nor can the beneficiary buy in a tax title and hold it against the estate. 7 Right to Possession. Ordinarily in America the right to possession of the real estate and chattels belongs to the trustees ; 8 but if the instrument intends that the beneficiary is to enjoy them in specie, he will be entitled to possession, 1 Lemen v. McComas, 63 Md. 153. 4 Young v. Snow, w6i supra. 8 Brandenburg v. Thorndike, 139 Mass. 102 ; Walton v. Follansbee, 131 111. 147; Moore v. Sinnott, 117 Ga. 1010. Sise v. Willard, 164 Mass. 48. 6 Russell v. Grinnell, 105 Mass. 425. Neyland v. Bendy, 69 Tex. 711. 7 Supra, p. 45. Dorr v. Wainwright, 13 Pick. 328. Supra, pp. 45 and 100.- 176 RIGHT TO POSSESSION and by statute in England the right of possession is in the beneficiary. 1 As, for instance, where he is intended to reside in a house and use the furniture. But where the personal property is likely to be injured or lost in his pos- session, he may be required to give security for it. If he is given the use of personal property he may wear it out, and neither he nor the trustee will be required to replace it ; and unless it is heirlooms or the appurtenances of an estate, such as the tools on a farm or the furniture of a furnished house, he ma}' use them wherever he pleases. 2 Where the instrument has no specific directions, the trustee will be justified in putting the beneficiary in posses- sion of a dwelling-house or farm as a home; but the bene- ficiary cannot compel him to buy him a residence, though the trustee may do so. 8 The beneficiary has no right to the possession of the trust securities ; but where he is given the dividends on certain specific stocks, or the rents of certain specific estates, he can require the trustee to give him a power of attorney to collect ; but where the trustee has the duty to manage the estate and pay over the net income, the bene- ficiary has no such right. The Beneficiary may lose his Rights against the Trus- tee by Release, Acquiescence, and the Running of the Statute of Limitations. If the beneficiary is sui juris,* and fully informed, and has a full knowledge and appre- ciation of the facts, he may make a valid and binding release of any claim he has against the trustee for a breach of trust or otherwise. 8 If, however, the beneficiary 1 Ames, 467, n. 2. 2 Supra, pp. 107, 125 ; Lewin, p. 768. 8 Schaffer v. Wadsworth, 106 Mass. 19. Supra, p. 111. 4 A married woman is sui juris, and may release as to her separate estate, Walker v. Shore, 19 Ves. Jr. 387 ; but a married woman without power of anticipation cannot release. Fyler v. Fyler, 3 Beav. 550, 563. 5 Pope v. Farnsworth, 146 Mass. 339; Brice v. Stokes, 11 Ves. Jr. 319, 325. HOW BENEFICIARY MAY LOSE HIS BIGHTS 177 has come of age latel}', he should be advised by counsel, as his inexperience may form a ground to invalidate his action. 1 Nor will a beneficiary be bound by his release if there was fraud, accident, or mistake. 2 If the beneficiary knew and urged a breach of trust, he not only cannot recover, but is liable to contribution, 8 even though the beneficiarj 7 be a married woman without power of anticipation. 4 If the beneficiary who is sui juris assents to a breach of trust, such as an improper sale 5 or investment, he cannot subsequently recover the loss, if he was fully in- formed ; but the assent to one improper investment will not authorize a second of the same character. 6 If he has been misled by the trustee his assent will not conclude, him, and he may disaffirm the transaction on learning the truth, 7 even though the transaction has been set forth in an account settled in court. 8 So, also, if the beneficiary who is sui juris knows of a breach of trust, and neglects to make any claim, 9 or does not make it for an unreason- able time, 10 he will be taken to have assented, and so cannot complain ; if he had no reason to suspect a breach of trust he is not bound to inquire, though he might have dis- covered it had he done so, 11 but time will not deprive a beneficiary of his remedy unless he has been guilty of 1 Wade v. Lobdell, 4 Cash. 510; Field v. Middlesex Banking Co., 77 Miss. 180. The ordinary statutes of limitations apply in England now. Trustee's Act, 1888 (51 & 52 Viet.), ch. 59, 8. 2 Perry, 922. 8 Raby v. Ridehalgh, 7 DeG., M. & G. 104. See supra, p. 151. * Generally, but by statute in England. See Griffith v. Hughes, 3 Ch. D. (1892), p. 105. 6 Fryberger o. Turner, 109 N. W. Rep. (Minn. 1906) 229. 6 Mant v. Leith, 15 Beav. 524; Adair v. Brimmer, 74 N. Y. 539. ^ Nichols, Appellant, 157 Mass. 20. 8 Morse v. Hill, 136 Mass, 60. 9 Badger v. Badger, 2 Wall. 87. 1 Denholm v. McKay, 148 Mass. 434, 441 ; Treadwell v. Treadwell, 176 Mass. 554; Quirk v. Liebert, 12 App. D. C. 394. 11 Lamberton v. Yonmans, 84 Minn. 109. 12 178 HOW BENEFICIARY MAY LOSE HIS RIGHTS laches. 1 A remainderman may interfere to protect the estate during the life tenancy, but he is not guilty of laches or acquiescence until the estate comes into his possession. 2 But a minor may cut himself off by inducing the trustee to act by fraud. 8 What constitutes laches depends on the circumstances of each case, but as a general rule mere lapse of time alone will not bar the beneficiary where the position of others has not been changed. 4 Lapse of time with circumstances indicating an intention to abandon the trust are sufficient to bar a recovery. 5 A beneficiary who has delayed electing whether or not to confirm a sale, in order to see whether the property will rise or fall, cannot elect at a later time.' Ordinarily the statute of limitations will not run against the beneficiary, 7 since the possession of the trustee is in the interest of the beneficiary ; but if the trustee takes an adverse position, repudiates the trust, and brings the mat- ter home to the beneficiary so that he is compelled to take action, 8 he may take the benefit of the statute, and the time will run from the date when he brought his adverse claim distinctly to the beneficiary's notice ; 9 but the stat- 1 Prevost v. Gratz, 6 Wheat. 481, 498, Story, J. Transfer of shares after sixty years held barred. Halsey v. Tate, 52 Pa. St. 311 ; Iverson v. Saulsbury, 65 Ga. 724 ; Speidel v. Henrici, 120 U. S. 377. 2 Stewart v. Conrad's Adm'r, 100 Va. 128 ; Bennett v. Colley, 5 Sim. 181 ; 8. c. 2 Myl. & K. 225 ; but see Browne v. Cross, 14 Beav. 105. 8 Preceding page, n. 3. 4 Morse v. Hill, 136 Mass. 60, 65, 66 ; In re Jones's Estate, 30 Misc. (N. Y.) 354; Blake v. Traders' Nat'l Bank, 145 Mass. 13. 8 Sawyer v. Cook, 188 Mass. 164. 6 Hoyt v. Latham, 143 U. S. 553; Curtis v. Lakin, 94 Fed. Rep. 251 (C. C. Utah, 1899) ; Skelding v. Dean, 141 Mich. 143. 7 Speidel v. Henrici, 120 U. S. 377 ; Riddle v. Whitehill, 135 U. S. 621. 8 Philippi u. Phillippe, 115 U.S. 151 ; Davis v. Coburn, 128 Mass. 377 ; Hubbell v. Mdbury, 53 N. Y. 98 ; Thome v. Foley, 137 Mich. 649. 9 Statute runs from time of distribution, Jones v. Home Savings Bank, 118 Mich. 155; or from date of decree of distribution, supra, p. 145. HOW BENEFICIARY MAY LOSE HIS BIGHTS 179 ute will not begin to run against the remainderman until his estate vests in possession, nor will it begin to run so long as the beneficiary is under the control of the trustee. TV. Rights against Strangers. The beneficiary has no claim to the property itself, * but he may constitute any person into whose hands it has come wrongfully a trustee for him. 2 As, for instance, a bank which has received stocks and bonds, which it knows belong to the trust estate as security for a personal loan to the trustee, holds the stocks and bonds in trust for the beneficiaries. 8 Al- though the beneficiary must sue in the name of the trustee, the defendant cannot set up the defence that the trustee was a joint wrongdoer in pari delicto.* A disseisor will not be held a trustee, since he claims the property by a title which supersedes that of the trus- tee ; 6 and a purchaser for value without notice takes the property free of trust, although he claims under the trus- tee, that is to sa}', if the transferee bought the estate for value, without notice of the trust, then he in a court of equity is equally meritorious with the beneficiary, and the court will not help the beneficiary against him, and so he ma}' keep his legal title, and will not be compelled to hold it as trustee. 6 A purchaser with notice from the trustee, if he denies the beneficiary's title, can avail himself of statute, and it will begin to run from the time when the beneficiary is in possession and not under disability ; and in case of fraud, from the discovery of the fraud, or when it might have been 1 Stirapson. Am. Statute Law, p. 237. 2 Third National Bank v. Lange, 51 Md. 138. 3 Loring v. Brodie, 134 Mass. 453 ; Blake v. Traders' Nat'l Bank, 145 Mass. 13; Tattle v. First Nat'l Bank, 187 Mass. 533. If the bondsman has made good the loss, he is subrogated to the beneficiaries' claim. * Wetmore v. Porter, 92 N. Y. 76. 6 Supra, p. 27. 6 Supra, p. 46. 180 BIGHTS AGAINST STRANGERS discovered with reasonable diligence ; J and the usual period of adverse possession is good against the beneficiary. 2 Aside from those who claim by a superior or adverse title, the beneficiar}- may follow the property as long as it can be identified ; and if it can be clearty shown that other property has been substituted for the trust property, the substituted property can be followed. 8 Where the trust funds form only part of the consideration of the substituted property, the trust may be enforced to the ex- tent of the trust property. 4 Money is said to have no earmark, 5 hence if it becomes so mingled with other funds that its identification is im- possible, the beneficiary becomes a simple creditor merely. 6 The mere commingling of the trust moneys does not neces- sarily prevent their identification, but makes it more diffi- cult. 7 " In some States it is held that, while it is not enough to show that trust property went into the general assets, it is enough to charge the whole estate with a trust, if it can be shown that the proceeds remain somewhere unexpended in the estate. 8 But by great weight of authority a trust cannot be established against the proceeds of trust prop- erty which has been disposed of, unless the proceeds can be identified and traced into some specific fund or prop- 1 McCoy v. Poor, 56 Md. 197. 