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rupt, would not pass to the assignee in bankruptcy, but would be considered as trust property; but that an amount of money due from the bankrupt as a trustee, and which could not be distinguished from any other moneys in his possession or under his control, could not be considered as “property” held by the bankrupt in trust. Hosmer v. Jewett, 6 Ben., 208.

§ 311. A creditor of a land company obtained a judgment against the company in the state in which the land was situated, but in which the members did not reside, without potice to the company, and levied on the lands of the company, to which, however, it had only an equitable title, and purchased the same. By collusion with the trustee of the company he procured from such trustee, without notice to the company, the means of procuring the legal title, and, availing himself thereof, took the legal title. Held, that the title thus procured was void. Oliver v. Piatt,* 3 How., 333,

S 312. It seems that if a bankrupt holds property in trust the beneficiary may follow it into the hands of the assignee. Engstroin v. Livingston,* 11 Fed. R., 370.

$ 313. A trustee who held stocks, issued to bim as trustee, pledged them as collateral security for loans under circumstances wbich were sufficient to put the pledgees on inquiry, and used the proceeds for his own purposes. The loans not being repaid the stocks were sold. The whole transaction being without the knowledge or consent of the beneficiary, it was held that not only the trustee but the pledgees were liable for the value of the stocks sold and accrued dividends thereon, Jaudon v. National City Bank,* 8 Blatch., 430.

S 314. The ratification by a cestui que trust of a suustitution of stocks not allowed by the terms of the trust does not imply an assent to a future violation of duty by the trustee, and is no bar to the right of the cestui que trust to recover for au illegal disposition of the stocks thus substituted. Duncan v. Jaudon,* 15 Wall., 165.

$ 314a. A person taking stock as collateral security for the individual debt of the trustee, which on its face shows that it was held by bim as trustee, is chargeable with notice of the trust, and is liable to the cestui que trust for the value of the stock where it has been suld to satisfy the loan. Ibid.

$ 315. into hands of partnership of which trustee was a member.- Where funds held by one member of a copartnership as trustee are received and used by the copartnersbip with full knowledge of their character on the part of the other members of the firin, the beneficiaries under the trust may prove their debt against the firm, although they have also proved the same against the individual estate of the trustee. In re Tesson,* 9 N. B. R., 378.

$ 316. A trust fund may be followed by the cestui que trust into the hands of any one who receives it with notice of the trust. Ibid.

$317. Where a trustee who is a member of a partnership firm wrongfully uses trust funds in the business of the firm, and the other members have notice of such use, the partnership and its members become liable to the cest uis que trust, and a joint and several claim is thereby created against the joint and several estates of the firm and its members. In re Jordan, 2 Fed. R., 319.

$ 318. bona fide purchasers.— Where a trustee has been guilty of a breach of trust in transferring trust property to a third person the cestui que trust has full right to follow such property into the hands of such third person, unless he is a bona fide purchaser for value without notice, or to take the proceeds, and this right cannot be destroyed by the repurchase of the trust property by the delinquent trustee. Oliver v. Piatt,* 3 How., 333.

$ 319. If a deed of bargain and sale be made by a trustee the legal estate passes, whether the terms of the trust are complied with or not; for if the bargainee takes with notice and for a valuable consideration, he himself stands as trustee in place of the bargainor; if without notice, and for valuable consideration, he takes an absolute title; for a trustee conveys by virtue of the legal estate vested in him, and not by virtue of a power. Bank of United States v. Benning, 4 Cr. C. C., 81.

$ 320. Full notice of a trust is equivalent to an express declaration thereof as to persons chargeable with notice, Mechanics' Bank of Alexandria v. Seton, 1 Pet., 299.

$ 321. When a trustee delivers, in payment of his individual debts, property which is stamped with the insignia of ownership as trustee, the creditor takes the property with notice of the trust, and if it is received without making suitable inquiry as to the right of the trustee thus to dispose of the property of the cestui que trust, the recipient takes it at his peril. United States v. Polbamus, 13 Blatch., 200.