2 Molton v. Henderson, 62 Ala. 426 ; Williams v. First Presb. Soc., 1 Ohio St. 478; Ward v. Harvey, 111 Ind.471 ; Hall v. Ditto, 12 S. W. Rep. 941 (Ky.) ; Merriam v. Hassam, 14 Allen, 516, 520; Attorney General v. Proprietors, etc., 3 Gray, 1. 3 For instance, Avhere the trust estate has been wrongfully put into a business, the assets of the business belong to the trust. Byrne v. McGrath, 130 Cal. 316; Reeves v. Pierce, 64 Kan. 502; Crawford Co. Com'rs v. Patterson, 149 Fed. Rep. 229. * Cases on tracing unmingled funds contra. Underbill, 458, n. 6 Deg v. Deg, 2 P. Wms. 411, 414. 6 Pennell v. Deffell, 4 DeG., M. & G. 372, 381 ; Wetherell v. O'Brien, 140 111. 146, 151 ; Little v. Chadwick, 151 Mass. 109. 7 Houghton v. Davenport, 74 Me. 590. 8 See Slater v. Oriental Mills, 18 R. I 352, 353; Bradley v. Chese- brongh, 111 Iowa, 126; Hopkins v. Burr, 24 Colo. 502; Pearson u. Haydel, 90 Mo. App. 253, 264 ; Lincoln v. Morrison, 64 Neb. 822. RIGHTS AGAINST STRANGERS 181 erty." l The trustee will not be presumed to have used the trust funds for himself ; 2 so the beneficiary may claim all the trustee cannot identify, and repayment to him on the eve of bankruptcy is not a fraudulent preference ; 8 but a person who receives property from an unfaithful trus- tee cannot be held to be trustee of property which cannot be connected with the trust fund. 4 Stock is like money, one share is as good as another ; so the beneficiary can take all shares in the company in the trustee's hands irrespective of the name they are regis- tered in. 6 Where the beneficiary has become a simple creditor, he is preferred in Georgia, Missouri, and Wisconsin 6 next to funeral expenses, but generally a beneficiary has no preference on account of the nature of his claim. 7 1 Knowlton, C. J., in an exhaustive opinion reviewing authorities in Lowe v. Jones, 192 Mass. 94, p. 101 ; In re Hallett's Estate, 13 Ch. D. 696; Lebanon Bank's Estate, 166 Pa. St. 622; Marqnette Fire Com'rs v. Wilkinson, 119 Mich. 655, 670; Hauk v. Van Ingen, 196 111. 20; Woodhouse v. Crandall, 197 111. 104; Ellicott v. Kuhl, 15 Dick. 333 ; Burnham v. Earth, 89 Wis. 362 ; Northern Dak. Elevator Co. v. Clark, 3 No. Dak. 26 ; Cushman v. Goodwin, 95 Me. 353 ; Rock- wood v. School Dist., 70 N. H. 388 ; Peters v. Bain, 133 U. S. 670 ; Frelinghuysen v. Nugent, 36 Fed. 229 ; In re Hicks, 170 N. Y. 195 ; Bircher v. Walther, 163 Mo. 461 ; Morrison v. Lincoln Savings Bank, 57 Neb. 225 ; Morse on Banking, 3ded., 590. 2 National Bank v. Insurance Co., 104 U. S. 54 ; In re Holmes, 37 App. Div. (N. Y.) 15 (1899) ; In re Steinway's Estate, 37 Misc. Rep. (N. Y.) 704. 8 Lewin, p. 1025 ; U. S. Natl Bk. . Weatherby, 70 App. Div. (N. Y.) 279. 1 Howard v. Fay, 138 Mass. 104; but see Welch v. Policy, 177 N. Y. 117. 6 Marshall v. Marshall, 53 Pac. Rep. 617 (Col. 1899) ; Draper v. Stone, 71 Me. 175. 6 Ga. Code (1895), 3189; Bircher v. St. Louis Sheet Metal Co., 77 Mo. App. 509 ; Evangelical Synod v. Schoeneich, 143 Mo. 652 ; McLeod v. Evans, 66 Wis. 401. See Bowers v. Evans, 71 Wis. 133, and Mercantile Trust Co. v. St. Louis, &c. Ry. Co., 99 Fed. Rep. 485 (Cir. Ct. Mo. 1900). 7 Little v. Chadwick, 151 Mass. 109; Lowe v. Jones, 192 Mass. 94, p. 103 ; Ellicott v. Kuhl, 60 N. J. Eq. 333 ; Cavin v. Gleason, 105 N. Y. 256. See Amer. & Eng. Encyc. Law (1st ed.), vol. 27, p. 257. 182 BIGHTS AGAINST STRANGERS The beneficiary is not bound to follow the trust funds if he prefers to hold the trustee or his bondsman ; l but he may elect which he will pursue ; he cannot however hold both remedies, and must elect one of them. 2 If he elect to follow the property he may choose whether he take the trust propertj* as it is, or have it converted and charge the trustee with loss. 8 Right against Stranger aiding in Breach of Trust. The beneficiary has a equitable suit against a person who aids in a breach of trust; as for instance against a person to whom the trustee has made a wrongful payment in dis- tributing the estate, or a tenant for life to whom he has paid or loaned part of the corpus of the estate, 4 and this irrespective of the trustee's right to recover the payment. So too he has a direct claim where a banker delivered up to one trustee the bonds 5 or money 6 which were confided to him by three trustees, or where a corporation trans- ferred stock improperly^ that is to say, in a manner which it knew to be a violation of the trust. 7 In such cases they will have notice of the trust if it is described on the face of the certificate, although the mere occurrence of the word " trustee " has been held not to be notice; 8 but the general rule seems to be that the word ' ' trustee " alone is a sufficient notice of a trust to put the purchaser or corporation on its inquiry as to the trustee's 1 Evans's Estate, 2 Ashmead, 470 ; Wayman v. Jones, 4 Md. Ch. 500; Clark v. Wright, 24 S. C. 526; Blake v. Traders' Nat'lBank, 145 Mass. 13. 2 Barker v. Barker, 14 Wis. 131 ; Hodges v. Bullock, 15 B. I. 592, 595. 8 Supra, pp. 154 and 170, 171. 4 Cowper v. Stoneham, 68 L. T. R. 18; Dixon v. Dixon, L.R. 9 Ch. Div. 587. Infra, p. 184. 6 Mendes v. Guedella, 2 Johns. & Hem. 259. Supra, p. 104. 6 Magnus v. Queensland N. Bk., 37 L. R. Ch. Div. 466. 7 Lowell, Transfer of Stock, 66; Loring v. Salisbury Mills, 125 Mass. 138 ; Bayard v. Farmers & Mechanics' Bank, 52 Pa. St. 232. 8 Lowell, Transfer of Stock, 69 ; Albert v. City of Baltimore, 2 Md. 159; Stockdale v. South Sea Co., Barnardiston, 363. BIGHT AGAINST STRANGER IN BREACH OP TRUST 183 right to transfer; 1 they must ascertain the right of the trustee to make the proposed transfer at their peril. The fact that there is a usage to make transfers 2 is not an ex- cuse ; nor can they rely on the power of sale which accom- panies the office of executor, 8 but must ascertain if he has it. If they know that v the executor is acting in fact as trustee, under the title of executor, 4 they are liable. As this duty is placed upon the corporation, it may require the trustee making the transfer to supply the docu- ments or other evidence showing his right to make the transfer, but in the absence of a by-law or statute requir- ing a deposit of the documents, it can only insist on in- spection of them, and not on the filing of copies. 5 If the beneficiary is actually in possession of the trust property, 6 he may maintain any action for the property which any other bailee might maintain ; and no one but the trustee, or some one claiming under him, can set up his title against the beneficiary, 7 and in Pennsylvania he might maintain an action for its recovery, 8 where, owing to lack of equity courts, the beneficiary has unusual privileges. 9 Ordinarily, the possession of the beneficiarj' is the pos- session of the trustee, and he must sue in the name of the trustee. 10 1 Shaw v. Spencer, 100 Mass. 382 ; Bayard v. Farmers & Mechanics' Bank, 52 Pa. St. 232 ; Stenfelds v. Watson, 139 Fed. R. 505. Bat the deposit of a check in the trustee's individual account made to his order as " trustee " is not notice to the bank of a wrongful use of the money. Batchelder v. Central Nat'l Bk., 188 Mass. 25. 2 Shaw v. Spencer, 100 Mass. 382. 8 Lowell, Transfer of Stock, 72. * Ibid., 73. 6 Bird v. Chicago, I., & N. Railroad, 137 Mass. 428. 6 Newhall v. Wheeler, 7 Mass. 189. 7 Stearns v. Palmer, 10 Met. 32. 8 Bailey v. N. Eng. Mnt. L. Ins. Co., 114 Mass. 177. 9 Fernstler v. Seibert, 114 Pa. St. 196; Miller v. Zufall, 113 Pa. St. 317. 10 Supra, p. 169, note 6, and p. 178, for instances where beneficiary may sue in own name. 184 BIGHT AGAINST STRANGER IN BREACH OF TRUST He cannot protect the property in equity any more than at law, and could not, for instance, restrain the assessors from taxing the estate, 1 nor sue in tort for an injury to it. 2 V. Liabilities. The beneficiary incurs no liabilities through his beneficial ownership, unless it be for taxation. He may be liable for taxes where the trustee is a non- resident, and such a tax is constitutional. 8 He is not liable as an owner, and, for instance, cannot be sued for an accident caused by the blowing over of a fence. 4 He is not liable to indictment for a nuisance on the trust property, 5 and need not contribute to protect it on foreclosure or otherwise. 6 He does not become liable as a stockholder, nor where a property qualification is needed does he gain a vote by his ownership. 7 A beneficiary who induces a trustee to commit breach of trust is liable to the other beneficiaries, and may be liable to the trustee, but his liability is not affected by the fact that he is a benefician", but he becomes liable by his acts as an individual. If the trustee pays charges from principal which he should have paid from income, or if the beneficiary obtains a wrongful advance of the principal, the trustee may withhold his income to make up the deficit, 8 but the court will not order him personally to refund a payment made by the trustee and disallowed in the trustee's account, and which the beneficiary took inno- cently. In such cases the trustee's remedy does not go 1 Western Eailroad Co. v. Nolan, 48 N. Y. 513. 2 Loring v. Salisbury Mills, 125 Mass. 138, 141. 3 Supra, p. 29. * Norling v. Alice, 10 N. Y. Sup. 97. 5 People v. Townsend, 3 Hill, 479. 6 Winslow v. Young, 94 Me. 145; Coffman v. Gates, 110 Mo. App. 475. 7 Lewin, p. 247. 8 Crocker a. Dillon, 133 Mass. 91 ; Hammond v. Hammond, 169 Mass. 83 ; In re Hurlburt, 51 Misc. R. (N. Y.) 263. Supra, p. 173. LIABILITIES 185 farther than the right to recoup out of the income ; * but his co-beneficiary will have a right to recover from him personally if there was fraud or collusion, or if he took the payment knowing that he had no right to it.' 2 The trustee cannot withhold the income as against an assignee of the beneficiary's estate to reimburse himself for money lent the beneficiary before he was appointed trustee. 8 If he litigates unnecessarily, he may be liable for costs. i Bate v. Hooper, 5 DeG., M. & G. 338. Supra, p. 121. * Supra, p. 182. Blair v. Cargill, 111 App. Div. 853. Abbott v. Foote, 146 Mass. 333 ; Mass. Rev. Laws (1902), ch. 174, 6; supra, pp. 49, 161 ; but see contra, Smith v. Peny, 197 Mo. 438. PART IV. INTERSTATE LAW. Construction of the Settlement. If the trust con- cerns personal property, the validity of the trust will be determined, and the instrument will be construed, accord- ing to the law of the place where the settlement is made, in the absence of a contrary intention on the part of the settlor. 1 If the settlement is by deed, the grantor's domicile is the place of making. 2 If by will, the place of probate is the place of making. 8 If the settlor obviously intended the settlement to be governed by the laws of some other jurisdiction, the docu- ment will be construed according to this intention. 4 If the trust is to be executed elsewhere, such an intention is manifested ; 6 but a settlement made in New Jersey cover- ing real estate both in New Jersey and New York as well 1 Re Megret (1901), 1 Ch. 547 ; In re Price (1900), 1 Ch. 442 ; Cod- man v. Krell, 152 Mass. 214 ; Lincoln v. Perry, 149 Mass. 368 ; Towns- end v. Allen, 13 N. Y. Supp. 73 ; Aubert's Appeal, 107 Pa. St. 447 ; Mercer v. Buchanan, 132 Fed. R. 501 ; Merritt v. Corties, 71 Hun, 612 ; Cross v. U. S. Trust Co., 131 N. Y. 330. 2 Mercery. Buchanan, 132 F. 501 ; Codm.in v. Krell, 152 Mass. 214; Jones v. Jones, 8 Misc. (N. Y.) 660. 8 Merritt v. Corties, 24 N. Y. Supp. 561 ; Sewall v. Wilmer, 132 Mass. 131; Proctor v. Clark, 154 Mass. 45; Lincoln v. Perry, 149 Mass. 368 ; Thiebaud v. Dufour, 54 Ind. 320. * Cross v. U. S. Trust Co., 131 N. Y. 330 ; In re Price (1900), 1 Ch. 442 ; Merrill v. Preston, 135 Mass. 451 ; Robb v. Washington and Jefferson College, 185 N. Y. 485; Story, Conflict of Laws, 8th ed., 479 a. 6 Mount v. Tuttle, 40 Misc. (N. Y.) 456 ; Keeney v. Morse, 71 App. Div. (N. Y.) 104; Paschal v. Acklin, 27 Tex. 173; Robb v. Washington and Jefferson College, 185 N. Y. 485, 496. CONSTRUCTION OP THE SETTLEMENT 187 as other property, does not indicate that the testator had New York law in mind, and will be construed according to New Jersey law. 1 If the trust concerns real property, its validity will be determined, and the document will be construed according to the law of the jurisdiction where the land lies ; and the law of the domicile must yield to the law of the jurisdiction where the land lies. 2 If the trust is valid according to the law of the place where it is to be executed, it will be upheld everywhere, and the funds will be transmitted to the duly appointed trustee.* This does not go so far as to allow an invalid trust to be established in New York, because later it is to be trans- ferred to a jurisdiction where it will be valid. 4 The construction adopted by the court in the jurisdiction where the settlement was made is conclusive on the courts of all other jurisdictions. 6 The Execution of the Trust A trust must be ad- ministered according to the law of the place of execution. 6 Land is naturally subject to the laws of the jurisdiction in which it lies, 7 and no court would enforce incompatible for- eign laws as to personal property which happened to be within its jurisdiction. 8 Thus a creditor suing in New 1 Sullivan v. Babcock, 63 How. Pr. 120; Proctor v. Clark, 154 Mass. 45 ; Lincoln v. Perry, 149 Mass. 368 ; Enohin v. Wylie, 10 II. L. C. 1 ; Jones v. Jones, 8 Misc. (N. Y.) 660. 2 Massie v. Watts, 6 Cranch, 148 ; Paschal v. Acklin, 27 Tex. 173; Lawrence's Estate, 136 Pa. St. 354 ; Bingham's Appeal, 64 Pa. St. 345 ; Penfield v. Tower, 1 N. D. 216 ; Bovey v. Smith, 1 Vern. 144 ; Liucolu . Perry, 149 Mass. 368. 8 Robb v. Washington and Jefferson College, 185 N. Y. 485 ; Sewall r. Wilmer, 132 Mass. 131, p. 137 ; Lanius v. Fletcher, 101 So. W. Rep. 1076. * Wood v. Wood, 5 Paige, 596. 6 English v. Mclntyre, 29 App. Div. (N. Y.) 439 ; Laws v. Williams, 56 N. J. Eq. 553 ; Jones v. Jones, 8 Misc. (N. Y.) 660, p. 662. 6 Keeney v. Morse,7l App. Div.(N.Y.) 104; Fayr. Haven, 3 Met. 109. 7 Paschal v. Acklin, 27 Tex. 173 ; Massie v. Watts, 6 Cranch, 148. 8 Sewall v. Wilmer, 132 Mass. 131, p. 137. 188 THE EXECUTION OP THE TRUST York, where a Rhode Island trust was being admin- istered, could not reach the income under New York law, although he might do so under Rhode Island law. 1 "Where the Trust Exists. In the nature of things a trust is ambulatory, and accompanies the trustee wherever he is, since the trust is an obligation on the trustee's con- science to do his dut}' to the beneficiary. 2 Hence wherever he goes, except as hereinafter noted, he is invested with his legal office, and may be called to account. 8 The exception is when the office is created by a decree of court. In this case the trustee derives his title from an act of the law, and the effect of the act is confined to the territorial jurisdiction over which the law extends. 4 The first consideration is, therefore, was the legal title to the property created by the act of the owner of the property, or by a decree of court? If the trustee is appointed by the settlor, whether the settlement be by deed or by will, his right to enforce the trust will be respected everywhere 5 upon his compty- ing with the observances of local law, such as recording the deed or filing the will. 6 Thus he may sue for the trust property or transfer it in am r jurisdiction. 7 1 Keeney v. Morse, 71 App. Div. (N. Y.) 104. See First Nat'l Bk. v. Nat'l Broadway Bk., 156 N. Y. 459, p. 472. 2 Sw/>ra, pp. 25 and 158. 3 Massie v. Watts, 6 Cranch, 148, 160 ; Memphis Savings Bank v. Houchens, 115 Fed. 96, p. 108. 4 Curtis v. Smith, 6 Blatchf . 537, pp. 546-549 ; Jenkins v. Lester, 131 Mass. 355; Leland v. Smith, 131 Mass. 358. In Jones v. Jones, 8 Misc. (N. Y.) 660, an Illinois trust was enforced in New York, the parties being all there. 6 Schwartz v. Gerhardt, 44 Oregon, 425-431 ; Smith v. Davis, 90 Cal. 25 ; Curtis v. Smith, 6 Blatchf. 537, p. 549 ; Bradford v. King, 18 R. I. 743 ; Iowa & Cal. Land Co. v. Hoag, 132 Cal. 627. 6 Curtis v. Smith, 6 Blatchf. 537, p. 549. * Pennington v. Smith, 69 Fed. R. 1 88 ; Toronto Trust Co. v. C., B. & Q. R. R., 123 N. Y. 37. WHERE THE TRUST EXISTS 189 So, too, he may be sued or forced to account wherever he may be found, 1 and the court may commit him for con- tempt if he fails to obey its decree. 2 In matters affecting the title to land, and other actions which are local in their character, he would, like other in- dividuals, be answerable in the local court only, and the court can enforce its decree by removing the trustee and appointing one in his place ; 8 but if the action is transitory, such as a contract for sale, he would be answerable in any jurisdiction where he was sued, even though the contract or matter in controversy affected land. 4 Thus a trustee of a railroad mortgage, which covered land situated in several States, might be ordered by the court of one State to foreclose the whole mortgage. 5 When the Trustee is Appointed by Judicial Decree, the title to the trust property is generally vested in him by the decree. 6 This decree has no force beyond the ter- ritorial jurisdiction of the court, and to enforce his trust in another jurisdiction he must receive an ancillary appoint- ment. 7 Thus a trustee appointed in Maryland could not transfer real estate in West Virginia. 8 If the trustee has a legal title to the property he may sue in a foreign jurisdiction to recover the property if the decree of the home State is not necessary to establish that 1 Supra, pp. 168, 169 ; Brown v. Desmond, 100 Mass. 267. 2 Kildare v. Eustace, 1 Vernon, 405 ; Cooley v. Scarlett, 38 111, 316 ; Story, Eq. Juris., llth ed., 1291. 8 Cooley v. Scarlett, 38 HI. 316 ; Story, Eq. Juris., llth ed., 1291. 4 Massie v. Watts, 6 Cranch, 148 ; Memphis Savings Bank v. Houchens, 115 Fed. 96; Bispham's Eq. 47; Jenkins v. Lester, 131 Man 355. 8 Mnller v. Dows, 94 U. S. 444. 8 Supra, p. 11. * Curtis v. Smith, 6 Blatchf. 537 ; Mass. Rev. Laws, 147, 9 ; Gen. Stats. Conn. (1902), 256; Maine Rev. Stats. (1903), ch. 66, 69, and statutes passim. 8 Wilson v. Braden, 48 W. Va. 196 ; Iowa & California Land Co. v. Hoag, 132 Cal. 627 ; Ay res v. Siebel & Co., 82 Iowa, 347. 190 WHEN TRUSTEE IS APPOINTED BY JUDICIAL DECREE title. The fact that there is a foreign trust attached to that title by foreign decree will not defeat it 1 For the same reason a trustee by judicial act can only be sued, and is accountable only in the jurisdiction where he was appointed. 2 A court in a foreign jurisdiction may appoint a trustee to carry out a foreign will, if it has the trust property in its jurisdiction. 8 It is usually provided by statute that the trustee appointed in the original ju- risdiction may take out ancillary administration. If he takes out ancillary administration, he is answerable in the subsidiai'y jurisdiction for the property which lies in that jurisdiction, 4 and that court may order the property to be distributed under its own decree, or may order it to be transferred to the original jurisdiction. 5 The trustee in the principal jurisdiction is accountable only for the balance transferred after settling his accounts in the subsidiary jurisdiction. 6 Even though the trustee has removed from the juris- diction the court will retain control of the trust, and may remove the trustee and appoint one to act in his place. 7 This exclusive control of a trust vested in the court in which it originates may be divested by the court's making 1 Fidelity Ins. Co. v. Nelson, 30 Wash. 340 ; Pennington v. Smith, 69 Fed. 188; Toronto Gen. Trust Co. v. C., B. & Q. R. R., 123 N. Y. 37; Bradford v. King, 18 R. I. 743. 2 Penn v. Brewer, 12 Gill & J. 113; Snyder v. Suyder, 1 Md. Ch. 295; Fay v. Haven, 3 Met. 109; Sewall v. Wilmer, 132 Mass. 131, p. 137 ; Jenkins v. Lester, 131 Mass. 555 ; Pennington v. Smith, 69 Fed. R. 188 ; Smith v. Calloway, 7 Blatchf. 86 ; Gulick v. Gulick, 3 Atl. 354. (See Jones v. Jones, 8 Misc. R. (N. Y.) 660, and Paget v. Stevens, 143 N. Y. 172.) 8 Rev. Stats. Ohio (1890), 5993. * Clark v. Blackington, 110 Mass. 369. 6 Welch v. Adams, 152 Mass. 74; Emery v Batchelder. 132 Mass. 452 ; Linton v. Shaw, 95 Ga. 683. 6 Clark v. Blackington, 110 Mass. 369. 7 Pennington v. Smith, 69 Fed. 188; McCann v. Randall, 147 Mass. 81 ; Chase v. Chase, 2 Allen, 101 ; Curtis v. Smith, 6 Blatchf. 537. WHEN TRUSTEE IS APPOINTED BY JUDICIAL DECREE 191 a final disposition of the trust, 1 and it has been held that where a trust originated in Massachusetts, and both of the original trustees had died, the New York court might appoint substitute trustees. 