$ 322. But the fact that the property bears upon its face the evidence that it is owned by the seller or the payer as trustee is not conclusive upon the party becoming payee, who is always at liberty to show that he made suitable inquiry. And whether he did or not is a question for the jury. Ibid.

S 323. An individual who has an interest in certain real estate, for the management and sale of which a trustee is appointed, must be presumed to know the nature of his title and the acts of the trustee. He cannot, having purchased the estate from the trustee, set himself up as an innocent purchaser without notice. Piatt v. Oliver, 2 McL., 267.

$ 324. Duty of purchaser from trustee to see to application of money.- If a trustee under a marriage settlement has a power to sell, and the purchase money from such sale is to be re-invested upon trusts that require time and discretion, or the acts of sale and re-investment are contemplated to be at a distance from each other, the purchaser is not bound to look to the application of the purchase money. But where the purchaser is affected with notice of the facts which in law constitute the breach of trust, the sale is void as to him; and a mere general denial of all knowledge of fraud will not avail him, if the transaction is one that a court of equity cannot sanction. Wormley v. Wormley, 8 Wheat., 421.

$ 323. The court of chancery has established it as a rule, that where the charge is general the purchaser is not bound to see to the application of the purchase money; but if a trustee sells with the avowed purpose of excluding the debts of him who created the trust, the purchaser voluntarily assisting him in it would not be secure. And if he have notice of a debt before he pays the money, he may be affected if he proceeds with the purchase. Garnett v. Macon, 2 Marsh., 185.

S 326. Good faith reqnired of parties purchasing trust property.– Where in a contract between private individuals and a county for the sale of lands granted by congress to the state, and by the state to the county, said lands being a trust fund for the purpose of reclaim. ing swamp lapis and building bridges, etc., if the parties know that they are dealing with a trust iund, devoted to a specific purpose, the utmost good faith is required. Emigrant Co. v. County of Wright, 7 Otto, 339.

$ 327. Gross inadequacy of consideration, the diversion of funds from their prescribed trust, and fraudulent conduct of agents, warrant the rescission of such a contract. Ibid.

$ 328. A purchaser of trust property from a trustee authorized to sell, charged with frauduleut collusion with the trustee in the purchase, is not liable to the cestui que trust for the proceeds of such property on the ground of inadequacy of consideration, there being no other evidence of fraud, unless such inadequacy be clearly proven and be so gross as to be itself an indication of fraud. Carpenter v. Robinson, i Holmes, 67.

$ 329. Presumptions as between cestui que trust and trustee.- Whatever acts are done by a trustee are presumed to be done for the benefit of the cestui que trust and not for the benefit of the trustee. Piatt v. Oliver, 2 McL., 267.

$ 330. Profits gained by trustee.- Where a trustee has abused his trust the cestui que trust bas the option to take the original or the substituted property, and if either has passed into the hands of a bona fide purchaser without notice then its value in money. If the trust property comes back into the bands of the trustee, that fact does not affect the rights of the cestui que trust. The cardinal principle is that the wrong-doer shall derive uo benefit from his wrong. The entire profits belong to the cestui que trust, and equity will so mold and apply the remedy as to give them to him. May v. Le Claire, 11 Wall., 217.

$ 331. Profits gained by a trustee in the sale of trust property belong to the cestui que trust. Prevost v. Gratz, * Pet. C. C., 364.

$ 332. Interest of, when exempt from execution.- Where a deed of trust directs the trustee to permit the cestui que trust to enjoy the rents, issues and profits arising from the trust estate during his life, and to apply the same to the support, maintenance and education of his children, the interest of the cestui que trust is not such as a court of equity will apply to the satisfaction of a judgment debt. Pickrell v. Zell, * 2 MacArth., 65.