2 In this case the original appointment was b}* the testator, and it was held that the trust was not established by the probate of the will in Massachusetts, and therefore was not a trust established by judicial decree until substituted trustees were appointed in New York. Non-resident Trustee. When the trustee removes from the State or remains out of the jurisdiction, he may be removed ; 8 or if he dies, the vacancy can be filled al- though the trust fund has been removed. 4 If the property is within the jurisdiction and there is a statute vesting the estate in a new trustee, the matter will be terminated ; but if there is no personal service on the absent trustee and the property is with him, as in the case of personal property, or if there is no statute vesting the estate in the new appointee, a conveyance must be obtained from the former trustee, and the new trustee can sue him wherever he can find him. 6 In Pennsylvania, the court may appoint a co-trustee for a non-resident trustee ; * but, as a rule, it will not appoint a non-resident trustee, and in some jurisdictions it is for- bidden to do so ; 7 in others, where the beneficiary is a foreigner, it will appoint a foreign trustee. If a non- resident trustee holds land and neglects his dut} T , the 1 Schwarz v. Gerhardt, 44 Oregon, 425, 431 ; Linton v. Shaw, 95 Ga. 683. 2 Farmers' Loan & Trust Co. v. Pendelton, 37 Misc. (N. Y.) 256. 8 Supra, p. 24. Smith v. Davis, 90 Cal. 25. * Curtis v. Smith, 6 Blatchf. 537. 6 See supra, pp. 168, 169. Jones v. Jones, 8 Misc. (N. Y.) 660, p. 673. 6 Brightly's Dig. Pa. (1894), p. 2034, 52. A singular remedy, since joint action of the trustees is indispensable. 7 Supra, p. 19. Non-resident trustees are usually required by statute to appoint an agent within the State. 192 NON-RESIDENT TRUSTEE court can in some States by statute appoint a trustee, and order the land sold. 1 The court can give a foreign trustee leave to sell land, and remove the proceeds to the jurisdiction of his original appointment. 2 So, too, it can order personal property 8 to be conveyed to a non-resident trustee where the beneficiaries live out of the State, 4 and where it is satisfied that a proper bond has been given. 5 Where a trustee takes out ancillary trusteeship, he must settle his account in the principal jurisdiction for any sur- plus funds in his hands after settling his account in the subsidiary jurisdiction. 6 The ancillary jurisdiction may order the trust fund to be transferred to the origiual jurisdiction, or may order a continuation of the trust under its own orders. 7 A trustee need not inventory or account for foreign real estate, or the rents of it, in the jurisdiction of his appoint- ment. 8 In order to control the land, he must be appointed in the jurisdiction where the land lies, 9 and if he sells by order of court it must be by the order of the court where the land lies. 1 Brightly's Dig. Pa. (1894), p. 2031, 30. See also Conn. Gen. Stats. (1902), 256. 2 Rev. Stat. Me. (1903), ch. 67, 32; Code of Va. (1904), 2630; Code W. Va. R. L. (1902), 3249. 8 Supra, pp. 10, 12. The approval of an account showing payment to a foreign executor is equivalent to a decree. Emery v. Batchelder, 132 Mass. 452. * Mass R. L. (1902), ch. 150, 27 ; Comp. Laws Mich. (1897), 9302; Brightly's Dig. Pa. (1894), p. 2032, 40; Code Va. (1904), 2632; Gen. Stat. Conn. (1902), 230; Code Ala. (1896), 4179; Code W. Va. (1906), 3249-3251. 8 Ky. Stat. (1899), 4709-4711 ; Gen. Stat. N. J. (1895), p. 3685, 9, 10. Clark v. Blackington, 110 Mass. 369. 7 Welch v. Adams, 152 Mass. 74. See Emery v. Batchelder, 132 Mass. 452. 8 Supra, p. 92. 9 Generally, and Mass. R. L. (1902), ch. 147, 9. FOREIGN INVESTMENTS 193 Foreign Investments. As a general rule, a court will not authorize foreign investments beyond its jurisdiction and control ; as, for instance, mortgages or real estate out of the jurisdiction. 1 This rule has, however, been more observed in the breach than in the observance by trustees. There may be good reason why a foreign investment would be authorized, as, for instance, where the beneficiary resides out of the State and needs a home ; 2 or where both trustee and beneficiary reside in another jurisdiction, and only come into the jurisdiction of the trust to account. Taxation. 8 The trustee will be taxed on real estate where the land lies, and ma}' be compelled to pa}' a tax on the income in his home State. 4 The trustee may be liable to taxation on the personal property where he resides, and if the beneficiary resides in another State, the latter may also be liable to an addi- tional tax. 6 The statutes are too numerous and varied to cite, and the principle only is stated. 1 Supra, p. 116. Ortniston v. Olcott, 84 N. Y. 339. 2 Amory v. Greene, 13 Allen, 413. 8 Supra, p. 29. 4 Snch laws are not unconstitutional. Hunt v. Perry, 165 Mass. 287. 6 Supra, p. 184. 13 INDEX ABANDON, trustee cannot abandon trust, 20. ACCEPTANCE OF TRUST, 5. See TABLE OF CONTENTS, p. vii, iii. need not accept trust, 3. how made, 5. implied from meddling in trust, 6. implied from not disclaiming seasonably, 6. duty to investigate trust deeds and property, 1, 83, 92, 93. ACCOUNT, generally, 91-94. beneficiary entitled to, 171. corrected by one beneficiary all get benefit, 159. refusal to, is cause for removal, 23. must keep accurate and separate, 91. open to inspection of beneficiary, 91. should be settled periodically, 91. settlement in court, 94-95. duty to examine predecessors', 92, 93. form of, 92, 93. liability for joining in false account, 149, 150. trustee's lien until settled, 145. effect of, 94. fictitious account not proper method of getting instruc- tions of court, 97. does not take place of decree of distribution, 144. may amount to a decree of distribution, 144, n. 3. ends liability, 145. expense of, charged to whom, 35, 95, 142. must account for any benefit received, 32. ACCUMULATIONS OF INCOME, become principal, 126. ACQUIESCENCE, in breach of trust estops beneficiary, 177. ACTIONS. See SUITS. ACTIVE TRUSTEE. See MANAGING TRUSTEE. ADDITIONS. See ALTEBATIONS, ACCUMULATIONS. ADMINISTRATOR. See EXECUTOB. 196 INDEX ADMISSIONS, by beneficiary, effect of, against trustee, 76. against each other, 159. by one trustee, 76. ADVERSE INTEREST, trustee cannot have, 87. must resign if he acquires, 87. beneficiary cannot acquire, 45, 175. ADVICE, of counsel excuses what, 142, 143. trustee may ask court, 96, 142. may ask beneficiaries', 96. beneficiary no right to give, 170. AGENT, cannot exercise trustee's powers, 67, 89. may be employed when, 57, 90. ALIEN, as beneficiary, 157. as trustee, 15. ALIENATION BY BENEFICIARY, what passes, 161. of equitable estate, 161-162. restraint on, 163-168. See RESTBAINT ON ALIENATION. ALIENATION BY TRUSTEE, 46-50. effect of conveyance, 46, 47. what title passes, 46, 47, 48. attachment and execution, 48. set off, 49. ALTERATIONS, charge on principal, 138. ANCILLARY TRUSTEESHIP, 192. ANIMALS, trusts for, 157. ANTICIPATION. See RESTBAINT ON ALIENATION. provisions against, 163 et seq. APPEAL, 88. duty to maintain, 88. APPLICATION OF PURCHASE MONEY, 70-71. APPOINTEE, may disclaim trust, 3. APPOINTMENT, who administers estate, under general or special power, 15. exercise of general makes estate assets, 162. APPOINTMENT OF TRUSTEE, 7. made when necessary or proper, 7, 191. temporary trustee may be appointed, 7. how made, 8-9. made by court when, 8. what court has jurisdiction, 8, 9, 10, 188-190, 192. made in what place, 10. trustee may be appointed where property is, 190, 192. who may be appointed trustee, 15-18. foreign appointment, 18, 192. INDEX 197 APPOINTMENT OF TRUSTEE (continued). who are proper persons, 17, 18. incomplete without title to the property, 11. regularity not questioned in collateral proceedings, 19. See TABLE OF CONTENTS, p. viii, iv. APPORTIONMENT, none of current dividends, 126, 135. of extra stock dividends, 127-134. of interest, 136. of coupons, 136. at end of life estate, 135. on conversion of security, 123. of expenses, taxes, etc., 137-139. APPRECIATION OF PROPERTY, belongs to principal, 124. ARBITRATION, power of, 75. ASSENT, by beneficiary to breach of trust, 176. ASSIGNEE, of beneficiary, rights of, 136. ASSIGNMENT, trustee's general assignment does not pass trust estate, 47. beneficial estate may be assigned, 169. ATTACHING CREDITOR is sometimes purchaser for value, 47. ATTACHMENT, of trust property for trust debts, 48, 49, 77. of trust property for trustee's debts, 48. of beneficiary's estate, 160, 163. ATTORNEY, trustee may be for beneficiary, 86. expense charged to trust fund, 35, 142. rule as to employing self as, 34. ATTORNEY OR AGENT, payment to, 144. trustee may act by when, 57, 90. AUGMENTATION. See GAIN AND Loss. BANKER, liable for delivering securities to wrong person, 182. BANKRUPT, is unfit to be trustee, 7, 8, 16. BANKRUPT TRUSTEE, not necessarily removed, 24. BANKRUPTCY OF BENEFICIARY, beneficial estate passes to assignee, 158. gift over on, valid, 167. BANKRUPTCY OF TRUSTEE, does not affect trust estate, 47. discharges his liabilities, 155. BENEFICIARY, who may be, 157. who is a, 158. person who may receive income at trustee's pleasure not, 79, 158, 166. in spendthrift trust, 79, 158, 166.. his estate, 159. no claim on trust property, 25, 159. 198 INDEX BENEFICIARY (continued). rights against trustee, 168-169. enforced where, 168, 189. can compel trustee to perform trust, 169. interests not joint, 159. estate of, will descend like other property, 160. alienation of estate of, 160. restraint on alienation of estate, 163. right to possession of trust property, 45, 100, 175. not usually necessary parties to suit, 26, 75. admissions by, do not bind trust, 76. can purchase trust property, 70. cannot acquire tax title, 45, 175. cannot deny trustee's title as landlord, 45, 175. is not stockholder in corporation, 27. expense of suit to protect, allowed, 75. right to support, 75, 83, 173. maintenance and support of, 75, 83. support apportioned where several, 81. right to conveyance, 175. right to information, 91, 171. right to account, 91. right to income, 171. rights as creditor, 170, 178, 181. right to follow property, 179. must elect whether to hold trustee or follow property, 182. stranger aiding in breach of trust liable to, 182. in possession of property may sue, 26, 183. contracts with trustee, 85. gifts to trustee, 86. payment of share to, before end of trust, 142. loss of rights, 176, 178. no right to advise trustee, 170. may be notified of proposed action, 96. may disaffirm transaction, 177. trustee's liabilities to, 147. may choose damages or property, 182. may discharge trustee, 19, 155, 176. is unfit to be trustee, 16. liabilities, 184. causing breach of trust, liable, 151, 177, 184. liable for fraud, 151, 184. need not refund payment, 173, 184. BENEFIT, trustee can take none from trust, 32. INDEX 199 BETTERMENTS, not apportioned, 137. charged to what, 140. BILL FOR INSTRUCTIONS, 96. BONDS, when required of trustees, 12. refusal to give, cause for removal, 23. sureties may be required, 12. expense of surety company charged to whom, 35. amount required, 13. sureties on executor's bonds liable for his acts as trustee, 14. liable for co- trustee if joint bond given, 149. BONDS, AS INVESTMENTS, 114. care of, 104. purchase of bonds at discount to balance ones at premium improper, 136. railroad bonds not real securities, 112. not mortgage bonds, 112. selling at premium, need not be converted, 107, 111. interest apportioned when, 136. BONDSMEN. .See SUBETIES. BONUS. See COMMISSION. BOOKS OF ACCOUNT, open to beneficiaries' inspection, 91. BREACH OF TRUST, is cause for removal, 23. but not if merely technical, 24. or accidental, 24. stranger aiding in, liable, 182. liability for, joint and several, 147. damages for, 154. contribution among those liable, 148. beneficiary may elect to follow property or trustee, 182. remedy for, lost how, 176. loss by breach falls on principal, 123. BROKER, commissions charged to trust fund, 35. commissions as between principal and income, 142. rule as to employing self as, 34. trustee may be for beneficiary, 90. BUILDING, with personal property, conversion, 108. BUILDING LEASES, 74. BUSINESS, of testator carried on sometimes, 112. BUSINESS RISKS, should be converted, 105. CAPABLE. See INCAPABLE. trustee should be, 16. court will appoint only capable trustee, 18. CAPITAL. See PRINCIPAL AND INCOME. CAPRICE, is not discretion, 61. 200 INDEX CAPRICE OF BENEFICIARY, trustee not removed for, 24. CAPRICIOUS TRUSTS, trusts for animals, 157. CARE OF TRUST PROPERTY. See CUSTODY. CESSER, gift over of beneficiaries' estate on condition valid, 166. CESTUI QUE TRUST. See BENEFICIARY. CHANGE OF INVESTMENTS, when made, 111. CHARGES, trustee's lien for, 145. See EXPENSES. CHATTELS, not converted when, 102, 107, 125. who has right to possession of, 102, 125, 175. CHECKS, who may draw, 103. CHILD, support of, where parent living, 84. payment to father for, 84, 85, 144, 152. CHOSE IN ACTION, should notify obligor, 101. effect of notice. See NOTICE. CLAIM, trustee cannot buy up, 34. beneficiary cannot buy up, 45, 175. beneficiary has none to trust property, 25, 159. but may follow it in hands of stranger, 179. CLERK, expense of charged to whom, 35. COLLECTION, from debtor to trust and self, apportioned, 87. COLLECTION OF ASSETS, 98, 101, 147. COMMISSIONS. See COMPENSATION. what are allowed, 37. from what fund paid, 37. on termination of trust, 38, 145. trustee can take no commission from strangers, 37. must account for any received, 32, 35. COMPENSATION, rule as to, for expert services, 34. trustee entitled to what, 36. extra on principal, 37. for distribution of estate, 38, 145. rules for various States, 39-44. trustee's lien for, 145. COMPETITION, trustee cannot come in, 34, 87. COMPLETION OF DUTIES, discharges trustee, 19. COMPOUND INTEREST, charged when, 110, 154, 170. COMPROMISE OF SUIT, when proper, 76, 88. CONDITION, on which income to cease valid, 166. power dependent on, 58. purchaser must see that condition fulfilled, 70. CONFLICT OF LAWS. See INTEB-STATE LAW. CONSENT, of beneficiaries, discharges trustee, 19. of beneficiary as a condition, 58. INDEX 201 CONSIDERATION, must be returned where sale disaffirmed, 170-171. CONTINGENT INTEREST, sufficient to intervene in appoint- ment of trustee, 158. CONTINGENT REMAINDER, sale of, 67. CONTRACT, to what extent the trustee can bind the estate, 77. trustee binds himself personally, 28, 77, 145. signing as " trustee " makes no difference, 28, 77, 145. for sale not specifically enforced when breach of trust, 70. but trustee liable for breach of, at law, 70. as to compensation valid, 36. between trustee and beneficiary, 36, 85, 86. with beneficiary may be set aside, 86. how trust estate is bound, 78. CONTRIBUTION FOR MAKING GOOD BREACH OF TRUST, from co-trustee, 151. from beneficiary, 151, 177, 184. CONVERSION OF FUND, apportionment between principal and income, 122-123. CONVERSION OF REAL INTO PERSONAL PROPERTY, improper, 107. of real into personal may be authorized by court, 108. of infant's estate, 109. on cy prds doctrine, 67, 109. implied authority, 109. CONVERSION OF SECURITIES, into trust investments, 105 et seq. equitable conversion, 122. not of testator's good investments, 106. none of property meant to be enjoyed in specie, 107. securities at premium not necessarily converted, 107. CONVEYANCE, by one trustee void, 45. beneficiaries' right to, 175. CONVEYANCE BY TRUSTEE, what title passes to volunteer, 46. to purchaser for value, 46. to assignee, 47. on execution, 48. to successor, 52. to remainderman, 50, 145. CONVEYANCE TO REMAINDERMEN, necessary when, 145. right of beneficiary to, 175. CORPORATION, may be a trustee, 15. trusts for, 157. liability for transfers of stock, 182. 202 INDEX CORPORATION ( continued ) . trustee is stockholder in, 27. beneficiary is not, 27. trustee liable as stockholder, 27. COSTS, when allowed, 35, 75, 98, 142. CO-TRUSTEE, cannot delegate trust to, 88. liability for acts of, 148. contribution from, 151. COUNSEL, expenses charged to trust fund, 35. rule as to employing self as, 34, 57, 90. trustee may be for beneficiary, 90. advice of, does not excuse mistake, 142, 143. COUNTER CLAIM. See SET-OFF. COURT. See also PBOBATE COUBTS and INTEB-STATE LAW. power to appoint trustee when, 7. what court has jurisdiction to remove trustee, 22, 191. will remove trustee when, 22. will not remove when, 23. may itself administer trust, 7. may exercise its discretion in removing a trustee, 22. will appoint trustees when, 9, 191. what court has jurisdiction of the trust, 9, 188, 189, 192. what court has jurisdiction to appoint trustees, 9, 188, 189. will instruct trustee when, 96. may order sale of trust property, 68. controls execution of powers when, 59-62. COVENANTS, trustee liable on in lease, 29, 75, 146. or deed, 29, 146. CREATOR OF TRUST. See SETTLOR. CREDITOR, beneficiary's rights as, 170, 178, 181. CREDITOR OF BENEFICIARY, his rights against equitable estate, 162, 163 et seq. may set off debt in equity, 49. of beneficiary in spendthrift trust, 166 et seq. of person exercising general power of appointment takes, 162. CREDITOR OF TRUST, remedy against trustee, 28, 77. remedy against trust property, 48, 78. CRIMINAL LIABILITY, for nuisance on trust property, 30. for taking trust funds, 147. CURTESY IN TRUST ESTATE, 51. in equitable estate, 160. CUSTODY OF TRUST PROPERTY, degree of care required, 105. cannot give to co-trustee, 149. of non-negotiable securities, 104. INDEX 203 CUSTODY OF TRUST PROPERTY (continued). of negotiable securities, 104, 105. of trust chattels, 45, 100, 175. CY PRES DOCTRINE, sale under, 67. conversion under, 109. DAMAGES FOR BREACH OF TRUST, measure of, 154. usually amount of loss and interest, 154. sometimes replace property and earnings, 154. DAMAGES RECOVERED, not apportioned, 123. DEATH OF HOLDER OF POWER, destroys power, 64. DEATH OF TRUSTEE, new trustee may be appointed, 7. what become of office and title, 3, 20, 61, 52. office and titla pass to survivor, 20. ends trusteeship, 20. liability ends at, 147, 155. DEATH OF SOLE TRUSTEE, title passes to whom, 2, 20, 51. how title passes to successor, 50. DEBT, collected from individual and trust debtor apportioned, 87. what can be set off, 49. DEBTOR, trustee cannot convert himself into, 147, 180. DECLINE. See DISCLAIMED DECREE, of sale must conform to statute, 66. appointing trustee should order transfer of title, 11. DEED, trustee is liable on covenants, 29, 146. when liable on recitals, 146. DEFEND, general power to defend actions, 75. DELAY, trustee liable for delay in investing, 106. in converting, 106. beneficiary may lose rights by, 177-178. DELAYED DIVIDENDS, 135. DELEGATE, cannot delegate trust, 88. trustee cannot delegate powers, 57, 90. ministerial acts may be delegated, 57, 89, 90. may employ agent where there is necessity, 90. DEMAND, of one trustee sufficient, 76. DEPRECIATION OF PROPERTY, after payment of one bene- ficiary, 143. generally loss of principal, 124, 136. DESCENT, of equitable estate, 160. of legal estate, 51. DEVESTMENT OF OFFICE, by trust ending, 19. by death of trustee, 19. by resignation, 20. by removal, 22. 204 INDEX DEVISE, of equitable estate, 160. of legal estate, 51. DILIGENCE, necessary, 89, 101, 106. amount required, 106, 113, 152. DIRECTOR, trustee is eligible as stockholder in corporation, 27. beneficiary is not, 27. DISABILITY OF TRUSTEE, effect of, 19. DISAFFIRM, beneficiary can disaffirm transaction where mis- led, 85, 86, 177. can disaffirm sale by trustee to self, 32, 70. DISAGREEMENT, of one trustee blocks all action, 55. with other trustees, if unreasonable, cause for removal, 23. with beneficiary, not cause for trustee's removal, 24. DISBARMENT, defaulting trustee liable to, 147. DISCHARGE OF ENCUMBRANCE, cost apportioned, 137. DISCHARGE OF TRUSTEE, by end of trust, 19. by beneficiary, 19, 176. in various ways, 19, 155, 176. by bankruptcy, 129. See DEVESTMENT OF OFFICE. DISCLAIMER, trust may be refused, 3. whole trust must be refused, 4. if one of several trusts in same instrument, 4. heir or representative of deceased trustee cannot always disclaim, 3. form of, 3. how made, 4. by refusing to give bond, 4. effect of, 5. DISCOUNT, trustee cannot profit by, 34. bond purchased at discount does not balance one at pre- mium, 136. DISCRETION, court may exercise in removing trustee, 22. honest exercise of, not cause of removal, 24, 62. unreasonable or prejudiced exercise is cause for removal, 23. personal exercise of, essential to execution of power, 55. cannot be exercised by any one but trustee, 56, 57, 58. cannot be delegated to agent or co-trustee, 57. cannot be exercised by court, 61. controlled by court when, 59, 60. amount required in investing, 116. in managing trust, 152. what is sound in investing, 112-117. "in his discretion" means little, 112. INDEX 205 DISCRETION (continued). of trustee as to support of beneficiary, 81, 85. in spendthrift trusts, 166. as to support of family, 167. DISCRETIONARY POWERS, execution not controlled by the court, 60-63. reasons for execution need not be given, 61. not liable for use of, 153. execution set aside for fraud, 63. paying whole fund fraud, 63, 82. DISSEISOR, trustee may be, 160. of property is not a trustee, 179. DISTRIBUTION, of trust fund at trustee's risk, 142. payment of shares at different times, 143. may have decree for, 143. by fictitious account improper, 144. compensation for, 145. conveyance to remainderman necessary when, 145. DIVIDENDS, ordinary are income, 126, 135. delayed, 135. on wasting investments, 126. extra or stock belong to whom, 127-134. not apportioned, 126. DIVISION OF TRUST, cannot disclaim part, 4. cannot accept part, 6. payment of part, 143. DOWER, in trust estate, 51. in equitable estate, 143. DRUNKARD, unfit trustee, 16. may be removed from office, 23. DUTY, neglect of. See NEGLECT. ignorance of, no excuse, 96, 152. where trustee is in doubt, may notify beneficiary of in- tended action, 96. may get instructions of court, 96. to exercise utmost good faith, 2, 86. not to aid adverse claimants, 87. not to come in competition, 87. is all to the trust, 87. to exercise the trust personally, 2, 85, 88. to examine trust property and documents, 1, 83, 98. to examine predecessor's accounts, 98, 147. to take possession of property, 98. to convert into trust investments, 105. to invest, 109. 