§ 333. Cestui que trust, when preferred creditor.— A deed of settlement conveyed to one of the signers, in trust, certain moneys, to be kept invested on real estate security for the benefit of H. The trustee neglected to make the investment required by the deed, and, his estate being insolvent, it was held that the debt of the cestui que trust arising from the misappropriation of the trust fund was a special debt and entitled to priority of payment. Burton v. Smith,* 4 Wash., 522.

S 334. Power of with respect to trust and trust property.- A cestui que trust may dispose of his trust estate, notwithstanding his title is contested by the trustee. Baker v. Whiting, 3 Sumn., 475.

$ 335. A certain sum was devised to A. in trust for the use of B. during her life, and on her death to the use of others, and the sum was, until paid, made a charge on certain lands of the testator. Held, that a paper signed by B. alone, in which she recited that the money had been invested to her satisfaction, and that she released the land and the trustee from all liability, had no effect to discharge the land. Dickinson v. Worthington, 4 Hughes, 430; S. C., 10 Fed. R., 860.

$ 336. To com pel performance of trust.- Where there is an absolute discretion in the trustee, a discretion which, by the express terms of the will, he is under no obligation to exercise in favor of the cestui que trust, who, by bankruptcy, has forfeited his absolute right as beneficiary under the trust created by the will, no interest is conferred on the latter that he or his assignee in bankruptcy can successfully assert in a court of equity or any other court. Nichols v. Eaton, 1 Otto, 716.

$ 337. Bondholders have a clear right to have executed that power of the trust deed which requires the trustees to take possession of the property upon default in payment of interest. If the trustees refuse to perform this duty the cestui que trust has the right to apply to the court to compel them to do it or appoint some one who will. Wilmer v. Atlanta & Richmond Air Line R‘y Co., 2 Woods, 409.

S 338. Miscellaneous.- If a cestui que trust, under an assignment for the benefit of creditors, buys a right of property which the assignees were empowered to sell in the execution of their trust, he must claim as a purchaser under them, not as a cestui que trust. Wilkinson v. Wilkinson, 2 Curt., 582.

$ 339. Under the statute of Illinois an unrecorded declaration of trust is inoperative against creditors. Hubbard v. Turner, 2 McL., 519.

S 340. Where a trust is created for the benefit of a third party, without his knowledge, he may affirm it and enforce its execution. Bank of the Metropolis v. Guttschlick, 14 Pet., 19.

$ 341. It is a well-established principle in equity that the act of a trustee shall not prejudice his cestui que trust. If a trustee purchase the estate of his principal, the sale, as a matter of course, is set aside unless ratified. Piatt v. Oliver, 2 ML., 267.

$ :42. A deed of trust of certain shares of bank stock provided that the title to the stock should remain in the grantor till his death, but that the dividends on the stock should be for the exclusive use of the beneficiary and her family, but that such beneficiary should neither sell, dispose of or change said stock without the consent of the grantor, or that of such guardian or trustee as the proper court should appoint after his death. It was provided further that the release of the beneficiary should release the trustee or guardian. Held, that on the death of the grantor the bank might pay the dividends to the beneficiary direct, she being married, though she was a minor and had a guardian appointed before the grantor in the trust deed. Linton v. First National Bank of Kittanning,* 10 Fed. R., 894.

$ 343. Where the whole beneficial interest in land, directed to be converted into money, or money directed to be used in the purchase of land, belongs to the person for whose use it is given, a court of equity will permit the cestui que trust to take the money or the land, at his election, if he elect before the conversion is made. But in case of the death of the cestui que trust without having determined his election, the property will pass to his heirs or persoual representatives in the same manner as it would have done if the conversion had been made and the trust executed in his life-time. Craig v. Leslie, 3 Wheat., 563.