206 INDEX DUTY (continued). in investing is what, 111. as to class of investments, 111-124. as to testator's business, 106. to keep accounts, 91. to prosecute suits, 88. to support beneficiary, 83. to repair, 102. to fence, 102. to insure, 102, 147. to pay taxes, 102. EFFECT, of disclaimer, 5. ELECT, beneficiary may elect to pursue property or trustee, 182. may elect damages or property, 154. EMBEZZLEMENT, 147. EMPLOYMENT, of a person is not trust property, 98. ENCUMBRANCE, discharge of apportioned, 137. END, trusteeship how ended, 19, 176. of trust discharges trustee, 19. ENFORCED, trust may be where, 188, 189. EQUITABLE ESTATE, 25, 158, 159. See ESTATE OF BENEFICIABY. EQUITABLE CONVERSION, 122. ERRORS, liability for, 151. ESCHEAT, of equitable estate, 159. ESTATE OF BENEFICIARY, incidents, 159. alienation of, 160-168. ESTATE OF TRUSTEE, is joint, 45. cannot be severed, 45. passes to survivor, 46. not affected by statutes making tenants in common, 46. in real estate what is needed, 44. in personal property absolute, 44. in code States no title, 44. ESTOPPEL, by receipting for securities, 100. by laches, 177-178. EXCHANGE, power to, 73. EXECUTION, of power must be accurate, 58. levy of does not affect trust estate, 48. trust property may be taken for trust debts, 48. equitable estate may be taken on, 161. EXECUTOR, may be a trustee in fact, 6, 14. liability of bondsmen for acts as trustee, 6, 13, note 1. when he becomes a trustee, 14, 100. INDEX 207 EXECUTOR (continued). ends executorship and becomes trustee how, 100. need not accept trusts in same will, 4, 6. EXECUTOR OF TRUSTEE, may inherit trust, 3. does not take trust powers, 54. duty as to trust estate, 54. power to disclaim testator's trusts, 3, 6, 20. his duty as to testator's trusts, 20. EXECUTORY DEVISE, sale of, 67. EXEMPTION, from furnishing sureties on bond, 12, 13. from liability by settlement, 153. EXPENSES, what are chargeable to income and principal, 137. what may be charged to trust fund, 35. of suit allowed, 35, 75. of accounting, 36, 95. of protecting beneficiary, 75. EXTINCTION OF POWER, 64. EXTINCTION OF TRUST, discharges trustee, 19. See END OF TRUST. FARMING IMPLEMENTS, may be used by whom, 102, 125, 175. See CHATTELS. FARMING STOCK, increase usually income, 125. See PEBSONAL PBOPEBTT. FATHER. See PABENT. FENCE, duty to, 102. cost charged to what, 138. FIT. See UNFIT. a trustee should be fit, 16. court ordinarily will only appoint a fit trustee, 17. FOLLOWING, the trust property into hands of stranger, 179- 182. FOREIGN INVESTMENTS, 115, 193. FOREIGN REAL ESTATE, ancillary trusteeship necessary, 188, 192. need not be inventoried, 92, 192. rents from, not part of account, 92, 192. FOREIGN SECURITIES, improper investments, 115, 192. FOREIGN TRUSTEE, appointment of, 18, 192. removal of, 24, 191. FORFEITURE of trustee's estate, effect of, 51. of equitable estates, 160. FRAUD, in account, 95, 149. to draw whole fund at once under power to use principal if needed, 63, 80. 208 INDEX FRAUD (continued). what is in sale, 70. in contract between trustee and beneficiary, use of position is fraud, 85. presumption of fraud if trustee gets any advantage, 85. in execution of power, 63. beneficiary liable for, 151, 184. may be forced to contribute, 151. contribution among parties to, 151. FURNITURE, may be used up when, 102, 125, 176. replaced from income, 125. See CHATTELS. GAIN AND LOSS, usually principal, 124. on separate transactions not set off, 124, 136, 147, 153. GENERAL ASSIGNMENT. See ASSIGNMENT. GIFTS, to trustee, 35, 86. GOOD FAITH, required of trustee, 2, 32, 85, 87. GRAVEL, when income, 125. GUARDIAN, of lunatic or infant trustee, 15, 20. payment to guardian, 144. expenses allowed, 35. HEIR OF TRUSTEE, may have title to trust estate, 3, 48. does not take trustee's powers, 54. HONESTY, protects when, 142, 151. not enough alone, 142, 151, 152. HOUSE, beneficiaries' right to use, 176. for beneficiary proper investment, 112. HUSBAND, not proper trustee for wife, 17. may be trustee for wife, 16. IGNORANCE, court will instruct when, 96. of duties, no excuse, 151. ILLEGAL TRUST, cannot be enforced, 169, 187. IMPLEMENTS, may be used by whom, 125. See CHATTELS. INCAPABLE TRUSTEE, when new trustee in place of, 8, 9. INCIDENTS, of legal estate, 25. of beneficial estate, 159. of ownership fall to trustee, 26. INCOME. See PRINCIPAL AND INCOME. first year's income, 172. investment should produce, 111. what is net, 139, 171, 172. INDEX 209 INCOME (continued). beneficiary's right to, 171. payable when, 172. commissions on, 37. may be withheld to reimburse trustee, 154, 173. may be on condition, 166. anticipation of. See RESTRAINT ON ALIENATION. accumulated, becomes principal, 126. may be collected by one trustee, 89. INCOMPETENCY, no excuse, 142, 151. INDEMNITY, trustee may require, 75. trustees' right to, from trust estate, 30, 31, 35, 78. INFANT, may be a trustee, 15-16. infant trustee may be removed, 16. effect of infant's being trustee, 16. no conversion in trust for, 109. right to support. See SUPPORT. payments to, 84, 144, 152. becoming of age should have advice, 85, 176-177. INFORMATION, beneficiary is entitled to, 171. strangers not entitled to, 146. need not give to stranger at beneficiary's request, 146, 171. INJUNCTION, breach of trust may be enjoined, 170. INNOCENT PURCHASER. See PURCHASES FOR VALUE. INSANE PERSON. See LUNATIC. right to support. See SUPPORT. INSANITY, expense of suit to establish allowed, 75. INSOLVENCY. See BANKRUPTCY. INSTRUCTIONS, bill for, lies when, 96. should not be sought by fictitious account, 97. trustee may get when, 96. as to distribution, 143. necessary parties, 98. INSURANCE, duty to insure, 102. liable for neglect of, 148. premiums charged to whom, 140. proceeds, apportioned how, 141. INTEREST, charged, for not investing, 110. for breach of trust, 171. simple and compound, 110, 154, 171. INTEREST ON INVESTMENTS, apportioned when, 136. on bonds bought at premium apportioned, 136. INTERESTED, who are, 158. persons having possibility not, 158. holders of general power of appointment not, 158. 210 INDEX INTERESTED (continued). person who may receive income at trustee's pleasure not, 166. potential payee in spendthrift trust, 79, 158, 166. person may have trustee appointed, 169. INTER-STATE LAW, 186-193. INVALID TRUSTS, 169, 187. INVESTMENT, duty to make, 109. sound discretion must be used in, 116. in discretion of trustee means what, 112. soundness determined by facts at time of investing, 116. must produce income and be safe, 111. what are proper, 114. English rule, 113. American rule, 113 et seq. improper ones, 115. proportion in one security, 116. gain on one does not balance loss on another, 124, 136, 147, 153. allowed in various States, 117-121. should be changed when, 110-111. of testator, not always to be converted, 105, 106. IRREGULAR SALE, aided when, 69. purchaser takes risk of, 70. JOINDER, of whom as parties, 26, 48, 75. JOINT, execution of powers necessary, 55-56. JOINT BOND, makes trustees liable for co-trustee, 149. JOINT TENANTS, trustees are, 45. beneficiaries are not, 159. JOINT TRUSTEES, survivorship, 45, 51, 54. must exercise trust jointly, 54, 55-56. liability joint and several, 147. must sue jointly, 75. when liable for co-trustees, 148. right to contribution, 151, 177, 184. JUDGMENT, trustee must use good, 116, 142, 151, 152. JURISDICTION, what courts may appoint trustees, 8, 9, 10, 188-190, 192. where trust can be enforced, 188, 189. what court may remove a trustee, 22, 191. what court has jurisdiction over trustee, 8, 22, 189. LACHES, rights of beneficiary lost by, 177, 178. LAND, VACANT, should be converted, 106. INDEX 211 LAND, VACANT (continued). proceeds of sale apportioned, 122. taxes on, charged to principal, 139. See REAL ESTATE. LANDLORD, beneficiary cannot deny trustee's title as, 45, 175. LEASE, power is general and incidental to office, 73, 74. what binds the estate, 73. building lease, 74. trustee is liable on covenants, 29, 75, 146. LEASEHOLDS, improper investments, 115. LEGAL ESTATE. See ESTATE OF TRUSTEE. LEGAL EXPENSES, charged to trust fund, 35, 75. LET. See LEASE. LIABILITIES, to beneficiary, 147-156. joint and several, 147. excused from, by trust instrument, 153. for acts of predecessor, 92, 101, 148-149. for acts of co-trustee, 148 et seq. for not investing in particular stock, 110, 154. for neglect of duty, 109, 148, 149. for allowing rent to fall in arrears, 148. for errors, 151. for use of discretionary power, 80, 153. for care of securities, 103, 104, 105, 149, 150. for payment of share to beneficiary, 143. for payment to wrong person, 142, 144. for distribution of fund, 142. to strangers, 30, 145. trustee is liable as owner of property, 30. trustee is liable as stockholder in corporation, 27. for misrepresentations, 100, 146. on contract, 28, 77, 145. trustee liable on contract of sale not enforceable in equity, 70. trustee is liable on covenants in deed, 29, 146. trustee on covenants in lease, 29, 75, 146. criminally, 146. criminal. See CBIMINAL LIABILITY. ends on death, 147, 155. terminated, 20. LIABILITIES OF BENEFICIARY, 184. for taxes, 184. for fraud, 151, 184. inducing breach of trust, 151, 184. LIEN, beneficiaries', on trust property, 179. 212 INDEX LIEN ( continued ) . trustee's for expenses, 36. trustee's for his charges, 145. mechanic's lien attaches when, 49. LIFE TENANT AND REMAINDERMAN, for respective rights. See PBINCIPAL AND INCOME. trustee's duty to, in investing, 111. LIMITATIONS, if trustee barred by statute there ia no rem- edy, 27. when statute runs for trustee, 156, 160, 178. statute runs after distribution or decree for, 145. statute of, discharges trustee's liabilities, 156. statute runs for breach of trust when, 178. LOAN, on personal security not proper investment, 116. cannot loan trust funds to self, 33, 147. or to relative or partner, 116. LOSS. See GAIN AND Loss. by breach of trust, principal, 123. liability for, 147, 148. of rights by beneficiary, 176, 178. LUNATIC, may be a trustee, 15. may be removed, 15, 23. effect of lunatic's being trustee, 15. expense of declaring, 35. duty to, 83. LUXURIES, allowed when, 81. MAINTENANCE, power of. See SUPPOBT. MAKER OF TRUST. See SETTLOR. MANAGEMENT OF TRUST PROPERTY, 98. See TABLE OF CONTENTS, pp. xiv, xv, xvi. MANAGING TRUSTEE, 88-89. cannot exercise all powers, 88. MARRIED WOMAN, status of, 85. settlement on self, 167. restriction as to income, 174. MEASURE OF DAMAGES. See DAMAGES. MECHANIC'S LIEN, attaches to trust property when, 49. MINOR. See INFANT. MISMANAGEMENT, is cause for removal, 23. liability for. See LIABILITIES. MISREPRESENTATION, liability for, 100, 146. MISTAKE, if honest, not a cause for removal, 24. liability for, 152. account may be re-opened for, 94. INDEX 213 MONEY, single trustee may collect, 90. can be followed, 180. care of, 103. MORTGAGE OF TRUST PROPERTY, not general power, 71. power implied, 71. court will not order, 72. power of sale does not include, 72. power of sale mortgage implied, 72. MORTGAGES, bonds may not be, 112. railroad bonds not investment in, 112. second not proper investment, 116. margin of security, 116. MOTHER. See PABENT. NEED, what is, 80. court will not control discretion as to, 80-81. drawing whole fund at once a fraud, 63, 80. NEGLECT, to disclaim implies acceptance, 7. to convert, 106. to examine trust securities, 89, 104. trustee liable for, 109, 148, 149. to claim rights, estops beneficiary, 177, 178. NEGOTIABLE SECURITIES, care of, 104. NET INCOME, defined, 139, 171, 172. ascertained when, 172. NON-RESIDENT TRUSTEES. See FOREIGN TRUSTEES. may or may not be removed, 24, 191. will not be appointed when, 18, 192. NOTICE, to obligor of chose in action, should be given when, 101. of prior equity, required when, 161, 162. effect on priorities in equitable estate, 162. what is, 162. NOTICE OF TRUST, what is, 47, 71, 182. word " trustee," 47, 182. purchaser with, 179. NUISANCE, trustee is liable for nuisance on trust property, 31. beneficiary not liable for, 184. OFFICE, expense of, charged to whom, 35. OFFICE OF TRUSTEE. See TRUSTEESHIP. ONE TRUSTEE. See SINGLE TRUSTEE. OWNERSHIP of trust property belongs to trustee, 25, 158, 159. of trust property does not belong to beneficiary, 25. in equity, considered to be in beneficiary, 158, 159. 214 INDEX OWNERSHIP (continued). incidents of, fall to trustee, 26. not beneficial to trustee, 32-35. PARENT, is unfit trustee, 16. duty to support child, 84. support of child may include parent, 79, 84. payment to, for child, 84, 85-, 144, 152. to account, 92, 94, 95, 143. PARTIES TO SUIT, who are necessary, 75. beneficiaries generally not necessary parties, 26. are sometimes, 26. to suit for removal, 22. to suit for appointment of trustee, 9. to bill for instructions, 98. to decree of distribution, 143, 144. PARTITION, estate of trustees is not subject to, 45-46. power to, 73. PARTNERSHIP, improper investment, 115. should be converted, 106, 112. may be authorized investment, 112. profits partly principal when, 123. PASSIVE TRUSTEE, duty of, 45. none recognized by law, 88. PAYMENT, by debtor, to single trustee, 89, 90. of share to beneficiary before end of trust, 143. by mistake, beneficiary not required to refund, 184. to infant, 84, 85, 144, 152. to attorney, 144. to wrong person, 144, 152. to wrong person, beneficiary may recover, 152. PERSONAL, a trust is a personal confidence, 88. PERSONAL LIABILITY. See LIABILITY. PERSONAL PROPERTY, conversion into real, 107. not converted when meant to be enjoyed in specie, 107, 125, 175, 176. taking possession of, 99-102. who entitled to possession, 45, 103, 107, 125, 175, 176. PERSONAL REPRESENTATIVES OF SOLE TRUSTEE, cannot disclaim decedent's trusts, 3, 20. of deceased trustee may be invested with trust estate, 3, 20, 51-52. of deceased trustee does not succeed to trust powers, 20, 54. of deceased trustee, duty as to trust estate, 20, 54. PERSONS, who are beneficially interested. See INTEBESTED. PLEDGE. See MORTGAGE. INDEX 215 POSSESSION, of beneficiary is that of trustee, 45, 188. POSSESSION OF PERSONAL PROPERTY, the taking of, 100-102. who has right- to, 45, 103, 175. POSSESSION OF REAL ESTATE, taken how, 99, 100. who has right to, 45, 175. POSSESSION OF TRUST PROPERTY, trustee is entitled to at law, 45. beneficiary may be entitled to in equity, 45, 102, 107, 125, 175. should be taken at once, 98-102. POSSIBLE PAYEE, interested in appointment of trustee, 11, 79, 169. but has no interest in trust, 79, 158, 166. POVERTY OF TRUSTEE, not always cause for removal, 24. POWER OF APPOINTMENT, holder of is not a benefi- ciary, 158. if general power exercised creditors of holder take, 162. otherwise where power is special, 162-163. who administers estate where general or special, 14-15. POWER OF ATTORNEY, payment on invalid power, 144. trustee cannot give a general one, 57, 89. may give special power, 57, 89. POWERS, general principles, 52. incidental to the office of trustee, 5253. the court can grant, 53. the legislature can grant, 53. specially given by the instrument, 53-54. general and special, vesting when and when not, 54. must be exercised by all jointly, 54, 55, 56. when lost by disclaimer of one trustee, 5. exercise of discretion is essential part of, 55. execution must be joint, 55, 56. exception as to collecting money, 56. to act by agent or attorney, 56-57. execution must be exact, 58. partial execution may not exhaust, 58. but may sometimes, 64. defective execution aided for purchaser, 58. defective sale confirmed, 69. substantial execution aided, 58. literal execution necessary when, 58. court controls execution when, 59. execution set aside for fraud, 63. of single trustee, 89. pass to successors, 54. 216 INDEX POWERS (continued). and survivors when, 54. of sole trustee, vest in successor, not in heirs, 54. fraud in execution of, 63. exhausted how, 64. extinction of, 64. cease when trust is accomplished, 64. liability for exceeding, 151-152. not liable for use of discretionary, 153. of sale are not incidental, 53, 64. of sale, 64. See SALE. of support, 79-82. to contract, 77-78. of compromise, 76. of revocation, 82. of arbitration, 76. to lease, 73-75. of partition, 73. to mortgage or pledge, 71-72. of exchange, 73. to convert real into personal property, etc., 108. to appoint new trustee when, 8-9. to appoint trustee, in whom, 9, 14. PREJUDICED TRUSTEE, may be removed, 23. PREMIUM ON BOND, reduced by sinking fund, 136. bond selling at, not necessarily converted, 107. purchase of bonds selling at premium and discount to balance improper, 136. PREMIUMS. See INSURANCE. PRINCIPAL AND INCOME, what is, 121-142. importance of distinguishing, 121. gain and loss on securities, 124-127. discharge of encumbrance, 137. accumulated income, 126. timber and gravel are what, 125. farming stock, 125. dividends are what, 126, 135. extra dividends, 127-134. stock dividends, 128-129. interest apportioned when, 136. interest on bonds bought at premium, 136. repairs, 138. alterations and additions, 138. betterments, 140. taxes, 139. INDEX 217 PRINCIPAL AND INCOME (continued). insurance, 140. expenses, 141. brokers' charges, 142. legal expenses, 142. support of beneficiary, 79, 83. apportionment on conversion, 123. apportionment at end of life estate, 123. right of single trustee to handle, 56, 89, 103. PRIORITY, among transferees of equitable estate, 161-162. PROBATE COURTS, proper place to file disclaimer under will, 4. appointment of trustee under will, 8. PROFIT, trustee cannot make profit from trust, 2, 32-35. PROMISE, to accept trust not binding, 3. PROPERTY, trustee should examine, 2, 98, 99. what may be trust property, 98. vests in trustee how, 11, 99, 100. the trustee's estate in, 44. ownership of trust property belongs to trustee not bene- ficiary, 25. beneficiary has no claim on, 158. may follow into hands of stranger, 179. unproductive should be converted, 106-107. but not property to be used in specie, 107. beneficiary's right to possession of, 45, 102, 107, 125, 175. beneficiary's right to conveyance of, 173-175. passes to successor how, 50. passes to remainderman how, 50. trustee cannot take any benefit from, 32-35. trustee cannot use trust property, 32. trustee cannot purchase trust property, 32, 70, 155. care and custody of, 102. of trust may be taken for trust debts, 48-49. replaced when, 154. PURCHASE MONEY, purchaser must see to when, 71. PURCHASER, trustee cannot buy trust property, 32, 70, 155. from beneficiary, rights of, 161. must see to application of purchase money when, 71. takes risks of irregularity, 70. PURCHASER FOR VALUE WITHOUT NOTICE, 46, 182. who is and who is not, 46-47. REAL ESTATE, trustee takes only necessary title in, 44. title should stand in joint names, 45. 