8 344. Property was conveyed to a husband for the use of his wife during life, remainder to her children, or, in default of such children, to his heirs. He was permitted to sell the land with her concurrence, when the proceeds were to remain subject to the trust. The land having been sold with her consent, the proceeds were used by the husband in the business of the firm of which he was a member. To secure the wife the husband assigned to her, in the firm name, a deed of real estate executed to the firm, reciting in the assignment that it was made to secure her for the money thus deposited with the firm. Held, that, as the wife had only a life interest in the property, she had no title to the money used by the firm, and therefore had no money on deposit with the firm, and could not hold the real estate assigned as against the firm creditors. In re Chisholm, * 8 Ben., 242.


1. Rights, Powers and Duties. SUMMARY — Loss by investment in Confederate money, S 345.— Relief under general prayer,

$ 346.

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& 345. A trustee who keeps no account of trust funds, but invests them in his own name, cannot charge them with the loss resulting from his having taken Confederate money in pay. ment. Mitchell v. Moore, SS 347, 348.

$ 346. Where a bill charged a trustee with a breach of trust, asked for an accounting, for the removal of the trustee, the payment of the income to the complainant, and for general relief, it was held that it was proper to direct the payment of the principal to a new trustee, as that relief was necessary in order to carry the removal of the old trustee into effect. Ibid. (NotEs. - See S$ 349–397.]


(5 Otto, 587–591. 1877.)

APPEAL from U. S. Circuit Court, Southern District of Alabama.

STATEMENT OF Facts.— Mitchell was trustee for Mrs. Moore, and under her father's will, of which Mitchell was executor, continued to hold her property for many years after his testator's death. He mingled the trust funds with his own, and during the war (he living in Alabama) converted much of it into Confederate money, by means of which it was lost. She filed a bill by her next friend for an account, and the removal of Mitchell as trustee. There was a decree in her favor, and Mitchell appealed. Further facts appear in the opinion of the court.

$ 347. A trustee who keeps no separate accounts, but mingles the trust funds with his own, is liable for all losses from bad debts or Confederate money.

Opinion by WAITE, C. J.

There can be no doubt that the trust fund in this case was always used by the defendant as his own, and that all investments were made by him in his own name, with nothing whatever to indicate an appropriation to the purposes of the trust. When inquired of by the complainant in October, 1860, in respect to the trust, the defendant wrote: “If you will be contented I will fix your money so that you can see it any instant. But as the time is now, it is in a better fix now than it would be if you had it.” In his deposition taken in his own behalf, when upon cross-examination he was required to make a full, complete and detailed statement of his execution of the trust, he said: “I kept no separate account of the trust fund after it came into my hands. I accounted for the annual interest to the agent of the complainant, and was ready to pay over the principal in the event of the death of A. L. D. Moore, which was the time fixed by the will of my father for me to pay over to my sister the corpus of the trust. I thought this was all I was required to do, and, therefore, kept no separate and distinct accounts of the trust fund, and cannot give the dates of the loans or other particulars inquired about. When necessary, I put some of my own funds with it to make out the sum a

I borrower might wish to get, and kept no separate accounts of it, and can furnish none.”

Under these circumstances, clearly, the defendant is in no condition to charge the trust with the losses he has sustained from payments to him in Confederate money. As long ago as 1681, it was said in argument, and approved by the then lord chancellor of England, in Dashwood v. Elwall, 2 Ch. Cas., 56, that“ if an executor hath orphan's or other men's money in his hands, and hath power to lend it, if he do so, and take security in his own name, which faileth, he shall answer the debt in his own money, unless that he indorse the bond or do some other thing at the time of lending the money or taking the security which may doubtless declare the truth,” and this because “heed was to be taken that we make not such examples under which dishonest men may shelter themselves.” If this were not the rule, it was also said: “It will be in the power of one who deals for several persons and for himself also, taking security by bond in his own name, if any of the debts fail to gratify whom he pleaseth with good securities, yea, himself, and play the securities, good or bad, into his own hands, or what he pleaseth.” Thus were set forth in the language of the time a rule, and the reason of it, by which courts of equity have universally required trustees to account; and it can never be de

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parted from without danger that wrong will be done. Massey v. Banner, 4 Madd., 413; Wren v. Kirton, 11 Ves. Jr., 377; McAllister v. The Commonwealth, 30 Pa. St., 536; Stanley's Appeal, 8 id., 431. This disposes of the first assignment of error. There is no dispute as to the amount of the trust fund, and no complaint is made of the rate of interest for which the defendant has been decreed to account, if he is liable to account at all.

$ 348. When a trustee is removed it is competent for the court to appoint a new one, although not prayed for in the bill.

The second assignment of error is to the effect that the court could not direct the payment of the principal sum to a new trustee, because such a decree was inconsistent with the specific relief prayed for. The prayer is for an account, the removal of the old trustees, the payment to the complainant of the money she is entitled to, and for general relief. There is no specific prayer for the appointment of a new trustee, or the payment of the principal of the fund to him when appointed; but such relief is necessary in order to carry into full effect an order for the removal of the old trustees.

Decree affirmed.

$ 349. Cannot claim adversely to cestni que trust or treat trust properly as his ow 11.A trustee who uses trust property to purchase securities cannot treat them as his own and turn them over to the trust fund at a higher price than he paid. Campbell v. Campbell,* 8 Fed. R., 460.

$ 350. A trustee cannot deny the title of his cestui que trust, or set up that the transaction out of which the trust grew was illegal as between the grantor and the cestui que trust. Railroad Co. v. Durant, * 5 Otto, 576.

$351. Riguts of as creditor.- A creditor does not, by becoming a trustee for his debtor, lose his right as a creditor. Prevost v. Gratz,* Pet. C. C., 364.

$ 352. In bankruptcy.- The trustees of a bankrupt take bis property subject to all legal and equitable claims of others, and are affected by all the equities which could be urged against him. Cook v. Tullis, 18 Wall., 332.

$ 353. To question validity of trust.- A trustee cannot be allowed to attack the validity of the deed under which he has gone into possession, unless he clearly shows that he has been deceived into taking a title which, without knowledge or laches on his part, really belonged. partly or wholly, to himself; nor can an executor be allowed to attack a deed of trust to his testator as in fraud of such testator and other creditors, unless he alleges, and clearly shows, that said testator was ignorant of, and deceived by, such fraudulent intent. Hunt v. Danforth,* 12 Law Rep. (N. S.), 74.

$ 354. Reimbursement for taxes paid on trust property.- Where lands are conveyed to A., which under a contract with B. should have been conveyed to the latter, and A. is suissequently ad judged to be trustee for B., held, that all taxes paid by A. while in possession to protect the title and prevent a sale of the property are not voluntary, and that A, is entitled to be reimbursed. Sherman v. Savery, 2 McC., 107.

$ 335. Trustees are bound to pay taxes on trust property if in funds, and are entitled to money advanced for that purpose. They may also keep such property insured. Burr v. McEwen, Bald., 154.

$ 356. Compensation.— The general practice in America, and especially in Massachusetts, is to allow commissions to trustees in cases of open and admitted express trusts, unless the trustees have forfeited them by gross misconduct in the administration of the trust. Jenkins v. Eldredge, 3 Story, 325.

$ 357. In Pennsylvania trustees are entitled to compensation for their services in the execution of the trust whether there is any provision or agreement touching it or not. Burr v. McEwen,* Bald., 154.

$ 358. In Pennsylvania all trustees are entitled to a commission on moneys passing through their hands; the usual rate is five per cent., and any departure therefrom is under special circumstances. Askew v. Odenheimer, 1 Bald., 380.

$ 359. Under the equity of the act of assembly of Pennsylvania, which allows commissions. to executors, trustees are entitled to claim them. Quære, if trustees are so entitled by the general rules of courts of chancery. Prevost v. Gratz, 3 Wash., 434.

$360. A trustee will not be allowed compensation for doing an act in violation of his trust and duty. Flagg v. Mann,* 3 Sumn., 84.


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