218 INDEX REAL ESTATE (continued). who entitled to possession, 45, 175. taking possession of, 99-100. unproductive, improper investment, 116. unproductive, should be converted, 106. duty to improve, 102. care and custody of, 102. repairs charged to what, 138. alterations and additions charged to principal, 138. conversion into personal, 107-109. foreign, 92, 188, 189, 192, 193. REAL SECURITIES, what are, 112. railroad bonds not, 112. RECEIPT, must be joint in equity, 56. of one trustee, sufficient when, 56. trustee bound by when, 100. liability for joining in, 149. RECEIVER, appointed when, 9, 170. RECORD, deed should be recorded, 99, 188. RECOUP, when trustee can, 154, 173. REFUND, beneficiary need not, 184. beneficiary disaffirming sale must refund consideration, 70, 170-171. REFUSAL OF TRUST. See DISCLAIMER. REGISTERING BONDS, when proper, 104-105. REGULARITY OF TRUSTEE'S APPOINTMENT, not ques- tioned when, 19. REIMBURSEMENT, 35-36. for damages in suit, 29. for expenses of suit, 35, 75. for expenses of accounting, 36, 95. for payment to beneficiary, 154, 173. RELATION, is not a fit trustee, 16-17. RELATIONSHIP, between trustee and beneficiary, 2, 3, 85. RELEASE, discharges liabilities, 155. by beneficiary, 176. REMAINDERMAN, title vests in without conveyance, 50. conveyance to when, 145. REMOVAL, is in discretion of court, 22. will remove for what, 23. will not remove for what, 24. of absentee trustee, 23, 194. lunatic trustee may be removed, 16. infant trustee may be removed, 16. RENT, is income, 136. INDEX 219 RENT (continued). apportioned when, 136. liability for allowing to fall in arrears, 147. REPAIR, duty to, 102. REPAIRS, charged to what, 138. REPRESENTATION, of one trustee not binding, 76. liability for misrepresentation, 100, 145. RESIGNATION, 21. must be accepted by all, 21. or by the court, 21. must resign whole trust, 21. may resign independent trusts under same instrument, 22. responsible in what court, 8, 154. RESTRAINT, on alienation, 163. valid in some States, 164-166. not valid in others, 164-166. married women, 114. by spendthrift trust, 166. RETIREMENT OF TRUSTEE. See DEVESTMENT OF OFFICE. REVOCATION, power of inserted in settlement in England not in America, 82. by using discretion to draw whole fund fraud, 63, 80. SAFETY, a necessary feature of investment, 111. SALE, of contingent remainders and executory devises, 67. power of not incidental to office, 64-65. power usually specially given, 65. power of, implied from a given duty, 65-66. power under statutes, 66. under cy pres doctrine, 67. may be ordered by special law, 67. by order of court, 68. management of, 68-69. irregular, 69. purchaser takes risk of regularity of, 70. purchaser's responsibility for purchase money, 70-71. unauthorized, confirmed when, 68. trustee cannot purchase at, 32, 70, 155. beneficiary may purchase, 70. cannot sell to relative or partner, 32. to trustee, damages, 155. disaffirmed, consideration must be returned, 70, 170. SECURITIES, duty to convert into trust investments, 105. right to possession of, 175. beneficiary may examine, 171. 220 INDEX SECURITIES (continued). care of negotiable and non-negotiable, 104. must not release, 88. SERVICES. See COMPENSATION. SET OFF, trustee cannot set off private debts against credi- tor of trust, 32. by whom and when, 49. trustees' set off against beneficiary, 161, 188. SETTLEMENT, should examine, 1, 2, 83, 98, 99. on self, peculiarities of; 167, 168. SETTLOR, may appoint unfit trustee, 18. cannot restrain self from alienation, 167. SIGNATURE " AS TRUSTEE," effect of, 28, 78, 146. SINGLE TRUSTEE, may do what alone, 89, 90. may collect money, 56, 89, 103. may handle income, not principal, 89, 103. may be entrusted with securities when, 103, 104-105. representation of not binding, 76. demand of, sufficient, 76. SINKING FUND, for bonds purchased at premium, 136. SOLE TRUSTEE, on death of, trust vests in successor, 51-52, 54. on death of, title passes to whom, 3, 51-52, 54. SOVEREIGN, may be a trustee, 15. SPECIAL LAW, sale under, 67. SPECULATION, with trust funds improper, 32, 110-111, 116. SPECULATIVE, investments improper, 116. what are speculative investments, 106, 107, 116. investments should be converted, 105. SPENDTHRIFT TRUSTS, 79, 166. interest of possible payees, 79, 158, 166. STATUTE, may provide for sale of trust property, 67. of limitations. See LIMITATIONS. STOCK. See FARMING STOCK. STOCK, certificate should stand in joint names, 101. should indicate trust on their face, 101. as an investment, 113-115. dividends of, belong to whom, 128, 129. liability for transfer of, 182, 183. STOCKHOLDER IN CORPORATION, trustee is, 27. beneficiary is not, 27, 184. trustee is liable as, 27. beneficiary is not, 27, 184. STRANGER, property followed into hands of, 179-182. aiding in breach of trust liable, 182. INDEX 221 STRANGER (continued). cannot require information from trustee, 146, 171. trustee's liability to. See LIABILITIES. SUBPOENA, where had, 168, 169, 189-190. SUCCESSOR, not liable for acts of predecessor, 95, 101, 148-149. should examine predecessor's accounts, 95, 101. not bound to receive property tendered, 95. effect of taking the property, 156-157. gets title how, 11-12, 51-52. SUIT, trustee has general power to sue and defend, 26, 75-76. duty to press, 88, 102. necessary parties to, 9, 22, 26, 75, 98. admissions in, are binding when, 76, 159. compromise of, 76, 88. expense of, allowed, 35, 75. beneficiaries' rights in actions, 26-27. beneficiary may sue or defend in trustee's name, 169, 183. against trustee, in what jurisdiction, 168, 188-191. SUPPORT, 65. power and duty to support beneficiary, 83-84, 173. when others have duty, 84. trustee's discretion as to quantity, 80-83. when court will review discretion, 81. from principal and income, 80. how apportioned among beneficiaries, 81-82. special power often given, 79. usually discretionary, 79. possible recipient not interested in trust, 79. of beneficiary or family in spendthrift trusts, 167. SURETIES, may be required on trustee's bond, 12. on bonds of executor, liable for acts as trustee when, 6, 14. expense of surety company allowed, 35. liabilities of, 13, note 1. making good loss, subrogated to trustee's claim, 179, note 3. SURVIVING TRUSTEE, office passes to survivors, 46. takes title on death of trustee, 51. TAXES, duty to pay, 29, 102. trustee is personally liable, 29. where taxes are payable, 29, 193. beneficiary may be liable for, 184. how apportioned, principal or income, 139-140. TEMPORARY TRUSTEE, appointed when, 7, 170. TENANT, should attorn to new trustee, 102. TENANTS IN COMMON, trustees are not, 45. 222 INDEX TERM, of lease trustee may grant, 73-74. TERMINATION OF TRUST, 19-24. by conveyance to beneficiary, 173-175. commissions on, 38, 145. THINGS, trusts for, 157. TIMBER, when income or principal, 125. TITLE, trustee takes absolute to personal property, 44. trustee takes none in code States, 44. trustee takes what estate is necessary in real estate, 44. to property should stand in joint names, 99,- 101. vests in others, on disclaimer of one, 5. to property necessary to complete appointment, 11. may vest by provisions of settlement, 11. decree for conveyance to new trustee, 12, 99. may vest in new trustee by statute, 11. to property, how it passes to successor, 11, 50. passes to remainderman how, 50, 144. TORT, beneficiary not liable in, 184. trustee liable in tort, 31, 146. TRACING trust property into hands of stranger, 180. TRANSFER OF PROPERTY, to new trustee, 11, 99. to remainderman. See REMAINDERMAN. TRANSFER OF STOCK, liability for, 183. TRANSFER OF TRUST PROPERTY. See ALIENATION. TRANSMISSION OF ESTATE, on death of trustee. See " DEATH." TRUST, differs from agency, 26. may be refused. See DISCLAIMER. will not fail for want of trustee, 7. cannot be delegated, 88. enforced where, 168, 169, 189-190. TRUST COMPANY, may be a trustee, 15. advantages and disadvantages of, 17. TRUST PROPERTY. See PROPERTY. TRUST TERMINATED, 19-24, 173. TRUSTEE, can refuse. See DISCLAIM. cannot abandon trust, 19. removal of. See REMOVAL. may resign. See RESIGNATION. temporary trustee may be appointed, 7, 170. appointment of. See APPOINTMENT. executor performing such duties is a trustee, 6, 14. any person intermeddling is trustee. 13.x who of two sets of trustees is entitled to act, 14-15. who can be, 15. INDEX TRUSTEE (continued). should be capable, 16. who is unfit to be, 16. must exercise trust himself, 57, 88, 90. managing and passive trustees, 89-90. is owner of trust property, 25, 26. the estate of. See ESTATE and TITLE. right to possession of property. See POSSESSION. can take no benefit from ownership, 32. cannot purchase at sale, 32, 70, 155. good faith required, 2, 32, 85, 87. cannot have adverse interest, 2, 87. contracts with beneficiary, 35, 85, 86. gifts from beneficiary, 86. may act as counsel, attorney or broker when, 34, 90. must keep accounts. See ACCOUNTS. powers. See TABLE OF CONTENTS, pp. xi, xii. duties. See TABLE OF CONTENTS, pp. xiii to xvi. compensation. &e COMPENSATION. his expenses. See EXPENSES. liabilities. See LIABILITIES ; also TABLE OF CONTENTS, p. xvi. may get instructions of court. See INSTRUCTIONS. single trustee may do what. See SINGLE TRUSTEE. death of. See DEATH AND EXECUTOR. is discharged how, 19, 155, 176. " TRUSTEE," on certificate is notice, 47, 182. signature " as trustee " effect, 28, 78, 146. TRUSTEESHIP, not always desirable, 2. is a relationship, 2, 83. not an agency, 2, 26. is a personal confidence, 88. See DELEGATE. cannot be abandoned, 19. may be resigned, when and how, 19-20. removal from, when, 16, 22, 194. passes to whom. See SUCCESSOR and DEATH. may be ended how, 11, 19-24, 173. UNAUTHORIZED SALE, confirmed when, 68. UNDIVIDED PROPERTY, should be converted, 106. UNDUE INFLUENCE. See FRAUD. UNFAITHFUL TRUSTEE, may lose compensation, 39. UNFIT TRUSTEE, when new trustee in place of, 8. who is unfit to be a trustee, 16. may be appointed by creator of trust, 18. 224 INDEX UNFRIENDLY TRUSTEE, may be removed, 23. UNPRODUCTIVE PROPERTY, should be converted, 100-107. converted, is partly income, 123. USE, beneficiary's right to use trust property, 45, 102, 107, 125, 175. trustee cannot use, 32. VACANT LAND, should be converted, 106. taxes on, how chargeable, 139. VESTING OF TITLE TO PROPERTY. See TITLE. VOTE, beneficiary not qualified to, as owner, 159. trustee votes as stockholder, 27. trustee enjoined from voting against beneficiary's interest, 170. WASTE, cause for removal of trustee, 23. WASTING INVESTMENT, dividends on apportioned, 126. should be converted, 106. WIFE, may be trustee for husband, 17. WILFUL BREACH OF TRUST, cause for removal, 23. LAW LIBRARY UNIVERSITY OF CALIFORNIA LOS ANGELES UC SOUTHERN REGIONAL I 'mi UN HIM inn UNI mil tun tmmmmmtmmBmiuR A 000 680 842 2